INNOVATION: Why It’s a Core Capability for Your Firm’s Future

Hugh O’Brian

Robert Tucker strides energetically into the Four Seasons Biltmore hotel in beautiful Santa Barbara, California, straight off a long flight from Morocco, where he had been giving a lecture. Through decades of studying innovation at successful companies, he has developed The Tucker Innovation Model. The tool, he says, helps “simplify the all-too-complex subject of innovation, which doesn’t need to be so complex.” We spoke with him about what he has learned regarding how companies, regardless of industry or size, can develop an approach to innovation that ensures they’ll be around tomorrow.

WHY SHOULD LEADERS IN THE TISSUE INDUSTRY BE CONCERNED ABOUT INNOVATION? Tucker: Because it may well decide if your company exists five or ten years from now. We’re in an era where even so-called commodity industries are being disrupted, and it’s happening faster and faster. Ten years ago we worked with Nokia’s high potential managers. My analysis revealed that the company’s culture had developed some barriers and bad habits that limited the company to only incremental innovation. At the time the company seemed invincible. Growth was in the double digits, profits were pouring in. But then a new market entrant – Apple – came out of left field with a product, the iPhone, that consumers quickly gravitated towards. Nokia wasn’t able to respond in time, and the rest is history. I’m seeing this type of disruption happening to more and more industries, and incumbents unable to respond in time. So my message to CEOs regardless of industry is: take stock of your firm’s IQ – Innovation Quotient – before the disruption is full blown. By then, it may be too late.

HOW DO YOU DEFINE INNOVATION, AND HOW DOES IT DIFFER FROM AN INVENTION? An invention is worthless unless it produces some sort of cost savings or added profit. If the customer doesn’t shell out money for your new idea, it’s not an innovation. At the most basic level, innovation is the act of coming up with ideas and bringing them to life. All companies innovate to some degree, or they don’t survive. But today, it’s about increasing the rate of innovation. So we need to approach this process consciously, and execute on new ideas consistently. We need to bring them to benefit customers lest they demand lower and lower prices. An innovation produces value both for the customer as well as the producer of the idea. It differentiates us from the competition, makes us the preferred provider, and keeps customers loyal even if we don’t offer the lowest price.

WHAT ARE THE BARRIERS THAT STOP COMPANIES FROM INNOVATING? The biggest barriers are all cultural. You get the behavior you reward. And what’s rewarded in most companies is execution, operational excellence. There’s no appetite for thinking out of the box, taking risks. Just make your numbers. Innovation is not a strategic priority. And frankly, the CEO and top management don’t really know how to drive it.

WHAT CAN BUSINESS LEADERS DO TO STIMULATE INNOVATION? Make it a priority. The truly leading innovation companies say that innovation is not a top three priority – it is their number one priority. And that cascades through the company. They back up this priority with a process to improve, to stay in touch with customers, look for new markets, solve unmet customer needs, avoid complacency. As Simon Spencer, Borg Warner’s first innovation champion, expressed it: “At some point we looked around and said, ‘we’ve got a process for everything, what about for innovation’?” Across the globe – and I’ve worked in 47 countries – more and more leaders are waking up to the need to have a process to stimulate innovation.

WHAT ARE THE ESSENTIAL DISCIPLINES THAT A FIRM NEEDS TO PRACTICE? From my work studying the world’s most innovative companies, I see five essential factors in stimulating innovation: 1. Make innovation a top strategic priority. 2. Manage ideas as assets. Install a process to extract value from these ideas – input, throughput, output to come up with fresh, compelling profit-producing ideas. 3. Collaborate closely with customers and strategic partners to get out front of changing markets. 4. Encourage a risk-taking culture. 5. Involve everyone in the enterprise.

WHICH COMPANIES DO IT CONSISTENTLY WELL? Among large companies, P&G and GE are two good examples. In 2000, AG Lafley, became Procter & Gamble’s new CEO. He took the helm at a company mired in bureaucracy, with stalled growth and sinking margins, and he shifted the culture into what I call the “opportunity mindset.” He started giving out small rewards to people who stepped forward with ideas. He pioneered Open Innovation and encouraged his people to partner with outside inventors to bring additional ideas to market. And he made innovation everyone’s responsibility. Previously P&G had an R&D department of 8,000 people; innovation rested there and nowhere else. But he opened it up and made everyone innovators. At General Electric, innovation is defined as reinventing. So everyone in the company is encouraged to ask: “How are we rethinking what we do for the customer? And what signals are we looking at to tell us it’s time for reinvention?” Companies that have innovation processes built into their DNA translate new products, more effective manufacturing processes, and new marketing and supply chain improvements into higher profits and higher stock valuations.

YOU’RE KNOWN FOR THE TUCKER INNOVATION MODEL. TELL US ABOUT THAT. Based on our work over the past two decades, I have developed a model that maps the flow of ideas through an organization. The steps are: Step 1 - Stimulate Ideas Bottom line: you need to stimulate more ideas to meet the challenge of change. This is the Front End of the innovation process. In times of rapid change, you need to constantly be coming up with new ideas, and there are various ways to do this. You need to encourage ideas from your customers, and your employees, and from your own sense of where you want to take the company. A growing number of companies are installing “electronic suggestion box software” to collect these from their people. It’s important that the idea funnel is quite wide, but also that you have a Selection Process in place to separate the high potential ideas from the losers. Step 2 - Select the most promising ones Once you have the ideas coming into your funnel, the critical next step is your selection process. Often, when I work with companies and ask them “So how does your idea filtering process work”, you get a blank ‘deer in the headlights’ look. Many simply don’t have one. The point is that if people don’t know what you’re looking for, what your criteria are, you’re never going to get their ideas. And you can’t go after every single idea, so you need to make “go or no-go” decisions about the ideas on the table. You need to prioritize them, and you need to do this not once a year but frequently and transparently. Most firms have absolutely no organized way of doing idea selection. Marissa Mayer, the CEO of Yahoo, was an early employee at Google when it was a startup. She noticed that people in the young company were coming up with ideas but they had no place to take them to get a hearing. So she set up a Tuesday morning idea pitch session, where you got 10 minutes to make your pitch. She and her committee would give you a quick ‘go - no go’ decision instantly. Google has since evolved their idea selection process of course, but that was the start of it. Most companies have yet to set up a process around idea selection, so nobody knows what kind of ideas the company is looking for. Step 3 – The Throughput (development) Phase This is the phase where the real work begins. Resources – manpower, time, talented employees – are devoted to exploring the idea further, building the business case, and testing it on customers. The team must begin understanding the value proposition, and being open to killing the idea based on what further research reveals. All of these functions take place during development. Step 4 – The Launch and Market Building Phase The big misconception of this phase is that you simply launch an idea – whether it be a new product, new value-added service, method, etc. – and you’re done. Actually it’s quite the opposite: this phase signals the need for a multitude of additional ideas to insure that the idea catches on and becomes successful. If you speak with Art Fry, the guy at 3M who invented the Post-it note, he’ll tell you “the work really begins when you launch the idea,” because this is where any idea is really tested for success or failure. His famous invention was about to be dropped by the company’s top managers because it wasn’t selling. But Fry and his team were relentless. They tried everything to get people hooked on the little notes, and soon everybody was using them.

WILL THIS INNOVATION MODEL WORK FOR ALL COMPANIES? If companies follow the outlined steps and practices to create the right conditions so people are encouraged, they will be on the right path. Of course each company needs to drill further down into each of the steps to design their practices.

ANY CONCLUDING THOUGHTS? Although I’ve not studied the tissue market, I would assume there’s not a huge disruptive force bearing down on this market like there is in many others today. But, my experience is that markets almost always look calm on the surface, but then all hell breaks loose. Nokia and Blackberry were convinced they’d be the market leaders for years to come, what could possibly go wrong? So even large and steadily-growing companies have to be thinking about this because disruptive forces are at work all the time, whether you realize it or not.