Despite the growing recognition that innovation is the only sustainable source of growth, competitive advantage, and new wealth, an Arthur D. Little survey of 669 global company executives found fewer than 25 percent of the companies believe innovation performance is where it needs to be if they are to be successful in the competitive marketplace. Having tried an endless array of alternatives, company leaders are now accepting enterprise wide innovation as a key operational discipline, just as in the past they adopted the disciplines of quality, planning, and management.
Of course, innovation is not a new discipline in most organizations. But the old ways, even those that may have worked in the ’80s and ’90s, are no longer adequate. Firms across the board are engaged in exciting experiments to reinvent the way they create the future, because “business as usual” hasn’t produced the desired results.
Given the torrid pace of technological and global change, the commoditization of product lines and industries, and convergence of strategies, companies are literally having to reinvent how they accomplish the all-important task of “inventing the future.” Having examined numerous companies and their innovation approaches for a forthcoming book, I believe that, winning firms will embrace the following four essential principles of managing innovation in the new century.
Principle No.1 – A company’s approach to innovation must be comprehensive. One day in l977, an engineer at Canon put a hot soldering iron a little too close to an ink-filled syringe. The heat boiled a tiny amount of ink in the needle, expanding it into a gas, which pushed ink out the tip of the needle. The result of this accident was Canon’s breakthrough bubble jet printing technology.
At Pfizer Pharmaceuticals, scientists attempting to produce a drug that would stimulate receptors in the human heart ended up stimulating receptors elsewhere in the human anatomy, giving rise to the impotence wonder drug Viagra. NutraSweet, the artificial sweetener, was discovered when a research chemist working on an ulcer treatment, licked his finger to pick up a piece of paper and noticed the astonishingly sweet taste.
While spending millions and even billions of dollars annually on research, most companies innovation successes come about primarily by accident. And while serendipity will always play a role in innovation, most companies approach their innovation process in a piecemeal, haphazard fashion that is anything but comprehensive. This can backfire, as Gillette discovered.
Gillette powered through the previous decade largely on the strength of a breakthrough product: Sensor. Introduced in l990, the new shaving system kept imitators at bay with no fewer than 29 patents and men from Jakarta to Peoria to Paris raved about the closeness of the shave. Despite selling at a hefty price premium, Sensor outsold its nearest rival ten to one. Wisely wasting no time after Sensor’s launch, Gillette began development of Sensor’s offspring, Mach3, which was introduced in l998.
But Mach3, while a hit in North America, did not have the same impact on revenue growth or stock price for Gillette. The super-premium product sold poorly in financially depressed Asian countries, growth stalled, and suddenly Gillette was being mentioned as a takeover target. Formerly laudatory Wall Street analysts began focusing on Gillette’s heretofore hidden weaknesses:… inertia, inefficiency, mismanaged inventories and receivables, a Golbergian corporate structure cobbled together over years of acquisitions, it underperforming divisions.
The lesson of Gillette’s sudden reversal of fortune is this: while breakthroughs like Sensor are beneficial, innovation must be promulgated in every area of the firm. Today, the practice of innovation is generally similar to how companies approached quality in the early 1980s. In those days, quality was a department – products were inspected before they were shipped. Now, quality is the responsibility of everyone in the organization. It has become systematized: “It’s the way we do business around here.” Today innovation is still confined to a few departments – primarily R&D or marketing. New ideas are almost always directed from the top down, rather than emerging from the bottom up, from suppliers, or from customers. But we are rapidly entering an era in which innovation, by necessity, must become everyone’s responsibility.
To produce ongoing results, a small but growing number of firms are making innovation a
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