How to Institutionalize Innovation?

I am an innovator by nature. I am always trying to do something more, to try something different, and for the companies for which I worked, to move them ahead of the competition. And I have been at the forefront of innovation thinking for quite some time through my associations with the Product Development and Management Association in the past, an angel investor with TechCoastAngels, and an Entrepreneur in Residence at UCI’s Applied Innovation.

I have been asked by clients and start-ups if a company can institutionalize innovation. The answer is simple: You bet. And you have to have a culture and management that supports innovation.

Let’s step back for a moment. First, do you know the difference between creativity and innovation? Creativity is defined as the spark generating a new idea. Innovation takes the idea to a new level and the essence of innovation is implementation through execution. Now with that out of the way, can companies figure out a way to create innovation in their company? To me the answer is clearly YES! How do you do that?

What are the categories of innovation? Here’s one list that I put together and depending on the company and their goals, there may be other categories. For innovation to take place, it should be put in the context of the company’s strategic and business plans.

1. New products and services, ranging from line extensions, to new-to-the-company products, to new-to-the-world products.
2. New ventures putting companies together in different ways to solve a problem.
3. New market development such as paint companies introducing anti-bacterial paint for hospitals and children’s rooms. (Also can be classified as a new product.)
4. New business models – for example the SaaS model replacing ownership of resources.
5. New partnerships such as GM and Lyft or Apple and McLaren for autonomous vehicles.
6. New business practices like Home Depot implementing Velexo’s one button installation for new technology and equipment.

There are several models that can be used to define the architecture of innovation for a company but let’s take a simplistic approach. For each of these categories, I believe we can define five different ways the categories can be analyzed and the driver of innovation can be investigated. These areas include: customer, competition, competencies, technologies, and processes.

• Customer. Think about how you can develop new ideas. One concept is to make sure marketers and developers talk to customers on a regular basis. In Japan, engineers routinely visit customers to understand how they work with their current products and ask questions on what else is needed. Another thought for integrating customers into a company’s product development cycle is to include customers on internal development teams as we did when I was at Connexion by Boeing. Or set up a living lab where customers can play with new concepts and ideas as I believe Ford has done in the past as it designed new cars and continues to do with their new designs.
• Competition. Looking at the competition can give insights into what is possible. Perhaps you can build off of what the competitor is doing and does it better, faster, cheaper by using new technology or developing new processes. Tools such as Spider Diagrams and SWOT analysis can provide perspective and focus.
• Competencies. I like what Intel does and how they go about innovating. They are not afraid to make their current products obsolete and in fact, they are always thinking two steps ahead. Their competence is engineering skills. But even Intel misses the mark and has left opportunities for others in the mobile chip area such as AVAGO/Broadcom, NXPI (in the process of being acquired by Qualcomm), Skyworks and others. Companies can focus on building their competencies in various ways such as partnerships with schools/universities, labs, and even smaller, more nimble companies. An attendant benefit which we often see is that the larger company buys the smaller company because of the smaller company’s unique competencies.
• Technologies. This, to me, is the kingpin for growth. I am probably biased as I am a technologist by training who converted to marketing and to being a business executive. Technology, above all, provides corporations the opportunity to think about the Art of the Possible. Technology can be developed internally as it used to be at Bell Labs or IBM, or can be acquired through licensing deals with universities, individuals, or start-ups.
• Processes. Companies can look at new processes as a way to innovate. Think about ways to do self-service support for various products and services. What if a car dealer set up a few bays to enable customers to do their own repairs using their equipment and their parts? Think about Sears which has a fleet of service vans and can set a new process such that when a customer orders a washer/dryer the customer can push one button to have it installed. This is process change enabled by new technology, e.g. Velexo, which benefits both the customer and the company.

What are we missing from this model? The key requirement for innovation in a company is when senior management drives innovation and sets a standard and goal for innovation to take place. This includes the reward and recognition system that encourages innovation and makes heroes out of the innovators. Companies like 3M encourage people to spend 10% of their time developing new products. Think about the classic story of Art Fry innovating not only a product but a market based on glue that did not bond well i.e. post-it notes! Or think about how Google encourages self-directed teams to form to develop new products and services. They recognize that most of these new ideas will not be commercialized although there will be substantial winners along the way.

And let’s not forget how companies can set a metric for the number of new products that should be developed and the revenue obtained from those new products so they can sustain growth. Can anyone say Newell Rubbermaid a formidable product developing Fortune 1000 company whose brands such as Lenox, Sharpie, Sunbeam, Dymo, Oster and a slew of others?

Finally, let’s look at a few ways companies can execute their innovation program: Here are just a few ways that we have seen in the past and have participated in over the years.

• New product advisory boards to generate new ideas on features and products.
• New channel management advisory committees where companies can leverage their channels view of their customers and work with the channels to develop unique products and services using a common platform.
• Appointment of a new product czar or growth leader to be the focal point for new ideas. In one of my prior assignments I formed a small organization called Ideation and Feasibility (IF) with the goal of “adopting” ideas from outside the industry to our industry.
• Product/service roundtables that meet once every few weeks, but certainly on a recurring and regular timetable and that would include cross-functional members from technology, marketing, account management, IT, and perhaps other groups as needed. Each member will have specific roles and even track specific competitors. Think about using Dropbox or some other common storage area for posting what the competitor is doing. Better yet, how about a “war room” where the group can track what customers and competitors are doing?
• Participation directly or through Corporate VC or business development functions in entrepreneurial activities such as the angel investment groups like TechCoastAngels and venues such as UC Irvine’s Applied Innovation where the corporation can invest in or participate in other ways in new start ups. This might be particularly true of innovations in the life sciences and cyber security areas.

In a future blog I will cover how to evaluate such opportunities in order to drive profitable revenue growth. In the meantime, if you want to discuss this topic feel free to reach me at dfriedman@clevelpartners.net.