Burning Questions

General Electric's Innovation Strategy

2007-10-26T13:26:47Z

The Burning Questions conference in London wrapped up today with a panel featuring Dan Henson, Chief Marketing Officer of General Electric, and Vijay Govindarajan, a professor at the Tuck School of Management. The two discussed innovation from a couple different viewpoints. Govindarajan looked at the organizational shifts that must take place for companies to, as he co-wrote in his Harvard Business Review article two years ago, build breakthrough businesses within established organizations. Henson focused on the process GE goes through to facilitate innovation from a company-wide perspective. Like many of the panels, this was a discussion filled with practical information as well as higher-level strategic discussion.

Henson said GE has a three step process to help the company reach the 8% annual growth targets set by CEO Jeffrey Immelt. The three steps are:

1. Identify the trends shaping the business landscape. Every year the company surveys what's happening in the world around it. This information then shapes how it will proceed with its growth and innovation efforts. This year, the company identified the rise of emerging markets, infrastructure growth (in large part enabled by the emerging markets), large demographic shifts, and environmental awareness in consumers.

2. Apply business goals that are unachievable if the units stay focused on the current business environment. This step related to a point Govindarajan made earlier--that business focus can be drawn into three segments: 1) managing the core business 2) moving into adjacent markets and 3) creating entirely new businesses.

3. Lay out the challenges, the trends, the targets, and have a discussion with key team members. The company convenes leaders from each of its units and surveys the above information and crafts the plans it will need to meet the goals. These innovation projects are then reviewed by the chairman once a month, which raises the profile of these efforts throughout the company and reinforces the importance of innovation.

Asked by an audience member where the innovation process "gets messy," Govindarajan said "It gets messy when you go to execute on breakthrough ideas. That's where the challenges lie."

To meet the challenges of executing on innovative ideas, Govindarajan suggests companies employ three key tenets:

1. Forget the rules that govern the core business.
2. Borrow the key components of the core business that will give the new business competitive advantage.
3. Learn how the breakthrough business should run- spend a little, learn a lot through testing your assumptions.

"Ultimately," said Govindarajan, "building a breakthrough business is less a technology challenge than it is an organizational challenge."

MORE ON INNOVATION:
Ten Rules for Strategic Innovators: From Idea to Execution (Hardcover)
Big Think Strategy: How to Leverage Bold Ideas and Leave Small Thinking Behind (Hardcover)
The 12 Different Ways for Companies to Innovate (SMR Article)
Radical Innovation: How Mature Companies Can Outsmart Upstarts (Hardcover)

Does Innovation Belong Only to the Young?

2007-10-26T12:24:34Z

I've been conducting a series of interviews with experts from both the business and academic ranks here at the Burning Questions conference. While each person has had something of real value to contribute to the innovation conversation, one individual turned the whole discussion on its ear.

Umair Haque is the principal of a small consulting firm called Bubblegeneration; he also writes a blog by the same name. When I asked Umair to name two things that all leaders must do to facilitate ongoing innovation in their companies, he told me, in essence, that I was asking the wrong question. Innovation won't rise out of a tweak to existing firm practices or culture, he said, but rather firms themselves must be reinvented -- or to use his term, need entirely new DNA -- in order for real innovation to take hold today. Haque says the innovation leaders -- Google, MySpace, and so on -- aren't organized like traditional companies and don't act like traditional companies, so they can generate new ideas and products at a rate that traditional companies cannot. What I understood him to say was that these firms were stitched out of a fabric of innovation -- that they have been built for the very purpose of generating and executing new ideas. That's a pretty far from the classic large Western company.

He then used a washing machine analogy to drive the point home. In a traditional company, if you took away management controls, the innovation spin cycle would slowly grind to a stop: without process and structure, people would not be able to move whatever ideas they have forward. At today's innovation leaders, however, a lack of controls would have precisely the opposite effect: the innovation machine would spin faster and faster as people were freed from organizational binds. That goes right to the DNA the company was built on.

What's your take? Can companies formed in previous generations come through with groundbreaking innovation today? Or has time passed them by?

MORE ON INNOVATION:
Innovation: The Classic Traps (HBR Article)
Payback: Reaping the Rewards of Innovation (Hardcover)
Staying Ahead of Your Competition (HBR Article Collection)
Open Business Models: How to Thrive in the New Innovation Landscape (Hardcover)

The Innovation Games of Small and Big Companies

2007-10-25T17:32:56Z

Sometimes you hear someone at a conference and it's clear: This person gets it.

Such was the case with a panel that's just concluding (I skipped the end to enter this blog post) at the Burning Questions conference in London. The panelist, Mark Bregman, is the Executive Vice President and Chief Technology Officer at Symantec. The panel was all about how to foster a culture that facilitates sustained innovation. Other panelists (stars in their own right!) included Dany Levy, the founder of DailyCandy.com, Sarah Lloyd Jones, the "Innovation Champion" at Unilever (and winner of "coolest title" at the conference, in my opinion), and Albert Ellis, CEO of Harvey Nash.

Bregman offered key points on the nature of innovation and the difficulties of sustaining an innovation culture in a post-acquisition environment (Bregman was the CTO at Veritas before it was acquired by Symantec). But what struck me the most was his observation that, when it comes to innovation strategies, big companies and small companies play different games. "Small companies play poker," Bregman said, explaining that in the start-up phase, you can't see what moves are coming down the path, and you must innovate around what you have in your hand. "Big companies," he continued, "play chess." Meaning big companies are on the hook with the markets to see three moves ahead and must assemble their innovation plans thusly.

The rub, said Bregman, is that there's strategic advantage in the traits needed to play both poker and chess. "How can you play both games?" he asked.

It's a deceptively simple question. Have you seen any companies that can cross this divide? Does your company?

Before you answer that question, one last bit from the panel. One of the panelists brought up the notion of failure (frankly, I think this critical subject was woefully under-represented in the discussion), and how she's seen companies reduce employee fear of failure to faciliate innovation. It's pretty simple, but remarkably few companies do it: Speak openly about failure. When a project or a product fails, senior executives (including the CEO) need to speak very openly with the company about the failure, but emphasize the learning that resulted from the failure, and the positive future implications that learning carries. In her experience, that materially reduced employee fear of failure. Conversely, not talking about failure -- when failed products get swept under the rug--the fear to fail increases. You can't innovate if you're afraid to fail.

MORE ON INNOVATION:
Payback: Reaping the Rewards of Innovation (Hardcover)
Staying Ahead of Your Competition (HBR Article Collection)
Open Business Models: How to Thrive in the New Innovation Landscape (Hardcover)
The Why, What, and How of Management Innovation (HBR Article)

Burning Question: Are We in a Green Bubble?

2007-10-25T15:19:30Z

I just got out of the Burning Questions panel "How Will the Trend Toward 'Clean and Green' Drive the Innovation Agenda?" and wanted to race back to my computer to get my own "burning question" out to the audience. More on that shortly.

The astute panel, made up of representatives from U.K. government, consultancies, and multi-national businesses, discussed a number of insights into how the "green" economy is shaping their respective sectors. Maggie Brenneke -- the very sharp director from SustainAbility, a consulting firm for companies looking to up their greenness -- mentioned that we're in the third wave of environmental initiatives.

They are:

1. The Compliance Era (the late 1960s and early 1970s). In this era, companies adapted some environmental principles to comply with government-led requirements.

2. The Citizenship Era (Late 1980s, 1990s). This era was driven by consumer demand that companies implement more environmental- and human-friendly practices. An example from this era: Nike being forced to reconsider its labor practices after the "sweatshop" outcry.

3. The Innovation Era (2000s). This era--where we are today--is driving by innovation and entrepreneurs- people and companies seeing the financial opportunity in creating green products and practices, or in helping other businesses increase their greenness. Examples of this include U.K. department store Marks and Spencer, which claims a direct link between its aggressive green campaigns and recent market share growth.

This was a fantastic bit of historical explanation, but what really struck me was a comment later in the panel session from moderator Jeff Kehoe, a senior editor at Harvard Business School Press. Reading from a recent mainstream media article, Kehoe quoted a consultant: "Ten years ago, everyone was asking me for a digital strategy. Now everyone is asking for a green strategy."

As a veteran of that time 10 years ago when everyone was cobbling together a "digital" "strategy," when adding the words "Internet initiative" to a financial press release could result in material stock gains, the comment really hit home. Clearly, the digital innovations that arose from that time 10 years ago are lasting and have themselves resulted in other innovations, but let's not forget that the rush to find a digital strategy also resulted in a devastating bubble burst in the financial markets, after many companies' digital strategies were revealed as meaningless.

The quote, and Ms Brenneke's identifying the current green era as one driven by entrepreneurship, presented me with my burning question: Are we in the middle of a green bubble? What do you think? If you submit your questions in the next day, I'll try and hunt down the panelists, get their takes on them, and post their thoughts.

MORE ON GREEN BUSINESS STRATEGY:
Harvard Business Review on Green Business Strategy (Paperback)
Going Green, Profitably (HBR Article Collection)
Redefining Corporate Social Responsibility (HBR Article Collection)

Welcome to Harvard Business School Publishing's "Burning Questions": Tales of Vikings and Coca-Cola

2007-10-25T15:00:03Z

Greetings from London! Harvard Business School Publishing is kicking off a week-and-a-half stretch in the U.K. with our annual Burning Questions conference, followed next week by a series of London events sponsored by Harvard Business Review .

This morning's sessions started off with a panel led by Harvard Business Online discussion leader Gill Corkindale that examined how to leverage global talent pools for innovation, and employed the metaphor of "vikings." Corkindale maintained that companies need to identify their "viking" employees (fearless, paradigm-shifting) and turn them loose where they want to spur innovation.

I caught most of the terrific interview between HBR editor Thomas A. Stewart and Coca-Cola chairman CEO Neville Isdell. Isdell offered some practical, "here's how" insight into how he turned that company around since taking over.

At the outset of his term as CEO, Isdell focused his team on creating a "manifesto" that detailed exactly where the company should go. Rather than deliver it from on high, he involved the top managers at Coke to create it with him. He says he only intervened twice during the working sessions, prefering instead to listen to the issues and ideas. One time he interrupted because the team was pushing towards a large acquisition, similar to what Pepsi had done with Frito-Lay. "Let me get this straight," he said to the team. "You acknowledge the difficulties we're having running our own business, and yet you want to go out and buy a company to enter into a market we know nothing about?" Put in such context, the team quickly realized it needed to focus on the core business.

In doing so, Isdell recounted, they realized that there was an enormous untapped opportunity within Coca-Cola's core market segment of non-alcoholic drinks. In fact, research showed that the category ("hydration," as Isdell calls it) was the number one growing consumer category around the world. Armed with this insight and with an agreed-upon strategy on how to address it, Coke has begun a steady reversal of its decline.

The key Isdell takeways: take a team-based approach in the formulation of strategy, and make sure you've examined all opportunities for your core before seeking adjacency acquisition opportunities.