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When
you hear the word innovation,
what comes to mind
first? New products?
Perhaps
another way of
creating new growth is
by addressing the
issues that surround
your products? By
shifting the approach
from product
innovation to, what
Adrian Slywotzky
calls, demand
innovation.
To
highlight this,
Slywotzky offers the
example of Cardinal
Health, a drug
wholesaler. For
Cardinal, demand
innovation meant
helping hospitals (its
customers) effectively
manage the three
troubling trends
dogging them—cost
pressures, talent
shortages, and poor
information
management.
So
the company began
offering logistics
management services
for hospital
pharmacies, and soon,
was providing complete
pharmacy management
services. Cardinal’s
results say it all—
double-digit growth in
revenues and operating
profits and more than
$25 billion in market
value creation over the past five years.
There
are many ways in which
a company can
innovate. New products
and services happen to
be just one of them. I
can list 12 more, but
that would be focusing
on what can be done.
An equally important
issue, one that I
often see
organisations wrestle
with, is how.
Read ahead to know of
the four key
organisational
practices that can be
holding you back from
achieving your
innovative potential.
Have
you hired a Chief
Innovation Officer?
Apple
Computer tops the list
of the Top 20
innovative companies
in the world,
according to a recent
survey (more on the
survey later). Who do
you think can be
called the ‘Chief
Innovation Officer’
(CIO) at Apple? Of
course, Steve Jobs
himself. Jobs has not
delegated the
responsibility of
‘innovation’ to
anybody.
As
a recent article about
Jobs notes, “He is
one of the technology
world's great
innovators but not
because he's an
engineer or a
programmer. He doesn't
have an M.B.A. either.
He doesn't even have a
college degree. (He
dropped out of Reed
College after one
semester.) Jobs has a
great native sense of
design and a knack for
hiring geniuses, but
above all, what he has
is a willingness to be
a pain in the neck
about what matters
most to him.”
And what matters the
most to Jobs is
innovation.
Only
one person in the
organisation can be
that pain. And that is
the head honcho. The
CEO/chairman is the
CIO. If it is anybody
else, well, innovation
is for the annual
reports.
Are
you rejecting the
winners?
The first thing
that most
organisations do these
days is to set up a
committee to evaluate
new ideas of
employees. Most of
these ideas are
rejected. But what
about the possibility
of winners getting
buried among these
rejects?
New
ideas will be chancy.
Some will work out.
Some will not. As
GE’s Jeffrey Immelt
says, “You are not
going to stick around
in this place and not
take bets.” What’s
the point if a
company, in the desire
to pick up only
winners, loses out on
potential
blockbusters. Google
is an exception. Its
credo is: ‘We're
going to try things,
and some aren't going
to work. That's okay.
If it doesn't work,
we'll move on.’ But,
selection of
successful ideas can
be done in a fairly
structured manner.
Successful
entrepreneur and,
equally successful,
venture capitalist
Brad Feld recently
noted about his
investment in Feedburner,
a company providing
RSS feeds. “One of
my premises was that
traditional media
would rapidly adopt
RSS for content
distribution
and…would
aggressively look to
outsource part (or
all) of the feed
management
activities.”
A
potential investor was
less convinced and
talked to a number of
his traditional media
friends. The
unambiguous reaction
was: “No way –
we’d never outsource
that – what that RSS
thing is.” Of
course, a year later,
it’s a different
story. Everybody that
this potential
investor had talked
to, have outsourced
their feed management
to FeedBurner.
It
is very natural, says
Feld, to want
validation that the
product will be
adopted. He instead
looks for “analogous
situations in
older markets
(especially ones that
I have experience
with), use my
instincts, and think
hard about how things
might play out. I
recognise – a priori
– that I could be
wrong and I’m
willing to take that
chance.”
Innovative
ideas are everywhere!
Good
ideas can be picked up
from everywhere. Jack
Welch is a passionate
advocate of this
approach. So is Tom
Peters. As I have
written earlier, the
myth of focus (that we
have been brought up
on) prevents us from
seeing things. That
is, seeing things other
than the ones we want
to see.
At
Anoova Consulting, we
recently helped a
client define and
develop a new
business, which is
closely related to the
main business of the
firm. But more
importantly, it feeds
into their core
business. As much as I
would like to claim it
to be an original
idea, it wasn’t. We
picked up the basic
model from another
industry, and adapted
it to the context of
our client’s
business. And voila,
you have a new line of
business, profitable
from day one, and
contributing to more
revenues for the
primary business!
It
is not about how
somebody else is doing
something, but how we
can use their approach
for our own benefit.
Good ideas are
everywhere, if only we
would care to look.
And learn.
Potential
for innovation exists
in everything you do
As
I mentioned earlier,
other than new product
development, there can
be 12 ways of
innovating. These
innovations can be
applied in anything
that you are doing.
Sachetisation of the
Indian FMCG market is
one example.
Or
take another instance.
Healthy fast-food was
regarded an oxymoron
till Subway changed
the tack in the late
1990s by highlighting
that seven of its subs
had six grams (or
less) of fat.
In
a lucky break in 2000,
the chain chose to
showcase Jared Fogle,
who had shed 245
pounds by eating
exclusively at Subway.
As a recent Fortune
article points out,
”This was dumb
luck—Fogle came to
Subway, not the other
way around—and there
was internal
resistance to the
idea.”
The
article adds that
“Subway went ahead,
though, and the result
‘was like lightning
striking’. Fogle has
become a brand icon,
and sales surged from
$5.17 billion in 2001
to $7.75 billion last
year. Wannabe
franchisees came
running. Between 2001
and August 2005, the
number of US Subway
shops increased 43 per
cent, to more than
19,100 (about 5,000
more than
McDonald's).”
The icing on the cake,
“Harvard even
invited Subway's icon
to address a forum on
obesity in 2003. When
Jared speaks, Harvard
listens: Now that's
brand power.”
Innovation
is possible.
Everywhere.
How
dissatisfied are you?
According
to a recent survey
among 940 senior
executives in 68
countries by The
Boston Consulting
Group (BCG), almost 74
per cent of the
executives surveyed
claimed that their
companies would
increase spending on
innovation this year.
Only 49 per cent said
they were satisfied
with the financial
returns on their
investments to date.
By
definition, innovation
is about the
‘new’. The
‘new’ too, after a
point, becomes old.
The innovation of
today becomes the
formula of tomorrow.
In the case of
Cardinal Health,
Cardinal admits that
the formula to reach
$100 billion will not
be the same one that
got it to $50 billion.
But the most important
issue is that the
mantra of innovation,
which is often not
passed on to
executives by its
practitioners, is
learnt the hard way.
It often involves
changing habits built
over a lifetime of
managing and leading.
Changing habits of the
mind.
Are
you also among the 51
per cent dissatisfied
with their investments
on innovation. If
so, what are you doing
about it?
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