Volume 9, #6 - November, 2011
Say It Again, Sam
The Not-So-Obvious Truth About Innovation
by Sheila Mello
Regular readers of Discoveries may have become rather tired of hearing PDC point out that one of the crucial elements for successful innovation is a deep understanding of both the articulated and latent needs of its customers. We also often discuss several other product development essentials: alignment of strategy with innovation goals, top-level management support for a customer focus, and a corporate culture that fosters innovation.
Happily, we’re not the only ones saying this. You now can hear these thoughts from another source (and one backed by recently collected data): Booz & Company’s annual Global Innovation 1000 study. An article about the study results, titled “Why Culture is Key,” appears in the Winter 2011 issue of Strategy+Business and says in summary: “Booz & Company’s annual study shows that spending more on R&D won’t drive results. The most crucial factors are strategic alignment and a culture that supports innovation.”
As I read over the article, several findings stood out as particularly interesting to product developers and managers of companies striving for innovation. Read on to discover how these findings relate to you.
Customer-focused culture
The research identifies several strategic approaches to innovation. Companies that fall into the category of what Booz & Company calls need seekers—which it describes as companies whose innovation strategy relies on actively engaging both customers and non-customers to understand what motivates them—have an advantage. In contrast to companies that either rely on market indicators or on internal technology capabilities to drive innovation, the need seekers financially outperform competitors and report greater alignment of business and innovation strategy.
To move into the ranks of the need seekers, a company must have in place a process to uncover what stands in the way of customers doing their jobs, as well as for generating and evaluating product ideas and then choosing the most appropriate and potentially profitable from among the possibilities.
Perhaps more interesting was that regardless of whether a company is a need seeker, a market reader, or a technology driver (the three categories by which Booz+Company identifies innovation approaches), the most important perceived cultural attribute was “Strong identification with the customer and an overall orientation toward the customer experience.” I couldn’t have said it better myself.
Innovation culture
It’s perhaps no surprise that Apple, Google, and 3M top Booz & Company’s survey results as the three most innovative companies. All three have cultures that support innovation, but the lesson for the rest of the world is not just “emulate Apple” (or Google or 3M).
A company’s tolerance for risk, which is a cultural characteristic, plays a huge role in either allowing or inhibiting innovation. One reason for risk aversion in the area of innovation is that companies lack tools for realistically evaluating the market appeal of a new and innovative offering. The fear engendered by uncertainty often forces companies to make only safe bets. Finding a way to measure the potential market appeal of a new offering allows a corporate culture that’s more open to risk.
Support of senior management
Nearly every PDC Discoveries article makes mention of senior management support for a customer-driven process. While senior management support is not exactly the same as corporate culture, when senior management is at odds with the direction of other parts of the organization, no progress can be made. For example, we worked with a major equipment manufacturer whose staff were told by management that they could not innovate more than 15 percent on a product in any given year. Obviously, this sort of risk aversion does not promote the kind of out-of-the-box thinking that leads to profitable innovation.
The message for the rest of us
The study’s overarching message—that none of the individual elements alone are sufficient to guarantee innovation success and that a company’s culture must not only support but encourage innovation—is obviously a message that bears repeating.
If you are one of the Top 10 Most Innovative Companies, congratulations. For those that aspire to top this list, the Booz & Company study can serve as a valuable catalyst to examine your organization and determine if you have the culture, strategic alignment, and innovation approach necessary to advance your position.
For us at PDC, it’s gratifying to get outside confirmation, particularly from a large recent survey, of our approach. Most gratifying for me, however, is the knowledge that the work I do has been able to help companies identify gaps in their innovation approach and take the concrete steps to fill those gaps and enhance their success.
What we’ve said before about…
...Culture
Aside from being started by a passionately dedicated (and relatively young) CEO, Zappos does three things differently from most companies. Number one: it weaves value into its culture. – The Great Product Shape-Up, November 2009
“At Siemens, the customer is at the center of everything we do. Being with teams that are so focused on wanting to understand customer needs is exciting. It's a defining way for our organization to come together.” – Siemens Healthcare Case Study
...Strategic alignment
The highest level of innovation maturity is Level 5, in which all innovation decisions & projects align explicitly with business & product strategies. – Oh, Grow Up: Assessing Your Organization’s Innovation Maturity, June 2010
...Executive-level support
If the CEO has never had to explain to the board of directors that the latest innovation is six months late and a million dollars over budget, maybe he or she hasn't experienced enough discomfort to comprehend the importance of ongoing investment in a deep understanding of the customer. – Five (Poor) Excuses for Abandoning VOC Research, March 2011
