Benchmarking Innovation in a Time of Transition
“Restoring America’s greatness will require a fundamental and wrenching change.”
– Barak Obama
One of our greatest challenges is to build innovative friendly organizations-where innovation is “just part of what we do.” It requires careful strategic planning and leadership support. Learn how some successful innovators around the world are creating a culture of innovation.
There is an old saying: “Necessity is the mother of all invention”. At this unique period in our history, necessity has become a powerful driver for innovation. In 2007, the Boston Consulting Group, McKinsey & Company and Booz Allen Hamilton completed studies on Innovation. On the positive side, the results indicated that Innovation remains a high priority for most corporate leaders around the world-they recognize it as a key growth driver. Unfortunately, they also found that there is a broad belief that most organizations don’t have the leadership, systems, or tools to successfully and consistently innovate.
When delving deeper into the research, the causes for this are:
- Lack of leadership support
- Innovations driven by the wrong constraints
- No strategy
- The absence of a culture which supports innovation
As well, they found no statistically significant connection between the amount of money an organization spent on innovation and its financial performance.
So, why aren’t we better at innovation? There are lots of examples out there and lots of advice. But in reality innovation challenges differ from one organization to another. Just as each innovation is unique, so is an organization’s culture. The process of innovation that works in one will not necessarily work in another.
As Peter Drucker once said, “Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you’ve got.”
Therefore, we must consider the unique cultures of our own organizations, examine them, benchmark ourselves against the best innovators and identify what we need to change in order to create a culture of innovation that is our own.
Here are some corporate stories that provide powerful lessons about innovation:
How Tata Motors Made Innovation a Powerful Business Strategy
In India, Ratan Tata had a vision of creating a car that would be affordable by the average Indian. He figured that this meant the car would have to sell for one Lakh. This equals 100,000 rupees which is about $2,500. When he first announced this “seemingly unreasonable challenge” he received a note from Suzuki Motors chief, Osaka Suzuki, who told him “Tata will not be able to make a one-lakh car”. Well, Mr. Suzuki was wrong. That car is being released this year and it’s called the Nano.
To illustrate its impact on the Indian marketplace, when the car was launched on the company’s website on March 23 of this year, their system crashed because they had more than 40 million hits in a day.
What is notable is the impact the Nano has had on innovation in the global automotive marketplace. One may question why other auto manufacturers didn’t introduce a similar car and why they are not investigating its launch. The US auto industry has no close equivalent. However, as soon as the Nano was announced, Skoda Auto India, a Volkswagen group company, announced that it was advancing its launch date for its small cars to 2011. Suzuki has already launched it Maruti which is priced at double the cost of a Nano but still stands as the 2nd most inexpensive car in any marketplace. Tata is now working on a European version of the Nano to be launched by 2011.
And interestingly, Tata has not done any marketing. There have been so many news stories out there that all of the publicity has been for free. Nano has now entered our general vocabulary and is a term used for small and short (i.e.; nano holidays, nano apartments, etc.)
The culture of innovation within Tata Motors is driven in a number of different ways:
- Innovation is one of their strategies
- They focus on cost without sacrificing technology or quality.
- Staff are constantly given “unreasonable challenges” and asked to transform these into realities
- They avoid expensive solutions that could burden their customers
- There is easy access to management. For example, there was a 500 member team working on the Nano. Whenever Mr Tata walked into one of the team meetings, even the most junior engineer could talk to him. This is true throughout the organization.
- They set-up cross-functional teams for advanced research projects.
Dr. Sumantran, Executive Director, Passenger Car Business unit said; “for every creative idea, you get a lot of others that may not work.”
Honda is Using Innovation to Survive and Thrive
It is interesting that there are so many companies that have slashed all innovation projects because of a world economic slowdown. What will their future bring? Honda, on the other hand, is spending money on innovation so they can come out of the current economics with new products, ready to launch.
At the beginning of 2009 Honda announced a venture to develop lithium-ion batteries. Takeo Fukui, President and CEO, said that since hybrid cars are heading for the mass market he believes accelerating the development of advanced environmental technology is especially necessary in the severe business conditions we are seeing. He believes Lithium-ion batteries are significant for hybrid cars to become common in the future. Despite that fact, Honda has slashed its profit forecast by more than half for this year, its third cut as the global economic crisis takes a heavier toll on the auto industry.
The culture of innovation at Honda is supported through:
- Kaizen management techniques
- Research and development innovation centres
- Continuous improvement of production and waste management
- They maintain a single citizen concept. When you walk into a Honda facility you’ll notice that everyone will be wearing white coats. There are no private offices and everyone is an associate of the company.
- They have innovation circles that any employee can join. They focus on cost-cutting and efficiency improvement opportunities through teamwork.
For Honda, innovation is used in different ways throughout the organization to develop new products and generate cost savings and efficiencies.
At BMW Leadership Leads Innovation across the Organization
BMW’s continued success is its strategic focus on developing customer-friendly innovations, coupled with an approach to innovation management that is unique within the motor industry. One of their keys is a constant focus on the culture of innovation – making professional innovative processes a key strategic and cultural constituent of every area of the company.
This focus on culture is a guiding principle within BMW. They believe that if a company knows what it stands for and what are its strengths, it can more easily develop and implement a clear strategy. They believe that to be innovative, it is necessary to give up the idea that a company can do everything equally well. On the contrary, it seems more likely that a company that tries to do everything equally well will be unable to make full use of its strengths.
The BMW Group knows what its strengths are. They see themselves as best in the Premium level of autos and therefore have not ventured into lower classes of autos. They are the only auto manufacturer to operate exclusively in the premium segment of the market. Their brands include the BMW, Mini and Rolls Royce. BMW ensures that all departments are focussed on innovation – not in all areas. While some organizations focus only on manufacturing, they also focus innovation on every department within the organization including sales and marketing, human resources and product development. They also recognize that the results achieved by a company in the past are only of limited importance. The innovativeness of a company therefore always depends on future business development (which is not yet known), potential, expected figures or in other words, specific ideas about future prospects.
Just about everyone working for the Bavarian automaker — from the factory floor to the design studios to the marketing department — is encouraged to speak out. Ideas bubble up freely, and there is never a penalty for proposing a new way of doing things, no matter how outlandish.
BMW’s management structure is flat, flexible, entrepreneurial — and fast. This helps innovations to be developed quickly to improve internal processes and for the marketplace.
A Culture of Innovation Permeates Nokia
Nokia has a 37% share of the global cell-phone market and more than twice that of its closest competitor, Motorola.
Nokia is obsessive about consumer research. They harness customers and partners in the service of innovation. They allow users to share and rate applications they have created such as screen-savers or games. And over the past year, Nokia designers have travelled to the developing world to ask users to sketch their own dream cell phones. By year-end, more than half the world’s population is expected to live in urban areas so to exploit this mega-trend Nokia’s researchers visited shantytowns in Mumbai, Rio de Janeiro and Accra in Ghana.
Some critical elements in their innovation approach are:
- There is no magic formula – innovators have an appetite to experiment, to try new things and to iterate concepts.
- There is a need to accept failure and an understanding that some overlapping work will take place in the organization. They create small teams that extend across the organization.
- Systems approach – Nokia believes that radical innovation goes beyond just planning features or standalone products, teams consider the context and the eco-systems in which the overall solution delivers benefits for various parts of the value chain.
- Sustainability – they don’t limit their opportunities to just a one-off. They ensure that what they make is sustainable in the long term.
- Agility – they adapt, think of what it takes for their innovation to remain relevant over time.
- Innovation culture – they don’t attempt to guide or drive everything from the top down. A lot of decisions occur deep in the organization. They don’t have a separate process or an incentive structure for innovation. It’s just part of the work that people do.
- Forward looking view – they have a vision, look at trends across their value chain and include the competitive environment.
- They embrace strategic thinking and articulate mission and guiding principles.
- They make their innovation ideas available to everyone in the organization and this stimulus creates discussions.
Apple Challenges the Status Quo
In Apple, innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea or because they just thought of something that shoots holes in how someone else has been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks they have figured out the coolest new thing ever and who wants to know what other people think of their ideas. It’s in their DNA. It’s imbedded in their culture.
Four key elements of Apple’s design process:
- Pixel perfect mock-ups: Removes ambiguity from the beginning
- 10 to 3 to 1: Start with 10 entirely different mock-ups for any feature, select three to spend months on designing, and then end up with one.
- Paired design meetings: They hold 2 meetings each week throughout the process: one for unconstrained brainstorming and the other for production details.
- Pony meeting: Everyone has their wants; like kids all want a pony. So they present the best options from the paired design meetings to the leadership team to select their “ponies.”
Apple combines designers and engineers. They have two meetings. One to brainstorm, without constraints, what is necessary to move from innovation to reality. The other meeting is more of a production meeting where they discuss what is actually necessary to make it happen.
Some of the key elements in Apple’s approach to innovation:
- Think differently
- Enable a product-oriented culture instead of one driven by technology or money
- Always make a profit to keep making good products
- Hire people who want to make the best things in the world
- Innovation comes from passionate, dedicated people
- Focus on where you think you can make a significant contribution
- Own and control the primary technology in your products
Google Allows Time for Innovation
Google ensures their culture of innovation remains strong by giving their engineers time to invent. Give your employees more time to think, and you’ll get better ideas. They aren’t afraid to take calculated risks and have developed a very flat organizational structure to foster innovation. All employees have easy access to face-time with senior management to present their ideas.
Google’s engineering staff is encouraged to spend 20% of their time working on projects they feel passionate about. That philosophy is credited with generating such services as Google News, Google Suggest, adSense for Content (online ads triggered by the content on the page) and Orkut, a powerful social-networking site.
One critical element in Google’s approach to innovation is their desire to get new products up quickly as a prototype so that customers can play with them, feel them and provide feedback on them. In this way they can quickly improve them, re-launch them and make them great. If they wait until it’s perfect before launching their experience has shown they will lose market share, increase development costs and in some cases, never get to launch a product that the customer actually wants. Striving for perfection before releasing an innovation can be a killer.
Organizations that have a culture which supports innovation are often customer focused, value-driven and strategic. Their committed leaders are willing to accept risk to create environments that support innovation and drive it forward, focusing on long term strategies for success rather than short term results. They ensure that their operating strategies are developed through interactions with their employees, customers, partners, vendors, suppliers and consultants. They review market trends and identify, through benchmarking, what is required to out-perform their competition.
Each of the organizations that I described has a very different culture of innovation or approach to it. When benchmarking against these and others, you must not expect to learn and transplant their approach but rather, to consider your unique culture, structure, products and services, strengths and weaknesses and of course, your strategic imperatives.