The evolution, current challenges and future of innovation

Innovation Management
Author Robert B. Tucker shares some thought-provoking insights into the state of innovation, including its surprising growth to date, what’s challenging organizations today and its future outlook.

Robert B. Tucker is president of The Innovation Resource, and an internationally recognized leader in the field of innovation. He is the author of several books, including Winning the Innovation Game, Managing the Future: 10 Driving Forces of Change for the New Century, and Driving Growth Through Innovation, which was just released in an expanded and updated second edition. In this Thought Leader interview, Robert talks about how the practice of innovation has evolved, current challenges given today’s uncertain economy and other disruptive factors, and what the future of innovation looks like.

Frey: What surprises you the most about how innovation has evolved – or hasn’t evolved – during the 5 years since the first edition of Driving Growth Through Innovation appeared?

Tucker: I don’t think any of us who’ve been around this field for awhile could have predicted how big it’s gotten. Survey after survey finds innovation one of the top priorities of CEOs and innovative companies like Apple and Google are inheriting the future. And of course right now the credit crisis and economic downturn are causing a wave of uncertainty and distraction like we haven’t seen in years. So a lot of these fledgling innovation programs that companies started up in the past five years are suddenly facing their first real test of sustainability.

Frey: Will they survive? What’s your perspective on that?

Tucker: The innovation managers I’m in touch with are getting push back – no question. A lot of them are having to make the case for innovation all over again. Innovation budgets are being scrutinized. But it’s different this time. There’s greater recognition that when times are tough it’s essential to put resources into innovation so that you take advantage when things turn around.

Frey: Isn’t cost-cutting and hunkering down inevitable? Who impresses you in the current environment as doing what you’re suggesting?

Tucker: No question, you have to cut costs. But you have to get creative too. Look at Howard Schultz [CEO] over at Starbucks. He realized Starbucks had gotten complacent. He realized that they’d taken their eyes off finding new ways to delight the customer. And suddenly paying $3 for a latte didn’t make as much sense to hard-pressed consumers. So they’ve started introducing new products; they closed 7100 stores in the US for an afternoon teach-in tutorial for baristas on improving espresso quality. They just launched to solicit customer suggestions. And it’s not just Starbucks. This is what progressive leaders are doing across the board.

Frey: You sound pretty optimistic. Isn’t it a whole lot more difficult to make the case for innovation when you’re losing money and your stock is in the tank?

Tucker: No question, but the global economy is simply too dynamic to go back to the old way. I see a new breed of innovation managers who are quietly, effectively making the case, and they’ve got so much better data with which to make it than they did five years ago. We just worked with a major bank in Europe that has been heavily impacted by the credit situation. Yet, they are continuing to move forward with a well-conceived innovation game plan that will deliver much-needed growth. I spoke before managers of the top student loan organization in the US. They’ve gone from a steady-state industry to suddenly facing a burning platform because of the credit crunch — they too are going ahead with innovation.

The growth of innovation

Frey: You said in a recent CNBC interview that the field of innovation has seen more change in the last 5 years than in the previous 20 or 25 years. How so?

Tucker: What I meant was how the tools and the skills of innovation have advanced. Companies today can benefit from the experiences of others who have tried various approaches – they don’t have to reinvent the wheel. Sometimes clients will come to me and say, ‘we’re going to do this; this is where it’s at, we’re thrilled.’ And I’ll say ‘okay, but are you aware of what the research shows if you try to do it that way?’ and you just didn’t have the data five years ago to help people avoid driving off into the ditch.

In the late ‘90’s, early 2000’s, when we were researching the book, we actually had difficulty coming up with enough companies to benchmark and write about because there weren’t very many of them. Today you’d be hard pressed to find a large company that hasn’t taken steps to revamp innovation, and we’re finding the mid-sized companies getting aboard the innovation train.

Frey: Innovation isn’t really new, though, is it? How was innovation practiced before?

Tucker: True – it wasn’t that companies didn’t innovate before. Every company innovates to some extent or it doesn’t survive – just ask DEC and Wang Laboratories or Polaroid or Smith-Corona. It was more that organizations innovated in fits and starts, with piecemeal efforts. Incrementalism ruled the day – endless line extensions and me too products. I remember the CEO of a major beverage company reminding me, just as I was going to address his 200 top managers, that I needed to define innovation for his people because they thought of it solely as new products or new technology.

Frey: A lot of people still define innovation that way, don’t they? How do you define it?

Tucker: As an all-enterprise imperative. As a systematic process of discovering, selecting and implementing ideas that add value, differentiate and ignite growth. Your company’s next breakthrough might not be a new product at all. It might come from entering a new market, or otherwise changing your business model. It could come from the logistics department or the payroll department or – gasp – human resources. Again, the speed of change is such today that you cannot redo one aspect of your innovation process in isolation, and expect that you’ll be effective.

Frey: In the new edition of Driving Growth Through Innovation, I noticed that you excised out discussion of several companies – EDS and Citibank being two of them that supposedly had ingrained innovation in their DNA. What happened?

Tucker: What happened was that these two firms both had changes in top leadership that led to a dismantling of their innovation programs. Version one of Driving Growth Through Innovation made a strong case for designing and implementing a systematic innovation process. And Citibank did just that. What Citibank accomplished in a short time was phenomenal. I had the privilege of working with a very talented team of Citibankers based literally all over the globe as we established “innovation catalysts” to drive the process at the grass roots level. We set up such things as Customer of the Month sessions to engender new product suggestions, and “magnet teams” to coach and select top ideas for implementation. The results were amazing – Citibank Trinidad, among others, reported a 40 percent growth rate as a direct result of the Initiative. But then the program was abruptly cancelled.

Frey: What happened?

Tucker: What happened at Citibank is what happens all too frequently in other organizations. The executive in charge of Citibank International was replaced for reasons having nothing to do with the innovation program and we lost our sponsor. I find it ironic that Citibank has been suffering ever since as they’ve tried to get their house in order in every which way except to get serious about driving growth through innovation. What it shows is that when there are changes at the top, look out. Your innovation program may not be as imbedded as you thought.

The challenges of innovation

Frey: Organizations are still talking about innovation today, but it seems that relatively few are succeeding at it. What are the primary reasons for this disconnect between intent and accomplishment?

Tucker: I’m not sure I agree that few are succeeding. I think that most are succeeding, but by different degrees. Look at vanguard companies like IBM, Proctor & Gamble, BMW, Whirlpool, Borg Warner – fantastic growth. And they all would be the first to tell you – it’s because they’ve gotten serious about innovation. Maybe company A launched an innovation initiative and they only increase growth by x percent instead of y, which they were hoping for. Was that a failure? What about if you compare what they did achieve against the alternative that they had done nothing to improve their practice of innovation? No question, companies are not succeeding that thought they could take a flavor-of-the-month approach and that would magically imbed innovation in their cultures. But firms that embrace innovation and drive it from the top are succeeding where it matters most.

Frey: And where is that?

Tucker: Let me give you one example of how you can measure the positive impact of innovation. Boston Consulting Group, in conjunction with Business Week, now compiles an annual list of the World’s 25 Most Innovative Companies. When you compare these firms against the Standard & Poor’s 1200 Global Stock Index, the Most Innovative Companies (MICs) had a mean margin growth of 3.4 percent annually, compared to a 0.4 percent increase among the total index. MIC stock returns averaged 14.3 percent, compared to 11.1 percent for the mean index. That’s just one metric of success I could cite, but an important one. My experience is that your innovation process will bear fruit in exact proportion to the amount of effort and focus you put into it.

The rise of the Chief Innovation Officer

Frey: You spend some time in the new edition of Driving Growth Through Innovation talking about the rise of the Chief Innovation Officer (CIO). How important is this development?

Tucker: It’s a fundamental tenant of systematic innovation that somebody other than the CEO be in charge of keeping the innovation factory humming. I participated in the first ever Chief Innovation Officer conference last year. It surprised us how many firms already have a CIO: Humana, Cargill, Diageo, AMD and many others. The title you give that person is not important; it’s the role that’s important.

Frey: What role is that?

Tucker: Herding cats [laughs]. No seriously, the role of the chief innovation officer is to work across divisions and silos to push the organization to change, to embrace change and new ways of organizing innovation. At Whirlpool, today a $19 billion organization, a four person team is all it takes to keep turning out hit products and services. They have trained over a thousand innovation mentors who push the tools and skills to the rest of the organization.

Frey: What’s the biggest mistake a CIO can make?

Tucker: I think it’s a mistake for the CIO to have a portfolio of deliverable projects, in addition to trying to coordinate the larger effort. Because then you’re right back into a centralized innovation approach rather than an all-enterprise approach. Study after study shows that this doesn’t work. When you confine innovation to a department, you send the message to everyone outside that department that delivering innovation isn’t your job.

Frey: Let’s pretend for a moment that I’m the CEO of a midsized firm. What’s the elevator pitch – why should I hire a CIO to help drive innovation in my company?

Tucker: You probably shouldn’t hire a CIO from outside. You’re better off identifying the right person inside your company to step up into this role. The reason I say that is that an outsider, no matter how talented, won’t know the culture and the market as well as they need to. I would advise that you look for someone in your organization who has broad respect, is a person eager to study up on innovation best practices, and who is passionately results-oriented. And if you find you just don’t have someone with those qualifications in your firm, only then should you recruit a CIO from outside.

The outlook for innovation

Frey: What does the future of innovation look like in the next five years?

Tucker: The importance of developing your innovation skills will continue to grow. Today, you can still find good, hard-working administrators in senior positions to whom innovation is a scary subject. But I don’t think that will be enough [to get you to the top] in the coming years. I see a rising crop of young people around the world who came of age living and breathing innovation, who just blow me away with their creativity and their passion. I recently conducted a public workshop in Mumbai for CNBC’s India affiliate and we had 500 mid-managers brainstorming – the room was electric! These 20-something year olds, whether you’re talking India, China or Nicaragua are truly global thinkers capable of amazing things. For them, innovating is a way of life not a ‘gotta-do’.

Also, the tools we’ll use will evolve, improve. Crowdsourcing is an example of a promising new tool. Used properly, it can generate new ideas, shorten R&D, cut development costs, create deeper loyalty. On balance, though, I don’t think coming out with a breakthrough product or business model will be any easier, though. The customer will be met with a plethora of new offerings and suppliers, all trying to differentiate.

Frey: Innovation has always been important. Is it more important today, and if so, why?

Tucker: It’s definitely more. In the global economy unless you innovate, a new competitor can show up out of nowhere and disrupt your business model overnight. Products and services become obsolete faster and faster. And we human beings, no matter our field or functional expertise, become obsolete faster than ever unless we figure out ways to create new value, which is what innovation is all about. Research out of MIT shows that if a job can be reduced to a set of replicable instructions, if it can be what they call “routinized” then it will likely go to a lower wage country. So my message is really that innovation isn’t just coming up with the next iPhone, it’s an essential survival skill for the 21st century.

The skillset of tomorrow’s innovator

Frey: What sorts of skills will we need to remain competitive in this new world?

Tucker: I think we all have to get serious about not only staying abreast of our specialist fields, but developing skills and competencies that aren’t taught in school. How good are you in convening a meeting for possibilities, for effective brainstorming? How good are you at tracking the trends and thinking through the implications to find hidden opportunities? Can you tap people’s creative imaginations? Can you unleash your own? Are you comfortable making decisions where you can’t possibly have all the data, all the facts and you must exercise intuitive judgment? Can you talk to customers and get them to really open up about what’s on their minds? Can you lead a team of people to deliver a result when you have no position power over them? These are the kinds of leadership qualities I coach executives in developing.

Finding new opportunities for innovation

Frey: It seems that innovation is easy to apply to products. But what about areas like sales, service, accounting and other less obvious areas?

Tucker: Actually, that’s the big trend we’re seeing in companies in the innovation vanguard. Companies like BMW, Whirlpool, IBM, and others realize that their next truly game-changing idea might come from their supply chain people or a sharp salesperson as it is to come from the new product team. I remind people that Starbucks’ Frappuccino was invented not at headquarters but by baristas at one of their stores in California. It was a retail clerk at Home Depot who came up with an inventory control system innovation that is today used throughout the chain. Two mechanics at American Airlines maintenance operation in Tulsa, Oklahoma came up with a way to reuse broken drill bits, saving the company $380,000. In progressive companies, we’re seeing a lot of emphasis on innovation becoming everyone’s responsibility.

Frey: Can individual contributors really have ideas in most companies?

Tucker: Absolutely. It’s just that in the past — and in most organizations to this day — we’ve confined responsibility for innovation to a few departments, like marketing or R&D and we’ve in effect told everyone else they were not to bother to take their ideas seriously. We’ve not listened to people in our organizations who didn’t have the right title. But now you need everyone to bring their brain to work. And you need every department and functional area to have some skin in the game, not just the folks in R&D.

Frey: So how do you motivate fresh thinking from traditional departments?

Tucker: You have to create a culture where individuals and teams in every area of the firm are responsible for delivering fresh approaches. It’s a matter of what you’re rewarding, what you’re incenting. One way you motivate fresh thinking from traditional departments is you break up their monopoly. You outsource some of what that department delivers, whether it’s training, HR, finance, whatever. And then you show the traditional department that they have to find ways to add value over and above their “competition”.

Frey: What is happening globally today relative to innovation and what warnings or lessons are there for us as leaders?

Tucker: Chuck, as you know, I work with companies outside the US almost as much as I do inside. And what my travels have demonstrated more than anything is that most companies based in the US have yet to truly embrace the global economy. Many who could find tremendous growth by entering new markets, are not doing so. Our domestic markets have been robust enough to where they didn’t have to. But now that we’re in a downturn, and now that foreign competitors are coming into their markets, this is changing very rapidly.

Another concern I have is the prevailing myth that we [in the U.S.] have some sort of lock on high value work. I just spent a week in India and I work with Indian firms. Indian and Chinese companies are not content to be simply low wage outsourcers of services or product manufacturers. They are hauling up the value chain at a much faster rate than anyone expected. Some of the most innovative firms on the planet are Indian IT outsourcing firms: Tata, Wipro, Infosys, Satyam, HCL Technologies.

Nurturing your “personal innovation”

Frey: Let’s look at a topic I know you’re increasingly interested in: personal innovation. What is it, exactly?

Tucker: Personal innovation is mastering a set of non-obvious and seldom discussed skills that enable us to be more effective at coming up with ideas and bringing them to life. We could use Jeff Immelt or Oprah or Steve Jobs or Tiger Woods as examples and think about just how many ideas these leaders come up with each day. I say to people, the reason you’re successful, is that you power out more ideas day to day than others in your field, you create value with ideas. I’ve had the privilege of observing the success habits of some highly successful people at close hand, and they are totally in touch with the artist within. Picasso once said that “all children are artists, the challenge is to remain an artist when they grow up.” Yet this is what it’s really about in this age of Innovation: finding what works for you as an individual and freeing yourself of mental boundaries. To identify what gets your creative juices flowing, to take time to think and dream, to set stretch goals – and yes, to implement too.

Frey: So what prevents it?

Tucker: Fear of failure would have to be at the top of the list. Have you ever failed with one of your ideas? Of course! Show me an innovator and I’ll show you someone who is very familiar with failure. I love what Soichiro Honda, the founder of Honda Motor said about this. He said, ‘to me, success can only be achieved through repeated failure and introspection. In fact success represents the one percent of your work that results from the 99 percent that is called failure.’ I always say, if you haven’t failed at something lately, you must be doing something wrong.’

Frey: What are the “daily disciplines” for personal innovation?

Tucker: I recommend carving out creative space to do your best thinking daily. Many people tell me they get most of their ideas in the shower, some while driving to work. I find a surprising number of people report getting their best ideas in the middle of the night. For me it’s getting up at five, going for a run and spending an hour reading and reflecting and planning my day – but for you it’s different. The secret is to be true to your own rhythms, and move away from distractions to claim your space. Another daily discipline is capturing your ideas when they occur – little ideas like ‘pick up the dry cleaning’ all the way to big ideas you get that you say ‘wow’ to immediately. I also suggest taking a problem or situation you’re facing and forcing yourself to come up with 10 different possible solutions. And there’s more to be sure. What we’re really talking about is paying more attention to what gaets your creative juices flowing.

Frey: How do we transfer these skills from work to our homes, communities and elsewhere?

Tucker: Innovative thinking is not just a tool for growing companies; it’s a tool we need to use in every realm of our lives – most especially in helping be good crew-members on what the great inventor Buckminster Fuller called Spaceship Earth. I had the pleasure of dining with Tharman Shanmugaratnam, the education minister of Singapore recently and his whole thing is how do we teach these skills and how does Singapore develop its young people to find the better way, the uncommon path. We very much need to help transfer these skills to our families and communities and to helping the planet deal with huge issues. I see business as being in the forefront of this movement to think up novel solutions and restore hope.