Pick Your Best People to Lead Innovation

by Paul Sloane

Many businesses make the mistake of giving innovation projects to junior executives. It seems natural to hand innovation opportunities to enthusiastic and promising upstarts. But generally it is the experienced heavyweights who can overcome all the process and political obstacles that will occur.

In September 1999 Lou Gerstner, CEO of IBM, read a line buried deep in a report which said that current quarter pressures had forced a business unit to cut costs by stopping efforts in a promising new area. Gerstner was incensed and wanted to find out how often this happened. He asked J. Bruce Harreld, IBM's senior VP in charge of Strategy to find out. Harreld found a similar pattern in at least 22 other cases. IBM had plenty of new ideas but it had a remarkably hard time turning those ideas into businesses. IBM had produced many crucial inventions, such as the relational database and the router, then watched while others, such as Oracle and Cisco built huge companies around them.

Harreld investigated the causes and found that IBM rewarded short-term results and was reluctant to devote management attention and resources to rolling the dice. IBM's leaders did not spend much time on new businesses and they did not tap their "A-team" of executives to run them. "We were relegating this to the most inexperienced people," said Herrald. "We were not putting the best and brightest talent on this." (Quotes from FastCompany magazine, March 2005 issue)

Gerstner and Harreld reversed this approach. They deliberately put their most experienced and talented executives in charge of Emerging Business Opportunities (EBOs). Their mission was to find areas that are new to IBM that can yield profitable billion-dollar-plus businesses in five to seven years. The program has been a remarkable success. Between 2000 and 2005 IBM launched 25 EBOs. Three failed and were closed down but the remaining 22 produced annual revenues of over $15 billion and growth of over 40% per year.

More importantly than their revenue impact, the EBOs helped change IBM's culture. "We've become more willing to experiment, more willing to accept failure, learn from it and move on. Now being an EBO leader is a really desirable job at IBM," says Harreld.

The lesson from IBM is clear. If you want to change the culture of an organisation so that it values innovation and new business start-ups then get your most senior and best people involved in these activities. Don't delegate it to lower level staff and hope for the best.


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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Failure - The Mother of Innovation

by Paul Sloane

In the 1950s the Jacuzzi brothers invented a whirlpool bath to treat people with arthritis. Although the product worked, it was a sales flop. Very few people in the target market, sufferers from arthritis, could afford the expensive bath. So the idea languished until they tried relaunching the same product for a different market - as a luxury item for the wealthy. It became a big success.

Very often the best way to test an idea is not to analyze it but to try it. The organization that implements lots of ideas will most likely have many failures but the chances are, it will reap some mighty successes too. By trying numerous initiatives we improve our chances that one of them will be a star. As Tom Kelley of IDEO puts it:


"Fail often to succeed sooner."


Honda Motor Company entered the US market in 1959 with its range of low-powered motorcycles. It endured failure after failure as it learned the hard way that little motorcycles popular in the Tokyo suburbs were not well received on the wide open roads of the USA. They eventually brought out a range of high powered bikes that became very popular. Soichiro Honda, the founder of Honda said:


"Many people dream of success. Success can only be achieved through repeated failure and introspection. Success represents the one percent of your work that results from the 99 percent that is called failure."


What makes Silicon Valley so successful as the engine of high-tech growth? It is the Darwinian process of failure. Author Mike Malone puts it like this:


"Outsiders think of Silicon Valley as a success, but it is, in truth, a graveyard. Failure is Silicon Valley's greatest strength. Every failed product or enterprise is a lesson stored in the collective memory. We don't stigmatize failure; we admire it. Venture Capitalists like to see a little failure in the resumes of entrepreneurs."


In order to develop the concept of the benefits of failure, Penn State University has a course for engineering students called Failure 101. The students have to take risks and do experiments. The more failures they have, the sooner they can get an A grade!

Many great successes started out as failures. Columbus failed when he set out to find a new route to India. He found America instead (and because he thought it was India he called the natives Indians). Champagne was invented by a monk called Dom Perignon when a bottle of wine accidentally had a secondary fermentation. 3M invented glue that was a failure - it did not stick. But it became the basis for the Post-it note, which was a huge success.

Scientists at Pfizer tested a new drug called Viagra, to relieve high blood pressure. Men in the test group reported that it was a failure at stopping high blood pressure but it had one beneficial side effect. Pfizer, the manufacturers, investigated the side effect and found that the drug had a dramatic effect on men's sexual vigor. Viagra became one of the most successful failures of all time.


Failure as a stepping stone

Even if the failure does not lead directly to a success it can be seen as a step along the way. Edison's attitude to "failure" is salutary. When asked why so many of his experiments failed he explained that they were not failures. Each time he had discovered a method that did not work.

Tom Watson Jr. was the legendary President of IBM who led them through the high-growth years when they were the most admired company in America. He encouraged what he called 'wild ducks', people with unconventional and disruptive ideas. On one occasion a Vice President who had lost the corporation $10 million on an experiment which failed was called to Watson's office. The VP was expecting to be fired so he took his letter of resignation with him and presented it. Watson refused to accept it. "Why would we want to lose you?" he said. "We've just given you a $10 million education."

Another boss who welcomes failure is Richard Branson, founder of the Virgin Group. According to his publisher, John Brown, "The secret of (Branson's) success is his failures. He keeps opening things and a good many of them fail but he doesn't care. He keeps on going."

In 1985 Coca Cola experimented by introducing "New Coke" - a new flavor to replace "Classic Coke." It had fared well in consumer tests but it was a marketing disaster and flopped. Coca Cola had to eat humble pie and reintroduce Classic Coke. Did this great disaster do any long-term harm to Coca Cola? Probably not. Did the senior managers and marketing professionals responsible for this failure all get fired? No, they did not. It was an experiment that failed but Coca Cola survived, learned and prospered. As the great philosopher Nietzsche put it:


"That which does not kill me makes me stronger."


Bill Gates stood down as CEO of Microsoft so that he could focus more time and energy on strategic leadership of the company's development efforts. He took intense interest in Microsoft Research, the 600 person think-tank he set up in the early 1990s to push the envelope of software technology, user-interface design, speech recognition and computer graphics. As one of his colleagues put it, "Bill isn't afraid of taking long-term chances. He understands that you have to try everything, because the real secret to innovation is failing fast."


Conclusion

The innovative leader encourages a culture of experimentation. You must teach people that each failure is a step along the road to success. To be truly agile, you must give people the freedom to innovate, the freedom to experiment, the freedom to succeed. That means you must give them the freedom to fail, too.


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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Playing at Strategy

Top Left: January 2010 edition of Harvard Business Review, Top right: Michael G. Jacobides

by Kevin Roberts

"The play's the thing" may be from Hamlet but the subject is from Michael Jacobides, an associate professor of strategic and international management at the London Business School who appears in the new issue of Harvard Business Review with an article Strategy Tools for a Shifting Landscape.

His starting point is the breathtaking speed at which customers and competitors transform - and the turbulence this creates. Traditional strategy frameworks aren't working, he says - they simplify rather than taking account of complexity and changing boundaries; they produce "still pictures of the future." Jacobides puts forward the playscript - a narrative in which "words are more powerful and flexible than value curves." Playscripts "consider how a company could succeed by reinventing its role as reality changes." His method involves characters and their roles, storylines and connections, links and rules, plots and subplots. More fun than the usual approach to strategy planning!

Jacobides' HBR article applies the playscript method to the challenges of the pharmaceutical industry; looks at how Ikea future proofed itself, how IBM reinvented itself, how Marvel Entertainment turned itself around - and this is the part I especially like - how Saatchi & Saatchi changed the very basis of its competition via Lovemarks.

The article cites the company's revival after its near collapse in the mid 1990s. Noting that "companies can change strategies by changing their roles," Jacobides writes that "Saatchi & Saatchi didn't just change its value proposition. It transformed itself into a strategic link between clients and their customers." By "writing a new playscript" Lovemarks shifted Saatchi & Saatchi from being suppliers to strategic partners; created an industry wide concept; cemented connections to clients; and increased the number of pitchless wins.

For me, it really was a case of "to be or not to be."


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Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Should We Revive Dying Brands and Companies?

Or are we better off creating new ones? Does "The Circle Of Life" apply here?

by Idris Mootee

We make assumptions that it is the management team responsibility to extend or prolong the life of any companies even they have fewer reasons to exist. Management is different from practicing medicine, although sometimes I am called the strategy doctor. Instead of wasting resources and energy to save a company or a brand, should we just take whatever assets and redeploy them? In life, the cycle of life is the natural order of things.

Although we do live longer now, death is inevitable. Technology is the same. Should corporations be the same? Saab is at the end of life. Should it deserve a second life? Apple had its near death experiences and came back stronger. Many argued at that time Apple should be sold to Sony. Wang Computers thought they were beating IBM and could become the next IBM. IBM was also close to disappearing from the scene just 15 years ago.

Management consultants usually have a keen preference for prolonging corporate life. I guess to keep them spending. The pharma companies don't want patients to die, just stay sick. Why do we care about extending the life of large companies or big brands? Is it because they can afford our fees? Or we have a love for them. Yes, build to last. Business schools love transformation stories because they make great business cases, and portray CEOs as heroes. For many large companies, transformation and renewal is the only source of survival.

The world of fashion has a lot of comeback stories, although they are generally not sophisticated from a management capability perspectives compared to the GEs of the world. Think how Burberry, Adidas, Dior, and Abercrombie & Fitch all have found prosperity in their new life. Many business school case studies have been written about of how brands were "brought back from the graveyard." Unfortunately, however, the lessons are often so idiosyncratic. There 100 times more cases where companies tried revitalizing old brands by hiring new CMOs and advertising agencies and throwing big money towards advertising, hoping to rebuild a great brand even when there wasn't a relevant product or service or a sound business model behind it.

For those fashion companies, it is about hiring the right designer (call Tom Ford or Marc Jacob) and for other businesses, whom do you call? The designer is often viewed as the critical component to reengineering a brand, and total attention must be paid to the brand in an effort to return to its essence and reason for being successful in the first place. It used to be case that you could recruit a top CMO and things will work out. This is not working anymore. You need a master strategist, a great storyteller and a change agent, all in one person (call Indra Nooyi or Steve Jobs). In fashion, you go back to the essence of the brand. In other business what do you do? How do you rediscover your core or find a new core?

Successful transformation and re-invention rests on two major premises: first, that our time is characterized by a rare confluence of new behavior and economic disruption, and second, that the "new global reality" is turning toward a "whole new emphasis on innovation". I was speaking to a group of graduating Ivey MBAs on global strategy. You can check them out at slideshare below:

Ivey Lecture Global Strategy Short

View more documents from Idris Mootee.

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Idris Mootee is the CEO of idea couture, a strategic innovation and experience design firm. He is the author of four books, tens of published articles, and a frequent speaker at business conferences and executive retreats.

Optimizing Innovation - Rajendra Seksaria of AT&T

by Braden Kelley

We are happy to bring you some of the key points and insights from Rajendra Seksaria's talk at the Optimizing Innovation Conference, which was held October 21-22, 2009 in New York City.

Rajendra Seksaria, AVP, Business & Process Integration at AT&T spoke about successfully managing your innovation process. Before AT&T, Rajendra spent time with IBM Consulting during the early days:

• Discovering and developing staff with creative minds in order to capitalize on their knowledge and optimizing the innovation process


• Important to create an environment where you can harness the best people (inside and outside)


• Streamlining process and minimizing risk


• Databases are not the key to innovation - connecting people is

"Many people cannot make the mental switch from protecting an existing business to creating a new business."


But at the same time, you also have to be careful not to abandon a dying business too early or you may not have the money to fund the new thing.

Interesting facts:

• IBM gets more patents than the next eight companies combined


• IBM introduced a way for patent holders to get a percentage of any licensing revenues that their patents might get

AT&T's innovative leaders program is run out of the Chairman's office and this program allows selected individuals to have visibility to other parts of the organization and to people in other parts of the organization that they would not otherwise have.

Rajendra gave an example of a situation where AT&T was 12 months slower in cycle time than our competition (42 vs. 30). But, they determined that instead of trying to go from 42 months to 20 months on a 2 year improvement program, they had to try and go from 42 months to 10 months because they needed to try and not just improve, but to vault ahead of the competition.


Are you setting the right goal?


Are you setting the goal in relation to the competition or just in terms of what you think you can do?


AT&T Corporate Innovation Process

• We have built something we think is sustainable. An innovation managemen system called "innovation pipeline"


• When you join the system you are given $10,000 of innovation money that you can invest - values go up and down


• The top 10-15 votes are presented to senior execs


• When the product comes to market, the people who submitted the idea, participated, invested, etc. receive some kind of reward


• First there is sme social innovation, then a pitch, then a project


• But, this is not the only process - this is a corporate-wide process. Divisions also have their own ideas processes for improving things in the division

"Learn from your competitors mistakes"


While focusing on creating new revenue is important, don't ignore cost savings ideas. How much new business would you have to sell to make the same amount of the savings?

Example: a $10 Million annual savings on revenue leakages from billing, cost only $40,000 to get, and that's pure profit. At our margins, it would take something like $200 Million in new business to make that much profit.


Also, think about your strengths and what you need to do versus what you can get others to do.

Example: The group chosen to build the IBM PC, chose to think about it in terms of just assembling computers rather than building everything. As a result it took only 9 months instead of 3 years to get to market.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Smarter Cities - Smarter Planet

by Hutch Carpenter

IBM recently launched its Smarter Cities initiative. Part of its overall SmarterPlanet project, Smarter Cities is an effort to find solutions to the problems that will occur due to our ever-increasing population growth in urban centers around the world:


"In 1900, only 13% of the world's population lived in cities. By 2050, that number will have risen to 70%. We are adding the equivalent of seven New Yorks to the planet every year.

This unprecedented urbanization is both an emblem of our economic and societal progress - especially for the world's emerging nations - and a huge strain on the planet's infrastructure. It's a challenge felt urgently by mayors, heads of economic development, school administrators, police chiefs and other civic leaders."


IBM has the smarts and global heft to be a major voice in innovating solutions for the problems that urban population growth will bring on. And of course, it doesn’t hurt that there will be government expenditures to make sure we've got the infrastructure ready.

IBM CEO Sam Palmisano laid out three fundamental changes to global urban areas:

1. Our world is becoming instrumented: Sensors and devices are coming down in cost, and increasing in functionality, giving us "for the first time ever, real-time instrumentation of a wide range of the world's systems"


2. Our world is becoming interconnected: With the rise of devices with these sensors, "systems and objects can now 'speak' to one another"


3. All things are becoming intelligent: Better sensors, increased computing power and more information from interconnection mean that "intelligence can be translated into action, making our systems, processes and infrastructures more efficient, more productive and responsive-in a word, smarter."

The sensors thing is interesting. I've heard both Tim O'Reilly and Paul Saffo talk about sensors as the big area of technology growth and opportunity.

As part of this initiative, IBM (in conjunction with Spigit) is running a series of prediction markets that you can participate in. The objective is to tap the collective wisdom of people around the world. Here are the prediction markets for which they're seeking your perspectives:

Education

• Which approach will be most effective in enabling better education outcome within a major city? (link)


• In order to increase the proportion of the population completing high school by 10% over the next five years; major cities will begin transforming education in what way (link)

Transportation

• Which company offers the best portfolio regarding Smarter Transportation? (link)


• In a major city, what will need to be improved in order to make transportation more efficient? (link)


• What enhancement can a major city make over the next year to be a global technology leader in public transportation? (link)


• What transportation enhancement will a major city, like New York, need to make to relieve its traffic congestion? (link)

Utilities

• Which of the following will be the most important to the rapid deployment and adoption of Smart Grids? (link)


• Over the next five years, what changes should a major city first implement to reduce energy waste and use its resources efficiently? (link)


• Which of the following will reduce household energy consumption the most within a major city like New York? (link)


• Which of the following should be a primary objective for a major city over the next five years? (link)

Government Services

• The current economic crisis will change plans for high priority projects in a major city in which way over the next few years? (link)


• If you were a mayor of a major city, which method would you use to assess the needs of your city, the business community and your citizens? (link)


• In 2011, what will be the primary method for citizens to communicate with their smarter city governments? (link)


• What immediate step should a major city government take over the next year to emerge as a leader in e-governance? (link)

Public Safety

• Over the next five years, what transformation will large cities make to their public safety systems to reduce the physical / personal crime rate against people, property, and infrastructure by half (50%)? (link)


• If a large city wants to improve its overall public safety position (i.e. reducing traffic fatalities, decreasing gang violence, improving emergency response capabilities) in which public safety area (or related city sub-system) should it target investment over the next year? (link)

Healthcare

• Which of the following sub-system improvement will be most effective in providing immediate benefit to healthcare delivery for citizens in a leading smarter city? (link)


• Over the next five years, what will major city hospitals do to increase efficiency and deliver better quality healthcare to its citizens? (link)

Other

• What are the top challenges large cities (i.e. populations over 5M) within emerging markets will face within the next five years? (link)


• What region(s) will recover most quickly from the current global economic crisis? (link)

If addressing these issues is something that interests you, check out IBM's SmarterCities Predictive Idea Markets.

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Hutch Carpenter is the Director of Marketing at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

Wipro Makes a Necessary Move

Wipro is coming to America, and Romania, and Egypt.

It used to be that Wipro was an Indian company employing mostly Indians in India and that when they did an outsourcing deal with you, they would offshore the work to India.

Times are changing though. An increasing number of potential outsourcing clients are becoming disillusioned with offshoring (especially for software development work). The reasons can vary, but include:

• Development overhead that wipes out most of the financial gains


• Finding that senior development staff is better suited to coding than directing Indian subcontractors


• Time zone hassles


• Language barriers


• Employee retention issues

I can't say that I think this is a bold or innovative move. This is something that Wipro has to do or they will not be able to compete with IBM, CSC, Accenture, HP/EDS, etc.

While doing a process analysis for a large UK-based financial and healthcare software company I personally witnessed some of the drawbacks and the company's reactions to them.

The fact is that as more commercial and internal software development moves to using agile methodologies, companies will require any external partners to be in the same country or even the same time zone or possibly even the same building.

This is one more proof point that the world is not as flat as people once thought. In this undulating world, success will come in part from differentiating between times when the world is flat and when it is round.

What do you think?

BiF-4 Insights - David Yaun - IBM

IBM's new core values:

• Dedication to every client's success


• Innovation that matters, for our company and for the world


• Trust and personal responsibility in all relationships

Global Innovation Outlook (GIO) program (similar to an innovation jam):

• Brainstorming around big societal issues


• 2-3 times per year at sites around the world


• Ideas were going global


• Innovation was becoming more open


• Have now run about 50 GIO's in 36 countries

Started with the question of:

What would happen if we took the five best scientists (IBM fellows) and five of the top, connected people from the consulting business and brought them together?

• Problem was that it wasn't open


• So we started inviting external people and opened it up


• We opened up our planning process


• Videos posted on the web


• Shame on us if we can't execute first

We took it to the Chairman:

• We estimated it would take 18-24 months to implement the idea


• The chairman asked if we could do it in five months


• Of course we stupidly said yes


• Chariman said that if we ever get comfortable while implementing it then we are probably doing it wrong

Executive response:

• "We already do this"


• "What you're proposing is very dangerous..."


• "Your guys are taking drugs"


• "I forbid you from talking to my customers"


• "If you must go ahead with this folly, my job will be to prevent you from embarassing the Chairman"

"Don't let your job desription define who you are or what you do."

For more information on the talk, go here.