Innovation Now!

Radical innovators think of their companies as portfolios of assets and competencies. The real foundation for growth and innovation consists of a company's assets (its brand, its customer relationships, its subscriber database) and its competencies (its skills and the ideas that are locked in people's heads). One of the tricks that you can use is to think of the world as a Lego kit of different competencies and assets, owned by different companies, that you can put together with the skills and assets that already exist in your company. One company that has done just that is Swatch.

When Swatch was getting beaten up by its Japanese competitors, it realized that it couldn't win by trying to be more Seiko than Seiko. It had to do something different. Nicholas G. Hayek, an ex-consultant who pioneered the Swatch concept, married Swiss watchmaking skills with Italian fashion design and then borrowed plastic-engineering skills from Lego to produce watches that were dramatically different from the feature-laden gizmos produced by Casio, Citizen, and Seiko.

To escape the myopia of your current business model, stop thinking of your company as a business, and start thinking of it as a collection of tangible and intangible assets. Then look beyond your company's boundaries and ask yourself, "What are the possibilities that might produce a radical adjustment to a tired old business model?" At the end of the day, the essence of a company is not what you do -- it's what you know.

The Wisdom of Markets
Let's say that you and your colleagues have learned to see the world through a new lens, and you're starting to generate a cornucopia of rule-busting ideas in hopes of finding the handful of new ideas that will turbo-charge growth and pump up margins. Here's the next problem: Most companies aren't set up to manage all of those ideas.

Most companies are organized like the old Soviet Union: There's a hierarchy that is cleverly disguised as a perfectly sensible "resource allocation" process. An idea fights its way up through various levels of skepticism until someone near the top decides whether or not to invest in it. In most companies, the only person who can buy an idea is your boss or your boss's boss. And the typical criterion that they use for judging an idea is that it must have a 90% chance of being profitable in the next year or so. The problem is, how many new ideas -- including those with enormous upsides -- start out as a 90%-sure thing?

Silicon Valley is a market -- for ideas, talent, and cash. There's no one person who can kill a new idea. Indeed, Hotmail was turned down by a slew of VCs before Draper Fisher Jurvetson latched onto it and helped make it one of the Internet's first killer apps. Drawing on that analogy, there's a better way to get talent and cash behind promising new ideas: Adopt a market-based system that uses peer review and alternate sources of funding.

One company that has been working on that approach -- creating a chance for people inside the organization to make a case for their game-changing initiatives -- is Royal Dutch/Shell. In fact, the process is called Game Changer.

Game Changer began within the E&P (exploration and production) division at Shell. The head of R&D wanted to devote 10% of his budget to projects with game-changing potential. The problem: how to find such projects and get them funded in a famously conservative culture. To get started, Shell brought together a small group of mid-level individuals -- an eclectic team that came to be the Game Changer panel -- who were known to be creative and who could also draw on other technical resources across the company to evaluate ideas.

The Game Changers did the first round of peer review on potential projects. Ideas that made it through that first stage were sent to an "innovation lab" where teams of peers helped one another improve and elaborate on their game-changing ideas. The projects that survived the innovation lab moved to an advanced stage called the "action lab." The goal here was not to test the idea itself but to begin designing an experiment that would let Shell explore the idea in a risk-controlled, real-world setting. The questions became more focused: What kind of technical support would the idea need? How could Shell build a low-cost prototype in a low-cost way? A typical first-round project was funded at a $10,000-to-$50,000 level. As the idea advanced, it would get more funding.

Game Changer started in one division. Today, it has spread across all of Shell. There's a Game Changer team in corporate that handles some of the ideas that fall outside the boundaries of existing businesses. And each division also has its own Game Changer process.