The Business Innovation Insider

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December 8, 2006

Benchmarking your innovation against Santa

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Just in time for the holidays, innovation guru and futurist Jim Carroll has published a fun feature on his blog: Why Santa Rocks at Innovation. If you're looking for insights from a "true master of leadership, insight, creativity and innovation," it's time to take a trip to the North Pole and figure out what makes Santa Claus tick: "Santa is an innovation master. Analyze his leadership style, and his operational insight, motivational style, approach to creativity, forward thinking orientation, or any other management trait, and he has it nailed." For example, consider the following seven traits that make Santa an innovation leader:

(1) He is future oriented: Santa knows. His talent for insight is unmatched. He's aware. He's sees you when you're sleeping, for example. He knows when you're awake. For goodness sake!

(2) His operational insight is pure genius: he's organized. He's got a list. He checks it twice;

(3) He's a fanatic on customer oriented innovation: he knows exactly what the customer wants;

(4) He is not afraid of hiring those who are different: Rudoph. Red Nosed. Reindeer. Enough said;

(5) He is mindful of work life balance: some people take a few weeks off for a holiday. Some might take off a month. Santa takes off entire seasons in order to recoup from his big night;

(6) He has maintained the essence of the brand name despite massive change: ensuring brand longevity over a span of several hundred years is probably the most impressive feat in branding that we have ever seen;

(7) He excels at keeping up with constantly changing consumer demand: he is a trend watcher, always on top of what comes next;

[image: Santa Claus in "Elf"]

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More coverage of the Gary Hamel keynote speech at the FORTUNE Innovation Forum

Gary%20Hamel.jpg Gary Hamel's keynote speech at the FORTUNE Innovation Forum last week continues to draw mad props from participants of the event. In one noteworthy posting ("The Upside and the Downside of Innovation"), Yvonne DiVita of the Lipsticking blog has pulled together a number of observations and commentary about Gary Hamel's views on management innovation.

Yvonne explores the link between management and innovation, explains why innovators must be "nimble" and "romantics," analyzes the Hierarchy of Needs within organizations, and riffs on Gary's comments about building a vibrant, resilient organization: "So, how do you build and manage a vibrant, resilient organization? By teaching the employees to be activists: find out what causes they support. Utilize the ever-present chance of surprise! Learn from positive deviants. Be experimental."

Look for more postings from Yvonne on innovation in December - every Wednesday, she will be sharing her thoughts on innovation and providing some additional commentary about some of the more interesting speakers and workshop leaders at the FORTUNE Innovation Forum.

Follow the Other Hand to Magical Innovation

Guiding%20Hand%20New%20York%20Times%20review%202.jpg Without a doubt, magic is cool these days. In just the past six months, we've been treated to Hollywood films like The Illusionist, The Prestige and Woody Allen's Scoop, all of them with magic as a central part of the plot line. (The films also feature big-name actors and actresses like Scarlett Johansson, Edward Norton, Hugh Jackman, Christian Bale and Paul Giamatti.)

With that in mind, perhaps, the New York Times has called Andy Cohen's new book Follow the Other Hand - which combines a behind-the-scenes look at the world of magic along with insights about innovation and business strategy - a potential bestselling business book for 2007. The Business Innovation Insider reviewed the book back in September, intrigued by the premise that corporations can become more innovative by learning to think like magicians. Paul S. Brown of the New York Times agrees, suggesting that the book will teach you how to "create ideas out of nothing, solve impossible problems, and make it all seem effortless."

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James Bond and the silencer innovation

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A new book from New Scientist, Why Don't Penguins' Feet Freeze?, is packed with the best questions and answers from the magazine's Last Word column and is already on top of bestseller lists in the UK. The Last Word is where users ask and answer questions on the "weird and wonderful" everyday science observations that have no readily apparent answers. (Kinda like a Yahoo! Answers for science fans) For example, have you ever wondered how the silencer in James Bond's gun works?

Penguins%20Feet%20Freeze.jpg Here's the answer, provided by Bill Harriman of The British Association for Shooting and Conservation:

"Silencers are more properly called sound moderators or suppressors and are widely used by hunters to reduce noise levels from the discharge of firearms, particularly sporting rifles and air weapons. A sound moderator is essentially no more than a series of baffles coupled to an expansion chamber, contained within a tubular attachment which screws on to the end of the firearm's barrel.

The noise of the discharge of most firearms is made up of two components. The first comes from the rapid expansion of propellant gases as they leave the muzzle. The second is the supersonic crack of the bullet. It is not possible to reduce the sound level of a supersonic bullet, but a sound moderator fitted to such a rifle will have some significant effect in reducing the noise signature because it controls the rate of expansion of the propelling gases.

For a sound moderator to be really effective, it must be used with ammunition whose projectiles travel at less than the speed of sound. In such cases, the noise of the discharge is greatly reduced and may not even be recognizable as a gun."

[image: James Bond in "Casino Royale"]

The Commerce Department's new innovation panel features five FORTUNE 500 CEOs

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Commerce Secretary Carlos Gutierrez has appointed 15 high-profile corporate executives and academics, including Microsoft CEO Steve Ballmer and Harvard economics professor Dale Jorgenson, to a new panel that will explore how U.S. innovation contributes to American economic prosperity and high living standards:

The Measuring Innovation in the 21st Century Economy Advisory Committee will help develop ways to measure innovation so that the public and policy makers can understand better its impact on economic growth and productivity. The committee will study metrics on effectiveness of innovation in various businesses and sectors, and work to identify which data can be used to develop a broader measure of innovation’s impact on the economy.

"American innovation is important to the vitality of our economy, and it is important to understand the impact innovation has on productivity and economic growth," said Secretary Gutierrez. "Getting a better understanding of how innovation contributes to our economy will help us craft policies to continue to grow and prosper."

The five CEOs of FORTUNE 500 companies represented on the panel include Steve Ballmer (Microsoft); George Buckley (3M); Art Collins (Medtronic); Michael Eskew (UPS); and Samuel J. Palmisano (IBM).

[image: Steve Ballmer]

Robert Iger of Disney: CEO of the Year

Robert%20Iger.jpg MarketWatch has named Robert Iger of Disney as the CEO of the Year for 2006, thanks in part to his commitment to innovation within the entertainment industry:

"With a blend of bold strokes and olive branches, in contrast to his predecessor's iron boot, Robert Iger has re-imagineered the Walt Disney Co.'s culture and reanimated its stock. Disney's $7 billion buyout of Pixar was just one of many moves in the past year that won plaudits for Iger. The company, formerly bogged down by board and shareholder discord, has emerged as an example of good corporate governance."

According to MarketWatch, the willingness to do the $7 billion Pixar deal was especially noteworthy and forward-looking:

"It may seem like an obvious, logical move now, but even those who work for Walt Disney Co. Chief Executive Robert Iger initially thought buying Pixar Animation Studios was a big gamble. When Iger pulled the trigger earlier this year on the $7.4 billion transaction, many in the entertainment industry questioned the wisdom of shelling out that much money for a company that puts out a single product once a year. Sure, Pixar had been wildly successful, scoring more than $3.6 billion in worldwide receipts, but it faces rising competition from other Hollywood studios.

Yet the move accomplished several tasks for Iger and Disney. It mended fences with Pixar chief Steve Jobs, who had grown weary of the mercurial Michael Eisner, Iger's predecessor. It also put in Disney's camp the animation specialist that had trumped its once-dominant position in the market. And it represented a symbolic but critical return to Disney's roots, seeming to quickly heal the deep divisions that ailed the entertainment giant."

[image: Disney CEO Robert Iger]

December 7, 2006

The Innovation Transformers

Steve Flinter's blog points to a piece in the Financial Times (sorry, no link available) that focuses on global trends in innovation. The article is based on a Forrester research report from Navi Radjou that looks at global innovation networks and the role of innovation transformers. According to this new framework for understanding global R&D, these innovation transformers are defined as "countries that are effective at taking developments from other nations or companies and turning them into commercial products." As Steve points out, "This is an interesting concept, as it separates R&D spend in the country under study from product development based on technology developed anywhere."

[image: Transformers videogame]

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December 6, 2006

Google makes the innovation world go 'round

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The Business Innovation Insider owes a big debt of gratitude to Google for a strong boost in website traffic over the past six months. As innovation becomes a more popular business buzzword the world over, I'm sure most other innovation blogs are also reporting a steep rise in international website traffic. Anyway, I've been combing through the website analytics page of the Business Innovation Insider, and some of the facts and figures are, frankly, a bit astounding. Google sites collectively account for 37 of the Top 50 referring sites to the Business Innovation Insider, led by the flagship Google (USA) site. While I expected Google UK, Google Canada and various Google European sites to show up high in the rankings, the depth and range of Google sites around the world that have driven traffic here to the site is impressive - Google India is ranked #4, Google Mexico is ranked #17, and Google Singapore is ranked #22.

[image: A holiday party at Google India]

NASA plans moon outpost by 2020

NASA%20Man%20on%20the%20Moon.jpg In what would be another giant step for mankind, NASA recently announced plans to start construction of a base station on the surface of the moon by the year 2020:

"NASA has opened the door to the next generation of space discovery by announcing ambitious plans for a permanently staffed base on the surface of the moon. Construction on the lunar outpost would begin soon after 2020, with astronauts living there within four years, the space agency said... Ultimately, the moon would be a staging post for humans to explore the solar system and one day land on Mars."

For now, the plan is to build on the south pole of the moon:

"A robotic probe will be sent in 2008 to scout potential sites, but the settlement is likely to be built on the moon's south pole... The southern end faces the sun for 75% of the time and would allow for the best harvesting of solar power. Scientists also believe that the south pole craters contain rich natural gases such as the rare helium-3 that could be used as fuel for the generation of nuclear power. In addition, teams of astronauts living there for six months at a time would mine for hydrogen and oxygen to make water and possibly rocket fuel."

Anyway, The Independent has put together a Q&A about the new lunar base in an attempt to figure out whether the trillion-dollar space program is worth the money.

[image: The NASA lunar base]

77 Design Gifts Under $77

Just in time for the holiday season, Core 77 has created a holiday gift guide called 77 Design Gifts Under $77: "Hot, cool, classic, alternative, hipster, nerdy, iconic and random -- the list is an explosion of holiday goodness with a pepper sauce chaser and some rainbow sprinkles on top. Yowza."

Just browsing through the list of 77 items, I came across three items that I hope to find under the holiday tree this year:

(1) Shaping Things, by Bruce Sterling - "Bruce Sterling's latest is a wonderful book that explores technology, design, and the future in a post-industrial context. What would the world look like and act like if we had "an Internet of Things"? Pretty good, actually. But Sterling's prose is a pleasure in any world, and his neologisms are protosplendopulicious."

(2) A box of Flickr mini cards - "The homepage text says it best: "Choose your favorite Flickr pics; make 100 different cards for $19.99; Add your personal details on the back; Share with friends!" And...just add $4.99 to ship them anywhere in the world."

(3) Worldchanging: A User's Guide for the 21st Century by Alex Steffen (with a foreword by Al Gore) - "What Bruce Sterling calls "Not the book of the year; the book of next year." ... "If Gore's 'An Inconvenient Truth' moved you, then Steffen's Worldchanging: A User's Guide for the 21st Century will move you to action."

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Turning innovation into jobs

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In Phoenix during a meeting of the National Governors Association, a 17-member blue ribbon task force comprised of national leaders in government, academia and private industry gathered to discuss how to transform innovation into jobs:

"The United States economy is creating millions of new jobs, yet the average American worker is feeling the squeeze of stagnant wages and the offshoring of entire industries. The cure? Brainpower. Innovation, more specifically.

The stakes are huge, task force members say, since the United States faces growing competition from global behemoths such as China and India. "We have an edge here but we are losing our edge," said Governor Janet Napolitano, chairwoman of the association and co-leader of the task force. "The world economy is changing. The United States economy is changing. This initiative is right at the tipping point."

[image: Arizona Governor Janet Napolitano]

December 5, 2006

Rosabeth Moss Kanter: The classic innovation traps

Rosabeth%20Moss%20Kanter.jpg Chuck Frey of the Innovation Weblog has posted an in-depth review of a piece by Rosabeth Moss Kanter in the Harvard Business Review on classic innovation traps. (The article is available for $6 as a PDF download from HBR). As Kanter explains, "many of the challenges we face when trying to implement innovation initiatives aren't new, but ones we've faced in past business cycles..."

At the core, these problems are usually people-oriented. organizational behavior issues, such as jealousy of line employees over the special perks and privileges an innovation team may enjoy, or the failure of managers to communicate and collaborate across divisional or functional silos. The classic innovation trap, of course, is the manager who undermines a new idea because he or she feels threatened by it.

[image: Rosabeth Moss Kanter]

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Paul Kwiecinski: Singing the Innovation Blues

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If you're like most people, you've probably seen the movie The Blues Brothers a half-dozen times and thought to yourself at one time or another, "Hey, I'd like to do what Belushi and Aykroyd did up there on stage." That's just what a number of participants of the FORTUNE Innovation Forum were able to do last week at the Rose Theater in New York. Paul Kwiecinski of Face The Music led a grand music finale that featured his band and two groups of innovation conference attendees singing original blues songs live on stage. (A big hat tip to "Slim Sigma," who had the full house clapping along to his inspired singing).

Over at Business Blogging Boot Camp, conference attendee Tom Collins has provided a live account of the blues performance as well as some context about the artistic workshops at the event:

"The last session of the Forum "Lessons from the Innovator's Studio" gathered the creative talents from the four ongoing workshops exploring the innovation value of play, painting and sculpture, story-telling, and music. The session was capped by blues band perfomances from Face the Music (listen to samples here) and two groups of Forum attendees who had created original blues songs around the innovation experiences at their companies during the workshops...

Paul Kwiecinski noted that writing and singing "blues songs are not about whining and complaining (that's country!), but about expressing the truth of a situation." He asked, "How true do you want it?" I'm hoping Fortune can find a way to get at least the audio files from the songs performed at the forum posted on their Business Innovation Insider blog."

We're working on getting the audio and video from the blues performance, but in the meantime, check out the following classic clips featuring Joliet Jake and Elwood Blues from YouTube.com: Soul Man, Everybody Needs Somebody and Minnie the Moocher.

[image: Paul Kwiecinski and Face the Music live on stage]

Tom Wujec: Using images to think and innovate

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At the FORTUNE Innovation Forum, Tom Wujec, author of Five Star Mind and Pumping Ions, led a one-hour workshop on Using Images to Think, Innovate and Drive Business. To demonstrate the power of using image visualization to convey ideas, Tom created visual representations of different sessions at the event, including the opening keynote by London Business School professor Gary Hamel (above). As can be seen above, the visualization of an event conveys a richness and texture that is not always apparent in a more traditional, text-only format.

Anyway, if you're interested in learning more about Tom Wujec's presentation at the FORTUNE Innovation Forum, he has generously made several PDF files available for download:

A synopsis of Tom Wujec's workshop on visualization

A real-time recording of Gary Hamel's keynote in images

A poster of Gary Hamel's keynote in images and words

Black-and-white sketches of Lea Thau's storytelling workshop in images and words

NOTE: These files will only be available for download for a limited time. After that time, please check out Tom Wujec.com for updates and highlights from the FORTUNE Innovation Forum.

[image: Tom Wujec's visual representation of Gary Hamel's keynote]

Marvin Minsky on The Emotion Machine

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In a Q&A with the Boston Globe, MIT computer science professor Marvin Minsky discusses his new book, The Emotion Machine. In it, Minsky argues that emotions are simply another way of thinking, one that computers could perform if given enough resources:

"Somehow, most theories of how the mind works have gotten confused by trying to divide the mind in a simple way. My view is that the reason we're so good at things is not that we have the best way but because we have so many ways, so when any one of them fails, you can switch to another way of thinking. So instead of thinking of the mind as basically a rational process which is distorted by emotion, or colored and made more exciting by emotion -- that's the conventional view -- emotions themselves are different ways to think. Being angry is a very useful way to solve problems, for instance, by intimidating an opponent or getting rid of people who bother you."

The%20Emotion%20Machine.jpg As Minsky acknowledges, the notion that all thinking - even emotions - will one day be emulated by a machine is certain to be controversial:

"We don't like to think of ourselves as machines because this evokes an outdated image of a clunky, mechanical, lifeless thing. We prefer the idea that inside ourselves is some sort of spirit, essence, or soul that wants and feels and thinks for us. However, your laptop computer has billions of parts, and it would be ridiculous to attribute all its abilities to some spirit inside its battery. And a human brain is far more complex than is any computer today."

[image: Marvin Minsky]

December 4, 2006

How Home Depot is borrowing a page from the Target playbook

nardelli%20headshot.jpg At the FORTUNE Innovation Forum in New York, Home Depot CEO Bob Nardelli explained how the company is experimenting with a new innovation program called Orange Works that will create new high-design products for the home-improvement retailer. In 2007, the company expects this new line of products to generate sales of $250 million - a significant amount, to be sure, but still less than 1% of total sales of $90 billion projected for next year. Products such as a fire extinguisher "with the smooth lines of a martini shaker" are already turning the heads of design fans and generating buzz about innovation and design at Home Depot. The Orange Works initiative was unveiled on November 29, with new products slated to begin appearing in stores in fall 2007. As the Wall Street Journal explains, the Orange Works project is a collaboration between the retailer and Arnell Group, a New York marketing and design company with links to Target designer Michael Graves:

"Such private-label products have become a retailing trend, helping to differentiate what might otherwise be commoditized goods. They also typically carry fatter profit margins... Home Depot's push resembles a similar effort by Target, which hired designer Michael Graves to design stylish home furnishings that have become one of the discounter's signatures. The idea for Orange Works was brought to Home Depot by Peter Arnell, Arnell Group's founder and an architect who started his career working for Mr. Graves."

For more on Peter Arnell and his vision for Home Depot, check out the following:

Product Guru Peter Arnell to Co-Create Retail Businesses [AdAge.com]
The Home Depot announces Orange Works Innovation Partnership [PSFK]
Sleek gear to be sold at Home Depot [Austin American Statesman]

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Day 2, 11:20 am: Innovative Experiences

comstock%20headshot.jpg 11:20 am - 12:15 pm: Beth Comstock (NBC Universal, pictured at left), John Jacobs (NASDAQ), Sean Maloney (Intel) and Deborah Senior (Lexus) joined moderator Jeffrey Rayport of Marketspace for an engaging look at innovative customer experiences. They discussed the types of experiences they are providing consumers and analyzed how they are changing in real-time to respond to new tastes and shorter attention spans.

The traditional 3-6-1 model (three months to create the idea and bring it to market, six months to harvest premium margins associated with the product, etc.) is forever changing. Look at fashion-forward retailer Zara, which now has 26 seasons, instead of 4 seasons like most traditional fashion retailers.

With that in mind, what is your company doing to change customer experiences?

Deb Senior (Lexus): We are a company that pursues perfection. With the GS hybrid, we brought something new to the hybrid proposition -- an incredible engine and world-class driving performance at the same time. On the go-to-market side, we are involving the customer in more ways than ever before (e.g. a giant car image in Times Square that was really a mosaic of photographs sent in by drivers)

Intel: It is a race to the infinitesimal (i.e. Moore's Law). The question facing Intel: what will people use incredibly faster microprocessors for?

NASDAQ: The term "extreme users" has meaning. Look at the world of electronic trading. There are three dozen order types, not just "market" or "limit" orders. We have to build to those people. The 3-6-1 model still applies, but in terms of "days," not "months" or "weeks."

Beth Comstock: We are thinking in terms of innovation around experiences. Rapid change and innovation go hand-in-hand. Video proliferation is an example - users are now watching TV in many different ways (e.g. TV screen on a belt buckle). Consumers are more in control than ever. Consumers are saying: "I want to be part of the storytelling." With technology and different platforms -- how can we connect them to change the storytelling process?

When the book The Experience Economy first appeared (in 1999), it raised a lot of different questions. How are companies grappling with the notion of "open-source experiences"?

Beth: You have to give up control to your customers. It is very scary - you don't know where it will go. When we were not innovative enough, it's because we didn't give up enough control.

NASDAQ: The customer is designing your services, products and even platforms. The fear is that of missing the accidental innovation. The notion of, "Oh, it has applications somewhere else?" We are trying to nurture this mindset within the culture.

Intel: We're getting ready for an avalanche of user-generated high-definition content. Tens or hundreds of millions of people shooting high-def video and then uploading or downloading them to the Internet.

In terms of high-tech commodities like the silicon chip. Where does the notion of customers experiences fit into this?

Intel: I have trouble with the premise. If commoditization is something that happens because you're 24 hours late, then let's be 24 hours early. You move faster. There's much more money around for the winners.

If the consumers are in control, how does that get designed into the process?

Lexus: It's important. We now sponsor events for consumers to drive Lexus cars. We make competitor's cars available as well (BMW, Mercedes-Benz). This makes the shopping process better for the consumer.

Let me shift gears... Events, online communities, communities of extreme expertise. What is the orchestration process. How do you take all those elements and create an organization? How do you put all that together?

Lexus: It's the responsibility of all the associates, and your business partner's associates. The "Brand Promise" is very important. In order to great insights on how to meet customer needs, you need to get connections to customers. One example involves Lexus and the US Open. We had on-site activities and displays that were intended to "surprise and delight" our consumers. We must work to exceed expectations. We sponsored VIP parking for Lexus vehicles, for example, that was free for consumers of our $80,000 luxury cars.

The desire to experience. It's very clear at Lexus, Is it as clear at other businesses?

Beth Comstock: We have gone from one-to-many to one-to-one. What are the different types of experiences? Maybe they are new storylines that are only going to live here. Media is forcing us to get better at connectivity and insights. You start with the consumer: What's the experience? It all falls into place.

NASDAQ: The brand has to be personal to people working there. It was one-to-many, now it's many-to-many. The brand has to say the same thing to all people. Execution has to be customer-driven. Our role in marketing: be right in there with the customer. The way we reach an alpha user is different from the way we reach the CEO of Intel.

How do you reach folks like leading-edge nerds?

Intel: Ultimately, the target audience is not the leading-edge. Organize yourself into campaigns and a blend of various media, with a call to action on the Web. If you want to reach people across the world, you still end up using TV. But will that be the case in three years? No - money will be shifted into other directions. TV is no longer about getting the leads, but about creating emotional touch points.

NASDAQ: Alpha traders have no emotions. You can't reach them via TV.

Beth: We won't give up on TV. It's all about mix. Immersing yourself in digital. It's all about different segments of behavior. Who would curl up and watch a 30-minute show on a tiny screen? TV will never do what online will do.

NASDAQ: Emotional "hits" are online or at events - there are more opportunities to connect there rather than via TV.

One of the most compelling media is video. What does video look like in 2-3 years?

Intel: There is no substitute for professional production. Eventually, you will be able to put a YouTube video up on your flat screen TV. This is a technology enabler that has a certain amount of inevitability around it.

What about involving people in the "show"? Technology is creating the experiences. Customer experiences are created by devices. What's the future of technology?

Beth Comstock: Some things don't change. It's the behavior that comes out of the technology. For example, the video as a belt buckle. The behavior changes, not the technology.

NASDAQ: Consumers are a lot like kids: "I want it now." We can actually do it now.

Lexus: We have to be ready to listen to consumers.

Intel: As the tech junkie here (on the panel)... Consider the example of SecondLife and virtual experiences. In North Asia, there are tens of millions of people online. Hundreds of people are in room, playing these games. In a virtual world, I once died hundreds and hundreds of times... Enormous amount of kids who spend more time in virtual world than real world.

The MarketSite location in Times Square is really an advertisement for NASDAQ, since no trading takes place there. You can think of Lexus as "a leather room with cool media." Are we all competitors at the end of the day?

Beth: It gives us a chance to be partners.

Lexus: A consumer wants an overall experience. If you can partner, everyone can win.

NASDAQ: Prior to the market crash of 1987, our role was to get small companies ready to go public. Then we let them go to the NYSE. After the market crash, there was a fundamental shift, and that led to the creation of a new brand. The marketsite in Times Square - it's the face of the market - no trading takes place there. Media and finance meet in Times Square. It's a collision that's never going away.

Intel: The easiest way 10 years ago to establish a brand or new product offering was via TV. With fragmentation, it becomes harder to get unified experiences.

Beth: There are very specific behaviors, which have nothing to do with age or gender.

NASDAQ: It was easier to build a brand in the 1980s. Now, it's harder to get share with fragmentation.

Beth: Fragmentation gives you different types of touch. You need to view it as an opportunity.

Lexus: The Scion brand took advantage of fragmentation, and took TV out of the advertising mix. Consumers were communicating our message. Since people put stake in what they hear from people they respect, this was important. That's the best advocacy you could ask for. Scion moved out of Toyota HQ. The Scion created enormous buzz for people new to the Toyota family. Toyota made an effort to bring in younger buyers with Scion: trendsetters and innovators who like to accessorize their cars, as well as creative and artistic people. Marketing must match with the overall brand proposition.

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Day 2, 10:00 am: Speed Thrills

oesterle%20headshot.jpg 10:00 am - 10:50 am: A panel discussion featuring Kris Halvorsen (Intuit), Nick Pudar (OnStar) and Stephen Oesterle (Medtronic, pictured at left) discussed why disruptive technologies and new players make speed to market more important than ever. Led by moderator David Kirkpatrick of FORTUNE, the panelists discussed the types of techniques that innovative companies are using to squeeze time out of product and service development cycles.

What do you see as the similarities between the three companies represented on stage?

Medtronic: Most things we make are implanted objects with sophisticated software. There is a natural link to OnStar and monitoring safety. Our implanted sensor technologies for healthcare are based 30-50% around software development, which leads us back to Intuit. There is a heavy software and communications aspect to the companies represented by all three panelists.

How do you think about speed? Why does speed matter? Can you give us some examples of speed within your business?

Nick Pudar of OnStar: We're part of the automobile industry, which has a 4+ year automobile development cycle. The product is then in use for 4-6 years, and it may have multiple users. On the other hand, our business is very close to the consumer electronics business. We have an 18-month cycle, yet we are putting it into a product being designed 4 years in advance. From a speed perspective, there are two gears and we must mesh the two together. One early product that we're proud of is the remote diagnostic tool, in which the user can see if the car is OK. It might just be the gas cap and vapor emission, but the user wants to know. When you evolve the product - it may seem "clever" and "obvious," but only afterwards. The product has evolved to the point where we will send an e-mail on the monitoring diagnostic. The "health monitoring" of the vehicle has a very rapid intake of customers.

Kris Halvorsen: Orchestration is very important. Intuit places a lot of value on customer-driven innovation. What is important is not the "supply of new ideas" but the "demand for new ideas." Customer-driven innovation relies on direct observation of how customers use products. What is important is the "demand" mechanism within the company that "pulls" on innovators.

Medtronic: Our average cycle time is 20 months. At the company, 2/3 of revenue is derived from products that have been introduced in the past 2 years. Rapid product cycle time. It's all about how you go about discovering. In the pharmaceutical world, there is the concept of "from bench to bedside." Scientists and chemists conjure up molecules, try for 10 years, and hope for 1-2 blockbusters. At Medtronic, where does the idea come from? It never came from the "bench" (i.e. engineers). The top 100 products came from physicians who were struggling. These products are "doomed to success." If there is an articulated demand, we need to match an articulated solution. Not "bench to bedside," but "bench-to-bed-to-bench-to-bed." (i.e. a feedback loop)

Who are your competitors? All three of you don't really have competition. For example, OnStar has no direct competition in the USA.

Medtronic: We have some competition from J&J and Boston Scientific, but not much else.

Intuit: The cultural challenge is to create visibility for observations. Ideas must not just be created in a lab.

Medtronic: There is a constant dialog between people developing and using products.

OnStar: We have 65 million customer interactions. These help in making tweaks to services. From this perspective, there are three different models to innovation: (1) MAKE & SELL ("very effective, if you know what the market wants"); SENSE & RESPOND ("customers do have a latent sense of needs" and pain points); ANTICIPATE & LEAD. You have to stand for something. At OnStar, it is "peace of mind." That, coupled with active listening process, is the key.

Intuit: As an example, we have an interesting partnership with Google. Combining Google Adwords with QuickBooks, we help small businesses advertise. Say you have a certain word in your inventory, you can use this in Google Adwords. You must realize a need, then concoct an alliance, and then roll out the product.

What is the process for speed? At Intuit, for example, there is an explicit gating process, that describes how products are green-lighted.

Intuit: We are moving from realized need to concept to product. The aim is to get everyone agreeing on the right questions (marketing, finance, engineering). One example is the medical expense manager. People who have high bills find it hard to coordinate. Top leaders at the company didn't see the need to get involved in health care expenses. Scott Cook (the CEO) was adamantly opposed to the product, but was committed to the green-lighting process. When the health care product made it through the gating process, he had no other choice...

So often, a good idea at a big company is killed by one person.

Medtronic: It's rare to see one person kill a project at Medtronic. We have a system of contractual funding in return for milestones. This process becomes part of the yearly performance review. This protects the source of funding - it contractually obligates funding to R&D projects. It is not allowable to "push things out" if having a tough quarter. We try to remove long-term projects into a new pathway so that people can't tamper with the funding. We take into a new area out of the core. We let them run with their own P&L ("which is all L at that point").

Intuit: If innovation has paid off in the past, this works in your advantage. It gives you the right kind of credibility.

OnStar: Onstar required the visionary guidance of Rick Waggoner. It didn't fit into the business, and it wouldn't have happened with marketing, engineering, etc. We set it up to work alone, in terms of the orchestration of all the necessary back-office components. In order to innovate later, need to set down the groundwork to set up the capabilities. One cool new idea: a service whereby instructions are "metered out" as needed, so that you aren't constantly looking ahead.

Can you explain more about the telemetry example that you mentioned to me earlier?

Medtronic: We innovate in different ways. Think of it as decentralized "state's rights." Medtronic is mainly about implants and radios and sensors and communicating. like OnStar, it's about "peace of mind." We have 32 different telemetry schemes (types of radios). What if all these radios spoke the same language? First step and most important: the implanted radio. Once it's in, can't change it.

(Mentioning a book) If you could change your business tonight - would you do it?

Intuit: A third of our growth comes from new products.

The leveraging of "the swarm" and open source in order to get speed within the innovation process... Is that the right thing, or is it only for IT?

Intuit: You can become a dinosaur if you don't leverage that. It's not just a question of speed. It [i.e. the community of users] can be better than the minds of a few experts.

OnStar: In general, it's a good idea, but it must be done responsibly. Safety is important - you don't want unknown people taking control of your vehicle. Plus, privacy matters are very important.