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Instituting Innovation:
Tell-all advice from 4 leading practitioners
By Brianna Sylver


 

Is innovation implemented as a mind-set, a process, or a deliverable?

While innovation is often talked about as a "process," it's usually the deliverables of innovation that get the spotlight—for better or worse—while the discussion on process and mind-set get back burnered. But an investigation into these structural considerations is key to the drive to innovation, and this article provides lessons that top executives—people who have spent years instituting innovation into their organizations—have to share.

Our experts have each been tasked with bringing innovation to their organizations: Arkadi Kuhlmann, CEO of ING Direct Bank; Ken Koziol, Corporate Senior Vice President for the Restaurant Solutions Group at McDonalds Corporation; Matt Mayfield, Senior Director for Mobile Devices of Motorola; and David Lawrence, Senior Manager of the Bicycle Product Development and Marketing division of Shimano. Each of these men have the responsibility of nurturing innovation and seeking additional ways to offer value to their customers. Recognizing that a one-size-fits-all approach to innovation is unrealistic, they have carefully and deliberately defined their strategy, taking factors such as their corporate culture, their organization's readiness for innovation, and their industry's standard pace of change into account. Consequently, their approaches for tackling innovation differ from one another—some having pursued a project-by-project approach, others having followed variations of an incubator model, and still others taking on innovation at the whole company level.

Innovation success within an organization is as much about navigating the political landscape as it is about having a good idea in the first place. To succeed, therefore, one must figure out the appropriate level of involvement required of business units and decision-makers throughout the innovation process. Unfortunately, there isn't a "one size fits all" approach that applies here.

Here is a bit more background on each:

Whole Company Mind-Set
Arkadi Kuhlmann, CEO of ING Direct
Promotes innovation at the whole company level, wanting it to become "part of the company DNA...the orange code." This means providing channels for all employees, at each level, to bring new ideas to the table and offering incentives that celebrate change.

Incubator Process
Ken Koziol, Corporate Senior Vice President for the Restaurant Solutions Group at McDonalds
Leads the Innovation Lab at McDonalds, which "plays an incubator, concept-car role for the organization," influencing the future operation systems for the McDonald's restaurants. The group defines projects that they believe will make the restaurants more customer-focused, and then seeks development support from various business units throughout the organization.

Matt Mayfield, Senior Director for Mobile Devices at Motorola
Leads another incubator-type innovation group targeted at product discovery, studying consumer's activities across the globe—such as commuting or travel planning habits—to define new opportunities for the mobile device market. The group gathers consumer requirements in each activity area and then facilitates the company's business units in ideating new mobile services and products to address the consumer needs identified.

Project-By-Project Deliverables
David Lawrence, Senior Manager of the Bicycle Product Development and Marketing division at Shimano
Takes a project-by-project approach to instituting customer-driven, human-centered innovation methods into the organization. With this model, there is a deliberate attempt to target innovation at the product level. Shimano's Coasting bike, marketed to the non-enthusiast, casual biker, was the first customer-driven innovation initiative of the organization.

Interviewing each of these innovation experts provided insight into both the how and the why of their methodologies, and despite the variety of approaches, revealed key takeaways, or lessons, that were quite consistent.

 

Lesson 1: Diversify your talent or you'll crash and burn
Talent is a huge part of the innovation equation and one aspect that our experts admitted to not getting quite right the first time around. The term "innovative"—perhaps with the help of today's media—oftentimes becomes synonymous with "Creatives." But it's more complex than that, expressed best by Koziol of McDonalds: "To take an analogy of the restaurant, our innovation efforts require 'openers' and 'closers.'" The "openers" (the Creatives) are the folks that are comfortable with and embrace the ambiguity associated with exploring new frontiers, while the "closers" are the people who have the know-how and discipline to wrap a project and make it ready for implementation. In order to be successful, innovation efforts require the skill sets of both "openers" and the "closers"—involving a transition stage in each project where one team of "openers" gives up control as the other team of "closers" takes the reigns.

Any successful innovation team also requires people who excel at problem solving, and those who possess a charisma and presence that enable them to be influencers within the organization. Problem-solvers need to be given the time and space necessary to do their deep thinking, while those talented at networking need the support to shop their department's ideas around the organization with the intent of gaining buy-in; buy-in that will only be ensured if the team's innovation efforts are relevant to the company's overall strategic vision.

Our experts note that rarely are the skills of "openers," "closers," problem solvers, and influencers found in the same person—at least not at equal strength. Further complicating the situation is the fact that different people tend to be pre-disposed to do development work on different time lines. Some folks revel in the challenge of predicting the future (3-5 years out), while others are better suited to tackling the problems of today. Perhaps for this reason alone, it's important for innovation teams to diversify their work force.

Defining the right balance of "openers" versus "closers," and of problem solvers versus influencers, depends on the structure of the organization, and in particular, the layers of decision-makers from which buy-in for change needs to be gained. Change—despite how much it may be welcomed—is hard, and requires these diversified skill sets to assist navigating new ideas through an organization.

A company that leverages economic return as its main measure of innovation success—particularly in new initiatives—creates a culture in which profit becomes the key driver of management behavior. This becomes problematic for the company that desires to be innovative, because everyone knows that the quick road to profitability is cost cutting.

 

Lesson 2: Cozy up to your customers; they've got the answers for long-term profitability
Kuhlmann of ING asserts that "To be innovative you need to get a tour of the shop floor. You need to research your customers, understand their challenges and then figure out how you can make things more simple, standard and easy to use." This is the philosophy that ING Direct Bank has operated by, and largely why their name has become synonymous with the term "rebel banker." They're challenging the traditional perceptions of a bank, and finding success along the way. They've been able to do this by asking the question, "How can we provide more value to our customer?" And in the retail banking industry, that answer has always been by putting more money into the customer's pocket. In order to offer higher interest rates than the competition, ING's had to cut costs. So the mind-set they operate on as a company is that anything that drives costs is an opportunity for innovation. As a result, they've simplified their operating costs by existing solely as a virtual bank—with no brick and mortar locations.

The foundation of ING's business is based on trending customer need. A case in point? The traditional 30-year mortgage. To date, ING only offers 5- and 7-year ARMs, finding that their core clientele rarely stayed in a property past 7 years, and thus didn't need (nor want) to sacrifice the lower interest rates initially offered on the ARMs for the long-term security offered in the 30-year mortgage. By operating with a narrower set of banking products, the company has been able to minimize their operational costs while passing on the cost benefits of a streamlined operation to their customers in the form of higher interest rates.

Likewise, our other experts have sought innovation success by walking in the shoes of their customers, and then trying to match customer need with business priorities and capabilities. For example, Koziol's team studies customer experience to make the operational systems of McDonalds' restaurants more effective at meeting customers' needs. Shimano, under the direction of Lawrence, has stepped into the world of the casual, non-enthusiast biker, developing a simple, pared-down bike—reminiscent of childhood days—that's attractive to a new kind of customer for the company, and establishing a beginning platform for more products to come. Similarly, Mayfield of Motorola rallies his team to study lifestyle trends in the hopes of identifying new growth opportunities for the mobile device market.

Each has taken a holistic approach to understanding what it is that makes their followers tick in hopes of discovering latent needs ripe for product or service innovation. And it's important to note that each of these customer-driven approaches to innovation starkly contrasts to the more traditional routes of seeking innovation through technology advancements or the optimization of businesses processes. For these leaders, a view into their customers' worlds gives them the perspective to think big—opening their minds to additional ways in which their organizations might be able to create value. And by starting with their customer, they are mitigating development risk, since there's more certainty that the market will adopt the product or service—providing that implementation goes well, of course.

It's important to note that each of these customer-driven approaches to innovation starkly contrasts to the more traditional routes of seeking innovation through technology advancements or the optimization of businesses processes. For these leaders, a view into their customers' worlds gives them the perspective to think big—opening their minds to additional ways in which their organizations might be able to create value.

 

Lesson 3: Know the path to least resistance; work within the system
As Koziol of McDonalds cautions, "You will already have an uphill battle for getting new ideas accepted. Don't fight the culture on top of it...and don't try to force fit your ideas." "Regardless of the titles or how the company is orged, you need to fundamentally know who is making the decisions," echoes Mayfield of Motorola. These bits of advice are paramount, and affect everything related to how your innovation efforts are organized—from the innovation approach you model to the types of deliverables you produce.

The concept of "working within the system," while intuitively obvious, is something that many people find difficult. Our experts gave many examples in which their groups tried to challenge the internal status quo of their organizations a little too aggressively at first, then later needed to take a step back to realign efforts. Shimano's story for launching their new Coasting bike is a perfect example: With the introduction of the Coasting bike, an entirely new customer (the non-enthusiast biker) was created for the Shimano organization and their dealers. Initially, the organization tried to get all of their dealers to stock a full order of Coasting bikes at launch. "Admittedly," Lawrence states, "we bit off too much...we went wrong here." The stakeholders—the dealers—were not comfortable with how to converse with the new customer. They were timid; uncertain whether their sales approaches, normally directed towards the core enthusiast market, would still apply. Eager to make a profit, the company forged on with their plan without taking into account the risk-averse nature of their stakeholders. That approach only lasted for so long.

Now, the Shimano organization has changed course, taking a deliberate top-down approach to converting supporters within the organization. As Lawrence states, "We're now focusing on working with the top dealers and gaining their support. Once we win there, we'll tackle the next tier."

Other strategies our experts have found useful in gaining support for innovation within their organization include soliciting development partners from within the company early, and pilot testing. Take a moment to reflect on the activities of your organization. How successful have you or others been in coming out with all guns firing, aggressively trying to sell an already baked idea to the decision makers at your company, versus gaining buy-in and support along the way? Probably not very successful. And that is the point of "working within the system." Getting people involved along the way ensures more internal support, since people will naturally feel that they've helped to create the idea if they're in from the beginning. Better, they will be emotionally invested in the success of the new product or service.

Innovation success within an organization is as much about navigating the political landscape as it is about having a good idea in the first place. To succeed, therefore, one must figure out the appropriate level of involvement required of business units and decision-makers throughout the innovation process. Unfortunately, there isn't a "one size fits all" approach that applies here. A review of track record, trust, and the critical quality of the decisions being made on the overall organization will ultimately define the number of touch points required with the business units and decision makers along the way.

Success means delivering value to the customer. Yet success of the deliverables is more often than not reduced to a mere number: profit. It's short-term profit gained that ultimately carries the fate of whether or not the initiative continues—not how much interest is sparked in the marketplace, potential for product platforming, or other, more subjective metrics.

 

Lesson 4: Defining metrics of success before launch is a good thing
Success means delivering value to the customer. Yet success of the deliverables is more often than not reduced to a mere number: profit. It's short-term profit gained that ultimately carries the fate of whether or not the initiative continues—not how much interest is sparked in the marketplace, potential for product platforming, or other, more subjective metrics.

Shimano's Coasting bike again provides a good example. Lawrence remarks that the Coasting bike "has generated more hype in the marketplace than any other product in our portfolio, and provided inspiration within the stores. But that hype hasn't necessarily translated to retail sales." To date, the Coasting bike has not generated the same profit margin that a new product, targeted at their core cycling enthusiast customer, would have. And as a result, the Coasting bike is not yet seen to be a success by the company.

This rigid, profit-focused evaluation system can seem a bit short-sighted, of course, and those who have dedicated their lives to instituting innovation into their organization argue for broader metrics. As Arkadi Kuhlmann advises, "You need to have longer-term measures, and need to take a more holistic approach to defining success." He adds, critically, "Also, you need to decide before the product is released how its success will be measured."

A company that leverages economic return as its main measure of innovation success—particularly in new initiatives—creates a culture in which profit becomes the key driver of management behavior. This becomes problematic for the company that desires to be innovative, because everyone knows that the quick road to profitability is cost cutting. New-to-market products, and services that take some time to realize their potential, may never get the opportunity to show their worth. By taking a more performance-based approach to measuring success of new products and services, an organization will ultimately measure their effectiveness in creating value to the customer, and to the long-term health of their organization.

So, how do you take a performance-based approach to measuring the success of new innovations? First, measure the profitability of a new product over the course of one, three or five years, instead of each quarter. As Arkadi states, "When you are changing the way things are being done, returns might not be consistent right away." This is not to suggest that products should be launched and not monitored for short-term growth. It just means that a new product's success metrics need to be broadened a bit to include things such as product quality, brand exposure, royalty, and licensing income potential, and to evaluate the impacts of that initiative on building repeatable and sustainable approaches to innovation in the organization.

 

Lesson 5: Don't loose sight of your company's business priorities
Finally, it is important to stay on top of leadership changes within your organization and the subsequent impact of those changes on your company's strategy. As Koziol stresses, "You need to always be in sync with the company's strategic vision. You just can't afford to be off strategy."

And we know what happens when you are off strategy: you get reorged out of your position or, worse, your group gets cut because it doesn't seem to be relevant to the organization. So, how do you stay on top of changes, even the small ones, in company strategy? That's where relationships and timing come into play.

At McDonalds, the Innovation Lab believes relationship building to be a key component of their success, considering themselves to be responsible for "connecting and aligning what's going on around the organization." Like other organizations, innovation inputs are coming in from multiple sources, and it's the Innovation Lab that is responsible for connecting the dots quickest between successful pilot programs throughout the global restaurants, ongoing operational-related initiatives of the Innovation Lab, and today's top priorities of McDonalds' Corporate strategy.

Similarly, timing plays an important role in maintaining alignment with the company mission. As Mayfield of Motorola states, "sometimes you need to present a new opportunity to the company two, three, four times before it gets some attention...it's purely about timing." And while his group is tasked with understanding consumer challenges and defining possible opportunities for growth in the mobile device market, it doesn't provide value to the organization as a whole until there is a "match between the consumer challenges [defined], and the things that the company wants and can do." Only then is his group perceived as progressing forward the strategic vision, and as a consequence, earning relevance in the overall organization.

Anticipating timing is where the challenge comes into play. "You need to know what your company values, and adapt to that," says Koziol. "In McDonalds' case, we value speed. So we try to anticipate the needs of the company and get an early start on solving the problems." While fresh ideas are valued in the McDonalds Corporation, the lengthy timeline required of innovation is not. If we can't "be there first with a good idea," then our value to the organization sooner or later will come into question. For this reason, he says, "We feel the need to run hard and run faster," showing the organization new future possibilities while always being prepared to change course as necessary to stay in sync with the corporate strategic priorities.

 

Make innovation more than the laminated slogan on the project wall; a few last words of advice
"When it comes to creating a culture around innovation, you need to listen to your own counsel," says Kuhlmann of ING. It's important to learn from one another, but essentially you need to "interpret advice given in a way that makes sense to you."

And as stated earlier, there is no "one size fits all" approach for instituting innovation into your organization. Rather, a company's innovation readiness, its corporate culture, and an industry's pace of change drive the approach that is most likely to be relevant and effective.

And, frankly, experimentation is key; some things will work, others will not. Each of our experts have tackled innovation at multiple levels of focus and scope over the years—some at the whole-company mind-set level, others following incubator-type processes, and still others taking a project-by-project deliverable approach. Neither is right or wrong. Having the flexibility to make changes along the way—whatever approach taken—will ultimately provide the key to supporting the development of repeatable, sustainable, and value-creating innovation initiatives.

Brianna Sylver is the founder and President of a customer-driven innovation research firm, Sylver Consulting, that helps organizations find opportunities to grow by gaining a deep understanding of their customers. Their methodology of Design Ethnography allows companies to identify new markets, to make better products and services or to create new ones.