Capturing the innovation premium: ingenuity is the key to creating customer and shareholder value. But to succeed, you have to be willing to break the rules - Roundtable

Chief Executive, The, June, 2002 by Jennifer Pellet

Innovations are ubiquitous--yet elusive. While new products, services and value propositions spring up daily--as businesses continually seek ways to create new markets or reinvent old ones--innovations that can deliver true value remain a scarce and much-coveted commodity. At the same time, the ability to innovate effectively is growing increasingly critical to success, and even survival, in today's competitive markets.

In fact, 83 percent of executives worldwide believe their companies will be more dependent on innovation in the future, according to a recent Accenture survey. "Research tells us that successfully innovative companies are more likely to generate growth rates of 20 percent or more than their less innovative counterparts," says Michael Sutcliff, managing partner in charge of finance and performance management at Accenture. "And while it can be difficult to measure the effect on the bottom line, innovative companies are often more attractive to customers, talent and suppliers."

Yet creating a company with both the continuous capacity for innovation and the ability to build value by implementing new ideas and programs effectively is not easy, agree CEOs who participated in a roundtable discussion held in partnership with Accenture. "You have to keep moving forward, but you can't move forward so fast that you forget the basins," said John Catsimatidis, CEO of Red Apple Group, who pointed out that in driving innovation, all CEOs face the challenge of tempering vision with pragmatism.

"You really need a process with a business mind leading it," agrees David Berges, CEO of Hexcel, noting that knowing when to pull the plug on a losing proposition is just as essential as the ability to generate new ideas. "You need to have a pipeline of new products and a regular review process.

Successful innovation requires not only unleashing the creativity of everyone within the company, he adds, but also managing the resulting flood of ideas. For CEOs that means making it a top priority, redefining business processes to make innovation part of everyday life and taking an active role in the process.

--Jennifer Pellet

Unlock new ideas

Michael Sutcliff (Accenture): I don't think I've ever run into a CEO who told me his or her company had a shortage of ideas. But I've run into many who reported a shortage of ability to get the ideas executed and deliver money to the bottom line. So CEOs must think about the difference between innovation and innovation delivered on a regular basis.

Are we talking about breakthrough innovation or incremental innovation? Most companies need both. They need some recurrent innovation on their existing models and they need the strategies to enter new markets or to change their competitive positioning. But how do you create a management team that has both the short-term entrepreneurs who engage in that hand-to-hand combat every day in your existing market and the long-term entrepreneurs who have the ability to make a substantial change in the way you compete? How do you unlock the innovation in your existing employees?

At BP, they use "action learning tasks"--a program that focuses on asking employees from across the organization to come together and take personal ownership of solving one of their challenging long-term business problems. In the BP program, if someone brings an idea for anything from a simple process improvement to entering a new business, that idea gets accelerated through the management team and they get a yes or no decision within 30 days. And if the decision is yes, it's implemented in the next 30 days.

BP enjoyed about a thousand new ideas a month for a year. While the vast majority were turned down, out of those 12,000 they found about 200 they thought were just absolutely incredible. And all 200 were implemented within a year.

We all know the story of how Dell created the direct pool model for the computers, which was undeniably a big innovation. Recently, we worked on a project with them where they posed the question, "What would happen if we could actually operate with zero inventory?" Together we came up with the solution that allows them to operate with less than two hours of inventory around the world and save hundreds of millions of dollars. So, while one big idea is great, constant improvements on the idea and the ability to actually keep innovating over time is where most companies find the real value.

We believe that innovation is about tapping into the existing potential in our organizations and our people, and discovering the real benefits--the new products and services, new business models, new ways of working and the efficiencies or the new values that our customers have--that we should focus on serving. Companies can think about innovation in terms of unique strategies to create a new competitive differentiated position. They can think about it in terms of new product and service design, and in terms of creating new business models.

J.P. Donlon (Dilenschneider Group): Tom, when you were at Dana Corp., did its program of compelling each employee to come up with two ideas a month pan out?