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.

The 5 C's of Clairvoyant Companies

No one is a psychic at TechCoastAngels.  Yet, we believe there are keys to success for start-ups.  For the past f weeks, myself and 6 other angel investors from TechCoastAngels of Orange County have screened more than 120 entrepreneurs in preparation for the “finals” of our fast pitch competition at TCA’s recent Celebration of Entrepreneurship event held on March 10.  We listened to these entrepreneurs’ 60 second pitches which would be provoking enough to take a meeting with them and listen to their pitch decks.    

In the past, I have looked at pitches of Unicorns and through my work and consulting practice reviewed or developed business plans, marketing plans, competitive analyses, positioning statements, branding architectures, and product road maps.  So, in this blog, I want to put it all together and share what I see are the common themes that came out of the pitches, pitch decks, business, and marketing plans- at least from my perspective.   

The following principles, which I call the 5 C's of Clairvoyant Companies are equally applicable to start-ups and on-going companies, large and small.

1.  Conveying the story.   The first “C” relates to conveying a story of what problem(s) the company is solving and telling a succinct story to entice the listener to ask for more information.   If it is a start-up, the entrepreneur has to put the listener in the shoes of the person having the problem and convey the solutions.  In the pitch deck, or the business plan, the CEO provides the details on how he or she will execute on the plan and drive financial results.  Conveying the story clearly applies to all companies, particularly if the company wants to attract new customers and brand itself in the market as something special.  Just think about the stories being conveyed by Nike and Under Armour or your favorite consumer or business product.

2.  Customer Clarity.   The second “C” relates to the target customers.  Who is the ideal customer?  Can you describe them and how do you find them?   If you think about Airbnb, the customers are both the person wanting to rent his property for a short period of time, to the other customer, a person wanting to rent a room or house.   The marketing and business plan should clearly indicate the problem the customer is facing and the solution offered.  Additionally, the company needs to present a cogent case for their marketing tactics to drive awareness, adoption and use.  Without clarity on the customer and how to find them and motivate them to action, financial success will not be achieved.

3. Competencies of the Company.   This third “C” relates to the existing or needed competencies within the organization that can drive the financial results.  It also relates to the intellectual property (IP), the culture of the company, and the way the employees think and execute the plans that are required to support the business or product.    How do you acquire and sustain the competencies that are needed for success?  Do you hire software developers on your team to build the product or can you outsource that skill?   What is critical based on your strategy and your competition?  

A competitive analysis and environmental scan may lead to the conclusion that skill sets that were once required are no longer required and new skills must be added.  That may lead the company to a training program, a partnership, or replacement of existing resources with new ones.  Some competencies such as Intel focus on technology as the prime competency and they develop the next generation of product even as they roll out the current generation.  Others, such as Zappos, focus on the uniqueness of the customer experience and the culture of the company, both of which are hard to duplicate.  Competencies help provide a “competitive moat” which brings up the next “C.”

4. Competition.   This fourth “C” is pretty evident.  No company operates in a vacuum.  Both start-ups and on-going companies need to be aware of the existing and potential competition that exists.   A competitor in the future may not be apparent today but may have the competencies, technology, leadership and resources to compete in a new and growing market.   Five years ago would GM or Lexus have considered that Tesla would be a competitor or that Google would enter the realm of cars with their automated car program?  A few short years ago, who would have thought that Red would be the camera of choice and used in three of the 2016 Academy Award nominees for best film? 

With technology and apps changing so quickly, competition can change just as fast.  Technology is the new enabler helping young entrepreneurs compete with established companies and with each other.  Recall what Andy Grove, former Chairman of Intel said:  Only the Paranoid Survive.  Whether you are a start-up or an established company, be paranoid and keep your eyes open.

5. CEO vision and passion.    We at TechCoastAngels say that we have to like the horse (the business concept) but must LOVE the CEO (the jockey and her team.)  As we screened the candidates for our upcoming event, we looked for a CEO with passion and vision and who can relate to us, the investor.  We wanted to find someone who had a history of success, was decisive, yet approachable and coachable.      

Think back to the great leaders of businesses or coaches and CEOs of sports teams.   Who is your model for a CEO with vision and passion?  I personally thought Lee Iaccoca was great when he resurrected Chrysler.  Jack Welch turned GE into a world class company with his vision to be #1 or #2 in his markets.   Steve Jobs showed the world a new vision for technology. And Alan Mullaly took Ford after the great recession to a new level of respect and performance.   

I trust that our C-Level Partner blogs and the ideas will help executives of start-ups and on-going companies be successful and also be used by executives to help them guide their companies to business success.   C-Level Partners has been established to be a beacon for value creation.  My partners and I would be glad to continue the dialog on what makes a successful company and help you optimize your business value and achieve your business goals.  Feel free to reach me at dfriedman@prodigy.net or call me on 949 439-4503.  And if you enjoyed this blog please like it, repost, and retweet it.

What Makes a Company Great?

I was at a very interesting meeting hosted by Brett Olinger and Susan Howington, founder, Power Connections on Dec. 16, 2015.   There were about a dozen high level executives around the table with titles ranging from VP to COO to CMO to CEO.  Susan got us together to talk about business issues and she asked a relatively simple question: What makes a company great? And the subordinate theme of what kind of company would you want to work for or build?

As a tech executive and one involved in the entrepreneurial eco-system in southern California, I would have imagined that I would hear about things such as the latest and greatest technology that captures people’s hearts and minds.  Or maybe I was hoping to hear about the great opportunities for career advancement or companies doing social good. 

I did not hear of specific industries, technologies, functions, unique characteristics of the leaders or anything that you might glean from an employee survey.  Remember the ones commenting have been and are successful executives.   After listening intently – and contributing as well- I captured their thoughts into three areas:  Culture, Leadership, and Customer Focus.   And I have to admit that is probably the order of importance because to me, culture is a platform upon which to build and enact leadership and a customer philosophy.  As you read the following, just ask yourself about the companies for which you worked.  What made them good?  Why did you like coming to work?  What drove your passion?  What made these companies great for you?

Culture

Culture was the number one item.  Culture was a necessary but not sufficient condition for making a company great.  Think about Tony Hsieh of Zappos.  He has instilled a clear culture in that company that focuses on the customer.  Do what is right for the customer. Certainly his vision and bent is the customer.  But without a cultural underpinning, Zappos would not be as successful as it has been.   

Culture is also unique to a company.  It is hard to duplicate and is normally set by the CEO.  Think about other companies that are successful and have a truly unique culture.  Think about Disney and the culture about Imagineering.  Think about Intel and the culture of innovation.  Think about 3M and their culture that they encourage people to invest their time on new ideas.  Without a culture of innovation and support for innovators, many companies may not achieve success. 

We discussed other components of culture as well.  Those components included telling it like it is……. but respectfully and constructively.  (As an aside, I can certainly relate to this coming from Brooklyn, NY and have seen direct cultures like New York and oblique cultures like I have seen in the Mid-west.)  Another element was pushing employees to the next level, i.e. making them believe they can succeed and giving them opportunities to succeed.   In the process of encouraging people, the culture must also accept failure (fast failure is preferred) and must set up a reward system for those that are successful.  

Culture is also critical as the underpinning of being customer focused.   Think about a company that is just focused on the bottom line versus a company that is trying to help a customer and wanting them to be happy.  Think about your experience with Zappos.  Or if you have web service or webhosting from 1and1, think about the great customer service you have received from them.  Was it easy to talk with the company and its reps?  When they talked with you did you believe that you were the only person in the world on their mind or did you feel that you were imposing by asking them a question?   We heard a story this morning about how Steve Wynn chose people to work for him.  Applicants were told to go to another part of the building and when they got there, Steve was sitting behind a desk, rose to greet the applicant and wanted to see their reaction.  If they were friendly and responsive, they were hired.  True?  I am not sure but it makes a good story.

Leadership

We all know that leadership is critical.  Leadership starts with the CEO and filters down to people in the organization.   The leader sets the culture.  When I was head of marketing at US Cellular, our founding CEO, Don Nelson, was a great leader.  He selected an eclectic group of people, set the objectives and measured results meticulously and religiously.  But what distinguished him was his willingness to listen to his people, set and change vision and set a clear direction for the company.  

The result, during my tenure was that the company grew fourfold in revenue in only five years.   

Think back to the CEOs and possibly mentors you have had in your career.  What has distinguished them?   This morning, the executives around the table believed that not only did the CEO establish and set the culture for the company, in essence being the chief culture officer, but also set a clear and compelling vision for the company.  As the Cheshire Cat said, “if you don’t know where you are going, any road will get you there.”  Leaders know where they are going.

Coupled with the vision is the ability to articulate the clarity and alignment of the messages across the entire company, and in my humble opinion, do it in a personal way.   As companies grow, become more complex, and are geographically disbursed, having a common vision and alignment of messages are critical to ensure everyone is marching in the same direction.   In this case organizations become both effective in generating profits (the end game for most) and efficient in doing so. 

The group believed that a great company has a servant-leader.  A servant-leader focuses primarily on the growth and well-being of people and the communities to which they belong. By focusing on people first, it empowers employees to be successful.  It also has a mentoring quality enabling employees to trust the leader such that when these employees are pushed to success by the leader, they trust that their best interests, and in turn the company’s, are aligned.    To be a true servant leader, two other elements must ring true.  The leader must be authentic and must be transparent.  There should be no hidden motive or ego at play.

Customer Focus

As a businessman and marketing executive, I have written extensively and talked about customer focus.  The customer, the one who buys your company’s products and services, must be foremost in your mind.  Companies who are customer focused truly understand the behavioral drivers of the customer and why they buy your products and services.  

The executives at our meeting believed that great companies connect with the customer.  These connections may come from a better user interface, or the way they train their front line people to interact with customers.    We bandied about the concept of Customer Experience Officer because customers, who are not happy, not satisfied, become disloyal.   And, all of us recognized that retention of customers is critical to a company’s success.  Further if you connect with the customer and relate to the customer, if a company makes a mistake there are positive “chits” that have accrued over time and forgiveness by the customer of any faux pas is normally granted.

Note that customer focus relies on a specific culture.  Again, think back to Zappos or think about any experience you have had at a retail store or an online store.  Systems are critical to help achieve customer focus but in reality it is the people, those front line sales people and customer support people that guarantee that the customer is important. Most of us go to Starbucks to get coffee.   Think about your experience.  They ask your name and if you visit the same store more than a few times, the baristas and others will get to know you.  How do you feel?  Pretty loyal I would assume.  

Starbucks, Zappos, US Cellular and other companies have realized something very critical.  The people who interact with the customers ARE the brand.  Leadership sets the vision and a customer centric culture is established.  Yet customer focus is executed by the people.   All of us agreed that great companies are those that have this passion for the customer, exercised by supporting a customer first philosophy on the front line.

Going back to the original question of What makes a company great, it comes down to three areas:  culture, leadership, and customer focus.   All three are interrelated.  In short, great companies balance the needs of customers, employees, and owners.  What companies would you want to work for?  What makes a company great in your mind?  My partners and I will be glad to talk with you about your business issues and help you set a course so your company can be "great" as well.

For more thoughts and ideas, feel free to contact me at dfriedman@clevelpartners.net  or visit us at www.clevelpartners.net.  I will also guarantee that if you write or call me, I will pick up the phone and talk with you.  Why?  Because we, too, love our customers and we have implemented a culture in our company of helping and sharing.