Cost-Cutting Is Rampant in Fashion

Nick Ferrari for Bloomberg Businessweek

By Chris Burritt

When Gap (GPS) was forced to slash its 2011 profit forecast by 22 percent on May 19, Chief Executive Officer Glenn Murphy blamed soaring cotton and labor costs. Retailers from Target (TGT) to Family Dollar Stores (FDO) have cited similar margin-squeezing pressures. All of this came as a shock to apparel company executives, many of whom have experienced only stable or falling costs for the past 20 years.

Retailers realize that they don't have much pricing power with budget-conscious consumers these days. That's why apparel makers are turning to "deconstruction" experts like Peter Brown, who shows clients how to tear garments apart and put them back together with cheaper and fewer materials. Companies are loath to talk about their cost-cutting for fear of damaging relationships with consumers. "They're working through this minefield," says Brown, who is the vice-chairman of retail consulting firm Kurt Salmon and says he works with most of the big clothing makers and sellers.

Brown is currently working with garment makers that will ship to stores in July 2012. (He declines to identify his clients.) There's a fair amount of nipping and tucking to be done, he says, because Kurt Salmon anticipates costs surging as much as 15 percent in the second half of this year.

Because only so much can be cut out of a garment, cost savings amount to a few pennies here, a few pennies there: eliminating cuffs and pleats, scrimping on linings inside coats, switching to coarser material for pockets. Fabric comprises as much as 50 percent of a garment's costs. Cutting it more carefully to reduce waste can reduce by 50? or more the cost of a pair of $195 men's wool dress slacks, Brown says. Zippers that come in a big roll are cheaper than ones custom-made for specific garments.

"For big apparel companies that make hundreds of thousands of men's suits a year, saving 20? or 50? a garment is a lot of money," says Salvatore Giardina, a men's suit designer and adjunct professor at the Fashion Institute of Technology in New York. Brown recently examined a pair of men's khakis that sell for $29.50 and spotted a coin pocket. Eliminating it zaps a nickel, he says. Watch pockets are an easy cut, since few men use them anymore. So are logos and decorative stitching inside the waistband—visible to men only when they put on their pants.

There's an art to this, designers say, at a time when many shoppers are watching their budgets. Consumers notice fixes that go too far. One no-no, says Giardina: making pants' pockets so shallow that loose change escapes. A simpler waistband with less material and stitching can make the top of a pair of slacks roll over. Switching to plastic buttons that crack after a few washings and using coarser wool can send shoppers elsewhere, says Giardina.

Most garment manufacturers take care to make changes that won't be spotted easily by consumers, according to Brown. "It's not the objective of any designer to say, 'How cheaply can we make these things?'" he says. "Most retailers don't want to cheapen the product. They're asking, 'Would dropping the watch pocket redefine this pair of pants? I don't think so. So knock off the watch pocket.'" In some cases, fashion trends can make life easier. The slim silhouette favored in suits and shirts by young men (and older hipsters), for instance, saves a lot of fabric.

Still, Brown says, the inflationary environment is exacerbating the usual tension between designers, who want to produce beautiful clothes, and manufacturers and apparel executives, who want nice togs with nice profit margins. "On one side of the table, you've got a designer who says, 'You can't destroy my beautiful product by lopping the watch pocket off,'" says Brown. "On the other side, you've got the manufacturing executive saying, 'You say you want to keep these things under $30. Tell me what you want to do.' "

Recently, Giardina's sister, Concetta, who is a button sales representative in New York, met with production managers from a major retailer to discuss the cost of a men's dress shirt that will appear in stores next spring. Did they want real shell buttons or imitation pearl? Concetta asked. "What's the price difference?" Concetta recalled them inquiring. About 20? a button for shirts that would need a dozen of them, she said. They took the imitation.

The bottom line: With fabric and labor costs projected to grow 15 percent in the second half of 2011, apparel makers are redesigning clothing to extract savings.

Burritt is a reporter for Bloomberg News.

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Innovation X: Why a Company's Toughest Problems Are Its Greatest Advantage

A fresh approach to succeeding with innovation, grounded in insights about rapidly changing customers, competitors and technologies

Written by a director at the award-winning global innovation firm frog design, this vital book shows business leaders and managers how to accomplish truly effective innovation in today's disruptive climate. Richardson shows how business is filled with "X-problems"- tough new challenges that present massive innovation opportunities, but also risks. Thriving in a world of X-problems requires harnessing four specific approaches: Immersion, Convergence, Divergence, and Adaption. Combining frog design's approaches with insightful analysis of companies such as Apple, BMW, Clif Bar, Google, Maxtor, and Salesforce.com, Richardson illustrates how to envision and realize successful new business ventures, products, and services.

• Provides a process for translating customer insights into relevant innovations, accompanied by case studies (many of them richly described from frog's own experiences)
• For the first time, gives real guidance on connecting products, software and services into ecosystems that are actually compelling to customers
• Shows how to facilitate bringing multiple perspectives to understanding a problem domain, as well as how to manage an innovation portfolio over time

Innovation X is an essential guide for companies seeking to create growth and differentiation in increasingly competitive markets.

Price: $27.95

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Questions on Accelerating Innovation

Some futurists claim that the "future" is approximately 30 years away (ref 1). Whatever the "average" amount of time between conception of a "new" idea (the future), and its attainment, the interesting question is whether a society has the ability to "accelerate" innovation. Is there something that society can do to increase the rate of change of innovation and discovery?

The creation of the internet emerged from the US Department of Defense that was aimed at increasing research productivity through a shared network of scientists communicating and sharing information with each other. Having achieved a world-wide, inexpensive to use system, are there any other strategies that society can harness to speed up the rate of innovation?

In April 2010, a team of prominent deans of business schools under the auspices of the AACSB International (an organization that grants accreditation to business programs) published their findings related to the role of business schools in promoting innovation. Lead by Dean Bob Sullivan (University of California San Diego, La Jolla, California), the team suggested that business schools have not exactly been invited to table by media, governments and trade organizations interested in advancing innovation. The team observed that many reports dealing with the need to promote innovation that received extensive publicity did not include representatives from the nation's business schools. The team called for efforts by business schools to re-look at their curriculum.

Years ago, academe debated whether entrepreneurship is an innate talent or whether entrepreneurship can be taught. After nearly a decade and thousands of published studies, most business professors concluded that entrepreneurship could be taught and courses in entrepreneurship jumped from some 250 in the early 1980's to well over 2,000 courses by 2000.

As with entrepreneurship, the issue of innovation will require wrestling with some basic questions: can it be taught? If so, how should it be taught and by whom? It is one thing to talk about behavioral issues such as government incentives for entrepreneurship, it is quite another to define the skills sets and information that would actually train or educate a person to be "innovative." Some will argue that being innovative is a state of mind, like a personality trait that is either present or absent. But, it may be likely that academe will find that as with entrepreneurship where necessity is the motherhood of invention, the same may be observed in innovation.

It may be useful to explore a strategy to better investigate innovation. First, developing a focused definition may be useful. And second, the proper context is critical. For example, innovation should not be tied to scientific, patentable inventions or we will be looking a merely developing more engineers in the name of promoting more innovation. A definition that allows innovation to span all types of organizations (such as government, private business, and non-profits) may allow for a more significant path of discovery. Getting to a definition is important because too narrow a definition may shut out other disciplines such as psychiatry, psychology, education, fine arts, political and other social sciences as well as the business disciplines.

The next line of inquiry may be to investigate how we recognize what is innovative. My studies reveal that much innovation is quite hidden from the casual observer or that the innovation is so prevalent that it remains unseen and unstudied. For example, one of the major innovations that literally transformed Wall Street and the merger and acquisition industry was the development and use of electronic spreadsheets (LOTUS 1-2-3, and Microsoft's Excel). While many attribute Wal-Mart's success to their innovation of "everyday low prices," such a strategy would not have been profitable if Wal-Mart had not developed incredible logistics and inventory management systems.

There is a body of research and commentary that may help in the quest to determine whether innovation can be accelerated by education that includes the works of Schumpeter and Drucker and Chao. Drucker's book on Capitalism and Innovation written in the early 80's suggests seven different sources of innovation. Chao's Innovation Nation builds a strong case that America is losing its competitive advantage in being entrepreneurial.

The effort to investigate our understanding of the process of innovation has significant implications for management education. Managers in all forms of organizations need to be better equipped to manage the process of encouraging innovation while also having a deeper understanding of how to influence or develop an innovative culture within their organizations.

The issue of innovation is central to the rate at which society can cope with its challenges. Welcome aboard!

Ref 1. (http://thenextwavefutures.wordpress.com/2007/04/21/30-year-futures-from-the-mod/).

Charles R. B. Stowe MBA, JD, Ph.D, Charles.Stowe@gmail.com, http://www.profentrepreneurship.wordpress.com. Professor of Management and Management Consultant. 15 years venture capital experience, retired Captain US Navy (Public Affairs Specialist), Author books: The Implications of Foreign Financial Institutions on Poland's Emerging Entrepreneurial Economy (Mellen Press); How to Start Your Business with No Investors or Debt (http://www.edpubtech.com) and Bankruptcy (Thomson-Reuters); academic articles; Licensed attorney, State Bar of Texas.

The Oxford Handbook of Innovation (Oxford Handbooks)

This handbook looks to provide academics and students with a comprehensive and holistic understanding of the phenomenon of innovation.
Innovation spans a number of fields within the social sciences and humanities: Management, Economics, Geography, Sociology, Politics, Psychology, and History. Consequently, the rapidly increasing body of literature on innovation is characterized by a multitude of perspectives based on, or cutting across, existing disciplines and specializations. Scholars of innovation can come from such diverse starting points that much of this literature can be missed, and so constructive dialogues missed.

The editors of The Oxford Handbook of Innovation have carefully selected and designed twenty-one contributions from leading academic experts within their particular field, each focusing on a specific aspect of innovation. These have been organized into four main sections, the first of which looks at the creation of innovations, with particular focus on firms and networks. Section Two provides an account of the wider systematic setting influencing innovation and the role of institutions and organizations in this context. Section Three explores some of the diversity in the working of innovation over time and across different sectors of the economy, and Section Four focuses on the consequences of innovation with respect to economic growth, international competitiveness, and employment.

An introductory overview, concluding remarks, and guide to further reading for each chapter, make this handbook a key introduction and vital reference work for researchers, academics, and advanced students of innovation.

About the Series
Oxford Handbooks in Business & Management bring together the world's leading scholars on the subject to discuss current research and the latest thinking in a range of interrelated topics including Strategy, Organizational Behavior, Public Management, International Business, and many others. Containing completely new essays with extensive referencing to further reading and key ideas, the volumes, in hardback or paperback, serve as both a thorough introduction to a topic and a useful desk reference for scholars and advanced students alike.

Price: $55.00

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Sustaining Innovation in Tough Times

The innovation manager on the phone sounded distraught. "There's so much distraction in our firm right now," he explained. "With the credit crisis and the economy in such shape, I'm having trouble keeping the focus on innovation." What to do? There's no question innovation initiatives are under pressure right now more than at any time during this decade. And innovation managers are definitely earning their stripes. Keeping these programs on the front burner can't be easy. Getting face time with the CEO becomes a creative challenge in itself. But it can be done.

Communication is Critical

Communication is critical. Making the case, and remaking the case, for continued investment of talent and resources and learning is essential. To be effective, the innovation team needs the persuasion skills of an evangelist, the skills of a diplomat (to navigate the inevitable issues of turf and budgets and rewards), the patience of Job, and the tenacity of a dog trying to bury a bone in a marble floor. And that's just for the good times, when innovation is easy. Actually, innovation is never easy. Never has been and never will be, even in the most innovation-adept organizations. Peter Drucker used to say that nothing gets done in organizations except by monomaniacs on a mission. Push back, foot dragging and outright pressure to wind down the innovation program will come, sooner or later, regardless of the larger economic environment. Getting distracted is nothing new.

Moving Beyond Boom & Bust

Innovation has always run in cycles. As Rosabeth Moss Kanter observed in a recent Harvard Business Review article, waves of enthusiasm inevitably give way to waves of neglect. During periods of neglect, budgets for innovation would get slashed. Creative people would get reassigned or shown the door. The firm's innovation engine would be allowed to rust. Until one day somebody high up in the organization (the chief) slaps his or her head and exclaims, "Oh my gosh! We've got nothing in the pipeline. This is a crisis!" And a new cycle of innovation would commence. This time it was supposed to be different. The Global Innovation Movement that blossomed in the early years of this decade urged an end to the boom-bust cycles. This loosely aligned group of thought leaders and corporate practitioners advocate a fundamentally different approach to inventing a firm's future. The Movement's big idea was that innovation should be embedded as deeply in your firm's DNA as quality or safety or environmental compliance.

You wouldn't practice quality in boom or bust cycles or in an ad hoc, piecemeal fashion would you? As Simon Spencer, BorgWarner's first innovation champion, once commented, "We had a process for everything else around here except for innovation." The good news is that, distractions aside, things do seem to be different this time. The troubled economy in the US, which has now spread to Europe, India and many other parts of the non-oil producing world, has not set off a bust cycle as it might have in the past. So second quarter, 2008, I'm cautiously optimistic. No question innovation initiatives are under strain. Budgets are being cut in more than a few firms. Some companies are throwing in the towel, and reverting to hunkering down as a strategy. Yet we hear constantly from organizations exploring the innovation terrain. Consultants in the field are seeing only a small pullback in demand for our services. Time will tell for certain. But I believe the Innovation Movement has brought about a paradigm shift in how innovation gets accomplished. There's no going back to the old ways of producing new products, services and business models. The world is moving too fast. Innovate or evaporate.

Robert B. Tucker is president of The Innovation Resource, and an internationally recognized leader in the field of innovation. Formerly an adjunct professor at the University of California, Los Angeles, Tucker has been a consultant and keynote speaker since 1986. Clients include over 200 of the Fortune 500 companies as well as clients in Europe, the Americas, Asia-Pacific, and Australia. He frequently contributes to publications such as the Journal of Business Strategy, Strategy & Leadership, and Harvard Management Update. He has appeared on PBS, CBS News, and was a featured guest on the CNBC series The Business of Innovation. Learn more about Robert's latest work, Innovation is Everybody's Business, at:

http://www.innovationresource.com/index.htm

Can Wi-Fi Work Citywide in New York?

By Peter Burrows

Imagine if smartphones always worked as fast as home Wi-Fi networks, and no one had to pray that a cellular signal was strong enough to send an e-mail or retrieve a map. A company called Towerstream (TWER) hopes to make that dream come true for New Yorkers in late June, when it turns on a network of about 1,000 wireless routers—souped-up, weatherproof versions of the Wi-Fi devices in millions of homes. The goal, says Towerstream Chief Executive Officer Jeff Thompson, is to provide a superfast mobile network that covers seven square miles of Manhattan, and sell access to the system to wireless carriers that can use it to fill in areas prone to spotty service. (Lots of those in New York.)

In theory—the company hasn't announced any deals with carriers—consumers may never know they're using Towerstream's network. Behind the scenes, Carrier X would seamlessly switch a customer's smartphone or tablet to Wi-Fi mode when that person comes within range of one of Towerstream's hotspots, and the connection speed would go up dramatically. During a demonstration recently on the corner of West Broadway and Broome Street in New York's SoHo district, an iPhone's data speed leapt from .35 megabits per second to 26 Mbps. That's fast enough to stream high-def video, and much faster than most home connections in the U.S.

Towerstream, a 12-year-old company that has specialized in providing broadband service to corporations, isn't the first to try large-scale Wi-Fi. In 2006 cities such as Philadelphia and Chicago announced networks; Google (GOOG) had plans to unwire its hometown of San Francisco. For a variety of reasons—slow speeds, high costs—those projects went nowhere. They were meant to cater to laptop users who wanted to connect wherever they were. Users weren't so desperate to do that, it turns out. Now users of mobile devices are.

While most of the failed experiments of yore were based on taxpayer-funded municipal projects, this time there's a clear business need for wireless carriers. Traffic that's processed via Wi-Fi doesn't take up any capacity on local cell towers and doesn't take up room on so-called backhaul connections—often decades-old copper cables—that bring traffic from the tower to the Internet. In Towerstream's network, data from iPads, Android phones, and such would be siphoned off by the nearest Wi-Fi antenna. Then the data would get passed along to other antennas until it reached one of nine large base stations around the city, including one at the top of the Empire State Building, and then travel right onto the Internet. "AT&T (T), China Telecom (CHA), and many others are doing this kind of 'Wi-Fi offload'" on a smaller scale, says Michael Howard, co-founder of market research firm Infonetics Research.

The antennas themselves are much cheaper and less obtrusive than cell towers. They're about the size of a football, cost about $800 apiece, and sit on poles or rooftops; cell towers can run upwards of $200,000. Towerstream representatives have fanned out in Manhattan, persuading landlords and building owners to let the company install the devices on their property. The company pays $50 to $1,000 per installation per month, depending on location.

There's little doubt about consumer demand. Last year, Towerstream conducted a three-month test of a 200-device Wi-Fi network in Manhattan. Without any promotion, the network handled 20 million Web sessions by consumers who happened to spot Towerstream when trolling for a Wi-Fi connection. That's a fifth of the Wi-Fi traffic generated by AT&T during the same three months at its hotspots, which include most Starbucks (SBUX) and McDonald's (MCD). Demand is expected to increase, even as cellular networks go from today's 3G technology to 4G. While 4G is roughly four times faster than 3G, overall data traffic is projected to rise more than 30 percent per year, according to multiple studies. "If any of these estimates are even close to true, those 4G networks will be filled up almost immediately," says CEO Thompson.

Towerstream's stock has risen from $3.71 in early April to $5.21 because of its Wi-Fi ambitions, says Morgan Joseph TriArtisan Group analyst Ilya Grozovsky. "Jeff is obviously very excited about this opportunity," says Grozovsky. "But until they get a carrier deal, this business is still very theoretical." If carriers choose to build their own Wi-Fi rather than rent from Towerstream, Thompson may need to take the riskier step of selling directly to consumers. Should his Manhattan project take off, Thompson says he'll proceed to San Francisco, then Chicago, then to seven other cities. As Thompson says: "If you can make it here, you can make it anywhere."

The bottom line: City-spanning Wi-Fi has been tried before. Towerstream's effort may work because of the rise of smartphones and tablets.

Burrows is a senior writer for Bloomberg Businessweek, based in San Francisco.

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Innovator: Cyber Guardian Adam Hildreth

By John Tozzi

Crisp Thinking/Bloomberg

In 1999, Adam Hildreth, then 14, and six friends in Leeds, England, started a virtual world for teens called Dubit. The site took off and at one point Dubit needed to employ 50 monitors to keep cyberbullies and other troublemakers in check. Human moderation "was never going to scale," he says.

Hildreth, who dropped out of high school two years later to run Dubit full-time, began developing software to address the problem. The idea became his next company, Crisp Thinking, which he co-founded in 2005 while remaining a shareholder in Dubit. Crisp's software analyzes users' language and actions to identify harassment, spamming, or predators on the lookout for victims. The system reacts in real time to warn or ban people who misbehave—or refer them to human moderators.

Crisp processes 500 million pieces of user-generated content a month for Internet clients, Hildreth says, sorting through comments, chat messages, and blog posts. Most of the analysis is based on word use (Crisp can interpret messages in nine languages), though the software also tracks online behaviors such as friend requests on social sites or patterns of activity in a virtual game. Crisp's filters detect obscene or inappropriate messages even when users break them into multiple lines in attempts to disguise them. The technology also judges users in the context of their past behavior: A new player who types a curse will receive a warning; a repeat offender would be blocked from the site right away, says Hildreth.

Now 26, Hildreth says Crisp has 75 clients, including Electronic Arts and the Cartoon Network, that pay between a few thousand dollars and tens of thousands a month, depending on the number of users. He expects revenue at the 30-employee company to double to $5 million in 2011. Sony Online Entertainment uses Crisp in its fantasy-themed Free Realms game and in Star Wars: Clone Wars Adventures, says Brad Wilcox, the company's customer service chief. Crisp provides a layer of monitoring on top of Sony's own chat filters to detect racist or sexual language "that is against the game's code of conduct and has no place in our games," Wilcox says.

Hildreth says the software can also help online game operators police a banned practice called "gold farming," in which players hoard in-game currency, spells, or magic powers and then sell them for real-world profit to players who want to take shortcuts and advance unfairly in an online game.

The next emerging market for Crisp may be corporations marketing on social-network sites such as Facebook and Twitter. They face risks from users bad-mouthing their brands—or harassing other visitors, says Hildreth. "Customer service in a public environment is a risk," he says.

High school dropout turned software millionaire

Cracking down on incivility and predators on the Internet

Demand for his Crisp monitoring software is robust

Tozzi covers small business for Businessweek.com.

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Innovation Games: Creating Breakthrough Products Through Collaborative Play

Innovation Through Understanding^sm

 

The toughest part of innovation? Accurately predicting what customers want, need, and will pay for. Even if you ask them, they often can’t explain what they want. Now, there’s a breakthrough solution: Innovation Games. Drawing on his software product strategy and product management consulting experience, Luke Hohmann has created twelve games that help you uncover your customers’ true, hidden needs and desires.

 

You’ll learn what each game will accomplish, why it works, and how to play it with customers. Then, Hohmann shows how to integrate the results into your product development processes, helping you focus your efforts, reduce your costs, accelerate time to market, and deliver the right solutions, right from the start.

• Learn how your customers define success
• Discover what customers don’t like about your offerings
• Uncover unspoken needs and breakthrough opportunities
• Understand where your offerings fit into your customers’ operations
• Clarify exactly how and when customers will use your product or service
• Deliver the right new features, and make better strategy decisions
• Increase empathy for the customers’ experience within your organization
• Improve the effectiveness of the sales and service organizations
• Identify your most effective marketing messages and sellable features

Innovation Games will be indispensable for anyone who wants to drive more successful, customer-focused product development: product and R&D managers, CTOs and development leaders, marketers, and senior business executives alike.

Price: $44.99

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Innovation - Small Business Imperative

When I think of innovation, I think of creative people, people that have changed the world with new ways of doing things. In the business world, you'd be hard pressed to find better examples of the success that constant innovation breeds than Microsoft and Apple. And I believe that it is no coincidence that these two massive companies have come to be known as innovation leaders. This is not a matter of their success coming despite the ultra competitive market in which they operate, but because of it. The more competitive the market you operate in, the more you will be forced to innovate in order to survive. It is easy to think that innovation is a trait that belongs exclusively to the huge multinationals like Microsoft and Apple, but you have to remember that both these companies were essentially started in their founders' garages - they weren't always big, but they were always innovative. And the competition between them and other early players in the market drove their innovative tendencies even further.

Businesses today face competition on more fronts than ever before. Your competition doesn't even have to have a point of sale in the same country as you anymore. The internet has enabled almost anyone to chip away at your market share from almost anywhere with just a few thousand dollars worth of software and some clever website design. Innovation has become an imperative for doing business today. But don't take my word for that. What do Bill Gates and Steve Jobs think of innovation and its importance to a business?

"We are always saying to ourselves, "We have to innovate. We've got to come up with that breakthrough." In fact, the way software works, so long as you are using your existing software, you don't pay us anything at all. So we're only paid for breakthroughs." - Bill Gates

Innovation distinguishes between a leader and a follower. - Steve Jobs

I can hear you saying, "Great for you Bill & Steve, but I don't have all the money in the world for R&D to come up with the next big thing in my industry". But innovation requires only one thing - a focus on starting down the path towards innovation, even in the most seemingly mundane areas of your business. According to dictionary.com, innovation simply means the introduction of new things or methods. That means you don't have to be at the forefront of cutting edge technology, you simply have to come up with something different or a different way of doing things.

I've put together a few ideas to get you thinking about how to get started with making innovations in your business that can lead to tangible, sustainable competitive advantage. They are simple, yet profound. It's not always the "greatest thing since sliced bread" kind of ideas that make the biggest difference in business. Sometimes, it's simpler ideas that can more quickly and easily be implemented that can have the greatest impact. Before you continue reading, prepare your mind to be open to the possibilities that exist for your business right now - think about things that might be staring you right in the face. You don't necessarily have to reinvent the wheel, just figure out how to make more people not want to buy wheels from anyone else but you and you're off to a good start.

Idea #1 - Spread your "unique-ness".

What is the biggest difference your customers notice about doing business with you as opposed to doing business with your competition? What do your customers LOVE about doing business with you? What are you always being complemented for? Do you have a better product? Do you have a better way of delivering your product? Are you more "user friendly"? Are some types of customers better suited to using your product than your competitor's? Have you found a niche? Take the answers to these questions and start exploiting your "unique-ness". Think about what makes you and your business one of a kind, especially if those points of difference would be difficult to duplicate, even if your competition wanted desperately to copy those very aspects. Now, think of how you can apply these aspects of your business or product more widely to all the other aspects of your business, your industry, your people, and your supply chain. You should seek to apply these points of difference across as many areas of your business as possible so that every element of doing business with your company gives you that same competitive advantage over and over again. This is the most basic form of innovation. By taking what is unique about your business and applying it to more and more of your business until practically everything you do is as unique and special as what you have come to be known for, you tap into the most powerful innovation of all - brand innovation. Creating an innovative brand can speak volumes about your business without having to say a word - and it can make your customers into stark raving FANS that don't want to do business with anyone else, regardless.

Idea #2 - There's more than one way to skin a cat.

Think about the "inputs" that are relevant to your business. How do you get your product ready to sell? If you're a manufacturer, what are the component parts of what you build? If you are a service firm, what are the steps involved in delivering your service to the end user? Now think about what your product or service ultimately delivers to your customers. For instance, many people would assume that McDonald's is in the food business. But let's face it; even if you are particularly fond of McDonald's food, it is neither the most nutritious or most satisfying option out there. But McDonalds remains one of the most successful businesses in the world because they consistently deliver not just food, but convenience. It is by being convenient, even more so than other "fast food" outlets, that McDonald's has maintained its amazing momentum over decades. Once you've analysed your business inputs, the "how" of getting your product or service into the hands of your customers, consider them all in light of what you are ultimately delivering that is of value to the people that buy from you. In other words, focus on the outcome for your clients. What are they really buying from you? Can you change or improve your inputs to get your customers what they really want in a way that saves them money, saves them time, or makes their experience even better in some way? If so, do it! We tend to stick with doing things the way we've always done them (the same old inputs) instead of exploring ways to make things better through thinking differently about how we deliver the outcomes. Your customers are really only interested in the outcomes your product or service delivers to them. The inputs or the methods you use to deliver those outcomes are usually secondary or even inconsequential to them. Therefore, it makes sense to focus more on how you achieve results and deliver value to your clients than on what specific "formula" you use to get them what they want.

Idea #3 - Get out of the box.

You've heard "think outside the box" a million times. But innovators know that in order to generate new thinking, you have to get away from the daily business routine. If you're having trouble seeing the proverbial forest for the trees, the best solution can often be taking a long hike up the nearest mountain. When I meet with my clients, I try as often as possible to meet with them outside of their offices. This does two things. One, it gets us away from the constant threat of endless interruptions. And two, it always helps to give us a bit of much needed perspective. I don't know how many business owners I've dealt with that are genuinely afraid that their company will collapse in a heap if they so much as go out for a cup of coffee. But time after time, when these same people get outside the four walls of their business, new ideas and clear thoughts about ways to attack problems and take advantage of opportunities begin to flow freely. Innovative thinking rarely occurs when you're locked in the day to day operation of your business. And there is a great deal of scientific evidence out there today that tells us that being in completely new or novel situations actually causes our brains to rewire themselves in order to attack old problems from new angles. Simply put, it's always going to be difficult to "think outside the box" when your head is stuck inside it. My standard advice to business owners with regard to strategic planning and long-term vision for their company is to "take five". As in five days. At least five days each year should be set aside for you to completely avoid the office so you can think only about your strategic direction and longer term plans for growing your business. Anything less than that and you're really going to struggle to do anything much more than what you've "always done".

Idea #4 - Get out the binoculars.

This is about shifting your focus. Many businesses are forever focussed on the here and now. That's good to a point, but if you're only ever thinking about today, you're not necessarily going to make your decisions on the basis of what is best for the long term sustainability of your business. Large, publicly listed companies often fall into this trap when they make decisions based on what effect they will have on tomorrow's share price instead of what will deliver the most value for their shareholders over the next 10-20 years. Building a truly sustainable business, one that is environmentally, socially and financially able to withstand the test of time requires long-term thinking. And the long-term viewpoint can lead to innovations that a short-term viewpoint overlooks. Changing your thinking about your business from a "what will we be doing next week or next month" viewpoint to a "what will we be doing in 20 years" viewpoint will focus your attention in many different areas that will frequently lead to improved business sustainability across the board. Think of how differently you would choose stocks to invest in if you were given an investment window of 20 days as opposed to 20 years. One of the key elements to business sustainability is investment. Innovative thinking about how you make key investments in your business can be the difference between success and failure in the long term, but that same innovative thinking can also be the source of significant competitive advantage in the short term. If you've been in business for over ten years, it might be useful to ask yourself what you would have done differently starting out in business if you knew then what you knew now. Now take those kinds of scenarios of what you would have changed and project them 20 years into the future. What should you be doing now in order to be ready for "your business v.2030"?

I hope those ideas have given you the appetite for innovation and a few thoughts about where to start. If you'd like to get more ideas about how to better manage your business, prepare it for the future or grow it up to the next level, sign up for my monthly eNews. And if you would like to receive my Top 10 Ways to Start Thinking Innovatively, just write to me at bankable@hotkey.net.au and put Innovative Thinking in the subject line. By the way - it's all FREE!!!

Alan Blair
The Bankable Business Builder
http://www.alanblair.com.au

I've been a successful advisor to middle market and SME businesses for the past 14 years. Working for some of the world's leading banks in the United States and Australia, I've had the privilege of sharing my expertise with literally hundreds of businesses, becoming a trusted advisor to many of them and helping them all to make their businesses more bankable.

A bankable business is one that can go to any bank assured of being able to secure finance on their preferred terms instead of having to "take it or leave it" by the bank's conditions. A bankable business is one that isn't just a "job" for its owners, but a growing, thriving enterprise that is built to last. A bankable business is run by people that are confident and capable of making the tough business decisions necessary to make sure that the business is sustainable over the long term. But too many business owners become overwhelmed and frustrated to the point that they aren't able to put all the pieces of the puzzle together in order to make their business truly bankable.

That's why I decided to start my own consulting company dedicated to helping business owners build their businesses and their personal skill levels to enable them to fulfill their aspirations and enjoy a level of satisfaction that, quite frankly, many small business owners fail to achieve on their own.

If you'd like to learn more about the essential skills you need to be successful, contact me today for a no obligation conversation about how I can help you achieve your business goals.

The Paradox of Open Innovation - Internal Or External?

What came first, the chicken or the egg? This paradox has perplexed philosophers for millennia.

In the progressive workplace, a similar dilemma confounds executives. In the pursuit of open innovation, what comes first: Innovation created internally, or innovation developed beyond the organization?

People talk about open innovation. It's the mantra of leadership experts and workplace counselors across the business landscape. But internal versus external innovation also presents a dichotomy. Often conflicting in nature, many proponents of open innovation get tripped up on why external innovation can fail to take root.

In my opinion, the paradox is easily answered: External innovation is destined to fail if the imperatives of internal innovation have not first been developed, deployed and adhered to. Workplace pundits extol the virtues of external innovation, but if innovation isn't alive and thriving internally, innovation itself will fall on the scrapheap of failed initiatives.

Effective innovation isn't about the Chief Innovation Officer or even the CEO mandating from on high what milestones R&D or Engineering must pursue or achieve. In fact, innovation that's "required" to come from R&D, Engineering or some other "Department of Innovation" is susceptible to the Not Invented Here syndrome. If it wasn't created by someone who's mandate it is to do just that, it's often likely to be squashed by exactly those who didn't come up with the idea. "Quit meddling in my sandbox," is the complaint.

Those barriers have to be removed. Effective innovation begins with breaking down silos that separate departments, divisions or teams - and encouraging, even welcoming participation from across the organization.

Sure, those directly charged with leading innovation might come up with good ideas. But will they speak to the heart of the organization and how it interfaces with its customers or constituency?

For example, since 1967, Hollywood Woodwork in Hollywood, Florida, has specialized in custom woodwork for use in premier hotels, spas, casinos, country clubs, public projects and corporate offices throughout the United States and Caribbean. Then the recession hit, and the company saw a drop off in its traditional business.

Then the company opened up and solicited ideas from all employees - not just those in Product Development. This led to a simple question: "Can we do church pews?" No deep analysis by skilled research teams or high-paid consultants. Just a simple query that made company executives wonder: Can we?

They could. And now, Hollywood Woodwork does, making many other products utilizing their assets. Building church benches helped diversify the company - and keep it afloat during the recession.

The request also made executives there realize something else: We must be receptive to potential innovation from all internal sources. Not-invented-here doesn't exist at Hollywood Woodwork. Innovative suggestions are welcomed from across its workforce of 150.

With the foundations of open innovation secure within an organization, only then should a company seek innovation from beyond its walls. If you don't have internal innovation down pat, and you haven't removed all the emotional barriers that inhibit the free exchange of ideas, you never will embrace what comes from the outside.

Successful open innovation, then, becomes the preamble to effective external innovation - if it's needed at all. Paradox solved, the entire team can focus on true innovation.

Robert F. Brands
Author of "Robert's Rules Of Innovation (TM) "
Wiley, Spring 2010
http://www.robertsrulesofinnovation.com

Managing Creativity and Innovation (Harvard Business Essentials)

Packed with practical information designed for business readers and managers at all levels, this essential volume offers insights on managing creativity in groups, developing creative conflict, and using technology to help foster innovation.

Price: $19.95

Click here to buy from Amazon

Innovation is Free

Quality is free

Having worked for the past 11 years on I.T. quality management (Implemening CMMi, People CMM, ISO, PMBok) out of the 16 years in the industry, I have convinced myself about the truth in the book "Quality is Free" by Philip B. Crosby. In that book, the author emphasizes that doing things right the first time adds nothing to the cost of a product or service. What costs, and costs dearly in terms of rework, test, warranty, inspection, and service after service, is doing things wrong.

It can also be explained as "efforts spent in building quality in the process and implementing the same (By establishing a quality management system, training on QMS, audit, continual improvement etc.) pays for itself many times through savings on rework and repeat orders from satisfied customers, that you can say quality in itself is free". Now going to my proposition...

The Proposition

Inspired by this experience, as we move into the innovation revolution, I am seeing that the investment we make on setting up the culture and environment, where new ideas are welcomed and mistakes are allowed in experimenting with them, will pay for itself exponentially. ROI on innovation management will be even higher than ROI on quality management. So my proposition is that "Managing Innovation is mandatory for managing the changing customer needs and survive. But that investment will also pay for itself through customer delight and exponential growth in the global market - So you can say Innovation is free".

This may not be as intuitive as "Quality is Free" today. But my effort to engage you in this conversation can be a beginning to get there. There are costs involved in choosing the right innovations, design, development and marketing. But if Total Quality Management concepts are embedded in an organization, just by providing a scheme and structure for innovation management, we can increase the chances of innovative solutions leading to customer delight and improved business results today and tomorrow.

I am sure when Philip Crosby said, "Quality is free", people would have wondered how it can be. They would have confused quality with grade and said, "Better quality products are always costly." Or they would have confused quality with goodness and said, "Not everyone can produce good quality. There are good workers and sloppy ones." Crosby defined quality as conformity to certain specifications set forth by management and not some vague concept of "goodness." These specifications are not arbitrary either; they must be set according to customer needs and wants. Now we all agree that everybody can acquire knowledge, skills and process abilities based on his/her strengths and produce quality work.

Similarly "innovation is free" will raise doubts like "Can innovation be institutionalized?" "Can creativity be taught?" etc. Let me proffer a definition for "Organizational Innovation". OI is a novel idea that better meets customer's requirement today and tomorrow and makes business sense in the organization's context to implement, based on pilot results and actually brings the business benefits." With that definition, we will see how IM can be implemented at organizational level.

Innovation Management System

Do we need an IMS then? Yes of course. IM policy should clarify that the organization believes that every one can innovate in spite of their level in the organization and the needed support will be provided. The key to innovation is in asking the right questions rather than finding the correct answers. Some times the question is the innovation! Finding an answer to that question may follow a systematic approach. The IM procedures should give guidance on how to ask the right questions and find the viable answer through pilots. In the end, if the innovation can be deployed across the organization, it should be done through the QMS. There should be links to IM assets and mentors who can ignite minds to innovate.

QMS and quality control cannot be compromised for Organizational Innovation Deployment. Otherwise newer products and services may meet changes to requirement but will stop meeting the original requirements.

Training and orientation

Training for innovation can be more effective through mentoring and coaching. Books, videos etc from powerful speakers can kindle the fire. Don't forget MS Academy workshops.

Audits?

Audits typically focus on non-conformances and defects and so do not apply to innovation management. Instead as part of coaching, the coach can ask the innovator to create a self review checklist and use that to measure progress. How about measurement and rewards and so on?

Measurement

Measurement should be tied to ROI and not just the number of innovations.

Culture and environment

Transparency, flexibility, empowerment, collaboration with customer and management focus are all necessary to set up a repeatable, sustainable innovation culture in the organization.

Rewards and recognition

Since we have defined OI as linked to business results, it automatically follows that the innovators, the coaches as well as the innovation evangelists should be rewarded and recognized. But all of them are in the game for the satisfaction of seeing their idea put to work and not for the money. So don't worry - Innovation will remain free.

Ganapathy Subramanian has a B.E degree from CEG Anna University. He was GM-Quality at CSC India Pvt Ltd when he left them to pursue and lead his dream project - Management Scholars Academy. In his 16 years career in IT he has participated in many quality initiatives leading to successful CMM Level 5 and PCMM Level 5 assessments. He has designed, developed, and deployed innovative training programs, frameworks, and awards schemes. These helped CSC build, sustain, and excel in quality. He has traveled to the US, UK, Japan and Singapore as a process consultant for AT&T, Lucent, Citibank, iSoft, Unilever and Visa. Ganapathy keeps a blog at http://msacademy.in/wordpress

Elon Musk on Running Tesla Motors and SpaceX

As told to Diane Brady

Sam Comen for Bloomberg Businessweek

I've always wanted to be part of something that would radically change the world. In 1995, that was the Internet, which led to PayPal. After it sold, I wanted to create a low-cost Mars mission that would get people excited about space travel. The idea was to land a vehicle with a greenhouse on Mars and establish life there. The problem was finding a rocket. It would have cost about half a trillion dollars for one mission; rockets are not reusable. To make life multiplanetary, you need a transport system that's fully and rapidly reusable. That would lead to a dramatic reduction in costs. In 2002, I started SpaceX to solve those problems.

I run both [electric car company] Tesla (TSLA) and SpaceX myself. It's a heavy workload, and I've never really wanted to run companies. Unfortunately, I came to the conclusion I was better than the CEOs we hired. If I'm not CEO, I can't make the inventions happen in the way they need to happen. Professional managers—MBA CEOs—are not very creative or adaptable, and their skills don't suit a startup. Business is like a multidimensional probabilistic chessboard. The rules aren't set, and the same moves don't always make you win. A lot of people can be really good in a set-piece battle; my biggest differentiating skill is I can invent new pieces.

We're entering the era of commercial space flight, which will advance dramatically faster than in the past. But I made the decision to patent almost nothing: Our competition is the Chinese and Russian governments, against whom patents are unenforceable and can simply be used as a recipe. It's much better for our technology to be trade secrets. I'd rather keep the information to myself. There could be a Chinese spy or a cyber attack, but my CIO is from PayPal, which never got cracked.

People forget the power of inspiration. All of humanity went to the moon with the Apollo missions. The issue was cost. There was no chance to build a base and create frequent flights. That's the problem I would like to solve.

View the original article here

Innovation Tournaments: Creating and Selecting Exceptional Opportunities

Managers, entrepreneurs, and venture capitalists all seek to maximize the financial returns from innovation, and profits are driven largely by the quality of the opportunities they pursue. Based on a structured and process-driven approach this book demonstrates how to systematically identify exceptional opportunities for innovation.

An innovation tournament, just like its counterpart in sports, starts with a large number of candidates, with opportunities as the players. These opportunities are pitted against each other until only the exceptional survive.

This book provides a principled approach for the effective management of innovation tournaments - identifying a wealth of promising opportunities and then evaluating and filtering them intelligently for greatest profitability. With a set of practical tools for creating and identifying new opportunities, it guides the reader in evaluating and screening opportunities. The book demonstrates how to construct an innovation portfolio and how to align the innovation process with an organization's competitive strategy.

Innovation Tournaments employs quirky, fresh examples ranging from movies to medical devices. The authors' tool kit is built on their extensive research, their entrepreneurial backgrounds, and their teaching and consulting work with many highly innovative organizations

Price: $35.00

Click here to buy from Amazon

Apple's Deals May Transform Digital Music

Illustration by QuickHoney

By Brad Stone and Andy Fixmer

(Corrects spelling of Russ Crupnick)

Compared with buying e-books, building a digital music collection is a hassle. E-books zip directly to reading devices like the Kindle and Nook and are backed up "in the cloud"—on the servers of Amazon.com (AMZN) and Barnes & Noble (BKS). A digital song, on the other hand, is typically downloaded to a PC and must then be manually transferred to an iPod or mobile phone. If you lose your Kindle, you can always download an e-book again; if the PC crashes or the iPod falls into the bathtub, the song goes down with it.

Moving music to the cloud has been an elusive goal for big tech companies and their music industry counterparts, until now. In the past two months, Amazon and Google (GOOG) have unveiled cloud music services, albeit to mixed reviews and indifference from consumers. These new services let users upload their music collections into so-called digital lockers on the Internet and stream the songs they own to a variety of devices. Both are limited, because neither Google nor Amazon could reach an accommodation with music labels. Label executives say they are negotiating aggressively to make sure they profit from the shift to the cloud. It may be the last opportunity to stem rampant piracy and years of plummeting sales.

Apple (AAPL), the reigning heavyweight of the music business, may have solved this cloud conundrum. It has reached agreements with three of the four major music labels and is close to reaching terms with the fourth, Universal Music, according to people with knowledge of these deals but who can't speak on the record because the talks are private. The company could preview its cloud plans as early as June at Apple's annual Worldwide Developers Conference in San Francisco. The music industry will be watching to see whether Steve Jobs & Co. have discovered a way to quell the deep anxieties of the music biz while creating a flexible, easy-to-use service that isn't too expensive. "With a big enough checkbook, anyone can get a deal with the record labels," says Michael Robertson, founder of an unlicensed cloud music locker called Mp3tunes, which is embroiled in a lawsuit with EMI. "The question is whether Apple's cloud music service will be consumer-friendly." Apple declined to comment.

Apple's music service, which Engadget and other tech blogs are already calling iCloud, might well represent the future of recorded music. Armed with licenses from the music labels and publishers, Apple will be able to scan customers' digital music libraries in iTunes and quickly mirror their collections on its own servers, say three people briefed on the talks. If the sound quality of a particular song on a user's hard drive isn't good enough, Apple will be able to replace it with a higher-quality version. Users of the service will then be able to stream, whenever they want, their songs and albums directly to PCs, iPhones, iPads, and perhaps one day even cars. And the music industry gets a chance at the next best thing after selling shrink-wrapped CDs: monthly subscription fees, a la Netflix (NFLX) and the cable companies. "We will come to a point in the not-so-distant future when we'll look back on the 99? download as anachronistic as cassette tapes or 8-tracks," says Russ Crupnick, a music analyst at NPD Group.

While it may be a huge shift, it won't be free. Apple no doubt has paid dearly for any cloud music licenses, and it's unclear how much of those costs it will eat or pass on to consumers. One possibility would be to bundle an iCloud digital locker into Apple's MobileMe online service, which currently costs $99 a year and synchronizes contacts, e-mail, Web bookmarks, and other user data across multiple devices. Users will be able to store their entire music collections in the cloud—even if they obtained some songs illegally. That would finally give the labels a way to claw out some money on pirated music.

View the original article here

Thiel Awards 24 Under-20 Fellowships

By Douglas MacMillan

Last fall, Princeton University sophomore Eden Full began to consider taking a break from school to turn her side project—a solar panel that rotates without using electricity—into a business.

In April, Full got all the motivation she needed when she was told she had won a $100,000 grant. The catch: She has to leave school for at least two years. "It's time for me to go out and try things in the real world and make mistakes and learn from those mistakes," says 19-year-old Full.

Full is one of two dozen young entrepreneurs named today to the 20 Under 20 Fellowship, a philanthropic grant announced in September by Facebook investor and board member Peter Thiel. The Thiel Foundation intends to spur the creation of more innovative startups through a controversial means: getting more young people to explore alternatives to a college education.

The recipients—all younger than 20 years old at the end of 2010—each will receive $100,000 and mentoring under the condition that they stay out of school for two years to build their businesses. The foundation said it expanded the list to 24 because it was "impossible to pick only 20" from among the pool of more than 400 applicants.

"People who have already gone to college and are in their 20s typically have student debt, sometimes a mortgage; often they're not well-positioned to take on the two-year financial risk of trying to start a company," says Jim O'Neill, who heads the San Francisco-based nonprofit.

The grant winners are pursuing a range of businesses, from alternative energy to education and e-commerce. Calgary native Full will use her grant money to move to San Francisco in August and speed up the process of patenting and licensing her solar panel technology. Years of tinkering in science had led her to come up with a contraption for increasing solar panel energy collection by up to 40 percent, partly by removing the electricity commonly used to rotate panels toward the sun.

"I don't have a concrete plan of what's going to happen next, but there are a lot of people who are willing to support me and make sure I'm on the right track," says Full, who will work with three separate mentors provided by the Thiel Foundation to handle technical matters, business development, and financial issues.

Full says she plans to return to Princeton eventually to complete her degree in mechanical engineering. "When I come back, I will get a feel for why I am studying what I am studying," she says.

Educators and career counselors say that skipping or putting off a college degree can be detrimental when business ideas fail.

"For every high-profile story of a Bill Gates or Mark Zuckerberg"—two high-tech chief executive officers who dropped out of college—"there are many, many less-publicized examples of men and women who have become highly successful entrepreneurs because of what they learned in college from teachers and fellow students," says Brian Rosenberg, president of Macalester College in Saint Paul, Minn. "Mr. Thiel's program seems not unlike luring college athletes out of degree completion with the promise of a career in the NFL or NBA."

Participants in the 20 Under 20 Fellowship can always go back to school if their business doesn't take off, says the Thiel Foundation's O'Neill.

"There's a difference between `stopping out' and `dropping out,'" he says. And the comparison to professional sports recruiting misses the fact that most athletes have relatively short runs in the pros before they wear out, O'Neill says. "If you're an entrepreneur and you're successful, it's probably something you can sustain throughout your career."

While high tuition fees can be a reason for young entrepreneurs to pass up school, that wasn't the case for Gary Kurek, a 19-year-old in Alberta, Canada, who was awarded a Thiel Foundation grant.

After graduating from high school last year, Kurek was offered a full engineering scholarship at the University of Calgary. Instead, he decided to take a year off and build his business, a maker of motorized walkers for the elderly called GET Mobility Solutions.

"Innovation is created by taking new paths, not following existing ones," Kurek says. "And creating a new path is exactly what this fellowship is allowing us to do."

Kurek plans to move to San Francisco in September and invest some of the $100,000 in testing and refining his walker product. Then he hopes to begin selling models to hospitals and assisted-care facilities.

Thiel may have found 24 exceptions to conventional wisdom, says Susan Brennan, managing director of University Career Services at Waltham (Mass.)-based Bentley University.

"The small group of entrepreneurial students Peter Thiel is targeting is not representative of the larger population," she says. "These exceptional students may take his grant money and indeed be successful. But the majority of young people need the skills, training, and experience that come with a college education and experiential learning."

MacMillan is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

View the original article here

Innovator's Guide to Growth: Putting Disruptive Innovation to Work (Harvard Business School Press)

More than a decade ago, Clayton Christensen's breakthrough book The Innovator's Dilemma illustrated how disruptive innovations drive industry transformation and market creation. Christensen's research demonstrated how growth-seeking incumbents must develop the capability to deflect disruptive attacks and seize disruptive opportunities.

In The Innovator's Guide to Growth, Scott Anthony, Mark Johnson, Joseph Sinfield, and Elizabeth Altman take the subject to the next level: implementation. The authors explain how to create this crucial capability for unlocking disruption's transformational power.

With a foreword by Christensen, this book provides a set of market-proven tools and approaches to innovation that have been honed through fieldwork with innovative companies like Procter & Gamble, Johnson & Johnson, Pepsi, Intel, Motorola, SAP, and Cisco Systems. The book shows you how to:

Follow a market-proven process -- so your company can reliably create blockbuster businesses

Create structures, systems, and metrics -- so the disruptive innovations that will power your firm's future growth receive the funding and personnel needed to succeed

Create a common language of disruptive innovation -- so managers can reach consensus around counterintuitive courses of action

Incisive and practical, this book helps your company take the steps necessary to benefit from disruption -- instead of being eclipsed by it.

Price: $35.00

Click here to buy from Amazon

Presenting Innovation in a Way That Gets to 'Yes'

In the innovation field, the closest thing we have to a professional association is the InnovationNetwork and its annual Convergence conference (produced in partnership with the Institute for International Research), which just took place in Minneapolis. I'm on a plane heading home to California as I write this, and I have to say, this was the best conference I've attended in quite some time.

The talk in the hallways was about the up-tick in the number of companies launching innovation makeovers. Just as some of us predicted, as the global economy has improved and CEOs get past their hunker down/cut costs/survival mentality, the question of how to drive growth begins to dog them. But getting senior management to take action on innovation often needs a catalyst.

To address this issue at Convergence, I led a CEO/Senior Management Panel titled "How to Present Innovation in a Way That Gets to Yes". We jettisoned the traditional panel discussion draped table and moderator podium and replaced it with a more dynamic talk show format. It went well, and was very well received. Guests on the lighthearted program included Carol Pletcher, Cargill Innovation Officer; Stephen N. Oesterle, M.D., Senior Vice President Medicine and Technology, Medtronic, Inc; Virginia Albanese, Vice President of Service, FedEx Custom Critical; and Alex Cirillo, head of 3M Commercial Graphics.

Championing innovation as a driver of growth

In my opening monologue, I noted that each time another company says yes to innovation, you can be sure there was a champion at work behind that decision. And quite often a team of committed people as well. They did their homework. Amassed the evidence. And made the case for embarking on a new approach to innovation as a way to drive growth.

With PriceWaterhouseCoopers and Accenture surveys showing that innovation has risen to the top of CEO priorities, you might think this would be easy. It isn't. CEOs know there is a great need to master innovation. But there's a lot of trepidation.

Top-line vs. bottom-line growth

As a result, companies have long favored interventions and initiatives that promise immediate returns: lean manufacturing, TQM, reengineering, Six Sigma and scores of others. These process improvements, none of which are easy to implement, have the benefit of showing short-term cost-savings, and elimination of inefficiency, the need for fewer staffers. They are, therefore, easier for consultants from outside and/or advocates on the inside to sell to the guys in the head shed. But here's what is not often clear: they do nothing to create top-line growth. They only improve the bottom line, and after awhile you run out of places to cut.

Oh sure, you can achieve growth from mergers and acquisitions, thus the M&A boom of the1990s. Guess who did a phenomenal job of selling CEOs on that strategy? Banks, lawyers, accounting firms, M&A consultants, etc. The only problem: study after study demonstrates this is a strategy fraught with problems of integrating incompatible cultures, and turf battles. But the big aha is that they just don't create shareholder value, as longitudinal studies by McKinsey and others clearly demonstrate. Again: innovation is the only way to unlock organic growth, and the only way to sustain it is with an innovation strategy that has metrics, is comprehensive, involves the whole enterprise and is cross-functional and cross-silo.

Innovation initiatives require patience, commitment

Innovation will never be an easy sell because it can't promise a quick payback. It took agribusiness giant Cargill, for example, almost a year of internal debate and study of best practices in innovation before folks there got clear on how they even should define it. With almost 100,000 employees, they knew it was a journey, but that they had to start somewhere if they were going to transform the organization. And as the feisty and outspoken Carol Pletcher, Cargill's innovation maven, told the audience at Convergence, now they are on their way.

Cargill has the advantage of being a privately-held company. Many CEOs of publicly-traded firms, with Wall Street ever more impatient for steady quarterly earnings, are apt to be gun shy. Innovation conjures up sinkholes of investment and missed earnings - and too soon the ax. So if you're in an organization that hasn't yet gotten to yes, you're going to have to overcome a lot of what professional salespeople call objections, both real and imagined.

Building a winning case for innovation

How can you make a stronger case for innovation? How can you present innovation in a way that gets to yes? By doing your homework. By keeping current on this ever-evolving field and knowing what works and what doesn't. By constant benchmarking of what other innovation-adept companies are doing, and finding out. And by selling benefits (growth, transformation, talent retention), not features (it works like this, isn't this clever, etc.).

Most important of all, it's essential to identify and reference companies that are enjoying the fruits of their systematic approach to innovation. Whirlpool, for instance, added a whopping $100 million in top line revenue during the first 12 months of launching its now-famous innovation initiative. Deloitte-Touche Tomatsu of South Africa doubled the size of its enterprise within two years of launching InnovationZone, its idea capture system. And companies like 3M and Medtronic cite innovation for their success year after year. By building the case for innovation, it won't be long before other firms come to you, wanting to know how you did it!

Robert B. Tucker is president of The Innovation Resource, and an internationally recognized leader in the field of innovation. Formerly an adjunct professor at the University of California, Los Angeles, Tucker has been a consultant and keynote speaker since 1986. Clients include over 200 of the Fortune 500 companies as well as clients in Europe, the Americas, Asia-Pacific, and Australia. He frequently contributes to publications such as the Journal of Business Strategy, Strategy & Leadership, and Harvard Management Update. He has appeared on PBS, CBS News, and was a featured guest on the CNBC series The Business of Innovation. Learn more about Robert's latest work, Innovation is Everybody's Business, at:

http://www.innovationresource.com/index.htm

The Innovation Playbook: A Revolution in Business Excellence

A complete roadmap to a revolution in business excellence founded on innovation

Author and successful innovator Nicholas Webb believes we need a revolution in business excellence founded on innovation. In The Innovation Playbook, you will learn why innovations fail, the five rules of customer connectivity, the power of "real open" innovation and customer co-creation, the secret formula for reducing product and market risk, the magic of Future-casting, and so much more.

• Includes an abundance of anecdotes and examples of successful-and unsuccessful-innovation
• Shares the 56 ways in which innovations fail
• Learn the success secrets of "Innovation Superstars"
• Reduce innovation failure and build speed to market

Includes online training a ($150.00 value) that will help you put the theory into practice, The Innovation Playbook will prepare you to get your CIS Certification, as well as to implement a successful innovation culture in corporate life.

Price: $49.95

Click here to buy from Amazon

Start Your Innovation Programme by Avoiding Terrible Innovators

Once you've decided you need an innovation programme, one of the things you'll be spending quite a bit of time doing is hiring the people you need to create new stuff.

Regrettably, many innovation leaders don't always get this right. The reason is that it is tempting to hire people who seem like great innovators, but who are actually poor at converting ideas into products and services that can actually drive a business forward.

Research suggests there are some key failure-inducing individuals you can watch out for. Here are the main ones you'd be better off avoiding:

The Gadgeteer. A gadget is a deceptively dangerous thing for an innovator. On the one hand, it seems the new thing (if only it could be sold correctly to stakeholders) would be a fantastic addition to the innovation portfolio. But on the other, there is practically no way to tie whatever-it-is back to any business problem.This is the hallmark of the gadgeteer - a pursuit of new things without any conceptualisation of what business problem is being solved.

The Cowboy. Such individuals are very, very committed to their innovations, so much so that no blockage can stand in their way. They go after what is needed to make the new thing happen, and they do so with gusto. Unfortunately, they also do it without much thought as to what will happen after they've rammed the innovation down everyone's throats. If the cowboys are lucky,they'll at least get their current innovation out the door and into the hands of customers. But in doing so they will have locked themselves out of being able to do the next round of innovation. Cowboys are aware that they are burning influence to make things happen, but their focus is so much on the now that they don't permit themselves to consider how they will deliver the next innovation, or the one after that.

The Defeatist. If you got to choose the kind of bad innovator you hired by mistake, you'd want the defeatist. The only danger that comes from having a defeatist innovator is that you have to carry the headcount without getting any return. The reason? The defeatist will look at any new thing and be so overwhelmed by navigating the organisation to get success they are unable to do anything at all. These are the individuals whose first response to any innovation is 'that's too innovative for us'. The problem of course, is that the defeatist doesn't have the right amount of influence to get what-ever-it-is accepted, and for some reason is unable to admit it.

The Consultant. The opposite of Gadgeteers, Consultant-Innovators spend all their time focussing on the business problem. They concentrate so hard on defining it they never get to a solution. Consultant-Innovators spend all their time generating reports and requirements documents, and very little on defining innovative responses.

The Talker. Although he or she will be a great presenter, able to fire up an audience with excitement, as well as a superior networker who can get a meeting with anyone, you'll not get much innovation out of this type of person. The reason is they say a lot and do very little. Execution is not the hallmark of the Talker.

The Lone Ranger. This innovator doesn't work in teams. He or she will prefer to have every detail of a new innovation under their individual control. Their thought is that only they can be trusted to make the innovation work, and they'll engage in significant individual heroics to make things happen. Usually, though, they won't deliver very much because innovation most often requires team work.

The moment you notice signs of these terrible innovators in your organisation, you should take steps. If they can't be removed altogether, sideline them somehow, because they will reduce the effectiveness of your innovation programme significantly. Even better, don't have them join you in the first place.

In the end, the challenge of starting an innovation programme is big enough by itself. You don't need Terrible Innovators around to make it harder.

If you're starting a new innovation programme visit http://www.futureproofbank.com to get the details you need, including free online excerpts describing the Terrible Innovators.

Managing Innovation: Integrating Technological, Market and Organizational Change 4e

Managing Innovation is an established, bestselling text for MBA, MSc and advanced undergraduate courses on management of technology, innovation management and entrepreneurship.  It is also used widely by managers in both the service and manufacturing sectors.  Now in its fourth edition, Managing Innovation has been fully revised and updated based on extensive user feedback to incorporate the latest findings and techniques in innovation management.  The authors have included a new and more explicit innovation model, which is used throughout the book and have introduced two new features - Research Notes and Views from the Front Line - to incorporate more real life case material into the book.  The strong evidence-based and practical approach makes this a must-read for anyone studying or working within innovation.

 

An extensive website accompanies this text at www.managing-innovation.com.  Readers can browse an online database of audio and video clips, as well as case study material, interactive exercises and tools for innovation, whilst lecturers can find additional support material including instructor slides and teaching guides and tips.

 

“Tidd and Bessant's text has become a standard for students and practitioners of innovation. They offer a lively account on innovation management full of interesting and new examples, but one that at the same is rigorously anchored in what we have learned over the last thirty years on how to manage that ultimate business challenge of renewing products, processes, and business models. Those who want to innovate must read this book. “

- Professor Arnoud De Meyer, Director, Judge Business School, University of Cambridge, U.K.

 

“Innovation matters and this book by two leaders in the field which is clear and practical as well as rigorous should be essential reading for all seeking to study or to become involved in innovation.”

- Chris Voss, Professor of Operations and Technology Management, London Business School.

 

'a comprehensive and comprehensible compendium on the management of innovation.  It is very well organized and very well presented.  A pedagogic tool that will work at multiple levels for those wishing to gain deeper insights into some of the most challenging and important management issues of the day'

- David J. Teece, Thomas W. Tusher Professor in Global Business, Haas School of Business, University of California, Berkeley, USA

 

“Those of us who teach in the field of Innovation Management were delighted when the first edition of this book appeared 11 years ago.   The field had long been in need of such a comprehensive and integrated empirically-based work. The fact that this is now the 4th edition is clear testimony to the value of its contribution.  We are deeply indebted to the authors for their dedication and diligence in providing us with this updated and expanded volume. “

 – Thomas J.  Allen, Howard W. Johnson Professor of Management, MIT Sloan School of Management, USA

 

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Innovation Teams - Central Or Not?

Central innovation teams are a model well adopted in many industries, from Pharmaceuticals, where research and development budgets tends to be held by large business units dedicated to the purpose, to Banking, where there are likely to be a few smaller New Product Development teams. Even in Government, there's increasing reliance on central innovation teams to drive efficiencies and cost savings.

It is not hard to understand the reason. Central teams are simple to set up, and very easy to measure in comparison to diffuse arrangements that rely on an "innovation culture". It is easy to point at such teams and say "this is how we do innovation". The team makes executives feel good that their innovation efforts are actually progressing, because when you can nominate specific individuals and assign accountability, you know things are likely to get done.

Now, in this model, the innovation team is the group that decides how and when to innovate. They ordinarily control an investment budget of some kind, and are accountable for making investments that drive forward the innovation agenda. If they are any good at all, they will sign up to some big return numbers that can justify the investments they're making.

There is, however, a problem with a central innovation team that does everything. The problem is that in order to get more innovation, you are forced to add more people. In other words, central innovation teams do not scale well.

Frankly, for most innovations, the difference in effort required to get an organisation to do something radical, versus the easier incremental kind of innovation, is not all that great. You still have to do the influencing, the management of politics, and of course, find the money in order to get things progressed.

Incremental innovation, though it tends to be relatively risk free, doesn't really make big returns on a case by case basis. This means that innovation teams have to do a lot of simultaneous innovation before they can make a sizable difference. With a central team, the fact is that a single incremental innovation will likely not pay for the time of the innovators.

On the other hand, doing things which are more radical can provide much better returns, though the risk level is much higher. For innovators, this makes it seem sensible to select more radical innovation for progression. The rationale is clear: do incremental and never break even, or do radical and at least have the chance to do so.

What is really needed, though, is a balanced portfolio approach to innovation coupled with significant inputs from customers and employees. Participatory innovation, as this approach is known when supported by a central team, is usually the best approach to making innovation work in large organisations.

Are you considering an innovation programme? If so, you'll need the information from this free online innovation book when structuring your innovation team [http://www.littleinnovationbook.com/rulethree16.html].

Red Bull's Billionaire Maniac

Illustration by Chuck Anderson; Mateschitz: Gerard Rancinan; Bloomberg; ImagedJ/Alamy; Red Bull Content Pool (4)

By Duff McDonald

(Corrects Sports Illustrated's paid circulation in fourth paragraph.)

Little known outside of his native Austria, Dietrich Mateschitz is one of the most successful entrepreneurs of our age, a man who single-handedly changed the landscape of the beverage industry by creating not just a new brand but a whole new category: the energy drink. As the visionary who brought the world Red Bull, affectionately known as "speed in a can" or even "liquid cocaine," Mateschitz, 67, has been a patron saint for more than two decades to late-night partiers, exam-week undergrads, long-haul truckers, and, above all, extreme-sports athletes everywhere.

In return for his sickly sweet innovation, the world has made him very, very rich. Last year the privately held company, also named Red Bull, says it sold 4.2 billion cans of its drink, including more than a billion in the U.S. alone. That represents a 7.9 percent increase over the year before, and revenues jumped 15.8 percent to $5.175 billion. Mateschitz runs an efficient enterprise that has yet to trip on its rapid growth: At the end of 2004, he had just 2,605 employees; in 2010, Red Bull employed 7,758 people—which works out to more than $667,000 in revenue per person.

Now he's set his sights on media. On May 15, subscribers to the Los Angeles Times, Chicago Tribune, Miami Herald, Houston Chronicle, and New York Daily News found a magazine called Red Bulletin inserted in their Sunday papers. The 98-page glossy features a cover story on San Francisco Giants ace Tim Lincecum, as well as pieces on Bob Dylan, graffiti art, and Russian BASE jumper Valery Rozov. Billed as "an almost independent monthly," the magazine is a product of Red Bull Media House, a subsidiary media company launched in Austria in 2007 that expanded with a Los Angeles outpost this January.

Red Bull knows what it's getting into. Over the years, it has produced TV programs (No Limits on ESPN), films (That's It, That's All), magazines, a website, and a steady diet of Web videos featuring snowboarders, rally cars, surfers, cliff divers, and concerts. Even so, its current ambitions reflect a serious ramping up, as well as the realization of a business plan that eschews conventional advertising in favor of marketing through its own events, shows, and publications. The company shipped more than 1.2 million copies of the first Red Bulletin in the U.S. (about one-third of Sports Illustrated's paid circulation). This fall its first feature-length documentary, a look at snowboarding called The Art of Flight, will be released in U.S. theaters. Earlier this year, the company announced a partnership with Bunim/Murray Productions, best known for creating the Real World reality-show franchise on MTV. The two are working on reality TV concepts for Red Bull athletes.

Mateschitz calls the multimedia assault "our most important line extension so far. As a major content provider, it is our goal to communicate and distribute the 'World of Red Bull' in all major media segments, from TV to print to new media to our music record label." He hopes Red Bull Media House will turn a profit, but, as with his sports teams, he's willing to wait. "In literal financial terms, our sports teams are not yet profitable, but in value terms, they are," he says. "The total editorial media value plus the media assets created around the teams are superior to pure advertising expenditures."

Red Bull has employees in 161 countries, but most of the major decisions still get made either at Red Bull's headquarters in Fuschl, an Austrian village of 1,500, or at Hangar-7, Mateschitz's private airplane complex a few minutes outside Salzburg.

Though he rarely gives interviews, Mateschitz's Hangar-7 provides ample evidence that he is not shy about his success. Each of his buildings features architectural flourishes that seem better suited to a design mecca like Berlin than to a bucolic Austrian suburb. "The architect almost killed me when I told him I wanted to add that," says Mateschitz, standing on a balcony and pointing straight up at the Threesixty Bar—a circular all-glass room that appears to be suspended in mid-air. It's extravagant, unnecessary perhaps, and that's precisely the point. "It wouldn't be Red Bull if it didn't start harmless and end up as a catastrophe," Mateschitz says. "And architects are really only paid discussion partners anyway."

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Brand Oprah Has Some Marketing Lessons

Taping her talk show outside the Sydney Opera House in December George Burns/Harpo, Inc./Landov

By Susan Berfield

In 1988, Oprah Winfrey made a decision that would change her life—and eventually the future of television. Her talk show was already getting better ratings than kingpin Phil Donahue and aired in 198 markets. When she renegotiated her contract with King World Productions, which syndicated her show, and with ABC (DIS), which produced it, Winfrey demanded control and got it. Winfrey's Harpo Productions assumed the show's production costs, but it also collected licensing fees from local stations, estimated at $100 million in 1988. Plus, Harpo earned money from a few lucrative moments of advertising each day. "I never wanted to be in a position again in life where I was meant to do something but couldn't do it because somebody was telling me I couldn't," Winfrey later told writers of a Harvard Business School case study.

The impulse to take control of her life—and then enjoy it—resonated with her viewers over a 25-year span that will end on May 25, when she airs her finale on broadcast television and turns her attention to her new cable channel. Over that time, Oprah became a singular brand born of her own personal history. Winfrey's story of childhood poverty and sexual abuse, her struggle with her weight, and her striving and charisma made her the near-perfect peddler of a relentless optimism. She was more than a celebrity: She stood for self-improvement, doing good, and controlling your own destiny. Her motto, "Live your best life," was invoked on her show, in her magazine, and on her website.

It all added up to a brand radically different but no less powerful than Coca-Cola (KO) or the Marlboro Man. It propelled her show, which drew about 12 million viewers in the U.S. at its peak, through more than 4,500 episodes and some 30,000 guests. She stayed on message as she launched her magazine and produced movies and developed a raft of syndicated television shows including those of Dr. Phil McGraw and Rachael Ray. The brand ultimately made the meticulously manicured entrepreneur very rich, with an estimated fortune of $2.7 billion, according to Forbes. "I'm hard-pressed to think of a stronger brand than Oprah, and I've studied 200 years of brands," says Harvard Business School professor Nancy F. Koehn.

Winfrey's other great talent was to combine her message with a rousing consumerism absent even a hint of irony: Treat yourself! You deserve it! Her viewers and readers bought in and bought big. The brand's marketing fairy dust was sprinkled on an array of products she endorsed without compensation, somehow adding to her already robust credibility. One day she might talk about age-defying makeovers, the next about the faces of autism; she went to Ethiopia; she went green; she went vegan. And then she went shopping. "For her, transformation is about self-esteem and about buying stuff," says Susan Mackey-Kallis, a communications professor at Villanova University. "It's consumerism, but it's not crass."

Winfrey, who declined comment for this story, has helped turn her favorite books into bestsellers and her favorite things into instant successes. After she recommended Eckhart Tolle's A New Earth in January 2008, it topped the bestseller list on Amazon.com (AMZN). Within a month, Penguin Group had shipped 3.5 million copies. Her "Oprah's Book Club" plugged 65 books and was credited by some with saving the publishing industry.

Winfrey regularly announced her "favorite things" in shows that were tantamount to infomercials, though far more effective. When DreamTime's Foot Cozys, aromatherapy slippers, were featured on an episode in 2002, the company was selling 3,000 pairs a month. The following month, it sold 20,000. The slippers became DreamTime's best-selling product that year. When Winfrey presented such goodies to her audience, it was the companies (from Williams-Sonoma to Apple (AAPL)) that donated them. The big shows—in which audiences received cars and trips—inspired the fervor of revival meetings. "Product placement is a fair way to describe her 'favorite things,'" says Kevin Lane Keller, a marketing professor at Dartmouth's Tuck School of Business. "But she is the one who is brokering those deals for her audience. It's product placement in a funny kind of way because the companies are giving the product away." Her brand could sell everything from croissants to refrigerators. Chicago blogger Robyn Okrant bought everything Winfrey recommended in 2008, spending nearly $4,800.

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