Commentary by Praveen Gupta

How can a small business benefit from innovation? Can small business afford innovation? How can innovation help small business grow revenue, and how quickly? These are some of the most frequently asked questions about innovation.

I believe most of the innovation talk is about large businesses benefitting innovation, ignoring the fact that small businesses are a very significant part of the business community in terms of revenue, employment, and opportunities for innovation. Looking from outside, and having worked inside businesses of all sizes, I can tell it is very difficult to move a mountain or roll it over, vs. a rock, or a pebble. One can see that it is relatively easier to be innovative with small businesses, but challenge is its justification. Small businesses tend to be more innovative as they work with fewer resources, are more agile due to fewer layers and reduced organizational complexity, and are more adaptive than larger organizations. However the challenge remains that a smaller company cannot grow like Wal-Mart in billions of dollars, and does not have billions of dollars like Google to invest in innovation.

That leads us to sizing innovation. Smaller businesses tend to focus on Variation type of innovations rather than fundamental innovations as the small businesses supply to Original Equipment Manufacturers (OEMs), or when small businesses are OEMs then they are not dealing with the volume of the larger businesses. The fact remains that purpose of innovation is the same for any business irrespective of its size that is to realize profitable growth.

To achieve the profitable growth, the company must identify opportunities to develop new solutions, be products or services. To identify opportunities for revenue growth, leadership must recognize its position in the market place, listen to its customers, understand suppliers’ capability, and utilize its employee’s intellectual potential. Benchmarking for knowing position in the industry, Kano’s model for listening to customer requirements, value-based partnership for suppliers’ capability, and the management process for employee ideas are some of the tools to deploy. Evaluation of various ideas for revenue growth, feasibility of the solution, resources, and capability to commercialize are critical factors for creativity to become innovation. There must be a formula that is suitable for the industry, and customized for the company to evaluate revenue potential of the solution in the available market segment. One must be realistic in assessing the market potential.

Half the solution to revenue growth is realized once the opportunities to grow revenue are identified. Rest of the innovation process must include steps for developing innovative solutions quickly, be able to produce and reproduce, and optimize in operations to minimize waste. In order to convert solutions into cash, one can learn from Microsoft’s model of partnerships with potential customers, distributors, or resellers. In other words, strong marketing and utilizing multiple channels to commercialize its solutions have been Microsoft’s secret to rise from its early beginnings, similar to any small business.

Finally one must remember a small business can not afford to take the same amount of time to develop its innovation. Small businesses must innovate faster than the larger businesses, and must innovate for now rather than for future.

If you would like to share your ideas about innovation in small businesses, please comment.

I met Wayne Rothschild about three years ago at a Kellogg Innovation Network meeting. We both were consultants and were looking around for contacts. We connected. He told me had 55 patents and I had just completed development of innovation framework. I wanted to network with him to validate my innovation framework, and he wanted some value through collaboration. We came to know each other better, and collaborated.

Searching for a topic for this column, I thought let me give him a call and see what he was up to. I knew he had developed a product that he has been aggressively marketing. I asked for an interview, and Wayne graciously granted. Here is what I learned.

Wayne Rothschild, President and Founder of Neat-Oh! International, LLC (www.neat-oh.com) is an accomplished senior executive, businessman and engineer. He has consistently invented highly successful breakthrough products that have caused dramatic changes to industries. As a kid, he had a goal to have one patent. Once he started working for Craft he worked towards getting his first patent. After getting his first patent, he right away set his eyes on getting ten patents. It took him 27 years to get his first 10 patents, but another six years to receive his 50th patent. Wayne was becoming addicted to innovation and patents.

With all the years of experience, Wayne recognized that foundational patents are lot more valuable. He recited that the purpose of filing a patent is to gain limited benefit from ones patents, and then educate the world about the new knowledge. Wayne says that his desire to solve problems in unique ways drives him to be innoholic, who is always intoxicated by innovative thinking. He learned that more distinct the solution the higher price the solution commands.

Wayne has benefitted from his innovation experience directly and indirectly. Working in a large corporation, the direct benefits are minimal of ones innovation. Wayne says it is understandable because organizations transform a new mouse trap into cash. Simply designing a new mousetrap is not enough. It takes resources to generate sales.

A high tech innovator, now running a toy company, Wayne is amazed at his own innovation journey. He used his prior knowledge, but end up developing a low tech solution. The joy comes from solving an age old problem of cleaning up after playing toys, putting the toys in the toy box. So, his son, Max and Wayne designed toy boxes that become toys themselves, eliminating the need for putting them back in the toy box. He has already helped his son get a jump start by having a patent at the tender age of ten years!

After making his toy reproducible, Wayne had an option of selling toys at a large volume by selling his patent to a larger toy manufacturer, or continuing with low volume by selling himself. According to Wayne, once a large company buys or licenses it, a manager is assigned who has no personal interest, and if the toy does not work it would be canned. But by building his own business, setting his sales channels, dealing with customers, and selling at a low price he sells the products over a longer period of time. Recently, he sold his first millionth toy. That’s an innovation!

So, what is the lesson learned? According to Wayne Rothschild, innovate but focus on commercialization. In other words not only innovate what customer may love to have, but also push its sales passionately. Otherwise, it would be no fun!

Have you worked on a successful innovation, or with the innovator who has been able to make his creative solution sell well? Tell us about it. I am sure readers would love to hear about it world over.

Recently, I asked a group of students to raise their hands if they thought they were creative. I saw about 20% raising their hands that they were creative. To validate my understanding I asked them to write at least one creative idea. Again, I discovered that about 20% of them wrote create ideas. I wondered what happened to my understanding that everyone is creative. Looking at their body language, I felt that they just could not try hard enough to think. I did confirm that ‘thinking’ appears to be the hardest thing to do, and we do not think naturally productively unless we force ourselves to think. Once we get used to thinking, we become fast thinkers otherwise simply thinking is tough thing to do.

Then, I listed the following steps for thinking creatively:

1. Force yourself to think
2. Observe objects and things around you for their uniqueness and creativity
3. Combine two or more things into a new idea

Again, gave them 5 minutes to write one creative idea. I asked participants again to raise their hand if they had written a creative idea. This time, about 90% of them raised their hands. Without evaluating extent of their creativity, it showed to me that they took the first step towards thinking creatively, i.e., just think.

I feel that we do not like to think unless we really have to. In order to force ourselves to think, everyone needs to create a setting that makes one think and try to go into that setting frequently. Going into that setting could be any or many factors such as challenge, fun, necessity, marching order, care, learning, or curiosity.

Once a person learns to think creatively, then the next challenge is to think creatively fast. It takes a lot of ideas to filter it down to one that scores a home run. It means one needs to practice combining many many things into unique way, and evaluate for their utility and perceived value. Thinking continually and fast are first symptoms of a person becoming an innovative person.

If anyone can think of some simple way to think creatively, I would love to learn more about it. Tell us!

Writing for realinnovation.com makes me look around for new ideas to write about. It occurred to me that my neighbor, who a few years ago showed me a charger for cell phone was also working on a spa system for last two years, made me an offer to take the Aerobic Spa bath. Reluctantly, I agreed. I thought let me see how he evolved from a less than a pound heavy charger to 400 pound aerobic spa equipment. I thought I might like to look at the work of an innovator. After I took the bath in his Aerobic Spa, I loved its benefits. Before I talk more about it, let me tell you the story of this innovator.

Jim McGinley, the innovator has worked for more than 20 years in electronics in manufacturing, marketing, and management. At some point Jim accepted the early retirement package, and started his venture along with his partner Don Rimdzius, who is an electrical engineer, and holds the MBA. Don has experienced in working with large projects. Jim and Don decided to create something new. So, they make a list of ideas or potential projects related to better power utilization. As use of cell phone has been growing exponentially, the market opportunity led to the development of a Travel Charger. Two years of labor led to the development of the Travel Charger. They built prototype, and demonstrated to several large potential customers, the big OEMs like Motorola. Working with large customers appears to be very attractive due to the size of its order, but difficulty of getting a lucrative contract can turn out to be very discouraging. Jim and Don just waited and waited for a large customer’s contract, and eventually put the Travel Charger on hold. This situation, however, did not dampen his innovation drive.

While at home, Jim knew his Mom had tried to develop an aerobic bath to address her health issues. It did not appear to be working well, so Jim and Don decided to work on developing the Aerobic Spa. They learned about various methods, and invested significant capital again and developed the Aerobic Spa. It has actually three parts, the Bath Chamber, the Controller, and the Filter.

After taking a bath successfully, I became curious about how these two guys who first were working on a $25 charger quickly switched $50,000 Aerobic Spa. Such a difference between two innovations, I wanted to know the secret. I understood that it took a lot of investment, a lot of sacrifice, and then a lot more effort in marketing and selling. The day I interviewed them, they heard from a large OEM to evaluate the Travel Charger, and also are about to get the first order for Aerobic Spa.

Like any innovator, the bigger challenge than creating new products is to market and sell. Jim and Don have been marketing their innovations through Internet, Sales Reps, Advertising, and the word of mouth. When I heard about aerobic spa, I tried it out, and I loved it. I have already introduced it to many of my friends. I know how it feels like to be an innovator who has to build his customer base one customer at a time. Estimating thousands of customers in the business plan never works.

If you know an innovator, or have experience in making innovations work, tell us.

While going to India for participating in the convocation events at IIT, Chicago’s Bangalore campus, I was supposed to travel from Chicago to Newark, and then catch the international flight to Delhi. Due to the size and cost associated with the international flights they are rarely canceled. Same, however, is not true for domestic travel. Canceling domestic flights appears to be an employee’s play at major airlines. Chicago is known for surprising weather conditions; my flight to Newark was delayed beyond catching the international flight to Delhi. Seeing the opportunity to participate in a business event evaporating in the freezing conditions, I asked the customer service supervisor to find a way to get me to Delhi. Being a frequent traveler, I should not have expected anything beyond a standard answer anyway. So, I did get the standard answer, “All flights were oversold. Sorry!” After canceling my reservation at the gate, I rushed to the ticket counter and made a plea to endorse my flight with another airlines from Chicago to Delhi, as that would be the only way I could go and attend my events. I was told that the ticket agent could not override decision made at the gate by a supervisor there. However, if his manager approved, the agent could work with. I quickly asked for the manager, and luckily the manager turned out to be the nice person. He said he had no problem if the agent could find one seat for you at any airlines.

Jugad (Joo gaard) Technology

It turned out the agent happened to be from Indian subcontinent. He was glad to help me get to Delhi, and promised he would apply the Jugad. I have heard this word before in Hindi, but never gave any significance to it. Now, it was going to help me, I paid attention. Jugad means really a combinatorial play acted out by street smart people for quickly solving a problem. Sales guys are very good at creating combinations that can sell. If one does not fly, the other one is promptly lands in front of the customer. Comedians call it improvisation. It is to come up with new funny lines by putting two or more unrelated things together. Any unique combination of two or more things is called Jugad, or simply the creativity.

When the ticket agent said, let me do the Jugad, he must have meant let me be creative to find a flight for me to Delhi. To my amazement, he found a seat on a overbooked flight at the other airlines, that too non-stop to Delhi from Chicago instead of going to Newark, NJ. I thought, WOW! Jugad works! It really meant creativity on demand works! Customers love it.

During my stay in India, I tried to understand better what Jugad meant to people in India. I understood that when resources are limited, an optimum solution has to be found, Jugad (creativity) must be applied. Even TRIZ says that when conflicting situation exists, inventive problem solving methods must be practiced. In India, even with a growing economy, resources are limited for a common citizen to meet their daily needs. When people have to struggle to survive they must think differently, must practice Jugad.

Similarly, in business world, when organization has to succeed in order to survive, it must encourage Jugad, i.e., employee creativity at all levels. I have identified Fundamental, Platform, Derivative, and Variation types of innovation in my earlier articles or columns here. Jugad is more like Variation type of innovation, where one must find an innovative solution quickly through combinatorial play. This requires ability to process information fast either mentally or using technology.

One of the example that is cited often in India of Jugad technology is a vehicle people have come up to meet their transportation needs. A common entrepreneur puts together an engine of a tractor, frame of a bullock cart, look of a vintage American car, and cover of a rickshaw. It does not mean that same vehicle would work in any other country or circumstances. However, the message is there. Find a way to put together whatever is available to develop a solution that meets your need. I believe we are moving in that direction with increasing oil prices, global 24x7 customers, diffusion of jobs, and depleting resources.

Let’s be prepared to be creative on the fly, and innovate on demand for ourselves, and for our customers. Everyone wins with Jugad! To see Jugad live, click here.

Last month I had an opportunity to speak on innovation at the IIT Chicago’s Bangalore campus. It is amazing to see talk and walk going on in this area there. Then I visited Prakash Kappoth, Senior Manager – Knowledge Management, whom I met at RealInnovation and Raj Datta, Chief Knowledge Officer, both at MindTree Consulting to share lessons in innovation. Interestingly, MindTree has been practicing innovation methods, innovation community, and social networks already in India. From our brief discussion, it appears that MindTree has implemented elements of the innovation process including the organization, technology infrastructure, knowledge sharing, idea management, and recognition and reward.

Innovation Chat with a CEO

Continuing my innovation exploration, I had an opportunity to chat with Ashok Chaturvedi, the founder Chairman and Managing Director (CMD equivalent of CEO) of The Flex Group (www.uflexltd.com), a multi-national packaging company based in India, exporting films, packages, and laminates to about 90 countries, and expanding operations globally.

Ashok Chaturvedi, CMD, UFLEX Limited

Letting my jetlag be responsible for omissions, the following Q&A represents what I could capture during our short interview session:

Q. What does innovation mean to you?

A. In flexible packaging, innovation means gain market share and improve bottom line by creating new packages, and is all about creating uniqueness coupled with ability to capture that uniqueness. We create new packages which customers find it better than found anywhere, and these are difficult to replicate. Innovation includes technology, material processing, and design. We have ignored our intellectual property earlier, but now we are patenting our packaging solutions going forward.

Q. What is your strategic commitment to innovation?

A. I head our innovation team and strongly involve for developing new products. There is a team of key individuals focusing on innovation. Innovation does not mean cost cutting exercises. I do not believe cost cutting is the same as innovation. To me, innovation means new products that drive process and technology innovations. For example, P&G requested an innovative package to improve an existing package for better shelf space utilization. We were able to develop a flexible packaging that highlights the product, takes less shelf space, and appealing to the customer.

Q. How satisfied are you with returns on innovation?

A. We are very happy with our strategic innovation effort. Innovation is the only way to keep the bottom line good, and market share grow. Without innovation manufacturing will become a rote activity, and lose its momentum and margin. Innovation always keeps you younger. With innovation we can protect the price, and serve our customers better.

Q. How is innovation managed?

A. As I mentioned earlier, I am heading the R&D division in Flexible packaging division. My job is not just to manage finance, or make key decisions. My primary job is to drive innovation. I am developing a team of innovators in flexible packaging. The team is expected to produce many innovative solutions that will be commercialized in 2009. The company profile will change in 2010. Last year we introduced nine new products scheduled for introduction in the next 18 months. We recently received a global patent for slider head zipper assembly with laser score and a metallic barrier.

Q. How is innovation rewarded at UFLEX?

A. We are paid to innovate, it is our job.

Learning innovation is critical for me in order to teach innovation. I read about other people’s work, and try to expand my understanding of innovation. Recent trend in offering recipes of innovations sound confounding to me. For example, some of the best selling innovation books and methodologies include the magic ‘Ten.’ Here is a list of the Ten’s of innovation:

Ten rules of strategic innovations

Ten rules of elegant innovations

Ten types of innovations

Ten faces of innovations

Trying to comprehend these methods or strategies in these books I can not figure out which combination of strategic rule, elegant innovations, types and faces would be good for me. I wonder how one would remember 40 things and their possible combinations from only four experts. There are many more innovation experts in the field. One must accept that these methods represent some aspects of innovation, not everything. Still the question remains how I use Ten’s. I hope you know what I am getting at. If I appear confused, help me! Give me your advice. It is your turn!

The list of Most Innovative companies in Business Week interests me a lot. I do not know what to do with the list. What can one learn from the companies listed on the list? They all look good companies, so are many more companies off the list. I recognize the criteria for ranking most innovative companies included stock performance, revenue growth, profit growth, and patents. My experience shows that patent and stock performance are not very effective measures given that only about 5% of patents are gainfully deployed.

I tried to answer the question. Why should a company be innovative? How does innovation help a company? Was innovation systemically utilized or the company hit the home run? What was the return on investment in innovation, or simply return on innovation?

Answering these questions I came up with variety of classification, such as Most Innovative, Best Innovation, Innovation Managed, and Return on Innovation. To me the company is most innovative that grows its revenue the most. The company that sold more has to be innovative given the primary purpose of innovation is growth. A company is best innovative when its revenue growth is profitable. The company that manages innovation means its R&D process contributes to its profitable growth. Finally, the return on innovation, where R&D is the major component of a company’s innovation, has to be the profit earned from the revenue growth per its R&D dollar.

The following table consisting of the top 25 and a few more using the Business Week data for 2003-2006 period, shows top five companies for the above four categories. I hope it makes sense to you as it does to me. If not, post your thoughts. Love to read your comments:

* Companies using the Business Week’s list of Most Innovative Companies 2007

Most Innovative - Revenue Growth Volume ($)

Best Innovative - % Revenue Growth * % Profit Growth

Innovation Managed - % Revenue Growth * % Profit Growth/ % of Sales R&D Expense

Return on Innovation - Revenue Growth * % Profit/ R&D Expense ($)

It is interesting to note that return on innovation for Nokia ($ 0.84) that is twice that of Motorola ($ 0.41).

In 2005 US Congress passed the innovation act with the intent of increasing research investment, increasing science and technology talent, and developing an innovation infrastructure. The legislation required to establish the President’s Council on Innovation for promoting innovation in the public and private sectors. The council is supposed to develop metrics for assessing the existing and proposed laws affecting innovation in the United States.

Research investment implied establishing innovation acceleration grants program for allocating 3% of funds at the federal agencies for high-risk frontier research. It also meant to double the research funding at National Science Foundation by FY 2001, and perpetuating the Research and Experimentation tax credit.

Increasing Science and Technology Talent meant to establish NSF fellowships for providing incentives encouraging more American students to pursue post-graduate degrees in science, technology, engineering, or mathematics. It appears that approach to increasing Science and Technology Talent needs to be clarified, and be more specific.

Innovation infrastructure implies development and implementation of advanced manufacturing systems, regional clusters (hot spots of innovation), and deploy advanced manufacturing technologies to improve productivity of the defense manufacturing base.

Well, reviewing the above summary, it doesn’t provide a clear impetus to accelerate innovation. If it is going to take several years to figure out what to do, the purpose of the act may be defeated. As a curiosity, I am wondering if anyone has been benefited from the National Innovation Act. If any individual, business, educational institution, or not-for-profit organization has received any support, resources, or encouragement for innovation, I am sure we all would love to learn about it. I am anxious to know what our Government is doing to facilitate GDP growth through innovation and to create new well paying jobs in America.

Look forward to hearing from you, the reader.

In recent discussions about intellectual property it has been reiterated that only about 5% of patents are of any significant value, and the rate of success for R&D driven innovation is also about 4 - 5%. So, I am wondering if it is worth protecting every idea or innovation. I was once told by my attorney that it is easy to get a patent but much more difficult to defend the patent. The question is then what should we protect, what should we kept a secret, and what should just be left alone and rapidly commercialized?

In my earlier articles, I have identified four types of activity based innovations, namely fundamental, platform, derivative, and variation. Fundamental innovations are more pure scientific research, platform is system level innovation, and derivative is by-product of platform innovation, and variation is innovation in application and integration. Given that product life cycles are shrinking, rate of innovation is accelerating, one must seriously and critically review what to protect and what to regulate.

The variation type innovations are happening continually somewhere in the world, one must critically think about the need of protecting (or not protecting) such innovations. Unless variation type innovations that have a scope of becoming derivatives or platform innovations later, it may not be worth protecting. Platform and derivatives type innovations are worth protecting because they have the longer life, and more economic value. Since variation type innovations are much larger in numbers than the platform or derivative type innovations, leaving them unprotected will save a lot of money in filing patents and improve the credibility of the patenting system. The fundamental innovations are more scientific discoveries that are usually not patented as it has been said that basic science is for everyone. So the practical scope of patenting confines to platform and derivative innovations.

US Patents and Trademarks Office (www.USPTO.gov) may look into classifying innovations or patents in such categories and establish due diligence guidelines accordingly. Thus the time to file patents for various types of innovations will vary based on their extent of innovation, and complexity of the patent application. Such an approach may also expedite most of the variation type innovations as they do not have long shelf life. In times when innovation is being accelerated everywhere, number of filings doubling more frequently, we must find a way to filter patent applications in various categories, and determine application fees proportionately. It will save application money to innovators, speed up the patent cycle time, and provide more time to innovators for generating higher economic value.

If you would like to share your views about the patent filing process in your country, you are invited here.

DePaul University’s Center for Creativity and Innovation held its first annual conference on October 26, 2007. The conference had Matthew Wise, CEO of Q Interactive, Tom Stat, Associate Partner at IDEO, and many other speakers on topics ranging from harnessing innovation, excellence in idea management, managing innovation, innovation in healthcare, innovation mindset, innovation work culture, and applied creativity. I thought it was a well organized, compact and powerful conference. Prof. Lisa Gundry, Director and Laurel Ofstein, Assistant Director of The Center for Creativity and Innovation welcomed participants to the conference.

Matt Wise, the keynote speaker suggested that everyone must find the right structure to create perfect mess. Trying to perfect a solution or getting carried away with the process can strangle innovation. His explanation of the team’s role in promoting innovation was interesting. Accordingly, “Team creates an opportunity for individuals to pile on ideas and innovate. Team must inspire individuals to innovate.” Eventually, individuals drive economy, drive innovation. Thus corporations must create an environment for individuals to do great. Matt’s company, Q Interactive, has several non-financial awards for innovation such as Cheers for Peers, or Q Rock, a large Styrofoam rock that is passed around among employees for their innovation.

Matt Wise, CEO, Q Interactive

Tom Stat from IDEO gave examples of how so many companies miss opportunities for innovation. For example IBM missed Microsoft, Blockbuster missed Netflix, UPS missed FedEx, Barnes and Noble missed Amazon, Sony missed iPod, and Maxwell Coffee House missed Starbucks. One of the key points was that nobody was demanding Starbucks’ coffee, or Apple’s iPod. These innovations created the demand. He highlighted seven habits of highly effective people:

1. Embrace diversity
2. Celebrate failures
3. Suspend thinking
4. Cherish ignorance
5. Defer solutions
6. Lose your way
7. Fuel the passion

Tom Stat, Associate Partner, IDEO

It was interesting to note that how Matt and Tom differed in their approaches. Matt promoted concepts of individuals innovating big things, while Tom recommended teams focusing on developing the next big thing. Tom mentioned that at IDEO teams work on one project at a time. Good to hear both perspectives!

What is your take on individual or team for innovation?

Chicago is celebrating its first Innovation Week by holding variety of innovation activies. I had the opportunity to attend Chicago Innovation Award (CIA) celebrations. The Award was created six years ago by Dan Miller, Business Editor of Chicago Sun Times, and Tom Kuczmarski of Kuczmarski & Associates. According to the Chicago Innovation Award website www.chicagoinnovationaward.com, the goal of the award is to recognize, educate and inspire.

Attendance at the innovation award celebrations has grown from about 75 to over 750 in just six years. Number of companies nominated for Chicago Innovation Award has grown to about 250 in 2007. From these 250 companies, ten winners were announced this evening. The winners’ circle included Abbott Labs for fighting new mutant variations of HIV virus to Radio Flyer for reinventing the Little Red Wagon. The winners can be found on the website http://www.suntimes.com/business/innovation.

I was impressed by attendance, i.e., about 750 people came to honor ten innovation award winners. Celebrations started with a reception which was also an excellent networking event. Here one could see who is who in Chicago’s innovation world. Innovation champions like David Pistrui, David Baker, and Dennis Roberson from IIT, Chicago, Laurel Ofstein from The Center for Creativity and Innovation, DePaul University, and Adam Hecktman, Joe Boggio, Mario Robello, and Shelley Stern from Microsoft to name a few were present.

Microsoft’s commitment to innovation was evident by visibility of its employees at the event. Bill Gates also spoke at the award ceremony via video message. Bill said that innovation creates growth and opportunity. The innovation award focuses on and promotes innovation.

According to Dan Miller and Tom Kuczmarski, the Chicago Innovation Award being celebrated in Goodman Theatre signifies bringing business and art together to realize three objectives:

1. Elevate importance of innovation

2. Inspire creativity and entrepreneurship

3. Celebrate success!

Just as Chicago Innovation Award is critical in promoting innovation in the City of Chicago, the CEO Recognition is critical to a corporation for institutionalizing innovation. Recognition of success brings more success, and recognizing valuable innovation will inspire more business innovation.

Has your company established an innovaiton award? How does your corporate leadership focuses on and promotes innovation? Let us know.

Everyone is talking about innovation in the corporate world. Books, conferences, courses, and presentations abound. Corporate executives are surveyed, and results publicized. Corporations are becoming more innovative just by availability of more information, and networked environment in the flat world. The question remains how does a CEO make his or her company more innovative? What should a leader do?

I have been thinking a lot. I sometimes give answers but the question remains the same…how to lead the innovation initiative? An organization can become innovative in two ways:

1. Allocating specific resources at a disjointed location to come up with a breakthrough solution, or
2. Institutionalize innovation through culture of creativity and thinking workers for developing innovative solutions continually.

In case of a dedicated team of few brightest people working together in isolation appears to be a paradigm of the last century where one has to get away from the noise of the factory, or smoke off fighting fires. Today, people have flexible hours, think 24/7 due to globalization; gain new experiences through Internet; and exchange new ideas continually. The world has become a community that can not be separated or isolated.

The process of creating a culture of thinking employees innovating continually appeals to me more as a leadership initiative. I can imagine in an organization of 100, 500, 1000, or even more than 100,000 employees there will be tons of innovative ideas. You are right when you think that ideas are dime a dozen. But once employees can think freely, the leadership can play the role of exploiting employee ideas into breakthrough solutions. Filtering ideas can be a process based on market requirements, feasibility criteria, and return on investment analysis. Breakthrough solutions will comprise multiple innovative ideas. New products or services will have to be developed fast through the new product development (NPD) process. Thus, the NPD process must be streamlined. Innovations with optimal designs perfected through operations and synchronized with customers’ love to have requirements tend to have high ROI. Given the product life cycle, from cradle to grave, is shrinking, we would need many breakthrough solutions every year. We simply would not be able to live with one new product every nth year. We actually need “n” innovative products every year!

What should then leadership do? Liberate employees from shackles of ‘it is not your job’ ‘we do not have time’ ‘we already have so many ideas’ or ‘we don’t have resources.’ Instead invest some resources in streamlining and speeding the NPD process, and synchronize the Idea Management process with the market demand. Make new products or solutions a priority, culture of creativity the corporate DNA, and management processes efficient. Instead of explaining why not to do something new, encourage why not try it out. Give employees time and freedom to come up with crazy, stupid, or funny ideas. They will go through the feasibility and ROI filters and come up with breakthrough innovations. Do not be afraid to have too many ideas. We have learned that crazy, stupid and funny ideas take more time to think, and are more innovative to begin with. Commercializing the right idea is the leadership challenge.

I am sure we would love to hear more opinions about this topic. Challenge and speak up!

Success Through Innovation: “Profitability and Competitiveness
in the European and World Markets” - The EIPC Management Council Meeting

Copenhagen, Denmark, Oct. 10, 2007 (www.eipc.org, www.ipc.org)

After lunch, Konrad Wundt, General Manager of Multiple International Europa talked about the European PCS industry and its impact on the European EMS industry.

Growth rate in Europe is 2.7% while it is about 10.4% in China. Europe and USA are still experiencing decline while China and many Asian countries are growing faster. New growth areas are optoelectronics, and renewable energy segments. Standard PCBs are experiencing no growth. Interestingly, German companies produce 1/3rd of PCBs in EU, and number of PCB companies has reduced by nearly 50% in EU.

Konrad Wundt

The final presentation was given by me on the topic of measuring and managing innovation for building value based customer relationships. Summary of my presentation included the following:

1. Commit to sustained profitable growth by driving innovation
2. Achieve excellence in idea management
3. Invest in building customer relations to learn customers’ ‘love to have’ requirements
4. Innovation is mandatory to deliver value to customers

Allow employees to give ‘funny’ ideas freely without fear for engaging them intellectually. Three initial measures of innovation are the following:

1. CEO recognition of employees for innovative value solution
2. Number of employee ideas
3. Revenue growth with innovative products or solutions

Learn the following about customers to create the opportunity for delivering value through innovation:

• Forces playing against customers
• Customer’s inconveniences
• Customer’s customer needs
• Customer’s own application and needs
• Customer’s cost of ownership model
• Customer’s pain points
• Customer’s preferred or ‘love to’ have requirements

Build relationship with customers based on the following:

• Compete on value, not just the cost
• Emphasize usefulness and appeal of the solution
• Build strategic relationship with and invest in the customer
• Create customer confidence in your capability and reliability
• Demonstrate priority to customer needs

The Management Council meeting ended with a roundtable discussions emphasizing need to continually developing innovative solutions.

Roundtable Discussion

Success through Innovation: “Profitability and Competitiveness
in the European and World Markets” - The EIPC Management Council Meeting

Copenhagen, Denmark, Oct. 10, 2007 (www.eipc.org and www.ipc.org)

Electronics industry has been the driver for dramatic progress for over last twenty years. Remembering about Motorola envisioning year 2000 in 1985, rate of change in the electronics industry has been phenomenal. No other industry can claim price reduction of as much as 90% of products. For example, DVD players used to cost over $400 about five to seven years ago, today it can cost practically nothing. Cost of laptop computers has come down from over $3000 to below $500 today. As a result the industry has been going through dramatic changes, shifts, and continual relocation to lower cost countries. For example, Chicago, Illinois (USA) used to have roughly 100 PCB manufacturers, today we have about 20.

It is impressive that EIPC and IPC (USA) have taken the initiative to explore opportunities for the electronics industry to sustain profitable growth. Electronics industry has been very innovative in its own rights, but it also represents the field open for accelerating dramatic innovation. The EIPC Management Council Meeting was held to address topics of management, market, status, and innovation. (http://www.ipc.org/calendar/2007/ipc-eipc-conf-1007/IPC_EIPC_conbro1007.htm). The picture below shows members of the organization team at IPC.

(l to r: Thomas Berger, Kirsten Smit-Westenberg,
Anouk Seeverenn, Susan Filz, and Sharon Starr)

Susan Filz, Director of Executive Programs, IPC welcomed executive delegates to the EIPC Management Council meeting.

The keynote presentation was given by Stefan Herr of Simon Kucher & Partners, who said, “Success in the electronics industry was defined as profitable growth.” The extremely market-share-oriented industry has experienced a significant adverse relationship between the price and market share. Stefan mentioned the following equation about relationship between the price and profit:

Profit = (price – variable cost) x volume – fixed assets

Slight increase in the price to improve margin leads to fear of losing the market share. Pricing is a major issue thus emphasis was given to learning how to price effectively. Smart profitable growth means price optimization and studying the entire value chain. Pricing excellence means pricing strategy, price analysis and optimization, price enforcement, and monitoring and controlling information. Stefan’s firm has identified about 40 levers to assess pricing, and determining areas for improvement. A question was asked about pricing lifecycle. Do we price the product for its entire lifecycle? Message was that the price should be determined based on the customer’s ability to pay, however, the challenge is that customer in electronics industry is getting used to pay less and less over time. One of the participants correctly said that market price is given, how can one increase the price?

Stefan Herr

Stefan demonstrated that many times discount offered to the client has been arbitrarily set, thus an optimal approach and discipline in pricing were recommended. For example, he showed his analysis of how the margins varied by sales representatives which could be as much as 10%.

The gap between the hope to charge more from the customer, and customer’s intent to pay less creates a conflict, which may be considered as an ideal opportunity for innovation. Actually, it is not an opportunity but it is the mandate to innovate.

The next presentation was titled The Global Electronics Market for EMS/ODM Suppliers. Charles Wade of Technology Forecasters, a think tank based in California, said that outsourcing to countries like China did result in cost savings, but there were additional costs that were overlooked. The electronics market is realizing CAGR of about 6.7% with a market of $1,617 Billion by 2011. Key segments growing in the electronics industry are medical, communication, instrumentation, computer, military/aerospace, automotive, industrial, and consumer from over 9% to 5%, in decreasing order respectively. Need for better healthcare, and miniaturization in telecommunication are driving growth in the EMS industry. Asia is controlling about 74% of consumer, 65% of computer, and 50% of communication products. It is not a surprise as growing customer base is in China and India, as well as the low cost manufacturing there.

Charles Wade

An interesting comment was made by a participant that Toyota makes about 90% of Toyota hybrid in house rather than outsourcing, thus suggesting that companies tend to produce innovative products internally instead of producing at low cost manufacturing centers around the world.

Work in progress

Low cost regions are not the answer, as other factors play a critical role in determining the overall cost of outsourcing:

• Local infrastructure
• Labor availability and skills level
• Productivity and quality
• Logistics

In a recent discussion at an innovation conference, someone made a point that scheduled innovation is a contradiction. Innovation is considered to be unpredictable due to uncertain amount of time involved, or the product development cycle.

We have seen two ways in which innovative products are introduced. One offers a totally disruptive, significantly innovative, and new capability. These innovative solutions are more technology or development driven that need to be sold to users. For example, iPod® or iPhone® are two technology driven innovations that were offered to consumers, and they loved it. There are many more innovations that were offered to consumers and did not fly such as digital dashboards in cars, or New Coke. The success rate of technology driven innovative offering is about 4-5%.

Other way to introduce innovative products or solutions is to identify opportunities, and offer innovative solutions fast. The opportunity could be new energy solutions, new features for phone, search engine, computer, container, toys, or appliance. This is where one needs be an opportunist in order to exploit the demand for innovation. How do we identify such opportunities? We need to be aware of pain or contradiction in society, and its magnitude to decide whether to pursue an opportunity or not. Depending upon the opportunity one can determine whether the required innovative solution is of Fundamental (conceptual), Platform (new system), Derivative (multiple options of the new system) or Variation (new applications) type in nature. Given the domain expertise, and networked resources one can determine how long it will take to innovate a solution. While fundamental and platform type of innovations take months to years, derivative or variation type of innovative solutions can be developed from on-demand to weeks. .The success rate of such innovative offering tends to be much higher as they are developed in response to customer needs. Customizing innovative solutions on demand are examples of scheduled innovations. Even customers are part of the innovation process.

In the information age, the need for solutions on demand, or scheduled innovation will continue to grow. In the open innovation environment, networked world, and knowledge economy innovation is occurring continually somewhere, and can be offered to the consumer and customer anywhere. Customers or consumers will become more impatient with suppliers for innovative solutions to their pain points or contradictions they face. This shall continue to increase the demand for scheduled innovation. And, speed of innovation will become a competitive advantage rather than innovation itself.

I believe we need to learn to innovate on demand, and offer innovative solutions to customers’ schedule. What do you think about scheduled innovation? Can we schedule innovation?

Finally, thanks to everyone at the forum, and special thanks to Julie Gatzkiewicz for her superb photography!

Thanks to Simon, Joe, Don, and Shelley Stern Grach for inviting me to the Microsoft National Innovation Forum, and for granting permission to post notes here. Thanks to Katie Barry for her help with these postings. I am still learning about writing blogs.

Praveen Gupta

Here are some pics:

The Forum in progress

Joe Boggio, Simon Floyd, and Don Richardson

Simon Floyd, Praveen Gupta, Joe Boggio

Having ball!

Bill Buxton and Harry Flotemersch

Bill Buxton, and Praveen Gupta

Randy Granovetter

Welcome to Day 2.

First presentation was titled Customer Needs Management in PLM given by Ed Miller, President of CIM Data. He asked if anyone knew what CIM stood for. He had to answer it, Computer Integrated Manufacturing. He mentioned that innovation is going through its evolution similar to other new methods and technologies. Time, Cost, Quality equation is no longer sufficient for success of a business. New dimensions such as globalization, product complexity, competition, pricing pressure have become equally important. Now, innovation has become a buzz word today but it comes in many forms – both internal and external facing.

“With the pace of innovation heating up, any enterprise that fails to replace 10% of its revenue stream annually is likely to be out of business within five years.” The Economist Magazine, 2003

Innovative products are clearly a key to success. In order to benefit from innovation, one must identify potential opportunity, and understand what customer wants to do, and how we can help the customer achieve its objectives. The innovation process is known but organizations are disjointed to pursue. Besides, the opportunities identification is hard to do.

PLM (Product Lifecycle Management) is the primary engine that translates customer needs into products. Innovation is the driving theme. PLM has become a strategic business approach integrating people, processes, business systems, and information. PLM emerged from engineering, and is expanding with major focus on collaboration to enable innovation.

According to Ed, Microsoft should concentrate on front end of innovation where practices are collaborative, social and ad-hoc, and deliver good enough (vs. complete) solution to allow extensibility. This needs to be quick, simple, and easy without too much overhead or complexity.

Community is critical to innovation but it is successful when an individual is motivated to participate. Executive sponsorship means establishing a core team of advisors who can facilitate innovation and funding it so ideas can be explored to conclusion

The next presentation was the highlight of the conference. A presentation titled Why I love the iPod®, WII® iPhones®, and Google® by Bill Buxton, Principal Researcher at Microsoft. At first, one wonders why a designer at Microsoft admires its competition. Bill Buxton has worked with great designers.

Bill said investment in process innovation gives better return on investment than in products. He believes in BHAG - Big, Hairy, Audacious, Goal from Good to Great by Jim Collins.

Bill set the context as the following:

• Current preoccupation with design thinking in areas such as business
• Problems in new product development in companies
• Frustrated designers within organizations
• (Justified) Fear of competition from other companies and Jurisdiction

Bill is a musician, an explorer, a mountaineer, and of course a designer. He understands that risk and danger are not the same, and worse thing one can do is to play it safe. To mitigate the risk, take some thing totally dangerous and make it useful with right tools, and right training. Companies trying innovation must think of four things - Fitness, Training, Tools, and Partners.

Bill’s talk was full of energy and exhilaration. He said when we fail we feel ashamed. Why? Failure is an expensive experience; we must learn benefit from it. His book titled Sketching User Experiences: Getting the Design Right and the Right Design was offered to all attendees after completing the conference evaluation. I would recommend his book to feel Bill’s excitement, and style of design.

Innovation at Microsoft Panel

The final item on the agenda before lunch was a panel of Microsoft managers who shared their own experiences with the innovation process. Randy Granovetter, General Manager of Innovation, has been an innovator, former President and CEO of Jabra, a leading maker of earphones, and winner of several industry awards. Her innovation mantra is fail fast.

The IdeAgency is a community platform used internally at Microsoft. The innovation process deployed in IdeAgency consists of Idea definition – seed, try and learn, prototype - no one is overnight sensation, observe and prioritize…get feedback from your customers…must immediately validate with customers.

People are scared to take risks. We promote Fail fast, Discover, Listen, Learn and Collaborate. She coined the term Ideators crating ideas standalone or linked. IdeAgency includes Idea Exchange – ideas, ideas, ideas… Innovation Challenge – attract seed activity in relevant areas….=> Global community…grassroots Experts…business Group liaisons…=> Contribute… freeform or structures comments, votes, etc.

Randy talked about Global Expo where ideas are bought or brokered by stakeholders who advise & direct, review readiness, and make funding decisions.

IdeAgency represents global Microsoft community…where employees Post… Participate…Experience and Learn…Collaborate…Prototype…Validate…

Being persistent; and understanding consumer cycles is important in institutionalizing innovation at Microsoft or any corporation. What are you thinking? Discover, listen, learn, and collaborate.

Besides Randy, there were six other Microsoft managers who shared their experiences with innovation in their department. In services innovation means driving standards, evolving processes (better, faster, and cheaper), pull out best ideas off our people, and create a sustained culture. Key Aspects include idea generation, Incubation, development, launch, and learn. Generally, people get stuck before the idea incubation. So filtering ideas is critical for sustaining innovation. On operations side, excellence in execution is important with less focus on new things, and next big things. Hiring outside people, and putting them in a different building does not work. Problem is when it requires interaction with the rest of the building. A better approach would be to take the most suitable people from the current environment, and then have them develop new ‘things,’ review frequently, and work with them.

Dan Rasmus mentioned about The Institute for Innovation and Information Productivity (www.iii-p.org), collaborative effort among several companies. According to its website, “The Institute for Innovation & Information Productivity was formed to research and develop global productivity metrics more appropriate to the Information-Age — and to explore and define the influence of technology and innovation that will uncover ways to measure the productivity of innovation.”

Innovation in HR department with more than 1000 professionals meant using project lifecycle, taking small steps with strong emphasis on change management, thinking globally, and leveraging known tools such as MS project portfolio server.

Keep it simple, just enough structure to make decisions without quenching innovation.

After lunch, participants were slated to take tour of Home of the Future, Microsoft, and meetings with Microsoft managers.

Overall, two days passed by meeting so many peers, and learning so much. I am sure everyone learned something at the Microsoft National Innovation Forum. I liked the idea of failing fast, hope not too many times!

Don Richardson gave a presentation about innovation management. He highlighted business challenges as follows:

• New competition
• Intensely increasing price and cost pressure
• Ever shrinking product lifecycles
• Increasing integration of the worlds economies
• Major technology shifts

Don’s research shows that many CEOs are primarily driving innovation, and most companies planned to increase their spending on innovation. For almost 90% CEO’s organic growth through innovation has become essential. Organizations cannot compete on cost alone. Innovation works best when a process of framework is in place and shared across the organization. By 2008, 25% of global 100 companies will have a formal process. An interesting fact I remembered about the average success rate of innovation to be about 5%. According to Don, strategic commitment spans across disciplines, with critical elements including culture, executive sponsorship, funding, incentives, process, and technology. To work across boundaries high value connections and profitable customer relationships are essential.

Microsoft Solutions

After Don’s presentation, there were presentation and demonstrations about Microsoft’s products. First demo was about unified experience through various Microsoft’s Office Communicator software which has been developed to harness power of innovation of several thousands of people spread world over. Today, the number of ways we can communicate is astounding. The list includes cell phone, email, voice mail, chat, meetings, LiveMeeting, Internet TV, and video conference. There is a shift from network driven communication to software driven communication.

For an IT department in a large organization, the following issues need to be addressed:

• Streamline communication methods for end users
• Increase operational efficiency for IT
• Build a future ready foundation for the organization
• Protect business communication from threats

Microsoft Office Communicator addresses issues including security, compliance, and provisioning.

Besides developing the office communicator, Microsoft showed several telephones, and demonstrated clear communication on Internet.

Another complementary product, called Roundtable, was demonstrated for facilitating live meetings. Roundtable includes multiple microphones, cameras, speakers, and a power data box. Roundtable scans the voice resolution and highlights the person associated with voice for live meetings. The five camera’s are stitched together to form the panoramic view, giving the best in class A/V experience making it a breakthrough solution for remote conferencing.

Microsoft’s Innovation Process Management

Simon Floyd, one of the organizers of the event, gave a presentation titled Facilitating Innovation Process Management in the Enterprise. Following Simon’s presentation Ben Chamberlain gave demonstration of another software designed to show how Microsoft products can be used to facilitate the innovation management process.

Recognizing that innovation today is Ad-hoc process dependent on ‘Eureka” moment. Microsoft’s innovation process includes the following seven steps, which have also been incorporated in the MS software product for innovation Management:

1. Strategize the opportunity,
2. Capture ideas and collaborate,
3. Formulate a business case,
4. Evaluate portfolio,
5. Define product or solution,
6. Promote to delivery mechanisms such as product lifecycle management, and
7. Deliver through that medium.

Microsoft’s Innovation Process Management software builds on its current collaboration products and project management tools to facilitate innovation. Initially, three aspects of modules were highlighted. In order to improve business performance, business drivers are identified, and current portfolio is aligned. Then, a culture of innovation is promoted through establishing incentives, creating an Innovation Management Office, utilizing the seven-step innovation process, and providing supporting technologies. Once the ideas start flowing, some funds must be allocated for funding many ideas and taking more risks. Some of the tools utilized for managing the innovation process include Relationship matrix, Pareto analysis, and Business case template including SWOT analysis. It looks like that Microsoft is convinced that innovation is becoming an industry now, and Microsoft can play a role in this new industry.

As creativity and innovation accelerates in the corporate world, information protection in the interconnected world becomes a major issue, and challenge for Microsoft is to address it in its software products. In today’s IT age, we need to connect with suppliers/partners, employees, businesses, consumers, friends, and family members. Information age has trended through development of the personal computer, productivity applications, Corporate LAN, Internet, Broadband, and now Mobility. Digital information is growing exponentially. Information workplace is without boundaries, and sharing, storing, and accessing information. Once information is shared, we lose control over the information. However, incredible growth occurs with lesser controls. When information protection is violated, it can cost on multiple fronts such as legal, regulatory, and financial impact, damager to image and credibility, and loss of competitive advantage.

Given that information sharing is not an option, and traditional protection methods such as firewalls, access control, or encryption may not be sufficient, digital information must be protected further. Additional protection methods such as authentication, access logging, embedding protection, personalizing information, and incorporating access control policies. Of course, Microsoft has a product in the making, called Rights Management Services that protects information through its lifecycle consisting of Create, Store, Share, Access, Roam, and Retire phases.

Well protected information will allow several benefits including the following:

• Natural system of information flow
• Reduces complexity for customers
• Integrated with common business application
• Managing a common infrastructure
• Consistent information security model for all applications

The final agenda item on the first day was the Voice of the Industry, which I was also a part of along with Najib Abusalbi of Schlumberger, Mark Deck of PRTM, and Dirk Schwarz-Hertzner of Novartis. Mark shared the innovation survey findings consistent with other innovation surveys, where extent of commitment, execution and understanding were rated below 50% of the expected performance levels. My presentation highlighted the industry dilemma of using innovation for sustaining profitable growth. He showed a slide from Bill Gates’ CES 07 presentation highlighting need to build profitable customer relationships before driving innovation in a corporation. Najib and Dirk represented two corporations that have their own innovation processes that included recognition, idea management, and product innovations.

At the end of Day 1, Microsoft hosted a reception with plenty of pool, drinks, and food. Best of all there was an opportunity to network, collaborate, and unwind at the end of a busy day.

Last week I had a great opportunity to participate in an innovation forum organized by Microsoft in Redmond, WA. Participants included Microsoft’s customers, employees, and partners including affiliates, consultants, professors, and experts. Objective of the forum was to seek input from attendees, share Microsoft’s practices of innovation, and showcase some of the new products in the making for release shortly. It is exciting to see that major players like Microsoft are getting into the world of innovation, and committing resources to accelerate innovation.

Kudos to Don Richardson, Simon Floyd, Joe Boggio, and the staff for putting together an enriching event!

The Opening

Don Richardson, Director Global Innovation Management, leads one of the Microsoft’s industry sales teams focusing on innovation. One of innovative methods used to enhance purposeful collaboration was identifying participants through badge colors. The Blue Badge for Microsoft employees, Green Badge for customers, and the Orange badge for partners. Don stated that “Microsoft is launching an innovation management initiative. How can Microsoft help manage innovation?”

The keynote speaker for the forum was Karl Ulrich, CIBC Professor and Chairperson of Operations and Information Management, Wharton School, University of Pennsylvania. The opening talk was about the process view of innovation, which focused on the front end of the innovation process. Prof. Ulrich, himself, has some interesting background as educator, entrepreneur, consultant, and an inventor.

According to Karl, innovation means value creating match of a solution and need, delivered to the customer. Three things common among innovations include the following:

1. Begin with a sensed opportunity – the hypothesis that a value can be created
2. From the outset, the probability of success is less than 100%
3. With an investment, the estimate of the probability of success can be improved

Then, Prof. Ulrich expounded on statistical analysis of the opportunities and ideas, which are available dime a dozen. However, the challenge is to evaluate opportunities to improve the efficiency of the innovation process. He walked through the process of identifying opportunities, and evaluating risks, investment, and return on investment on innovation using uncertainty associated with the opportunity.

Prof. Ulrich’s research shows that most of the innovations are internally generated, followed by customer and competition driven innovation. He finds that the distribution of quality of opportunities or ideas tend to be bell shaped with most ideas in the middle, some worse than others, while some outstanding in value. Example of worst idea was ‘revenge social networking’, while the best one was ‘brokering medical tourism for semi-elective surgery.’

Prof. Ulrich also shared findings on the analysis of various types of idea generation processes. The objective of the idea generation process is to get the right idea, and use the corporate process to create value off the right idea. Interesting lesson we learned that quality of ideas varies insignificantly among various idea generation methods. However, the speed of generating ideas varies among various idea generation methods as shown the below:

Finally thought was that most beautiful looking instant successes come after many trials. For example to develop an innovative tooth brush, a company looked at about 300 ideas, made 40-50 foam models, simulated field trials, molded and tested 5 models, and picked one as the main brush for the market. Thus, a breakthrough innovation requires hard work it is no flash of genius.

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