For the last few years, Esselte Corp. (Stamford, CT), a $1.2 billion global manufacturer of office products, has been relentless and systematic about pursuing innovation. First came a concerted effort on the part of President and CEO Magnus Nicolin to infuse the spirit of innovation throughout Esselte's culture and to impress on employees its importance to the company's future growth. Small divisions were set up specifically to experiment with and test new products. Cross-functional committees were tasked with exploring new ideas and ways of conducting business, and formal practices were put into place to solicit feedback and requirements from customers.
The latest move in Esselte's innovation makeover has been to create a new senior management position charged with promoting innovation best practices across the company.
"This shows our organization's commitment to innovation -- it's not just words anymore," says Sean Fernandez, Esselte's newly named senior vice president of innovation. "Having someone focused on innovation makes sure that, even under pressure and with multiple priorities, we don't lose our focus on the critical products that will set the future for the company in the long term."
While a lot of manufacturers talk up the need to innovate, few have gone as far as Esselte toward revamping their management and organizational structures and putting formal processes in place to drive innovation enterprise-wide.
"Despite good intentions and an increasing awareness that we must have a process for innovation, the vast majority of American manufacturing companies are just beginning to take even small steps to outline and execute an innovation strategy," says Robert Tucker, president of the Innovation Resource Consulting Group (Santa Barbara, CA) and author of the book Driving Growth Through Innovation. "We have been working to get better, but what we have to do now is turn more attention to working to be different."
Unlike Esselte and other progressive manufacturers, most companies are just climbing out of cost-containment mode, having spent the better part of the last decade trimming the fat and improving productivity. Most of those switching over to innovation mode still associate the strategy exclusively with new product development, meaning their creative resources have been spent on developing the next hot product, not reinventing key supply chain, production, or other processes.
Moreover, most manufacturing companies haven't put in place the processes needed to link customer needs and desires to specific innovation efforts in a consistent and repeatable way. Without that kind of capability, experts say, companies risk wasting precious resources and pursuing ideas that are off-track.
The answer, Tucker maintains, is in developing an action plan for improving enterprise-wide innovation, which he defines on three levels: product, process, and strategy. "Companies have to do all three," Tucker says. "Companies are now starting to recognize that they can't wait for the next happy accident to get to the next breakthrough idea. It's not enough to meet the challenges manufacturers face today."
Beyond the Suggestion Box
Most U.S. manufacturers today are stuck putting all of their innovation efforts into new-product idea creation. Over the last few years, management, under increasing market pressure to boost innovation, has sunk time and money into tools and programs aimed at boosting creative brainstorming. The investment can be as basic as a simple idea box promoted by management to the more complex collaboration technologies designed to promote idea sharing among cross-functional teams.
But there are inherent problems with some of these approaches, according to Navi Radjou, a vice president at Forrester Research Inc. (Cambridge, MA). First, when you only canvas for new ideas within the enterprise, you risk being blinded by a group-think mentality. Also, Radjou says, ideas themselves don't constitute innovation. "Until you can transform ideas into a new market offering, they're not an innovation," he explains. "It's the transformation process that companies are missing."
Part of that transformation process, Radjou maintains, is creating the end-to-end practices necessary to move organizations away from a siloed approach of innovating in only one functional area at a time. Instead, Radjou says, manufacturers should be looking to coalesce all parts of the organization around the same innovation plane. Letting customers drive where innovation efforts are focused is a critical step in that direction. Another is to involve IT.
"IT has so much to bring to the party -- they have a good understanding of companywide processes," Radjou says. "Where companies have fallen down in the past is they haven't proactively involved IT and the CIO in the innovation process. Engineering has traditionally owned the process, and they don't typically trust IT." (See infographic for more.)
Getting different functions to coordinate innovation efforts is also a key theme espoused by author Geoffrey Moore in his new book, Dealing with Darwin: How Great Companies Innovate at Every Stage of Their Evolution. Moore identifies 14 vectors of innovation, any of which, he says, is fair game, as long as companies stay focused on a single path. (See "Darwinian Games" sidebar.)
"Achieving focus and cross-functional alignment on the same vector is easy to understand, but hard to execute," says Moore, managing director of TCG Advisors and a venture partner with Mohr Davidow Ventures (San Mateo, CA). "The management team has to realize that no function is an island. They have to realize that it's not enough, for example, to innovate within manufacturing."
The idea is to strike a balance between fostering a grassroots culture of innovation and promoting a top-down management strategy that keeps everyone on the same page. "If you just let innovation bloom, it will do so on all vectors," Moore explains. "There's got to be an exercise in pruning and shaping."
Who's responsible for the pruning and shaping can vary depending upon an organization's culture. Ultimately, experts say, there needs to be a high-level stakeholder to evangelize and enforce the company's chosen focus. There also must be recognition that the commitment to reinvention of products, processes, or both must be on-going.
"You have to look at innovation as a continuous process," says Ken Amann, research director at CIMdata Inc. (Ann Arbor, MI). "Companies that are truly the market leaders are never going to stop. Once they've achieved something, they look for the next place [to innovate]."
At Esselte, that commitment to continuous innovation is encouraged on numerous fronts. On an organizational level, the company now has an Innovation Leadership Team (ILT), a cross-functional committee of representatives from all regions and product lines that meets on a regular basis to discuss and prioritize innovation possibilities as well as to decide how R&D dollars should be spent.
Under the new organizational structure, each division has budget responsibility for line extension innovations as well as adding new functionality to existing products. But the ILT has its own budget to fund efforts around disruptive innovations -- a recent example being Esselte's new Design Runner portable printer product for the scrap book market.
Esselte also conducts focus groups and promotes various kinds of customer interaction in order to ground innovations on customer need rather than pushing out new technology for technology's sake. Beyond the ILT, Esselte management reaches out to the company's masses with internal communications programs and incentive schemes to get everyone involved.
According to Fernandez, "The bottom line is to get people to realize that this isn't just some executive sitting in an ivory tower preaching innovation from up high. People can have an impact and participate in the company's direction."