Point:  Use roving cross-functional teams to hunt for promising new product and service ideas.

Story:
In a world of large organizations and diverse global hotspots for R&D, innovation occurs everywhere.  Companies can tap those innovations through search processes, which may be cheaper and more effective than only using traditional “start from square one” R&D efforts.  The rationale: there may be no need to re-invent the wheel if the wheel already exists somewhere inside (or outside) your organization.

Here’s how multinationals General Mills and Whirlpool approached the search for innovations. General Mills formed two “innovation squads” consisting of six-to-eight employees selected from multiple functions. The squads are tasked with hunting for ideas from inside and outside the organization – one squad focuses on finding ideas internally, the other focuses on looking outside the organization.  The squads present the best ideas they’ve found to division heads. Once a quarter, the squads give their top 10 ideas to the company chairman.

For example, one squad found a patent for a new method of encapsulating calcium. The patent had been donated to a university. The squad converted it into a very successful new line of orange juice with added calcium that doesn’t taste chalky.

Similarly, Whirlpool designates some employees as innovation mentors – “i-mentors” – training them in innovation and tasking them with identifying promising new product ideas from across the organization. Whirlpool has 1000 i-mentors globally.  Most of the individuals self-identified and asked for the training, which consists of a formal training program that creates a common language for innovation and embeds innovation into an organizational competency the way Six Sigma training does. Whirlpool developed “how-to” guides for its innovators, including analysis of who has contact with whom [network analysis].

Action:

• Explicitly designate individuals or teams to look for innovations
• Provide innovation training to these cross-functional teams
• Cast a wide net when searching for good ideas
• Filter, refine, and present the best ideas for funding/implementation decisions

Sources:

“Unleashing Innovation,” Research-Technology Management, http://findarticles.com/p/articles/mi_6714/is_1_52/ai_n31337091/

Mason Carpenter and Sanjyot P. Dunung, “Harnessing the Engine of Global Innovation” in International Business, Flatworld Knowledge, August 2011 http://www.flatworldknowledge.com/pub/international-business/524265#web-524265

Jessie Scanlon, “How Whirlpool Puts New Ideas Through the Wringer,” http://www.businessweek.com/innovate/content/aug2009/id2009083_452757.ht

Peter Erickson, “Innovating on Innovation” Keynote Presentation at the Front End of Innovation Conference, Boston, MA, May 2009

Point: Admitting ignorance is a crucial first step to building strong knowledge that leads to innovation.

Story: Many of the 2010 World Business Forum presenters spoke authoritatively about what we know about business and economies.  But Steven Levitt (author of Freakonomics and Super-freakonomics) highlighted a systemic blindside in what businesses and leaders know.  In his discussions with companies, Levitt found that business people fear saying, “I don’t know.”  Such an admission seems to them like a reputation-damaging weakness in the eyes of their coworkers, bosses, shareholders, and customers.

Yet being unwilling to admit ignorance carries at least three types of stiff penalties.  First, the arrogance of presumed omniscience leads to hubris, which is the first stage of downfall, according to research by Jim Collins, author of bestsellers Good To Great and How the Mighty Fall.

Second, by not admitting ignorance, companies underinvest in gathering and creating knowledge. If we claim to already know something (e.g., “we know our customers”), then why invest in gathering more knowledge about them?  Third, and ultimately, willful ignorance are leads to mistaken decisions and failed innovation.  No wonder 90% of new product launches fail, according to data cited by Martin Lindstrom (author of Buyology).

Admitting ignorance need not signal weakness.  Saying “I don’t know” isn’t the same as saying “I can’t know.” A number of the presenters described four concrete ways of reducing ignorance.

First, A.G. Lafley (former CEO of P&G) stressed the value of reducing ignorance about customers simply by listening to them and watching them as they naturally interact with the company’s products.  P&G spends a lot of time and money trying to understand the two moments of truth — when the customer chooses products in the store and when the customer uses products in the home.  Even as CEO, Lafley made a point to visiting ordinary consumers and stores when he traveled.  These visits demonstrated to all P&G employees the importance of learning more about customers from the customers themselves.  The point is the listen more and go out in the real world — admitting (and resolving) ignorance about how customers really use products and services.  Charlene Li, author of Open Leadership and Groundswell, likewise stressed this point and cited the new-found power of social media to let companies hear what real people are saying about the company (see previous post: Getting CEOs on Board with Social Media).

Second, Martin Lindstrom showed exciting new tools such as fMRI (functional Magnetic Resonance Imaging) and SST (Steady State Topography) that can trace the activity of the subconscious parts of the brain.  With these tools, innovators and other business researchers can answer previously unanswerable questions about people’s innermost reactions to brands, products, and sensory cues associated with new or existing ideas.  With these tools, Buyology researchers can show how just the red color of a Marlboro cigarettes pack or the angular shape of a McDonald’s restaurant roof triggers a reaction in consumers.  These new technologies help business resolve age-old ignorances about why people really buy.

Al Gore (former Vice President of the US and Nobel Peace Prize-winning creator of An Inconvenient Truth) gave an impassioned plea for responding to global warming before more dire effects take hold of the planet.  His presentation illustrates a third tool for reducing ignorance: developing deep models to estimate the direct and indirect effects of various phenomena.  For example, climate models help predict the ongoing rise of humidity and the concomitant rise in the severity of storms such as those that caused this year’s floods in places like Nashville and Pakistan.

Modeling does come with risks.  Levitt criticized prevailing economic models for focusing too much on what was mathematically easy rather than what was relevant to real economies.  People need to validate the model by showing, for example, that the last 60 years of temperature increases track the increase predicted by climate models.  Good modeling helps people reduce ignorance about what might happen without the full costs of making it happen.

Finally, testing represents the natural culmination of the other ignorance-reducing tools:  will an innovation or new idea really work? Levitt recommended doing more experiments — testing the effects of changing the price, changing the advertising, changing the product features, and so on. Levitt also suggested leveraging accidental tests.  For example, when an intern at a consumer electronics company forgot to submit newspaper ads for three months in one local market, the company discovered that the lack of newspaper advertising had caused no corresponding drop on sales.  Lafley likewise encouraged managers to test new ideas, even if they couldn’t get permission beforehand. Resolving ignorance is too important to be stymied by bureaucracy. Moreover, testing need not be expensive these days. A.G. Lafley noted how much easier it is to test new packaging and merchandising innovations in a computer-based virtual 3-D simulation. P&G can create an accurate 3-D model of a consumer’s favorite retailer and graphically add and test new designs. Changing the color, shape, size, graphics, etc., only takes the click of button. Cost is no longer an excuse for ignorance.

Action:

• Admit ignorance and document what you don’t know but would like to know.
• Watch and listen by going out to customers and the world to glean potential insights and innovations.
• Use new data collection technologies to answer previously unanswerable questions.
• Build models to predict the impact of innovations and other changes in products, processes, and business.
• Test innovation hypotheses via various methods such as virtually, in test labs, or in select markets.

Point: Creating new products & services for developing countries requires radical innovation and opens new opportunities in developed world markets as well

Story: GE Healthcare sells sophisticated medical imaging devices around the world. Historically, they have sold these high-end machines in emerging economies like India. But only 10% of Indian hospitals can afford a $10,000 ECG machine. Reaching the other 90% of the market takes more than simply cutting a few costs. It requires radical innovation and an in-depth understanding of local conditions.

For example, most Indians live in rural areas. That means they don’t have a local hospital to go to. Rather, the machine needs to go to them, and no rural healthcare clinic is going to lug a $10,000 machine into the field even if it could afford the device. Achieving the goal of a lightweight, reliable, simple-to-use ECG machine took radical re-thinking. GE built a device, called the MAC i, that could fit in a shoulder bag, has a built-in replaceable printer, and cost only $500. In addition, because the device would be used in rural locations with scant access to electricity, GE designed a battery that could do 500 ECGs on one charge.  To make it easy to use, GE designed the machine to have only three buttons. Finally, just because the device is inexpensive doesn’t mean it’s dumb.  Because the cost of a copy of software is zero, GE installed professional-level analysis software to aid rural doctors.

With its new MAC i, GE has unlocked a whole new market in developing countries.  Beyond that, GE has also opened up new opportunities back home — and that’s the reverse innovation side of the story.  How? The portable ECG machine with a $500 price tag is ideal for use in ambulances, saving lives of accident victims in rich countries as well.  Cheap, portable, and easy-to-use devices are desirable in any country.

Action:
Reverse innovation means designing a product for a developing country and bringing that innovation back home.

• Make the product extremely low in cost so that it is price-acceptable in developing markets and opens up new sales opportunities in developed markets
• Start from the ground up with a radical rethinking. (See also the Tata Nano example.)
• Plan for intermittent electricity
• Make the product modular to facilitate remote repair
• Make the product easy to use, like GE’s three-button ECG machine

Sources:

Vijay Govindarajan, “Reverse Innovation: A New Strategy for Creating the Future” HSM webinar March 18, 2010

Prof. Govindarajan will be speaking more on this topic at the World Business Forum in NYC October 5-6, 2009

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