There simply is no hotter word for senior level executives right now than innovation. It drives almost every discussion of growth that we hear and one factor contributing to this push for innovation is the increasing amount of attention companies are paying to customer value -- not just in the short term, but in the long term as well.
These days the business journals and news magazines are filled with examples of bellwether companies driving innovative services and products forward. It's not just the innovative "usual suspects" like Apple, Tesco, Google, Zara, Intuit, Nokia, or GE, either. Even Wal-Mart is coming up with new ideas to improve its already highly successful retailing formula. In addition to its efforts to tailor individual store product inventories to the local demands of the communities being served (see related article), the company recently launched an innovative pricing program for prescription drugs, announcing that it plans to sell generic prescriptions for as little as $4 per.
Whirlpool innovates customer value
But if innovation is to mean more to a business than a momentary fashion, the business itself has to organize around the creation and implementation of new ideas. Among the success stories in terms of creating innovative customer value is Whirlpool. Its executives are held accountable not only for the development of new products and services, but also for the creation of processes and systems that foster innovation.
Whirlpool uses a knowledge management system called "Innovation E-Space" to provide a ''dashboard'' view of its innovation activities, track the mix of incremental versus radical ideas and to engage innovators throughout the organization. To debunk the myth that innovation has to be risky and costly, it has established a seed fund for innovation in each region that is accessible to all employees, not only business unit heads. Whirlpool has also created a team of Innovation Consultants whose job is to teach others in the organization about innovation. In the first quarter of 2006 this approach contributed to a 37 percent increase in earnings, record unit shipments and "productivity improvements."
As the executives at Whirlpool know, the surest way to strengthen a firm's "innovation quotient" is through its employees. Successful, consistently innovative companies encourage and cultivate new ideas from employees, and measure the results from the ideas that employees generate. In their April
Harvard Business Review article "Manage Customer-Centric Innovation Systematically," Larry Selden and Ian MacMillan point out that employees must be relied on to fuel the innovation engine. "It is essential for frontline employees to be at the center of the customer R&D process," they wrote. "The only way to sustain customer R&D is by putting customer-facing employees behind the wheel. The benefit is two-fold: Companies exponentially expand their knowledge of their customers and employees become engaged as they contribute their insight and energy."
One tactic for engaging employees in the innovation process is something Carlson Marketing's Director of Performance Improvement Jennifer Rosenzweig, calls "appreciative inquiry." This is a technique for emphasizing a company's unique strengths (appreciative) while at the same time developing a meaningful and robust dialogue with employees (inquiry) that seeks to help management understand when the company is moving in the right direction or not.
Carlson Marketing's research shows that given the opportunity, nearly 50 percent of employees will engage in identifying and implementing ideas. But "squandered" or untapped ideas are a major source of employee frustration and disengagement. A recent Gallup report shows that 17 percent of all the employees it surveyed consider themselves "disengaged" at work.
Toyota engages innovative employees
Toyota may be one of the world's most accomplished companies when it comes to engaging employees with this kind of strength-based questioning and dialogue. They don't call it "appreciative inquiry," but the Toyota Way is well known and has been written about extensively. According to the Economist (19 January 2006), Toyota's strong corporate culture of employee participation and engagement is what generates a nearly constant stream of innovation at the firm.
Once everyone has bought in to the Toyota Way, decision-making can be pushed down into the very front-line organization, whether it's manufacturing, distribution, or sales. Toyota's famous "just in time" provisioning, enabling it to operate manufacturing plants efficiently in 58 countries around the world is only made possible by the fact that line employees are actively engaged in making decisions with respect to parts supply and production. Part of the Toyota Way leads employees to come to work each day with a determination to become just a little better at their job than they were the day before. Continuous employee engagement like this increases the likelihood of developing consistent innovation. Inquiry, recognition and reward must all be part of an organized process.
Beyond shareholder value
Just as important as the organizational process of engagement, however, a company's culture has to focus employee efforts on a mission, or purpose, that transcends simple profit or shareholder value. Having a mission is what employees need in order to have the energy and drive to overcome obstacles and surmount barriers, even when those obstacles might stretch across different business units or organizational areas. A sense of purpose gives staying power to employees' problem-solving efforts -- and most truly effective innovations, at their roots, stem from problem-solving initiatives.
| Part of the Toyota Way leads employees to come to work each day with a determination to become just a little better at their job than they were the day before. |
Of course, one of the highest callings of any business -- the most compelling, useful, and rewarding sense of mission for a business -- is to earn the trust of customers. Asking employees to treat customers the way they themselves would want to be treated is guaranteed to unite employees around a sense of purpose that can provide a common denominator for problem solving across business units and throughout the supply chain.
Such a culture also provides employees with a long-term view of their business, which is essential for success, especially when it comes to innovation. "Innovation is a long-term play," says Chris Trimble, Dartmouth College marketing professor and author of 10 Rules for Strategic Innovators. "It will be a top priority a year from now, and three years from now, but the results will need some patience. I think there's a general perception that innovation processes pay immediate dividends. Our research shows that they rarely show results in the first year. Some companies have started, and will need to start, whole new companies to execute innovative ideas. Seeing the results from that takes time."
Toyota, Whirlpool, and other firms that have proven themselves adept at harvesting employee-generated innovation are also renowned for the fact that they take a long-term view of their business. Solving customer problems does not always generate immediate sales, even though the effort often generates short-term costs. But with a focus on what's ahead, their innovative spirit can lead to impressive results.