By Chuck Frey
Robert Tucker is the author of several books on innovation, including the classic Driving Growth Through Innovation. In February, he will release Inside the Innovation Elite: Practices of the World’s Most Innovative Companies as an “online, on-demand briefing” to update executives with what’s going on in the field. As president of The Innovation Resource Consulting Group in Santa Barbara, California, USA, Tucker works with a wide range of companies including IBM, Nokia, American Express and Citibank each year to deliver growth through innovation. He recently sat down with InnovationTools’ Chuck Frey, to discuss the global innovation movement, key trends for 2007, and the latest methods companies are developing to drive results.
Frey: What were the most significant developments in 2006 for the field of innovation?
Tucker: For me, the most significant event was the declaration that China made that 2006 was the year of innovation. The Chinese government kicked off a drive to transform its companies into not just the world’s 800-pound gorilla of low cost manufacturing, but also an innovation powerhouse. They committed to spending $115 billion a year on research and development, and on transforming their culture to be the originator of breakthrough ideas and technologies. We’re already seeing the result of this shift: A Chinese company, Lenovo, bought IBM’s PC division. Chinese companies are also making cars, major appliances, consumer products, and we haven’t seen anything yet.
Frey: Do you think the field of innovation is in danger of becoming overheated and over-hyped?
Tucker: There are certainly some faddish elements, but remember, this is the business mega-trend of the 21st century. I find American managers especially tend to discount the impact of this trend and think of it as just a flavor of the month or a theme. Every year, I lecture at 50 or so conferences and conventions around the world, and I see how conference planners think: Let’s see, we did the leadership theme last year and innovation this year, so what theme should we pick for 2007? But innovation is more than a theme and you can’t possibly cover it in a single conference. I’m still learning all the time. I often feel like a grad student on finals – things are moving so fast.
Frey: When you talk to corporate leaders, what’s your message to them?
Tucker: My message to CEOs is this: You’re in an innovation arms race. It’s the strength of your business process versus those of your competitors. A cost reduction strategy alone will not cut it. I disagree with RosaBeth Moss Kanter when she said (in a Harvard Business Review article) that interest in innovation comes and goes in seven-year cycles. It may have in the past, but not today.
Frey: And why is that?
Tucker: Simply because it’s tough to pull it off. CEOs of publicly traded companies, in the U.S. at least, have attention deficit disorder when it comes to innovation. And who can blame them? Their average tenure is a short three years. Either they drive growth and meet their quarterly numbers and get the stock price up, or they’re out. Thirty-five percent of departing CEOs left involuntarily in 2005, according to the Wall Street Journal! So I think a lot of them look at innovation as planting trees that will bear fruit – for the next guy or gal, not for them, so they’re of two minds.
You ask them, how important is innovation? In one survey, 72 percent of them said that it’s one of their top three priorities. But then the knowing-doing gap kicks in. They “know” they’ve got to get better at it. But what they “do” is often piecemeal, ad hoc, seat of the pants. If innovation were a company, and you and I were assessing growth prospects, I’d say there’s still a lot of growth to be had because most companies are still at the beginning of their journey. I wrote a piece in my e-newsletter called, “Is There a Ford in Your Future?” about Ford Motor Company – which lost over $7 billion in 2006 – and how it’s suffering a classic disruption of its business model, just like Wang Labs, Blockbuster, Kodak, Montgomery Ward, and dozens of other companies. The response to that article was typical. We heard from managers who wrote, “I fear if we don’t do something in my company, we’re quickly going the way of Wang.” They want to know what to do.
Frey: You talk about how tough innovation is to pull off. Are companies getting better at successfully implementing it?
Tucker: Studies I’ve seen that have been published indicate that there is greater achievement of return on innovation. In my book, we cited a Arthur D. Little survey of 669 global executives conducted in the late 1990s that “fewer than one in four believe they have fully mastered the art of deriving business value from Innovation.” And Boston Consulting Group’s survey of 1,070 senior executives last year in 63 countries found that almost half were satisfied with the returns on innovation. While that’s hardly where you’d like it to be, it does show improvement. When compared against the S&P 1200 Global Stock Index, the 25 most innovative companies that BCG identified (MICs) had a mean margin growth of 3.4 percent annually, compared to a 0.4 percent increase among the total index. And MIC stock returns averaged 14.3 percent, compared to 11.1 percent for the mean index. So I think we’re seeing improvement in what innovation initiatives deliver to companies.
Frey: What trends do you see emerging in the field of innovation for 2007?
Tucker: The big movement I see is a broadening of the definition of innovation. Yes, it’s those process improvements that you need to cut costs. Yes, it’s new products. But it’s also what I’ve long called strategy innovation and which some people call business model innovation.
Strategy innovation concerns everything you do that touches your customer that’s not your product, and doesn’t have to do with your back-office processes that the customer never sees. This area is extremely hot for the simple reason that your new breakthrough product can and will be copied, knocked off faster today than ever before. Patents are increasingly less effective in preventing this, and technological innovation gives your competitor a multitude of ways to workaround and duplicate your invention without outright violating them. But if you can come up with a unique way of adding value, especially if it’s coupled with a breakthrough product – think iPod and iTunes – you’re much more likely to be on to something sustainable. So companies are coming to us wanting to brainstorm not just new product concepts, but new ways of going to market, new ways of entering new or adjacent channels, new value-adding services, and new ways of anticipating unarticulated customer demands.
Frey: What companies are doing interesting new things in the area of innovation?
Tucker: I’m impressed with what Bank of America is doing with its Innovation & Product Excellence Group. In 2006, they innovated their way past Citigroup to become the world’s largest bank by stock market value. They have come up with a new twist called Voice of the Associate, where they gain valuable feedback from their own employees, before they even pilot a new idea. I think BMW is on to something with its Listening Posts satellite trend observation teams in places like Palo Alto and Tokyo and Shanghai. I think what IBM did last year with its second Innovation Jam was outstanding.
In fact, there are a lot of interesting new methods being developed, plus new ideation techniques, new mind-mapping and idea management software. Our toolkit is evolving rapidly today, as practitioners and consultants alike continue to experiment with what works, and what doesn’t. Innovation is still such a new field that only now is it becoming clear that there are five or six key areas where you need to focus in order to build an innovative capability. For example, how will we harvest enough big ideas at the front end, how will we manage ideas, how do we select the most promising ones and allocate resources, etc.
Identifying these buckets isn’t difficult; addressing them equally well is. The only thing worst than doing nothing about improving innovation in your company is doing the wrong things – the things that sound good, but that evidence shows don’t work. And unfortunately, a lot of people just want to “get creative” and try to reinvent the wheel, rather than doing the research into what other companies have learned through experience. That was what led me to develop Inside the Innovation Elite: Practices of the World’s Most Innovative Companies. It’s about adopting what works and not going down blind alleys.
Frey: You noted IBM’s Global Innovation Jam. Wasn’t that mostly a publicity effort?
Tucker: Well it did generate a lot of free publicity for IBM, no question. But what IBM did was unprecedented in scope and scale. In the interest of full disclosure, IBM is a big client of mine, so far be it for me to bite the hand that feeds me.
But look at what they did. In July 2006, they issued an online brainstorming invitation to their 330,000 people in 173 countries around the world, but also to IBM clients, business partners, and even family members. They said, “We want your ideas.” They exposed their advanced projects to these people in separate web sites to give participants information about emerging technologies from supercomputing to avatars. IBM managers then used automation to winnow the 37,000 ideas they received down to 300 well-defined ideas. Finally, more than 50 employees spent a week at IBM’s Watson Research Center in New York further combining and trimming these top ideas to down to 30. And now they’re spending $100 million to develop ideas that came from the Global Innovation Jam. I was in Asia Pacific working with IBM’s country officers and it was the talk of the town.
Frey: What’s your impression of the open innovation movement? Is it here to stay, or just a fad?
Tucker: It’s here to stay. I just wish I’d named it instead of (UC Berkeley business school professor) Henry Chesbrough, who’s been such a great advocate of it in his books and lectures. Open innovation is a powerful tool to force collaboration both within and outside your company – and it works. IBM’s biannual survey of over 700 global CEOs showed clearly that companies with higher revenue growth report using external sources significantly more than the slower growth firms.
What open innovation does is give management a tool to break up the monopoly of where ideas come from. Before, they came almost exclusively from R&D and marketing and new product development. Open innovation practitioners like Procter & Gamble CEO Allen Lafley are saying to their people, “You no longer have that monopoly.” Lafley wants 50 percent of ideas coming from outside the organization. This creates healthy competition for breakthrough ideas in the company! What leader-directed collaboration is about is not letting grass grow underneath your patents – either use them or lose them. If you haven’t used them before a certain date, you have to sell them off to somebody who can.
Frey: What are the benefits of getting customers involved, either directly or indirectly, in the innovation process?
Tucker: The benefits are enormous. The innovation vanguard companies I monitor and in some cases advise are figuring out how to gain customer insights in amazing ways. I’m impressed with what John Deere developers in their turf division did to listen for their customers’ unarticulated needs. They used our friends at Product Genesis consultin] out of Boston to help them do extensive Video Voice of the Customer. They went out and interviewed golf course groundskeepers and superintendents and asked them what they wanted in a mower. They also watched them cut grass, lots and lots of grass. They were looking for unique insights, not just “you could add a cup-holder” kinds of suggestions.
They noticed how the guys doing the mowing had to work around the golfers during the day, and how they couldn’t mow at night if it was near houses because of all the noise. They came up with the idea of the silent mower, and their breakthrough hybrid mower was the result.
See, what’s lacking in innovation today are folks in these giant companies who have a well-honed intuitive feel for their customers, the way a Bill Clinton knows how to read voters’ minds, or the way a Sam Walton knew how to tell if something would fly with customers or store managers. Managers are so busy these days answering e-mail and going to meetings that they have no feel for the customer. They don’t get out there and develop these chops. So all these methods – ethnography, customer case research, voice of the customer – are essential for creating a way to clue in to what your customers’ needs and wants and aspirations are.
Frey: When you first got into the field, you’ve observed that mavericks and outliers didn’t get much respect. Is it any different today?
Tucker: Some of those mavericks are running their own companies today, and laughing all the way to the bank. But seriously, while there’s greater respect for highly creative people in many organizations, there will probably always be a tension between those who want to change the system and those who want merely to improve the system, whatever system you are talking about. It’s just that today companies are figuring out ways to unleash bottled up creativity while also being good at execution.