Enterprise Architecture in Action

Accidental Innovation... Any takers?

Sat, 23 Aug 2014 15:05:00 +0000

Of course, there are takers! After all who cares? An innovation that happens by accident is just as good as an innovation that was carefully, deliberately, meticulously, and painfully thought out and executed. The reality is, as I had discussed in my book, Living in the Innovation Age (TekNirvana, 2011), that errors are the lifeblood of innovation. History is full of examples of innovations that were the result of accidents and errors. Alexander Fleming discovered the virtues of penicillin when mold accidentally contaminated a culture of Staphylococcus (i.e. Staph) he had left by an open window in his lab. Think of how many lives have been saved because of that one accident. Modern electronics owe their existence to a few errors as well, a few of which ultimately led to the creation of the vacuum tube. In fact, it is said that when Lee De Forest first invented the vacuum tube even he did not completely understand why it worked!

So, you might be wondering why all of a sudden I am writing a blog on this topic. The blame squarely lies on a recent article I read in Businessweek that discussed a Nanogenerator that can recharge a device with a jostle, swipe, or tap. The one millimeter thick, transparent nanogenerator converts mechanical energy (or movement) into electricity. An obvious (and very lucrative) application would be to incorporate such a nanogenerator into a cell phone case/cover, which would continuously charge your cell phone as you were using it and even as it bounced around in your pocket. The kicker is that the innovator, Professor Wang at the Georgia Institute of Technology, had been working on a new charging technology for several years. The big breakthrough, though, came as the result of a sloppily pasted model by one of his students. The "erroneous gap" in the model, due to the sloppy work, actually boosted the current output! Hmm, I wonder what grade the student got...

The Bottom Line
Yes, many innovations have been the result of well-thought out and deliberate actions. However, history (and as the example above illustrates, even the present day) is chock full of stories of amazing innovations starting out as a side-effect or even an accident. Of course, by no means am I suggesting that anyone throw all caution to the wind, but at the same time don’t be afraid of making mistakes… embrace them for you never know which one of those errors might sow the seeds to the next groundbreaking, game changing innovation!

To Do or Not To Do - Now that's a Decision

Thu, 08 Aug 2013 14:55:00 +0000

A while back I had blogged about how impressed I was with the insights from Management Guru Peter Drucker as I read his classic book (aren't they all classics?) “Innovation and Entrepreneurship”. In Chapter 12, Peter discusses a process he calls “Selective Abandonment,” in which every three years or so, the enterprise must put product, process, technology, market, channel, and staff activity on trial for its life. The organization must ask, “Would we now go into this market, product, channel, technology, etc. today? If not, the next question becomes, “How do we stop wasting resources on it?” Selective abandonment not only helps free valuable resources for the “new” but helps an enterprise relieve itself of the burden of “near misses” and “half successes.”

How about just calling this "making a decision"?

The fact is making a decision is not as easy as it might appear. I just came across an interesting blog on HBR on this titled "To Move Ahead You Have to Know What to Leave Behind" by Nick Tasler. Did you know that when an executive announces that her business will change to become a luxury service provider, technically it is not a decision until she also states that they will not provide low cost services to price-sensitive customers anymore?

So, a necessary element of a decision is not just what will be done but also what will not be done. In fact, this element is actually part of the word [decide] itself. As Nick explains, the Latin root of the word "decide" is caidere which means "to kill or to cut." (think homicide, suicide, genocide.) Technically, deciding to do something new without killing something old is not a decision at all. It is merely an addition. But as he also explains, making trade-offs is mentally exhausting and uncomfortable, which is why most decisions never actually become decisions; they are just "pile ons" to existing initiatives.

The Bottom Line
Making real decisions is crucial in business and life. Michael Porter's theory on strategy is based on this concept - deciding what not to do is just as important as what to do. Innovation relies on this as both Peter Drucker and more recently Vijay Govindrajan have demonstrated with their respective theories on "Selective Abandonment" and "The Three-Box Model". Making decisions is a cognitively and emotionally taxing activity that the average person will go to great lengths to avoid but a key element of what makes great leaders great. Great leaders and change agents have come in all shapes, sizes, colors, genders, and personality types. But the one thing they all seem to have in common — the one thing that distinguishes them from ordinary people — is their willingness to decide when others could not.

Google's Culture Wars - Will Innovation Still Thrive?

Tue, 23 Jul 2013 20:27:00 +0000

Google's "20% time" has been legendary in terms of how many successful innovations it has helped Google bring to the market. Basically, Google allows its employees to use up to 20 percent of their work week at Google to pursue special projects. That means for every standard work week, employees can take a full day to work on a project unrelated to their normal workload. Google claims that many of their products in Google Labs started out as pet projects in the 20 percent time program.

That might be a thing of the past in the not so distant future...

At least that's what many in the industry are thinking out loud based on the recent demise of Google Reader, a popular tool for reading RSS feeds. Adding salt to injury, the original Google Reader, Chris Wetherell, says that he wouldn't have founded Google Reader within Google as the company exists today. Instead, he would have just gone elsewhere or started his own company. As Alex Kantrowitz explains in his blog on Forbes.com, "Wetherell’s comments highlight a problem Google might face now that Reader is shutting down. The company has long benefited from a culture of innovation which has helped it turn employee side projects like Gmail, Google News and Ad Sense into core offerings. But, with the understanding that even successful products can be killed in the future, the company’s employees might now have less of an incentive to launch their ideas within Google, and innovation at the company may suffer as a result."

The Bottom Line
Personally, here's what I think:

Google is devoting significant resources to it's social networking endeavors and has decided to redirect resources utilized on Google Reader to Google Plus. As a publicly traded company with a shareholder price to worry about, this type of cost/benefit analysis is to be expected.
There could be a bit of "sour grapes" on part of the Google Reader's founder who of course would be personally attached to his invention.
It is a stretch to extrapolate that Google might either discontinue to 20% time or that employees would not use this time to explore their ideas in fear that their ideas would be squashed at some later time. One data point is just not enough to arrive at that conclusion. In statistical terms, this one observation could be deemed as an "outlier" - an observation that is numerically distant from the rest of the data and is often excluded from analysis.

I really don't think Google is going to be any less innovative than it was before. Let's not proclaim that the sky is falling just yet...

Tesla - An Evolving Ecosystem and A Tale of Business Model Innovation

Wed, 03 Jul 2013 14:35:00 +0000

Tesla's Model S is designed to allow a fast battery swap, exchanging a depleted battery for a fully charged battery in less than half the time it takes to refill a gas tank. To facilitate this, Tesla has introduced an innovative switching station based infrastructure based on a model pioneered by the now bankrupt electric vehicle company, Better Place. These switching stations serve a similar purpose to what gas stations serve for fossil fuel vehicles - if and when a motorist runs out of charge, they can replace their depleted battery with a fully charged battery. Realizing efficiencies and gains from economies of scale, these switching stations can be a win-win for both motorists and Tesla. Motorists are relieved of their anxiety of being stranded with a drained battery and the car company can get many more motorists to buy their vehicles and sign up for use of the stations. Tesla's latest battery swapping switching stations builds upon its evolving strategy of building a complete and robust electric vehicle (EV) ecosystem that started with aspirational cars (0 to 60 miles in 4.2 seconds), batteries with up to a 300 mile range, and supercharging stations.

Innovations come in many forms forms the essence of Principle #5 of my recent book, Living in the Innovation Age (TekNirvana, 2011). I compare these forms of innovations to the concept of avatars of Lord Vishnu in Hinduism - each form unique and specifically designed for a purpose but none any better than the other. While most associate innovation with technology, a crucial and often necessary form of innovation occurs in business models, such as the Tesla switching stations described above. As Karan Girotra and Serguei Netessine discuss in their HBR blog, At Last, a New Business Model for Tesla, groundbreaking technology rarely achieves mass adoption without a corresponding innovation in the business model around the sale/use of the technology. I concur with the authors' assessment that these patterns extend far beyond Tesla — there are numerous innovative technologies that are waiting for an innovative business model that could facilitate their use and adoption.

The Bottom Line

Innovation has many forms. One such form is Business Model Innovation, which is often the catalyst that enables groundbreaking technology to achieve mass adoption. It is a well-known fact that much of Apple's iPod's success can be attributed to its business model innovation of the iTunes Platform. Such is the story with Tesla as well. Tesla realizes that it is not enough just to build a great electric car. In order to make their product truly useful, they are creating an entire ecosystem around it - long range batteries, supercharging stations, and now high speed battery swapping switching stations. So, will Tesla's switching station concept finally be the tipping point that will position its flagship product as the first all-electric, no-compromises, luxury sedan? Only time will tell...

Sony and "The First Mover Advantage Fallacy"

Mon, 27 May 2013 18:37:00 +0000

Sony's SmartWatch
Although first to market it might
only help competitors come up
with better offerings

On October 12, I blogged about GM's failed attempts at capitalizing its first mover advantage with its early introduction of the redesigned "2013 Chevy Malibu" in February 2012.

The May 6 - May 12 issue of Businessweek discusses yet another example of the so called first mover advantage fallacy. The victim this time? Sony.

Sony introduced its first smart watch, LiveView, in 2010. As a new product in the growing and lucrative smart device marketplace, it was interesting but lacked in features and was mired with kinks. A more recent version called the SmartWatch is priced at $130, is about the size of an iPod nano, has a 1.3-inch touchscreen, and wirelessly connects to Android smartphones using Bluetooth technology. The gadget alerts users to incoming calls and allows them to reply to e-mails or texts with an array of pre-written messages. It even connects to Facebook and Twitter and controls a wearer’s phone-based music library.

Sales are struggling though.

Sony’s failure to gain traction with the SmartWatch is the latest in a long line of first-mover advantages the electronics giant has squandered. Well known failures include the Clié, a Palm OS-based personal digital assistant that allowed users to listen to music, play games, and watch videos, which Sony introduced a year before Apple's iPod; a failed music platform similar to iTunes despite owning the distribution rights to thousands of popular songs and films; and an e-reader called the Portable Reader System, which Sony introduced a year ahead and with 600,000 titles, more than twice as many as Amazon’s Kindle.

Sources with inside knowledge of the company have attributed Sony's struggles to research that has been too inward-looking and deliberative and not focusing enough on early customer feedback. Perhaps Sony could learn and benefit from an increasingly popular concept known as the "Minimum Viable Product", which found its origins helping smaller entrepreneurial companies launch new products but seems equally applicable to larger companies such as Sony as well.

The Bottom Line
Don't be too quick to assume a positive correlation between successful innovation and being first to market. As Mito Securities analyst Keita Wakabayashi puts it, "Sony was ahead of its rivals to release a watch, but it takes more than an idea to create a hit product. It’s about bringing a product that has functionalities that people would want and marketing the product in the right way.” So remember this the next time you have an innovative idea and instinctively want to rush to be first to market. You might just be helping out your competitors in the process...

Netflix - How it has "Innovated" itself out of the hole that nearly became its grave!

Sun, 12 May 2013 21:09:00 +0000

Netflix is near to my heart. Perhaps I am a bit biased but not because I love their $8.99 a month unlimited streaming plan that allows me to watch movies and TV shows to my heart's content. It's actually because I started Chapter 1 of my book, Living in the Innovation Age, with an interesting anecdote about Netflix that illustrated just how critical constant and continuous innovation is for all companies. Things looked pretty bleak for Netflix back in late 2011. About 18 months ago, Netflix was spending much time trying to save face. Netflix had awkwardly unveiled plans to raise prices and separate into two companies - a DVD mailer called Qwikster and a streaming entity still under the Netflix name - and lost millions of customers in the process. Not surprisingly, the share price fell from $298 to $52.81. Things were so bad that in a Saturday Night Live skit, Jason Sudeikis played the role of Netflix's CEO Hastings apologizing to consumers while at the same time unveiling increasingly complex businesses, culminating with Nutqwakflikster - a nut, insurance, and movie seller, mocking their recent Qwikster debacle.

But as I said, that was back in 2011. As documented in a recent Businessweek article, Netflix has mounted one of the all-time great comebacks. First quarter results show that revenue rose 18 percent from the same period last year to $1.02 billion, while the company added 2 million subscribers in the U.S. alone, dispelling widespread fears that its growth had slowed. And shares of Netflix are back above $200 being hailed as one of the best-performing stocks of the year. The article goes into quite a bit of depth on what has been going on at Netflix over the past 18 months.

Here are three key takeaways that I believe have contributed to their awe inspiring success:

Cloud Computing - Netflix has bet its future on cloud computing and Amazon's cloud platform. At any moment, Netflix draws upon 10,000 to 20,000 servers running in Amazon data centers somewhere. Being an early pioneer, Netflix has been forced to build from scratch much of the software it needs to survive. Since it relies on Amazon for data centers, its 700 engineers focus on coming up with tools for, say, automating the ways in which thousands of cloud servers get started and configured.

Original Shows - The biggest bets Netflix is making now are on its original shows. The company won’t disclose how much it paid for two seasons of House of Cards, though the Hollywood blog Deadline.com says it was about $100 million. Other original content includes Hemlock Grove, Arrested Development, and Orange Is the New Black.

Creativity and Innovation - Netflix is best known for the 1 million bounty that it offered to the person or group that could improve its ratings-based algorithm the most. A prime example of an open innovation contest, the winning team, a collection of independent engineers from around the world, built Netflix a better prediction engine. Netflix is always testing things - better recommendations, using avatars for interaction, voice guidance, etc. This mindset is at the crux of Principles 2 (Innovation is a Journey, Not a Destination) and 3 (Innovation is "Where No Man Has Gone Before") that I discuss in my aforementioned book.

The Bottom Line
Netflix is an excellent example of a company that has come back into relevance after everyone had given up on it. It did so, not by trying to doing the same things over again or finding new ways of cutting costs. Rather it rethought its business model with new technology platforms, new content, and new ideas. In other words, Netflix innovated!

The Legal Side of Innovation - Who needs Soap Operas Anyway?

Wed, 08 May 2013 18:15:00 +0000

Over the past few months, I have written several blog posts about a topic that I call the "Legal Side of Innovation" and I first covered in my book, Living in the Innovation Age. The "Legal Side of Innovation" is a phenomenon in which companies are increasingly using patents and other intellectual property (IP) as a way of attacking each other in highly innovative and competitive areas such as smartphones and tablets. Essentially, IP law has become a double-edged sword that on the one hand protects an innovator's hard work and yet on the other hand creates impediments in the very road to innovation that it seeks to promote.

The legal battle between Apple and Samsung has become the technology world's version of steamy afternoon soap operas. As the never ending saga of twists and turns continues, Apple is now asking a court to force Google to turn over its Android source code as part of its patent litigation against Samsung. Apple, as part of its second patent-infringement lawsuit against Samsung, argues that Android is used in all of Samsung’s allegedly infringing products and “provides much of the accused functionality” in Apple’s claims. Meanwhile Matthew Warren, a lawyer for Google who also represents Samsung, claims that Apple made a “strategic decision” in filing its case “to keep Google off the complaint.” to ensure that Google doesn't have the same legal rights that Apple and Samsung have with respect to “reciprocal discovery.”

Now, isn't this a story that can match any of the love-hate triangles on today's soaps?!

The Bottom Line

By now none of us should have any doubts that the "Legal Side of Innovation" is real and here to stay. Hmmm... might be an interesting career opportunity here - a new caped crusader who is a dry, boring, attorney by day and a dynamic, cool innovator by night. :)

The "First Class" CIO - A Sequel

Wed, 08 May 2013 15:02:00 +0000

A few months back I had written a white paper on the struggles that CIOs face as they try to establish themselves as "equals amongst equals". In other words, many CIOs are viewed as second-tier executives in their organizations, less equal than other CXOs. The paper is aptly titled The "First Class" CIO - Three strategies to help ensure the CIO's seat at the executive table.

In the past few days, I have seen two blog entries in HBR on the same subject. The first entry, titled "How CIOs Can Keep In Step With CEOs", discusses the dissonance between corporate IT and the C-suite. The entry cites new research, conducted with HBR, The Economist, CEB, and TNS Global, which reveals that CEOs believe CIOs are not in sync with the new issues CEOs are facing. It states that CEOs often believe that CIOs do not understand where the business needs to go and how IT should support strategic goals. The second entry, titled "Three Ways CIOs Can Connect with the C-Suite", provides three simple steps CIOs can take to begin repairing the dissonance between business and IT, and guiding their organizations into the 21st century.

I hope you enjoy my white paper (if you have not read it already) and these two blog entries. I'd love to hear your thoughts on the subject.

Innovation Metrics

Sun, 24 Mar 2013 23:07:00 +0000

Innovation metrics is always a hot topic and a welcome ice breaker in any cocktail party (at least at my house). It's a topic that I discuss at length in my book, Living in the Innovation Age (TekNirvana, 2011). In Chapter 9, titled "Knowing What to Measure – Picking the Right Innovation Metrics", I explain how picking the correct mix of innovation metrics is key to inducing the desired behavior. That's because, as I explain in the chapter, what you measure will most certainly have an impact on how your organization behaves and views your innovation initiatives. Some of the more common innovation metrics include:

Return on Investment (ROI)
Total Research & Development (R&D) budget or total research and development headcount
Number of ideas submitted by employees
Percentage of sales from new products or services

While all of these metrics can be valuable for driving investment in innovation and evaluating results, each metric by itself provides a narrow view of the total innovation picture. Additionally, each metric by itself can induce both positive and negative behavior. For example, consider the seemingly straightforward and innocuous metric ROI. While ROI is most certainly a meaningful measure, it might cause an organization to avoid a potentially risky but highly lucrative market in the long term in favor of a lower potential but more measurable market in the short term.

Scott Anthony recently posted a blog entry titled "How To Really Measure a Company's Innovation Prowess" in HBR, which also addresses the topic of innovation metrics. Since the primary purpose of innovation for private companies is financial impact, Scott discusses Return on Innovation Investment (ROII) as a reasonable, aggregate measuring stick for innovation. Not surprisingly, ROII is calculated by taking the profits or cash flows produced by innovation and dividing that figure by the cumulative investment required to create those returns. ROII can be further sub-divided into three more micro metrics as follows:

Innovation magnitude (financial contribution divided by successful ideas)
Innovation success rate (successful ideas divided by total ideas explored)
Investment efficiency (ideas explored divided by total capital and operational investment)

While ROII and its sub-divided forms appear to be reasonable measures, the challenge is always having the data to actually calculate them. The lack of common definitions and publicly available statistics makes bench marking difficult. Simple questions, like "what defines an idea?" or "what does 'success' mean?" need to be answered in consistent ways - a concept that I discuss in my book as well.

The Bottom Line

Defining the right metrics for your innovation efforts is both an art and a science. It can especially be tricky since there is no single answer that is appropriate for every organization, which means that the optimal set of metrics will vary from company to company. Therefore, the best approach is to use a balanced mix of metrics that focus on the entire innovation life cycle from inputs to outcomes.

Let there be [more] light...

Sun, 17 Mar 2013 14:55:00 +0000

Innovation is not just a fancy term for entrepreneurs to make more money with new ideas and products. Innovation has real value in helping improve the lives of people and our society as a whole. This is an area that I focused on in my book, Living in the Innovation Age (TekNirvana, 2011). One fascinating example of this was how students from the Massachusetts Institute of Technology created the solar bottle bulb – a simple, yet effective innovation that costs less than $3 and only requires a one-liter soda bottle filled with a mixture of purified water and bleach to provide approximately 55 watts of daylight. This innovation solves a challenge faced in numerous poorer communities with cramped settlements of small metal roofed houses that do not get any sunlight in their homes.

Businessweek recently covered the story of an innovator who has created one more way that the poor can get clean and cheap light. Better yet, this one doesn't require daylight, which means it can provide light even after sunset. Kerosene lamps used in many developing countries in addition to posing fire hazards and injurious to health are also a major expense for many of the world’s estimated 1.5 billion families without electricity. Poor households typically spend at least 10 percent of their income on kerosene, as much as $36 billion a year worldwide, according to the World Bank. British industrial designer, Martin Riddiford, has figured out a way to use gravity instead of kerosene. He has created GravityLight - a pineapple-size lamp powered by a 25-pound weight that falls about six feet in a half-hour and shines slightly brighter than most kerosene lamps. The catch - once the weight reaches bottom, it must be manually lifted to repeat the process since GravityLight ingeniously uses human power stored as potential energy. GravityLight is slated to have its first field tests this summer in Africa, Asia, Latin America, and the Middle East. Once Riddiford’s team works out the final kinks, the basic model is expected to retail for about $5. Not bad at all.

The Bottom Line
Innovation can help proactively improve the quality of life for those less fortunate. Even simple innovations such as enabling members of poorer communities to get daylight in their homes or providing a safer, cleaner, and cheaper alternative to kerosene lamps can substantially improve the lives of those who live in under developed parts of the world.

Steve Jobs' Biggest Mistakes Exemplify the "Innovation Journey"

Tue, 22 Jan 2013 15:10:00 +0000

Principle #2 in my recent book, Living in the Innovation Age, states that innovation is a journey rather than a destination. I provide numerous examples of how successful innovators battled through a series of failures to ultimately succeed. The list includes individuals such as James Dyson (vacuum cleaners) and companies such as Google (social media). A recent HBR blog titled "Five of Steve Jobs's Biggest Mistakes" by Peter Sims provides yet another example of a highly successful innovator, Steve Jobs, who too battled epic failures of his own along his long and illustrious innovation journey.

Check out the complete blog posting here.

Now this is a "Reverse Innovation" that makes sense!

Thu, 17 Jan 2013 15:44:00 +0000

I bet this short story will bring a smile to your face. If not, I owe you another story :). There was a Japanese soap manufacturing company in which the soap blocks were made, then wrapped in wrapping paper automatically on the assembly conveyor belt, and finally packed in cartons. Typical Japanese automation at its best. Unfortunately, there were times when the wrapping machine created an empty packet without a soap inside. To rectify this problem the Japanese company bought an x-ray scanner from the US for $60,000 to check each packet on the assembly line and find the empty ones.

Not surprisingly, the empty packet challenge was not unique to the Japanese company. Nirma, a premier Indian soap manufacturer, faced a similar problem. Their solution was just a bit different and way cheaper. They simply bought a big fan (about $60) and placed it at the end of the assembly line. Problem solved: the empty wrappers without soap just blew away!

Now that's what I call a "Reverse Innovation" that makes sense to adopt worldwide! :)

HBR - Nine Rules for Stifling Innovation

Wed, 16 Jan 2013 14:59:00 +0000

We all talk about how to create a fertile culture to spur and encourage innovation. In her recent blog posting, Rosabeth Moss Kanter has done a nice job of identifying nine ways to completely derail any innovation efforts whatsoever. They're actually quite funny, although if you are facing any of these where you work then you have my full sympathy...

The nine rules she identifies are summarized (and slightly paraphrased) below:

Be suspicious of any new idea from below. After all, if the idea were any good, we at the top would have thought of it already.
Invoke history. Find a precedent in a an earlier idea that didn't work, so it won't work this time either.
Keep people really busy. If they don't have free time, they won't try to think as much.
In the name of excellence, encourage cut-throat competition. Get groups to critique and challenge each other's proposals, preferably in public forums, and then declare winters and losers.
Stress predictability above all. Count everything that can be counted, and do it as often as possible.
Confine discussion of strategies and plans to a small circle of trusted advisors and make sudden, big announcements.
Act as though punishing failure motivates success. That'll stop people from trying new things.
Blame all problems on the incompetent people below.
Keep reminding everyone that the top people already know everything there is to know about this business.

You can read the complete blog posting here.

Book Review - The Wide Lens

Thu, 03 Jan 2013 22:38:00 +0000

Why do many innovations fail? It is a question that baffles the best of us and keeps many a corporate executive awake at night. This anxiety is not unwarranted. Despite having a brilliant idea based on true customer insight and needs implemented with flawless execution, many innovations simply fail to meet the expectations set of them by their creators and by the market for which they were created. The Wide Lens by Ron Adner is a must read to gain insight into why that might be the case. In his thought provoking book, Adner explains how most innovation initiatives focus solely on managing the "execution" risk i.e. ensuring that a valid customer need exists, vetting the idea, and ensuring appropriate leadership and implementation. Adner explains that this "narrow lens" view is a root cause of why these innovators are blind sighted by failure. A "wide lens" view reveals two other major risks that need to be mitigated for success:

Co-innovation Risk - This risk represents the extent to which the successful commercialization of an innovation depends on the successful commercialization of other innovations.
Adoption Chain Risk - This risk represents the extent to which partners and others will need to adopt the innovation before the end customer can reap the full benefit of the value proposition.

Adner illustrates these risks very clearly in explaining how Michelin’s big innovation in tires - the PAX System, which was designed to run for 125 miles after a blowout - failed to take off, despite the backing of major automakers, because the company failed to foresee the need for a robust network of service centers to repair these run-flat tires before going to market. The inability to service PAX tires and the resulting additional expenses incurred by consumers who had to buy new tires led to mass consumer backlash and even lawsuits that ultimately turned automakers off of these truly innovative tires. The PAX system falied because Michelin had failed to mitigate the adoption chain risk.

As Adner explains, co-innovation and adoption chain risks lurk in the blind spots of traditional strategy. They remain dormant as long as an innovation follows established lines (such as Michelin's successful introduction of Radial tires in the 1946). However, as soon as an innovation goes beyond being incremental in nature (such as the PAX tires), ecosystem challenges arise, which can only be addressed with a wide angle lens.

History is replete with examples of innovation failures that occurred despite brilliant execution. Nokia spent millions to be first to market with a 3G handset, but failed to profit because critical partners in its ecosystem did not complete their innovations in time. By the time customized video streaming, location based services, and automated payment systems were finally ready, so was the competition. Phillips suffered a similar fate as it tried to introduce HDTVs in the 1980s. And we are observing a similar dynamic with 3D TVs today. All of these are examples of failures stemming from the lack of "co-innovations" that need to happen for consumers to be able to realize the full benefits of an innovation's value proposition.

The Michelin story above illustrated an innovation's failure due to non adoption by a critical player in the ecosystem. Pfizer’s suffered a similar disastrous fate with its miraculous inhalable insulin, Exubera, which was approved by the FDA, hailed by Wall Street analysts, and launched with huge fanfare. The $2.8 billion write-off, widely acknowledged as one of the biggest failures in the history of the pharmaceutical industry, can be traced directly to endocrinologists not embracing the requirement of lung function testing imposed by the FDA.

Contrast the above examples of failure with two innovations that have been successful. Digital Cinema Initiative (DCI) is an example of a consortium of movie studios coming together in a unique way to overcome the cost of adopting digital film within the theater value chain. In essence, they subsidized and shared the cost of capital investment in smaller theater chains to ensure that digital film would enjoy the broad distribution and availability critical to its growth. It was a direct result of this innovation that director James Cameron was able to regale us with his 2009 blockbuster movie "Avatar". Amazon's success in the e-reader market with its Kindle product is also an example where Amazon overcame publisher reluctance by subsidizing their participation in addition to robust digital rights management both of which Sony was unable to accomplish and therefore failed despite having a technically superior e-reader.

Finally, Adner provides insight into a topic that is near and dear to my heart - "The First Mover Advantage." In my recent book, Living in the Innovation Age, I talk about the fallacy of thinking that "only the first to market" reaps the benefits of innovation. Rather, there are many cases of second, third, and subsequent movers being successful where the first mover failed. Adner sheds further light on this matter by presenting a framework that one can use to determine whether they should even try to be the "first mover". Per this framework, it only pays to be the first mover if your innovation has very little dependency on the ecosystem. The more complex your innovation becomes and the more it depends on co-innovations and adoption, the less beneficial it is to be a first mover (i.e. the risk of moving first goes up significantly). In such cases, it is much more prudent to be a smart mover as Amazon was with its Kindle and Apple was with its iPod.

The Bottom Line

I highly recommend The Wide Lens to anyone involved in innovation strategies, commercialization and new business development. Its unique approach to analyzing that factors that contribute to the success and failure of complex innovations and the supporting tools (value blueprints, leadership prism, first mover matrix, supply chain reconfiguration levers, and minimum value footprint) are sure to, as Adner summarizes in his last chapter, "multiply your odds of success."

Popular Social Media Metrics - A Waste of Time?

Wed, 19 Dec 2012 14:57:00 +0000

I came across an interesting post in HBR today titled "Why Your Social Media Metrics Are a Waste of Time" by Ivory Madison. Popular social media metrics such as page views, unique visitors, registered members, conversion rates, number of Twitter followers, or Facebook likes are "interesting" at best. They're what Eric Ries, author of The Lean Startup, calls "vanity metrics." Vanity metrics look good but fail the "So what?" test. That is, vanity metrics are accurate, but irrelevant. Does it really matter if you have a million Twitter followers (an accurate number), if at the end of the day you cannot trace any product sales back to that metric (no relevance)?

So, Ms. Madison recommends the following four metrics as more useful alternatives:

Relevant revenue. Note the word "relevant," which refers to recurring sales in your core business. Don't count revenue from one-time or stagnant sources.
Sales volume. This can be a number like units sold or active subscriptions, something that shows whether or not enough people want to buy what you're selling.
Customer retention. Metrics like "new customers" can hide the fact that although you may attract 1,000 new users a month, you're losing 900, which means you're not going to scale.
Relevant growth. Too often, companies compound the stupidity of their choice of metrics by creating a metric tracking the growth of vanity metrics. You should be looking for a traceable pattern in which the actions of your existing customers create new customers. That's what Ries calls an "engine of growth."

My 2 cents - The above four metrics are "motherhood and apple pie." They are the holy grail of measuring the effectiveness of any activity; social media or not. The challenge is not that no one recognizes that these are the best metrics but that no one has figured out (or publicly announced) how to capture these metrics for Twitter or Facebook or any of the other popular social media sites.

The Bottom Line

As I said, an interesting post but unfortunately it falls short of presenting any new information. Most experts would agree that the current, popular social media metrics are less than optimal. The question is how do you measure the "right" stuff? And is this another example of not letting perfect be the enemy of good enough?

Want to Innovate? Abandon Best Practices.

Thu, 06 Dec 2012 16:08:00 +0000

"Status quo is the enemy of innovation" is a concept I discuss extensively in my recent book, Living in the Innovation Age. In fact, that conviction is the basis of Principle #3 in my book - Innovation is "Where No Man Has Gone Before."

So, what have "status quo" and "innovation" got to do with best practices? Aren't best practices supposed to be a good thing? After all, best practices are the distilled essence of the learning of many individuals from years of experience, successes, and failures. Best practices are supposed to help ensure success and avoid past mistakes. Conventional thinking would agree. There are, however, two main problems with such conventional thinking and therefore with these so called "best practices."

The first problem is that many best practices are rooted in past constraints and/or fallacies. Freek Vermeulen explains this nicely in his recent blog posting titled "Which Best Practice Is Ruining Your Business?" in HBR. He starts the discussion with an excellent example of the best practice of printing newspapers on broadsheet format even though such a practice raised printing costs substantially. Despite the higher costs and inconvenience, newspapers were terrified of going against the established "best practice" assuming that customers equate quality newspapers with broadsheet. When finally, in 2004, the United Kingdom's Independent switched to the denounced tabloid size, it actually saw its circulation surge!

One reason why a best practice's inefficiency may be difficult to spot is because when it came into existence, it was beneficial. Decades ago broadsheet newspapers made sense since newspapers were taxed based on the number of pages. By using broadsheets newspapers were able to cut down taxes, lower costs, and make more money overall. But even when the tax per page was abolished, newspapers stuck to broadsheet printing as a best practice for quality newspapers and forgot that the real reason for broadsheets had nothing to do with editorial or content quality or even user convenience.

The second problem builds on the first problem and serves to reduce a company's differentiation and hence competitive advantage. By default, best practices are well documented, accepted ways of doing things. Also, by default, it then follows that everyone is adopting these best practices, sometimes without even realizing that they are doing so. For example, software packages such as Enterprise Resource Planning (ERP) systems and Customer Relationship Management (CRM) systems that make up the backbone of many company's core operations come with best practices codified in their business logic and database tables. So, when a company implements one of these ERP or CRM systems and leverages the built in capabilities they are in fact adopting the same "best practices" that everyone else is using. Therein lies the issue - best practices only serve to solidify the status quo not challenge it. In an era when customers demand creativity and innovation, that's just not going to cut it. In the long run, relying on best practices will doom you to mediocrity. Instead of getting bogged down trying to reverse-engineer the strategies of others, your time will be much better spent finding your own path.

The Bottom Line

Innovation requires challenging the status quo and going "where no man has gone before." That cannot be achieved by following best practices since such practices at best solidify the current state of knowledge. Innovation requires breaking away from best practices and creating "next practices" that can enhance differentiation and provide sustainable competitive advantage.

Dealing with Disruption

Thu, 29 Nov 2012 18:56:00 +0000

In my previous posting titled Are All Reverse Innovations Disruptive?, I discuss two key factors that help determine whether a "reverse" innovation has the potential of becoming disruptive - the sustainability of a low cost advantage and the effectiveness at closing of the performance gap. Both of these provide insight into not only how the disruptor might behave but also as to how the "disruptee" should counter behave in response. For example, by understanding the underlying cause of competitive advantage, the "disruptee" might be able to change the definition of what consumers perceive as "value" thereby "disrupting the disruptor."

The December 2012 issue of the Harvard Business Review (HBR) has a couple of articles that take the above discussion further. Dealing with disruption essentially consists of two parts - identifying the source of disruption and executing a strategy to overcome its potential impacts. In the first article, Surviving Disruption, authors Maxwell Wessel and Clayton M. Christensen explain how disruption is less a single event than a process that plays out over time, sometimes quickly and completely, but other times slowly and incompletely. Therefore dealing with disruption requires a systematic way to chart the path and pace of disruption so that you can fashion a more complete strategic response. They propose the following three steps to help determine whether the disruption will hit you dead-on, graze you, or pass you altogether, you need to:

Identify the strengths of your disruptor’s business model;
Identify your own relative advantages;
Evaluate the conditions that would help or hinder the disruptor from co-opting your current advantages in the future.

To help evaluate the relative sustainability of the advantages identified in bullets # 1 and 2 above, the authors propose a systematic assessment of five kinds of barriers to disruption, listed below from easiest to overcome to hardest.

The momentum barrier - Status quo is a difficult thing to change.
The tech-implementation barrier - Does existing technology suffice?
The ecosystem barrier - Also known as the platform advantage.
The new-technologies barrier - The technology needed to change the competitive landscape does not yet exist.
The business model barrier - The disruptor would have to adopt your cost structure.

Perhaps, most important though, according to the authors, is for the "disruptee" to understand and segment their customers by the "job" they want to get done. As an example, they discuss the ongoing battle between online grocery retailers and the brick-and-mortar grocery stores. Out of the three job categories the authors identify - "emergency item" shoppers, "dinner" shoppers, and "non-perishables & brand" shoppers - only the last category is currently susceptible to disruption based on the three step and five barrier analysis presented by the authors. The two crucial questions then become "what can the disruptor do to win over the other two categories of shoppers?" and "what can traditional stores do to keep all three categories of shoppers to themselves?"

The answer to the second question is provided in the next article titled Two Routes to Resilience in the same issue of HBR. The authors Clark Gilbert, Matthew Eyring, and Richard N. Foster explain that companies facing disruption (such as the grocery stores above) need to reinvent themselves in response to disruptive market shifts, technologies, or start-ups. But rather than a complete upheaval they propose that companies under assault pursue two distinct but parallel efforts:

Transformation A should re-position the core business, adapting it to the altered environment.
Transformation B should launch a separate, disruptive business that will be the source of future growth.

Such an approach allows the company to realize the most value from its current assets and advantages, while giving the new initiative the time it needs to grow. Fueling both transformations is a “capabilities exchange” that allows both efforts to share resources without interfering with the mission or operations of either. The authors walk readers through the dual transformations of three companies that were facing massive disruption: the Deseret News, which was losing advertising to online upstarts; Xerox, whose copier business had been eroded by Asian rivals; and Barnes & Noble, which was threatened by e-books.

The Bottom Line

Dealing with disruption has no silver bullet. It is a complex undertaking with the appropriate response being vastly different on a case-by-case basis. Yet, there are guiding principles that can help. Understanding your consumers and their "jobs" is crucial to pinpointing the segment of your consumers that are most vulnerable to disruption. Next is identifying the source of the disruptor's competitive advantage and how sustainable it is in the face of the five barriers discussed above with respect to each consumer segment. Finally, executing the response strategy is best thought as two discrete and parallel transformations - rebuilding the core and disrupting the core - with a well thought out capabilities exchange fueling both.

Are All Reverse Innovations Disruptive?

Wed, 21 Nov 2012 18:04:00 +0000

Vijay Govindrajan is one of management's top thinkers today. One of his more recent insights lies within a concept that he has called "Reverse Innovation" in which innovation is driven from developing countries to the developed ones in contrast to the typical, and perhaps more intuitive, globalization model that drives innovation the other way around. The traditional flow of innovations in our economy has been from the developed to the developing nations. Vijay calls this phenomenon "glocalization" in which companies take successful products that they have created for customers in their Western markets and modify them, most often by stripping off many of their features, for distribution all around the world at lower price points. And while glocalization has proved effective in reaching the top segments of the market in developing nations – buyers with needs and resources similar to those in the developed world, it has not proved to be an effective market penetration strategy. The reason – most growth opportunities in emerging markets are not at the top but in the middle market and below, where the gaps between customers’ needs and those of their developed-world counterparts are enormous. While success in ripe developing markets might be reason enough to embrace reverse innovation, there is more good news. Because the global economy is richly interconnected, innovations developed for emerging economies can be extended to the developed world. Such "extensions" generally occur in two phases - first in under served, niche areas of the developed markets and then "disruptively" in the mainstream markets.

Hence the question - Are all Reverse Innovations Disruptive?

I found the answer to that question in a recent article titled "How Disruptive Will Innovations from Emerging Markets Be?" in the MIT Sloan Management Review. In his informative article, the author Constantinos C. Markides eloquently describes the two conditions that any "reverse" innovation must satisfy to become disruptive. First, it must start out as inferior in terms of the performance that existing customers expect, but superior in price. Second, for the innovation to truly become disruptive, it must evolve to become “good enough” in performance (attracting mainstream customers from the earlier generation of incumbent products) while at the same time remaining superior in price. In other words, it must become “good enough” in performance and superior in price. So essentially, as the author summarizes, one must answer the following two questions:

Will the emerging-market innovators continue to have a significant price advantage over competitors from more developed countries?
Will the emerging-market innovators succeed in closing the performance gap so that customers in more advanced economies come to see their products as “good enough”?

There are many success stories that illustrate the disruptive nature of reverse innovations. Disruptive innovation has been credited as the strategy that led to Japan’s dramatic economic development after World War II. Japanese companies such as Nippon Steel, Toyota, Sony and Canon began by offering inexpensive products that were initially inferior in quality to those of their Western competitors. This allowed the Japanese companies to capture the low-end segment of the market. As the performance of their products improved, they began to move upmarket, into segments that allowed them more profitability. Eventually, they captured most of these segments and pushed their Western competitors to the very top of the market or completely out of it.

What many people do not realize is that there are many stories where reverse innovations have failed to be disruptive. In the razor business, Bic emerged as a huge, low-cost disruption to Gillette in the 1970s and quickly succeeded in capturing 25% of the disposable razor market by the early 1980s. Yet Gillette countered with its own line of inexpensive disposable razors, and Bic ceased being a major threat to Gillette in razors by the early 1990s.

So why do some reverse innovations disrupt industries while others don't? Once again, the answer lies in how well the reverse innovation stands up to the two fundamental questions posed by the author above.

As the author explains in his article, the first indicator of success lies in the source of the "low cost" advantage of the reverse innovation. If the source of the cost advantage is low labor costs or a reengineered product that requires fewer or cheaper components, incumbents can find a way of neutralizing these advantages. However, there is one source of cost advantage that is more sustainable than others. This is the business model of the disruptors. A cost advantage that comes on the back of a business model that is not only different from but also conflicts with the business model of the established companies is more sustainable than other cost advantages. This explains, for example, the success of low-cost airlines over traditional airlines.

The second indicator of success is the reverse innovator's ability to close the "Performance Gap" between their innovation and the mainstream product/service. As the author explains, reverse innovators have a number of options in how they go about closing the performance gap. However, less obvious is the proposition that whether the reverse innovator's products come to be seen as “good enough” depends not only on what they do, but also on what incumbents do to influence consumers’ expectations of what is “good enough.” As an example, consider how Nintendo dealt with the onslaught of gaming consoles in its bread and butter market space. Nintendo’s response to all of this was a classic strategy of shifting the basis of competition and changing consumers’ perceptions of what is “good enough” in this market. Rather than follow Sony and Microsoft down the performance trajectory, Nintendo introduced the Wii on the basis of family entertainment, a benefit that the disruptors were not paying attention to. Nintendo’s strategy was essentially to expand the market by developing consoles that would support simple, real-life games that could be learned quickly and played by all members of the family, including the very youngest and the very oldest. By 2007, the launch of the Wii led to household penetration of consoles rising for the first time in 25 years. The console outsold the PS3 three-to-one in the Japanese market and five-to-one in the United States.

The Bottom Line
Reverse innovation is a powerful force for good in developing countries. Not only does it benefit the innovator but it serves to uplift the lives of all those to whom mainstream products were simply inaccessible or impractical. Longer term, many (but not all) reverse innovations have the potential to disrupt mainstream markets and incumbents. Success, however, depends on two critical factors – 1. basing the cost advantage on a sustainable and "hard-to-imitate" source (such as a business model) AND 2. becoming "good enough" in the eyes of the "mainstream market." Conversely, incumbents must constantly be on the look out for reverse innovations that have the potential to be disruptive and proactively undermine them by redefining "good enough" and/or changing the rules of the game.

Are all "Big Ideas" really that "Big"?

Sun, 18 Nov 2012 21:50:00 +0000

Today I finally got a chance to catch up on some reading. First up was my November 2012 issue of the Harvard Business Review (HBR). I quickly turned to the "Big Idea" section that had caught my attention earlier. Titled "Accelerate!" and written by the well-regarded author, John Kotter, the "Big Idea" he discussed was how the most innovative companies capitalize on today's rapid-fire strategic challenges and still make their numbers. Frankly, I was not too impressed with the article. It seemed to primarily regurgitate and re-package concepts that we have been talking about for close to 20 years.

Here's my paraphrased version of the basic premise of the article:

Companies are designed for efficiency not innovation.
Companies must find a way to manage the present while also creating their future.
In a rapidly changing environment, what is value-adding "context" today can quickly become "vanilla" core tomorrow.

This premise should be of no surprise to anyone who has not just crawled out from under a rock. So, what is Kotter's advice to deal with these obvious conditions? He recommends creating a second "operating system" devoted to strategy and innovation. Kotter defines a company's operating system as the collection of its organizational hierarchies and processes. Since the primary operating system is too focused on day-to-day tactical operations, a secondary operating system is essential to ensuring that an all important focus on strategic initiatives is not lost. Here's why I am not at all excited by these suggestions - there's nothing new here. For decades companies have had a "second operating system" to deal with the "new and unexpected." This second operating system has been called many things including the all too famous "skunkworks". And based on years of various success (and failure) case studies, we now know that such skunkworks initiatives can be made much more effective by integrating them within the core of an organization's culture and strategy. In fact, even I talk quite extensively about this in Part two of my recent book, Living in the Innovation Age.

So, I am sorry Mr. Kotter. Although, I am still a fan of your writing, I am unimpressed by your latest article in HBR.

Why Innovate When You Can Litigate?

Fri, 09 Nov 2012 00:59:00 +0000

Over the past few months, I have written several blog posts about a topic that I call the "Legal Side of Innovation" and I first covered in my book, Living in the Innovation Age. The "Legal Side of Innovation" is a phenomenon in which companies are increasingly using patents and other intellectual property (IP) as a way of attacking each other in highly innovative and competitive areas such as smartphones and tablets. Essentially, IP law has become a double-edged sword that on the one hand protects an innovator's hard work and yet on the other hand creates impediments in the very road to innovation that it seeks to promote.

Now it seems that companies have learned how to use IP laws to their advantage not only as a way to stop their competitors from innovating but as a "revenue generator." Indeed, the new mantra appears to be "why innovate when you can litigate." Just recently, Samsung and HTC together have paid Microsoft $792 million in "patent royalties" in a single quarter. And in August, Apple won an overwhelming victory over rival Samsung in a widely watched federal patent battle, a decision that some worry could stymie competition. The jury, after three days of deliberations in the complex U.S. District Court trial in San Jose, awarded Apple more than $1 billion after finding that Samsung had infringed on six patents by copying the look and feel of its mobile devices.

The Bottom Line -
The "Legal Side of Innovation" is real and here to stay. So, what's a technology geek to do? One option - Consider getting a law degree instead of that PhD in rocket science or even in lieu of a plain old MBA. :)

Innovation - Does Size Matter?

Fri, 02 Nov 2012 13:05:00 +0000

Does [company] size matter in innovation?

That's a question that I have been asking for a while in my blog (see my postings from September 28 and October 3). The opinions in the HBR blog postings have been all over the map, sometimes contradicting one another in a matter of days (and you thought flip flopping only happened in politics!). My opinion has always been that company size and innovation do not have a strong correlation - positive or negative. Ultimately, successful innovation is a function of organization strategy and culture alignment with the desire to innovate.

Well, finally, a blog posting in HBR that supports my position and challenges that wavering positions on size vs. innovation within the HBR blog postings. The posting titled,
Innovation Isn't Tied to Size, but to Operating Rules, by Nilofer Merchant concludes that if an organization knows what principles of innovation work, then innovation follows - regardless of size.

May I recommend my book, Living in the Innovation Age - Five Principles for Prospering in this New Era, as a starting point for which principles of innovation do work? :)

McDonald's Successful Innovation Strategy - Be Global, Act Local

Sat, 20 Oct 2012 14:34:00 +0000

Ever wonder how McDonald's has been so successful in its growth into a diverse range of international fast food markets?

Their secret is that they are becoming global by acting locally! In the United States, the McDonald's brand has been synonymous with affordable hamburgers for decades. But that is not the case in McDonald's foreign markets. I tell the story of the beginnings of McDonald's' transformation in Chapter 7 of my book, Living in the Innovation Age. It all began in 2003 when McDonald's' new chief executive officer, Jim Cantalupo, redefined their primary customer from real-estate developers and franchise holders to the people eating at their restaurants. That decision had profound implications in the way McDonald’s did resource allocation. McDonald’s reallocated resources from centralized corporate functions to regional managers, who were encouraged to customize local menus and store amenities to suit local tastes. Until 2003, McDonald’s had a fairly common menu (i.e. hamburgers) worldwide. It now serves breakfast porridge in the United Kingdom, soup in Portugal, and burgers that are topped with French cheese in France.

A recent blog posting in HBR by Nataly Kelly further picks up on the elaborate menu that McDonald's has in its international markets. For example, if you go to a McDonald's in Singapore you can order jasmine tea and a Shaka Shaka Chicken, which you create by dumping spice powder into a bag and a quick "shaka" of the bag coat your chicken patty in the bag with local spices. In Japan you can order a Koroke Burger, which consists of mashed potato, cabbage, and katsu sauce. In Hong Kong you'll find a burger that is served not between sesame seed buns, but between rice cakes. And finally, visit India, where eating beef is against religious rules for about 80 percent of the population, and you won't find any beef burgers on the menu whatsoever. Nataly summarizes the following five key takeaways from McDonald's' success in expanding into such wildly different international markets:

Don't confuse your brand with your products.
Figure out which products have international appeal.
View a new market as a chance to take on new brand attributes.
Remember that "small markets" may very well define your future.
Let your customers tell you what they want.

The Bottom Line

As I explain in my book, defining and understanding your primary customer is absolutely critical to successful innovation. More importantly, it's essential to realize the differences that exist in the "tastes" of your primary customer by market. As you find yourself expanding into diverse markets, remember McDonald's' strategy, which I have summarized as "Be Global, Act Local."

GM's First Mover Disadvantage

Thu, 18 Oct 2012 13:46:00 +0000

One of the topics I discussed in my book, Living in the Innovation Age, is the fallacy of the first mover advantage. While there are cases where first movers have been highly successful, there are plenty of cases of disillusionment and despair as well. I used the meteoric success of TiVo followed by a decade of sagging profit as a case-in-point in my book. Here's another good example. The October 1 - October 7 issue of Businessweek discusses how GM too might have fallen prey to the "First Mover Advantage Fallacy" with its early introduction of the redesigned "2013 Chevy Malibu" in February 2012. While the initial results following the introduction were positive, it turns out that GM might have been better served if it had delayed its launch until it had the complete lineup ready. That's exactly GM's competitors - Toyota, Honda, Nissan, Ford, and Hyundai - did. They waited and learned from early customer reactions to the Mailibu, which is a major reason why today the Malibu is having a tough time matching up in key measures such as prices, gas mileage, and technology gadgets.

Check out the Businessweek article titled "GM's First Mover Disadvantage."

The Bottom Line
Don't be too quick to assume a positive correlation between successful innovation and being first to market.

Is the P&G Innovation Well Drying Up?

Sun, 07 Oct 2012 17:47:00 +0000

I talk quite a bit about P&G in my book "Living in the Innovation Age." P&G is an admirable company that has thrived for 175 years with one innovative product after another. Starting with their "Ivory" soap in 1879 to the first all-vegetable shortening oil "Crisco", to "Deft" and now "Tide", Crest, Pampers, Pringles, Febreze, and Swiffer, the list goes on with amazing products that are household names. Over the decades, P&G has not only innovated products but has innovated product "categories"! As a testament to its commitment to innovation, P&G has more than 1,000 Ph.D.’s among the 8,000 employees at its 26 innovation facilities around the world.

Businessweek recently published an excellent article titled "At P&G, the Innovation Well Runs Dry." The article explains how lately there’s been a dearth of pioneering brands emerging from the world’s largest consumer-products company. Spending on research and development in fiscal 2012 ended June 30 was $2.03 billion, or 2.4 percent of sales, the same as the prior year and down from 3 percent of sales in 2006. Add to that the fact that P&G’s most recent homegrown blockbusters - Swiffer cleaning devices, Crest Whitestrips, and Febreze odor fresheners - were all launched at least a decade ago. Considering that the company’s current product pipeline is mainly focused on “reformulating, not inventing, products," the situation does appear a bit dire for P&G.

So, is P&G losing it's edge in the game of innovation? I encourage you to read the aforementioned Businessweek article, which does a decent job of exploring this question with a combination of facts and expert opinions.

The Bottom Line
P&G has become a household name because of its ability to innovate - new products and new product categories. Sustaining its competitive advantage depends on it being able to maintain its leadership with such homegrown, innovative products that are not just "reformulations" of existing products but true revolutions that continue to delight its customers.

Part 2 - Can Big Companies Innovate? The Saga Continues...

Wed, 03 Oct 2012 12:37:00 +0000

On September 28, I had posted a blog entry titled "Big Companies - Can They Innovate or Not?" in which I had discussed two seemingly "ying and yang" blog postings in the Harvard Business Review (HBR) blogs on innovation at big companies. Well, today, the author of the second blog post that discussed why big companies were often not set up for innovation posted another post titled "How Big Companies Should Innovate" in which he talks about how such big companies could innovate.

I am just smiling away... not just because I find this discussion amusing but also because his ideas line up quite nicely with the five principles I discuss in my book "Living in the Innovation Age". So, there's the plug for my book... now go read it! :)