Marketing Innovation

The Global Innovation 1000: Making Ideas Work (Booz&Co.)

Booz and Company has done a study of 1000 global companies with respect to innovation, and published their findings in the linked report. They looked at the front end of innovation, and broke it into two parts: idea creation, and idea conversion. Most companies appear to be pretty good at coming up with ideas; very few are very good at picking the right ones. “It’s often said that the means by which companies seek out and find good ideas tend to be vague, or fuzzy, or highly variable from one company to another. Yet according to our survey, the most successful innovators in all industries have developed a variety of consistent, manageable ideation practices that are well aligned with their innovation strategies. And when moving ideas into the development stage, they tend to depend on an equally consistent set of principles and processes. Indeed, any company in any industry can take advantage of these tools and processes to get the most out of the money they spend on innovation.” They divided companies into three categories: Need Seekers, Market Readers, or Technology Drivers. Need Seekers develop products and services based on superior end-user understanding. They are often first to market with new products. Practitioners include Apple and P&G. Market Readers respond to markets, customers and competitors, and usually do incremental innovations. They are usually “fast followers”. Practitioners include Caterpillar and Hyundai. Technology Drivers depend heavily on their internal technical capabilities to develop breakthrough and incremental innovations. Their new products usually address (stated or unstated) customer needs through application of technology. Practitioners include Google and Bosch. “The process of choosing which ideas to convert to full-scale product development is perhaps even more critical to a company’s innovation success than is the ideation stage.” One of the tools that most companies use to help them at this stage is “leading customer reviews”, particularly among Market Readers. “Yet the true key to success at the conversion stage isn’t the specific tools and mechanisms used — after all, companies report that, by and large, they all use quite similar processes. The key to success is for companies to have the right people in place to manage the process, using experience and judgment to rigorously make the needed decisions. Says [CTO Darlene] Solomon of Agilent: ‘Our pipeline is about how much we think a technology can move the needle in creating value for our customers, and usually, that’s not a numbers question when you are assessing a disruptive technology. It’s easy to make anything look good. [What matters is] the judgment of people who are very experienced in leading research, and we are fortunate to have really smart people who have a good combination of technology and business sense.’ “That combination is critical when deciding which ideas to carry through to commercialization and which to kill. As ideas and projects move down the pipeline, business considerations become increasingly important. ‘In managing the research portfolio that is in the labs’ funnel,’ says Solomon, ‘we constantly ask ourselves, ‘What have we learned about the technology that makes it more or less attractive than [it was] six months ago? What have we learned about the market, the competitive technologies — and what’s going on in the world that might help us decide whether the technology is now even more valuable or perhaps becoming a “me-too” technology? What has changed within Agilent in terms of our business priorities?’ All of these perspectives evolve over the course of our longer-range research, and influence our decision whether or not to continue to invest in a particular project.’” For the record, their list of the top ten innovative companies, in order: Apple, Google, 3M, Samsung, GE, Microsoft, Toyota, P&G, IBM and Amazon.

Wisdom from the Ages Predicted Apple's Success

"No organization can achieve greatness without a vigorous leader who is driven onward by his own pulsating will to succeed. He has to have a vision of grandeur, a vision that can produce eager followers in vast numbers. In business, the followers are the customers. To produce these customers, the entire corporation must be viewed as a customer-creating and customer-satisfying organism.

"Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organization. It has to do this continuously and with the kind of flair that excites and stimulates the people in it. Otherwise, the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction."

Source:  "Marketing Myopia", by Theodore Levitt, Harvard Business Review, July-August 1960

And to think that Steve Jobs was only five years old when this was published! He obviously learned this lesson brilliantly.

 

Accidental innovation - Corn Flakes!

Sometimes, you just can't improve on reality.

From http://yhoo.it/l1UDs8

Corn Flakes

As a Seventh Day Adventist, Dr. John Harvey Kellogg adhered to his faith's vegetarian diet as well as the teachings of the cultish, nutritional hardliner Sylvester Graham, the inventor of graham crackers.

In 1894, while employed by the Battle Creek Sanitarium in Michigan, he began experimenting with ways to make that restrictive diet more palatable and an inexpensive way to feed his charges.

Leaving some boiled wheat unattended, it went stale. Attempting to salvage it by rolling it into dough, Kellogg (aided by his brother Will) found that it tore into pieces and refused to hold a shape. Undaunted, they toasted the flakes and were pleasantly surprised by the result.

After a bit of trial and error, the brothers decided to use corn, instead of wheat, as the main ingredient. The result was deemed tasty enough by patients that Will founded a company bearing the Kellogg's (NYSE: K - News) name to sell their corn flakes.

Dr. John, however, opted out of the venture, angered that his brother tampered with the healthful nature of the recipe by adding sugar to the mix. It should be noted that the elder Kellogg wasn't so much worried about obesity or bad teeth; as a staunch practitioner of sexual abstinence, he theorized that his corn flakes would suppress physical urges. Sugar, an aphrodisiac in his opinion, would undo that.

Further revolutionizing how the world eats breakfast, a patient at Kellogg's sanitarium, C.W. Post, used his own variation of the cereal to create his own company and a competing product, Post Toasties.

Does Innovation Pay?

To answer that, I look at three companies:  Apple, HP, and Dell.  Apple is rated the most innovative company in the world by both BusinessWeek and FastCompany; HP is #42 in the BW poll and doesn't make the FastCompany 50; Dell makes neither list.

Let's look at five year stock price:

• Apple went from $63.55 to $346.66
• HP went from $32.13 to $40.81
• Dell went from $25.96 to $16.01

Let's look at the most recently reported full year revenue:

• Apple:  $87.5B
• HP:  $127.2B
• Dell:  $61.5B

Profit margin:

• Apple's is 22.36%
• HP's is 7.17%
• Dell's is 4.29%

And finally, guess which companies match these market capitalizations:

• $320.6B
• $88.3B
• $30B

Yep, Apple, HP, and Dell in that order.

Seems to me the answer to the title is pretty clear -- innovation pays big.