CHAPTER 1

The Innovative Organization

When the DuPont Center for Creativity and Innovation was created, we needed amodel on which to structure our offerings. Having been a manager of research anddevelopment for some 18 years, I drew from my personal experience about theenvironmental factors that help innovation and the ones that can quash it. Sincethat time I have refined the model that appears in Figure 1-1. I call itthe "Innovation Competence Model," since the model works for most anyorganizational competence.

The Three Arenas of Innovation Competence

The three arenas of the competence model are education about theprinciples, tools, and techniques of creativity and innovation;application of these principles, tools, and techniques to solve criticalbusiness problems; and leadership in the workplace to enable innovation.Developing an internal competence for innovation requires a systemic approach inall three arenas.

It is a mistake to think that focus on one area alone will result in an increasein innovation competence. That's why training in creative thinking techniquesalone will be uniquely ineffective in improving innovation competence unlessthere is attention given to the remaining areas, application and leadership.Leaders who delegate innovation to the training department will always bedisappointed with the outcome, since innovation requires total commitment andleadership from the very top of the organization.

Since I first published this Innovation Competence Model (Blueprints forInnovation, New York: American Management Association, 1995), a number oforganizations have embraced it, most notably the 3M Company's Grass RootsInnovation Team (GRIT), whose members found they were already doing what themodel illustrated. As Kim Johnson, leader of the 3M GRIT. says, "The Model ofThe Innovative Organization gave structure and brought clarity to what we weredoing, and made it easier to communicate to upper levels of leadership. We werehappy to have independent confirmation of our programs and activities." If youare to use this book as a guide for innovation in your organization, werecommend you use the Innovation Competence Model as the unifying system fordefining and for describing each specific activity.

At the DuPont Center for Creativity and Innovation, we offered courses increative thinking (education) and facilitated problem solving workshops(application), but we naïvely assumed that leaders in a company known forinnovation would themselves know how to lead it. That was a mistake. Since thenwe have developed a strong focus on innovation leadership so that innovation cancontinue after the consultant goes home. We now know that total leadershipcommitment from the top is the single most important factor in a company's levelof innovation competence and its innovation success.

Innovation Leadership from the Top

In the first of several insightful articles on the short life span of some 20"centers of innovation" in major U.S. corporations—all of which werediscontinued ("Can Corporate Innovation Champions Survive?" ChemicalInnovation, November 2001, Vol. 31, No. 11, pp. 14-22; available atpubs.acs.org), Jack Hipple points out vividly the absolute requirementfor solid and consistent involvement and commitment from the topmost leadership.In addition he points out that the people who were the leaders of innovationcenters all differed significantly in creativity and personality style fromtheir superiors, whose continued support was necessary for survival. Theinnovation center leaders were tolerant of ambiguity and strongly preferred the"change the system" problem-solving style (see Chapter 12), whereas themanagers to whom they reported were intolerant of ambiguity and preferred theopposite "perfect the system" problem-solving style. This great dissimilaritywas not understood at the time and caused real problems in seeing value and incommunication. Hipple also points out that many of the physical facilities thatwere created and decorated with great excitement and fanfare are today computerrooms.

There are three important lessons:

* Topmost leadership support is absolutely vital.

* All parties need to truly value diverse problem-solving styles.

* Physical trappings are relatively unimportant.

In company after company, we have seen innovation delegated to lower-levelpeople, only to falter for lack of support from the top. If you want tounderstand the true value system of any organization, look at the budgetingprocess. Which functions get the money. Is there a budget for innovation?

Apple's iPod and iPhone: Models of Top Management Support

The story of the development of the iPod illustrates the effective and criticalrole that leadership from the top plays in innovation. Steve Jobs is one of themost iconic and celebrated leaders of innovation in the business world today.Since his return to the leadership of Apple in 1997, the company has beenreshaped and has created a continuing stream of high-impact, customer-focusedinnovations that Jobs was responsible for leading as CEO. Jobs has been sosuccessful at reinvigorating the innovation machine at Apple that it has beenrecognized by Business Week four years in a row (2005-2008) as theworld's number-one innovative company.

Nothing epitomizes Apple's resurgence and Jobs's ability to align hisorganization around a singular and powerful vision more than the iPod. As Jobssaid, "If ever there was a product that catalyzed Apple's reason for being, it'sthis [iPod], because it combines Apple's incredible technology base with Apple'slegendary ease of use with Apple's awesome design." When the iPod project waslaunched in early 2001, there were already portable digital music players on themarket, but they were difficult to use and poorly done. Jobs had a vision oftransforming the portable music listener's experience so that with the iPod"listening to music will never be the same again."

The first step was aligning the whole organization around the vision of creatinga high-capacity music player that could hold the user's complete music library.In addition, in the words of Steve Jobs (quoted in the Apple press release,October 23, 2001), "With iPod, Apple has invented a whole new category ofdigital music player that lets you put your entire music collection in yourpocket and listen to it wherever you go." The iPod changed the way people listedto music forever—and it went from project launch to full commercializationin less than a year, in time to hit the Christmas buying season. The goal oflaunching such an innovative product in that short a time could have been deemedimpossible by the team and created an insurmountable obstacle to gettingorganization buy-in. But Jobs and his team sensed that while the finalproduct would be a radical breakthrough, most of the key productcomponents needed for success were already available.

And today we have the iPhone 3G, again as a result of single-minded devotion andpersonal commitment from Jobs himself. When it comes to innovation, there isjust no substitute for passionate personal commitment from the very top of theorganization.

Innovation Choices During Hard Times

Top leaders with a narrow focus on immediate profits tend to make seriousmistakes regarding innovation when trying to cope during periods of seriouseconomic downturn. Innovation is the lifeline to the future; in fact, innovationhelps ensure there will be a future. However, many CEOs trim costs quickly bythrowing the lifeline overboard to reduce weight during the storm of pooreconomic conditions.

Innovative organizations make choices that favor innovation. Less innovativeorganizations make choices that favor the stock price. The stock price is atyrannical boss that will squeeze out innovation every time because of its focuson the near term. I have worked with a number of small privately held companiesstill run by their entrepreneurial founders. They don't worry about next week'sWall Street analysts' meeting; they make business decisions with theirgrandchildren's future in mind!

One of the best ways to understand the choices being made in your organizationis to examine the budget. It is in the budget that the true values of anyorganization are displayed for all to see. Which programs get the money? All toooften company leaders will fund an innovation project with just enough money tokeep it running at a low level so that it doesn't quite die.

Some of the worst mistakes that top managers can make in a downturn that willhurt innovation were described by Bruce Nussbaum in BusinessWeek,(online January 13, 2008). On the surface these actions seem fair enough,because they will save money in the short term, but at the sacrifice ofinnovation. I have abstracted them below:

1. Fire talent. Talent is too valuable to be treated as an expense. Itis our biggest competitive advantage when it comes to innovation.

2. Cutback on technology, particularly IT.

3. Reduce risk. Risk and innovation go hand in hand. There cannot beinnovation without risk. Leaders need to fight the temptation to fund onlysurefire ideas guaranteed not to fail, since these are also guaranteed to not bevery innovative. Once entrenched, risk aversion becomes a very difficultcultural norm to reverse.

4. Stop new product development. Companies that have their eye on thefuture continue to develop new products and have new offerings as soon as themarket turns around (witness the iPod), beating the pants off companies that didotherwise.

5. Replace growth-oriented CEOs with cost-cutting CEOs, who then replaceinnovation as a key strategy. Cost-cutting CEOs leave innovation behind: theycut costs from existing programs and may neglect to think ahead to what's comingnext and where they're going.

Recessions don't last forever. Winning companies usually emerge with somethingnew for the marketplace because they've kept working on it during the downturn.Apple worked on iTunes, iPod, and its retail stores during the last recessionand came out winning once growth returned.

Categories of Innovation: Finance, Process, Offerings, Delivery

Doblin, Inc., an "an innovation strategy firm" (www.doblin.com), hascategorized innovation into four major categories—Finance, Process,Offerings, and Delivery. Within these categories it has further subdividedinnovation into 10 types.

The major point here is that while most people think of innovation in terms ofproduct innovation, there are a great many more business opportunities forinnovation that can return greater profits with less work. For example, in theFinance category there is business model innovation, such as Dell'smade-to-order computer built specially for each customer, with payment inadvance. In the category of Delivery, another type of innovation is customerexperience—how customers feel when they do business with a company.Think about the loyalty that Nordstrom's customers feel (see sidebar) or thespecial feeling guests experience at a Ritz-Carlton hotel.

In the Process category, Spark Labs LLC of Tampa, Florida has innovated its in-house rapid new product development process, and it's paying off handsomely (seesidebar). Charles Armstrong, CEO, explains that Spark Labs LLC is a new productdevelopment machine whose focus is to create new products, brand them, and thensell the brands once they're successful.

Many companies spend small fortunes developing proprietary products andtechnology and then subsequently patenting them. Spark Labs has reinvented theprocess to maximize profits and minimize investment.

1. Solution-centric brainstorming sessions (radical ideas welcome)

2. Adaptation of three to five core concepts to market-feasible products

3. SWOT analysis of market landscape and research via Google Patents

4. Development of one product within a potentially proprietary space

5. Submission of provisional patent applications to the U.S. Patent andTrademark Office

6. Congruent brand development

7. Internal consumer testing following industry-recognized practices

8. Product revisions

9. Trademark filing

10. Brand extension to multiple consumer contact points (on- and offline)

11. Development of engaging, data-driven presentation to highlight the new brand

12. Pitches to various, prospective licensees/buyers for initial reaction

13. Performance of a full patent search, contingent upon licensee/buyer interest

14. Extension of the provisional patent application to full utility patentapplication (if necessary)

15. Sale of intellectual property and surrounding brand Here's how Armstrongexplains the process for Cord Cuffs:

In 12 months' time, we've taken a 'napkin concept' to market, and done so withvery, very little financial investment. Initially, we spent our time researchingthe market landscape and viable materials for our own cord management solution.Once we'd developed (and filed multiple provisional patent applications for) adesign that was cheap to make, yet high quality and effective, we shifted ourfocus to productization. Name, logo, packaging, Web site ... everything. Withthis, we then performed several rounds of consumer testing—each timerefining our materials so as to better communicate the product's utility whilesimultaneously forming an emotional bond with the consumer via branding. Onceour messaging was completed, we settled on manufacturing partners and had 10,000Original and 10,000 Heavy-Duty Cord Cuffs made. We then equipped our nationalnetwork of 150 sales representatives with both sales presentation materials andphysical product samples. From there, our emphasis then moved tosupport—supporting our reps with everything from training materials andin-use graphics to bulk-pricing and licensing agreements.

This is an excellent example of the Innovation Competence Model in action. Itshows a systematic and supported approach encompassing the three arenas ofeducation, application, and leadership.

Now, let's get into the basics of innovation.

Manager's Checklist for Chapter 1

* Sponsor activities in the education, application, and leadership arenas tofoster innovation in your team. Make comparisons to the safety program in yourorganization as you think about how to systematize innovation.

* Always remember that support of innovation by the top managers is absolutelyvital for its success. If you're not the topmost leader in your organization,find ways to involve those whose support you need: make them part of yourinitiative early on (Chapter 2) so that their support will be availablefor you.

* During hard economic times, continue innovation work, so that when bettertimes return, you will be ready to profit. Also adequately resource one goodproject that has a chance of succeeding rather than inadequately resourcing alarge number of projects, which guarantees that all will lose.

* As you decide where to spend your innovation dollars, remember to look notonly at product innovation, but also at the other types of business innovation.A good place to start is streamlining your process for new product development.Find ways to build customer loyalty for life by providing outstanding service.

CHAPTER 2

Innovation 101

Creativity and innovation are really all about problem-solving. I like to thinkof problem solving as the continuum shown in Figure 2-1.

At the center of the continuum, your system is meeting expectations. But ifthings go wrong, you move to the left where the goal is to solve the problem andreturn your system to meeting normal expectations in the center. You might thinkof this kind of problem solving as remedial, fixing what's broken. On the otherhand, if your system is meeting expectations but you're dissatisfied with therate of growth or you feel a need to create a new product or service to be morecompetitive in the marketplace, you will need to move to the right on thecontinuum. You might think of this kind of problem solving as innovative,creating what you don't have.

Use the Right Process for the Problem

The tools and processes that help us fix what's broken are very effective and weall need them every day. These tools include Six Sigma, TQM, and theanalytically based problem-solving tools. These tools are effective on the leftside of the continuum, fixing what's broken and bringing the system back tonormalcy. However, they are not effective at creating what we don't alreadyhave.

For this kind of challenge we need a different kind of problem solving, namely,innovative problem solving that helps us create new technologies, new solutions,and new products and services to delight our customers. Since this book is aboutinnovation, I am referring to innovative problem solving that lies to the rightof the continuum of Figure 2-1.

Innovative Problem Solving

Figure 2-2 illustrates a simplified form of an innovative problem-solvingprocess. The process begins with a problem, a need, or an opportunity. First, wedefine the problem clearly. Then the process of idea generation occurs, yieldinga number of good ideas. The best ideas are selected and the process ofimplementation yields a result on the right, the desired outcome, whatever itmight be, depicted as dollar signs.

Which of these processes is the most important? Obviously, all are equallyimportant, for one without the others is woefully incomplete.

In Figure 2-3, I have added the "cloud" of working climate above thewhole process of problem solving. The dimensions of the working climate willpowerfully assist or powerfully impede both the generation and theimplementation processes. The dimensions of the working climate for innovationare treated fully in Chapter 10.

It's obvious that the idea-generation process will be assisted by a climate thatallows time to generate ideas and provides support. In addition, trust amongteam members and leaders is crucial. In the same way, the idea-implementationprocess is assisted by a climate characterized by trust and openness and thatalso values (or at least tolerates) risk taking.

(Continues...)