WHEN CONFLICT ABOUT FUNDING OLD AND NEW BUSINESSES ARE RESOLVED AT LOWER LEVELS, INNOVATION USUALLY LOSES OUT.
The case of Hewlett-Packard stands out as a classic example of the tragedy that happens when the decision regarding allocation of resources to old and new businesses are left to lower levels of management. HP, by 1996, had built a successful franchise in the fast growing market of flatbed scanners when a new innovation emerged: the portable handheld scanner. A small team within the scanner’s unit of HP came up with a portable prototype with an aim to gain from this newly created market segment. The only ingredient this team lacked was the support from the senior managers who were too busy winning market share for the flatbeds. Although senior HP executive Antonio intervened with a $10 billion dollar sanction for the portables team but within months the scanner unit had diverted the funds to plug a hole in its budget leaving the portables R&D team with no fund and authority, thus crippling their further development. This happened because the senior management didn’t want to go through the painstaking process of making tough choices leaving the decision making part to the lower levels.
To hold this tension at the top, two approaches have been particularly successful. The first one is the Hub and Spoke model and the other being the Ring-team model.
In the former, the CEO sits at the centre of a wheel surrounded by business unit heads and interacts with them on a one-to-one basis. But there is no interaction among the business unit heads so that they do not intervene in each other’s domains and concentrate on their own agenda. Following this model also helps in avoiding under representation of issues not in congruence with the business’s identity thus facilitating the proper consideration of agendas (innovation) that can shape the firm’s future. Every time a new stream of revenue develops, it creates a new unit of its own leaders, engineers and local culture. Integration of these diverse units remains the main job of the CEO in this model.
In stark contrast to the hub-and-spoke approach, a ring-team model brings unit leaders together in the CEO’s key circle. Decisions are made collectively by the senior team about how to allocate resources and make trade-offs between the present and the future.
EMBRACING INCONSISTENCY
In many companies, innovation units find themselves measured against performance standards of the core business. This puts the former at a disadvantage as it struggles to match up to a well-established business that has proven itself. The senior management should avoid falling into such traps and should develop different benchmarks for the core and the innovation unit, demanding profit and perfection in one and encouraging experimentation in the other.
Take former ‘USA today’ president Tom Curley, who grew his company’s online business even as he scaled the newspaper into a publishing phenomenon. When a CEO embraces inconsistency in this way, the company’s mission and strategy can seem incoherent but this inconsistency is also accompanied by the readiness to tackle changes justifying the sacrifice.
It would be safe to conclude that change and innovation have always been and always will be an important aspect of doing good business. It is better for businesses if the current generation and the future breed of CEOs realize this.
Intuit Innovation Catalyst
In the following paragraphs we will see how any corporation-no matter how small or prosaic its business be-can sail in through to become successful with some changes incorporated in the grassroots level.
Intuit- ‘a design driven innovation machine’ started its transformation arguably in 2004, with its adoption of the famous Net Promoter Score (NPS), developed by Fred Reichheld, of Bain & Company. Now, what is NPS? It’s a likert scale measurement of a customer’s feedback of a product, based on a simple question-“How likely are you on a scale of 0(not at all likely) to 10(extremely likely), to recommend this product or service to a colleague or friend?”
Based on this simple, yet dubious question, INTUIT planned their way ahead. Although Intuit had lowered its detractor percentage substantially, it had to made little headway with its promoters. Following a discussion with Claudia Kotchka, then P&G’s vice-president of design innovation and strategy, Cook and Steve Bennet, then Inuit’s CEO, decided to focus on the role of design in innovation at a two-day off-site for the company’s top 300 managers. DESIGN for DELIGHT (D4D), which is an event aimed at launching Intuit’s reinvention as a design-driven company, was the by-product.
How it worked?[/b]
The whole game plan was through a design challenge, creating prototypes, getting feedback, iterating and refining. The drawback that Inuit had was, though it had user-interface designers, graphic designers and others, they were buried relatively deep in the organisation.
It was then that, Kaaren Hanson, an extremely talented young design-director, created a team of design-thinking coaches, namely-“innovation catalysts” –who could help Intuit managers work on initiatives throughout the organisation. This was a team of nine people. In selecting the nine, Hanson looked for people with a broad perspective on what it meant to be a designer. The group was structured like following-
· 2 persons from Hanson’s unit
· 7 people from other units across the company
· 6 women and 4 men
· Came from variety of fields-design, research, product management etc.
As a whole, the group consisted people who were influential even though they were all one or two levels below director, meaning closer to the bottom of the organization than the top and worked with a collective motive of creating graphic user interface that was both appealing and intuitive. It included thinking about whether the software solved the user’s problem in a delightful way.
Hanson’s innovation catalysts were available to help any work group crate prototypes, run experiments, and learn from customers. The innovation catalysts were expected to spend 25% of their time on big-payoff projects for Intuit overall, to cut off the risk of stretching the catalysts too thin. Hansom, herself kept in close contact with general managers who had catalysts working with them to make sure that the catalysts were addressing the manager’s biggest problems. In 2008 two employees who had been working with Inuit’s D4D,for 4 months came up with an online social network for the D4D initiative and rolled it to the market in the very next year, with management’s consent but direct support. In its first year, the new platform known as ‘brainstorm’ generated 32 ideas that made to the market.
Today D4D innovations begin with what Intuit calls-‘pain storm’-a process invented by two catalysts, Rachel Evans and Kim McNealy. It is aimed at figuring customers greatest pain point, for which Intuit can provide relief. One of the success story of ‘pain storming’ comes from Indian villages, where the farmers faced a persistent problem of –perishable inventory, that either went unsold or got a suboptimal price. Intuit reduced their pain by enabling the farmers to consistently sell their products before spoilage and at a decent price. Intuit eventually launched a simple text-messaging based marketplace connecting buyers and sellers, a Mobile Bazaar. The initial trials showed that half of the farmers were able to increase their prices by more than 10%; some of them earned as much 50% more. Within a year of launch, Mobile Bazaar had 180,000 subscribing farmers, most of them acquired by word of mouth. They report that, on average, the service boosts their prices by 16%.
Design for delight has somewhere clicked because people see that it is an obviously better and more enjoyable way of innovating. To support this empiricism, there are lots of success story in store with Intuit, like Snap Tax application, having 4.5 stars in both Apple and Android stores and a NPS score of high 80s, TurboTax etc.
A step towards creative thinking and novelty has led Intuit employees to move from ‘satisfying’ customers to ‘delighting’ them.
Understanding Cheap Innovation and How do we internalise a Product[/i][/b]
A practical guide to creating new products without starting from scratch
By Lance A. Bettencourt and Scott L. Bettencourt[/i]
[/i][/b]
Rain Bird is a unique business. But at the same time, it is like so many other businesses: Its product line is specialized—it makes sprinklers and other irrigation systems for lawns and gardens. And like most companies, Rain Bird has felt pressured to spend less on innovation in a down economy.
At the best of times, innovation investments can be painful .Success rates are low, and returns on investment far from assured.
In 2010 Rain Bird was able to introduce a new product line, based on proprietary technology, and see an almost instant payback. Its Convert to Drip line, as it is called, enables a gardener to convert a portion of a watering system from sprinkler to drip action in a matter of minutes. That’s a capability that both retailers and customers value. As we head into the 2011 summer season, sales of the new line continue to grow. And it could do that because the big-idea innovation at the heart of the new line wasn’t actually brand-new at all. It was found in work that Rain Bird had already done.
The Bird in the Hand
All it takes to realize a substantial and swift payback is for the company to recognize what it has. Rain Bird’s offerings featured two basic kinds of products: drip and spray. The DC-6 was part of the drip offerings, but it had an unheralded capability: It could replace a spray-head nozzle to get drip action out of what would usually be a sprinkler. At some point, Rain Bird noticed that something out of the ordinary was going on in one of its retail accounts. Sales of the DC-6 had suddenly taken off. The unexpected surge gave Rain Bird a new insight: It had underestimated the number of customers who would be interested in converting their sprinklers to drip.
Rain Bird changed the name of the product and the messaging around it to reposition it for the job it filled. The company also expanded on the concept, creating variations focused on customers’ needs to water trees and shrubs, vegetable gardens, or areas of mixed use (perhaps featuring some planters, some turf).
Failure to Launch[/b]
We know of great product ideas that never got off the drawing board because the manufacturing costs would be too high or because certain technical hurdles couldn’t be overcome. Ryobi Tools introduced a 10-inch band saw in 2004 that featured a dust collection system called Silent Vac.
A firm should create a storehouse of rejected product concepts and make a habit of revisiting it .In light of current projects and industry changes, is renewed potential there? If the obstacles have disappeared, the company may have an innovative product ready to go to market with only a modest investment.
Ahead of Their Time[/b]
Out of 10 good things that could be said about its unique and meaningful attributes, seven might go unmentioned. How can a company uncover innovative features or capabilities that are hiding within a current solution? The best way is to develop an up-to-date prioritization of customer needs and then reassess the capabilities of existing products in light of it. The good news is that product managers within a organization already possess the technical insight required for this task.
The trick is to identify not only the needs that are most relevant to customers now but those that may be in the future, and closely monitor how their significance to customers changes. Periodically examining those criteria will help companies discover product features that may be ahead of their time.
For the last part of the article please visit
http://www.managementparadise.com/article/4579/the-dynamics-of-break-through-innovation-an-analysis-of-hbr-june-2011-part-iv