How Successful Companies Sustain Innovation

Innovation is widely regarded as the single most important ingredient in today’s economy. But innovation as a destination isn’t enough.

Sustained innovation is a high-productivity state in which an organization strives to innovate in all aspects of its business, including management, divisions, operations, customers, and suppliers. It requires a seamless, structured management approach that begins with board- and CEO-level leadership and connects all the way through technology investment and implementation. Above all, sustained innovation is a journey, not a destination. The enterprise doesn’t stop innovating after attaining one goal; it’s engaged in a continual process of reinvention, invention, and discovery.

Consider the following three examples:

The one-hit wonder: The smartphone market is red-hot, with Apple and Samsung engaged in the most fierce race for dominance via product innovation. But let’s not forget the once ubiquitous handheld of choice for most employers and business people: the BlackBerry. A mere five years ago, Research In Motion was one of the most celebrated technology companies in the world, as the BlackBerry, or “CrackBerry” as it became known, led the smartphone market. But the meteoric rise of the iPhone and Android devices has made R.I.M. and its big innovation a relic in a world of constant reinvention.

Rising from failure: In 1919, Cornelius Vander Starr was the first Westerner to sell insurance to the Chinese, and he did so successfully until Communism drove him and American International Group back to the U.S. in 1949. AIG quickly grew it business globally, and in 1962 Starr gave management of the company's slowing U.S. holdings to Maurice R. "Hank" Greenberg, who revitalized the company by moving from personal insurance to high-margin corporate coverage and selling through independent brokers rather than agents to slash those salaries. The company went public in 1969 and continued to thrive until 2005, when AIG became the high-profile subject of fraud investigations by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General's Office. Greenberg was booted amid an accounting scandal in February 2005 and the company was battered by a liquidity crisis when its credit ratings were downgraded below "AA" levels in September 2008. Thanks to government bailouts in 2008 and 2009, AIG has bounced back and regained its status as a vital American multinational corporate titan. AIG isn’t taking its rescue for granted. The insurer unveiled a new corporate logo as part of a major rebranding overhaul aimed at its continued growth and success.

Ongoing success: Pfizer, the world's biggest pharmaceutical company by revenues, constantly develops blockbuster medicines and vaccines with household names like Zithromax, Lipitor, and Viagra. Founded in 1849 as a manufacturer of fine chemicals, Pfizer's discovery of Terramycin a year later launched its successful and ongoing expansion into a research-based pharmaceutical company. The drug maker has augmented its research by building its brands, pipeline, and profile through a series of major acquisitions. The company continues to lead the market with treatments for myriad maladies. Last month, the U.S. Food and Drug Administration approved Pfizer’s Bosulif, which treats a rare type of leukemia that usually affects older adults.

3 Principles for Sustained Innovation

Sustained innovation is powered by people who come together to share ideas, compare observations, and brainstorm solutions to complex problems. Enterprises with a strong focus on sustained innovation share three common principles that act as the glue binding people together in productive collaboration. They are:

Converged disciplines: Ideas aren’t isolated; they’re celebrated in groups that enable the entire organization to act as one entity. Of particular importance is the convergence of business and technology management to ensure that no one unit or division is missing the opportunity to capitalize on new ideas and possibilities.

Cross-boundary collaboration: No enterprise operates in a vacuum. Every manager, employee, and contractor potentially has a piece of the puzzle to create a new breakthrough business opportunity. Suppliers, partners, distributors, and customers are an equally valuable source of information and ideas.

Innovative business structure: Not every organization can empower an unstructured development culture like the Lunatic Fringe who led innovation at groundbreaking tech pioneer Texas Instruments; most require structure that compels convergence of disciplines, management, and operational units.

To bring these principles to life, enterprises operating with sustained innovation focus on three distinct, intimately related practices that require business/technology/management convergence to perform at a high level of organizational maturity.

Sustained Innovation Playbook

Designing and operating organizations capable of sustained innovation requires a playbook that demands a systemic process constructed around the following core steps:

Listen broadly for ideas through vision, innovation, and external networks. Listen to the customer. Listen to the front lines in your organization.
Understand who your actual and potential customers are, what they want and need, what they will need, and why those needs have not yet been met.
Organize the innovation team to include those with a stake in the innovation, organize the innovation program, and organize the resources and investments needed to address the problem.
Create an environment and capability for innovation by giving the team the ability to fail. Create many alternative solutions by leveraging the cascaded innovation lifecycle.
Experiment and learn from failure. Conduct many experiments in parallel, using prototyping and other iterative, feedback-driven techniques.
Listen again to the customer to help them imagine. Use prototypes to elicit feedback. Listen to customer acceptance/buying criteria. Listen to what could go wrong, but don’t let the devil’s advocate take control.
Design the concepts to address customer-centric values, such as cost, intuitive use, ease of change, and sense of enhancement.
Implement the final go/no-go decision. Consolidate or eliminate competing alternatives to a manageable number. Send concepts back for reinvention, retesting, or redesign. Implement the second stage of the innovation lifecycle: manifestation.

Get Out of the Garage

Sure, some people work better alone. But most people are more prolific as part of a team or extended community of ideas and talents that fosters some of the world’s most important inventions. Garage inventors can’t possibly compete with myriad breakthroughs born from sustained, systemic innovation. The first single chip microprocessor publicly introduced by Intel in 1971, the first car safety air bags offered in the 1973 model Chevrolet, and the depression game changer drug Prozac in 1988, are all considered great innovations developed and perfected by teams, not individuals. Even Oppenheimer needed the Manhattan Project team to create the atomic bomb. The true test of sustained innovation isn’t the invention itself, but the ultimate and ongoing benefit produced by the innovation for the business.

Discipline and innovation are not opposites, but complements. Establishing an innovation culture consumes a great deal of organizational energy in overcoming the forces of inertia and entropy. But once an idea has been successfully commercialized, respected champions emerge to drive new sources of the energy, creativity, discipline, and resources that sustain and grow an enduring culture of innovation. Successful organizations manage innovation from concept to commercialization so that good ideas not only get created, but also continually find their way into the products and services portfolio.

[Image: Flickr user Defence Images]

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3 Comments

  • Julietandrew392

    Good article but I think this article is perfect for a company know as Schaeffler. Schaeffler is a German bearing company and their innovation as make them one of the successful bearing company in the world. The company has invested in new capacity in Asia and America, even serious downturn can,t endanger the company because they invested in new capacities.

  • Paul Sloane

    A good article with many fine guidelines for sustained innovation.  The use of AIG as an example is curious.  What significant innovations have they had recently?

  • Esl Kingston

    Good article. Schaeffler AG as Europe's largest ball bearings auto parts maker showed a positive growing sign recently. After they came back to DAX index, especially after the news about their shares in Contiental being sold, investors seemed like not lost some confidence. However, with the stable grade from Moody, steady growth of Schaeffler is predictable