The Business Innovation Insider

January 23, 2006

MIT's Eric von Hippel on Democratizing Innovation

The OpenBusiness blog has posted an interesting interview with MIT professor Eric von Hippel, who was a guest speaker at last month's FORTUNE Innovation Forum. Von Hippel literally wrote the book on Democratizing Innovation and has documented in detail how corporations are making use of new user-centered innovation methodologies. At the FORTUNE Innovation Forum, for example, Eric explained how elements from the skateboarding culture of California (as featured in the highly-entertaining film Dogtown and Z-Boys) - such as innovation with new materials and techniques - are now finding their way into the corporate boardroom. If users are excited about your products (as skateboarders were with their skateboards), they will take them apart, examine them, and discover innovative new ways of using, making and sharing them.

According to von Hippel, these user-centered innovation processes have been the norm for "hundreds of years." With new technologies and new communication methods, though, the user-centered innovation process is now moving to the forefront:

"Sophisticated design tools are far more widespread, less costly and easier to use. By and large the vast improvements in computation has been the driving force. And most importantly the increasing communication between users, because of the Internet, has made it much easier to share knowledge and drive innovation."

In the interview with OpenBusiness, von Hippel also points out what the "democratization of innovation" means for traditional business models:

"Users have a natural advantage in the innovation process. They know what they need and can distribute their ideas much more effectively than large corporations. You know there is a general rule – markets start small – therefore corporations tend not innovate at the cutting edge of social and commercial demands. Manufacturers tend to concentrate on markets they like and understand. And they had no real access to users and their demands. Innovations therefore were quite often not need-oriented. Now users can connect, debate their needs and create solutions in a much more seamless way. Businesses in this environment need to be far more connected to their users and integrate them directly in the innovation process."

Technorati tags: vonHippel, innovation

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January 13, 2006

For BMW's Chris Bangle, imitation is the sincerest form of flattery

Thursday's Wall Street Journal (print edition only) featured a glowing piece on BMW's head designer Chris Bangle (one of the panel speakers at last month's FORTUNE Innovation Forum), who has finally been vindicated for his cutting-edge designs:

"Trashed by critics just a few years ago, BMW chief designer Chris Bangle is experiencing a pleasant reversal of fortune at this week's Detroit Auto Show. Mr. Bangle, a 49-year-old American, was pummelled by BMW fans and auto journalists after the German car maker restyled its flagship 7 Series sedan in 2001 with sculpted curves and contours. The car's bulbous trunk was ridiculed as the "Bangle butt," and thousands signed an Internet petition imploring BMW to "Stop Chris Bangle.

But at this year's North American International Auto Show, designs resembling Bangle's work are cropping up in cars from several BMW rivals, including Toyota Motor Corp.'s new Camry and the Mercedes-Benz S-Class from DaimlerChrysler AG's Mercedes division, both of which sport raised trunks. Suddenly, everyone is trying to do the kind of styling for which the auto journalists criticized the BMW group so badly..."

A few days earlier, the auto enthusiast blog Jalopnik also wrote about the changing perceptions of BMW's Bangle. Apparently, his innovative thinking about automobile design was just a few years too early for popular acceptance:

"Propellerhead design guy Chris Bangle’s earned his fair share of grief over BMW’s most recent aesthetic direction. And even he admits that he could’ve picked a better name than “flame surfacing” for the look of the latest Bimmers. We also think the 6-Series is ugly. But having said that, we think that Bangle’s one of the most fascinating, divisive and influential figures on the automotive scene today, so the morning speech that Bangle was scheduled to give was probably our #1 must-attend of the whole two-day press hoopla fête thing...

Bangle, on the other hand, seems to be an exploratory mind; pointing out that automobiles were in their baroque period a half-century into their existence; using architecture as the yardstick that drives car design. He then equates the flame-surfaced Bimmers with the Bilbao Guggenheim. He goes on explain that surface is a cardinal tenet of designing automobiles; that “Surface is really structure revealed.” Which, given high-end rod shops’ penchant for metalfinishing and repetitive block-sanding of coats of paint, makes sense, because in that realm, the surface dictates to the viewer what the structure underneath is, even if that’s an illusion."

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Lights, camera, espresso! Starbucks gets into the movie business

After launching an innovative digital music strategy for its coffee customers, it looks like Starbucks is preparing to enter the Hollywood film industry. The company just inked a "sweeping promotional deal" for an upcoming film (Akeelah and the Bee) and it looks like other film deals are on the way. TheStreet.com has more details:

"Starbucks has made another leap into its role as a marketing powerhouse for the entertainment industry. The java giant said Thursday that it is partnering with film studio Lions Gate Entertainment to jointly market and distribute the upcoming film Akeelah and the Bee. This marks Starbucks' first foray into the film business, but the company has already proved its mettle as a marketing force in the music industry by selling exclusive albums from the likes of rock legend Bob Dylan in its chain of 5,000 coffee shops in the U.S."

Yesterday's Wall Street Journal (sorry, print edition only) had the best coverage of the story, highlighting the role that Kenneth Lombard, the head of Starbucks' entertainment division (and a guest speaker at the recent FORTUNE Innovation Forum), played in signing the movie deal. Lombard, of course, was a key figure in Starbucks emerging as a key force in the music industry, helping the company get into the business of producing, promoting and distributing CDs. The Wall Street Journal explains the role of Kenneth Lombard in the new venture:

"To oversee movies, Mr. Lombard hired Nikkole E. Denson, formerly president of Magic Johnson Entertainment and, previously, Magic Hallaway Pictures. As director of business development in Starbucks Music and Entertainment, she is responsible for screening projects, including scripts, and will take a lead role in submitting prospective projects to Messrs. Lombard and Schultz."

So what will Starbucks do for the film (about an 11-year-old African-American girl from South Los Angeles)? There won't be life-sized posters of the film's actors in Starbucks cafes, says Lombard. However, the company will hold advance screenings for some holders of Starbucks cards, as well as some of its baristas. Starbucks will also run trailers of the film over its in-store Wi-Fi network. Finally, stores will begin selling DVDs of "Akeelah" as soon as August - approximately four months after the film opens on 2,000 screens nationwide. It is also likely that Starbucks will promote the film on the coffee cup sleeves used by patrons.

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January 11, 2006

IBM's coverage of last month's FORTUNE Innovation Forum

On the home page of IBM's On Demand Business site, there's a link to an exclusive video from the FORTUNE Innovation Forum. The "Is Innovation Still America's birthright?" video is from a panel discussion featuring FORTUNE's David Kirkpatrick as well as Linda Sanford of IBM, Shantanu Narayen of Adobe and strategy guru John Hagel as they discuss whether or not America's innovators are keeping pace with those in India and China.

In response to a question from David Kirkpatrick about the implications of America losing its position as the leading global innovator, IBM's Linda Sanford describes the changing nature of global innovation:

"I think when you think about where the world has moved to, it is all about innovation, in my mind, that matters, and I think that is what will distinguish us, has distinguished us here in the United States and I think we will continue to do that.

What I mean by that is that it is not just technology for its own sake – it is technology that gets applied to solving real business problems. I am a mathematician by background, so my little equation says it is invention, which might be the next great technology, plus insight, business insight is where real innovation is going to come from.

You need to be able to have relationships, not just within your own business, but outside of the four walls of your business, and it is going to be more and more multidisciplinary, not just within any particular, you know, functional area, but literally bringing together an ecosystem of what might seem like unrelated parties that really will come together with a different perspective that will yield the true breakthrough innovations.

So am I worried (about America's ability to innovate)? I am worried that we won’t get there fast enough and it is a sense of urgency that we need to continue to drive here. But I do believe that we are looking at it in a different way today, in a way where innovation matters, not only for our businesses, but for the world in general."

On the IBM site, it's also possible to download a podcast of the panel discussion and read the full transcript from the panel discussion as a PDF document.

Also, check out the link for Linda Sanford's new book - Let Go to Grow: Escaping the Commodity Trap.

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January 10, 2006

Linda Sanford's new book on innovation and commoditization

Linda Sanford of IBM, one of the guest speakers at last month's FORTUNE Innovation Forum, has just published a new book on innovation called Let Go to Grow: Escaping the Commodity Trap.

On his IBM blog, colleague Irving Wladawsky-Berger recently posted a glowing review of the new book:

"The book's basic premise is that the Internet, globalization, and deregulation have given rise to an ultra-competitive marketplace in which many products and services have become commodities. It then presents a sequence of management principles to not just help a company survive the commodity threat, but actually turn it into a growth opportunity by letting go of outdated business models and management systems and bringing innovation into all aspect of the business. I have worked closely with Linda for many years now, and can attest without hesitation that when it comes to business transformation, she knows what she is talking about from first hand experience

[...]

Let Go to Grow is a handbook, based on real experiences, on how to transform a business based on such principles. It acknowledges how difficult it is for a business to change, even when it has no choice, which accounts for the high proportion of companies that do not survive over time. You are asking a business, its management and overall workforce to change its very culture, which in all likelihood is the same culture that has accounted for its success in the past. Leadership is absolutely necessary, both to articulate the vision and need for change, and to operationalize the vision and link it to execution.

Let Go to Grow is a relatively short, easy to read book. It presents its principles and advice in concrete, simple language. It is a book that everyone interested in understanding the business environment in the 21st century and what to do about it should read."

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January 2, 2006

Burt Rutan on "60 Minutes" news program

Throughout 2006, we'll be following up on news from some of the speakers at last month's FORTUNE Innovation Forum. Last night on 60 Minutes, for example, there was a fascinating profile of Burt Rutan (the winner of the $10 million Ansari X Prize), who described some of his innovative ideas about the future of the space tourism business. According to Rutan, we will be sending tens of thousands of regular, everyday civilians into space within the next 12-15 years.

In a companion video clip to the article (look for the "Reporter's Notebook" link on the CBS News site), Ed Bradley calls Rutan "one of the most amazing people I've ever met." I have to agree. At the FORTUNE Innovation Forum in December, Burt Rutan was honored as an innovation visionary for his groundbreaking work within the aerospace industry.

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December 6, 2005

How Intuit's Scott Cook built a culture of innovation

Anyone who heard Scott Cook, chairman of Intuit, speak at the recently concluded FORTUNE Innovation Forum knows that he has worked hard to create and sustain a real culture of innovation at the company. The company has even created a "Greatest Failure Award" to celebrate risk-taking activity by all employees.

In the most recent issue of FORTUNE magazine, David Kirkpatrick catches up with Scott Cook and goes behind the scenes at this culture of innovation. By having a "maniacal" focus on the customer and dedicating extraordinary resources to field research, Intuit is able to root out new market opportunities, as Harvard Business School's Clayton Christensen (author of The Innovator's Dilemma) explains:

"What Intuit does in the field is wonderful. When a market is not well defined, the only way you get insights about what customers will buy is to go out and see what people are trying to get done in their lives."

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November 29, 2005

The Fortune Innovation Forum is cleared for take-off

Currently, there's less than 24 hours to go before the kick-off of the Fortune Innovation Forum in New York. Should be an exciting event filled with a long lineup of A-list speakers - as well as a stellar list of equally-distinguished participants, some of whom have already contributed original content to this blog. Thanks to the blogosphere, I've already had a unique chance to interface with these individuals and to hear their ideas about innovation in Corporate America.

Anyway, I'll be live-blogging the event from New York City's Time Warner Center over the next two days, so if you have photos, blog entries or commentaries that you'd like to send my way, please feel free to contact me during the event. There's already a team of veteran bloggers assembled, ready to post commentary about the event in real-time: as these blog postings enter the blogosphere, I'll try to point out the most illuminating of these. And then, after the event, I'll try to provide a capsule analysis of the highlights of the Fortune Innovation Forum, along with audio downloads from the event. See you there!

[cartoon: Ross Mayfield via Flickr]

November 22, 2005

Kenneth Lombard: Innovation has been instrumental to success at Starbucks from the beginning

In coordination with the upcoming FORTUNE Innovation Forum in New York City, Kenneth T. Lombard, SVP of Starbucks and President of Starbucks Entertainment, has generously offered to share his thoughts about business innovation in an interview with the FORTUNE Business Innovation blog. Building on Starbucks' longstanding commitment to innovation, Lombard is spearheading the build-out of the company's music and entertainment strategy. At the FORTUNE Innovation Forum, Kenneth will be speaking on the topic of "The importance of partnerships for innovation."

Kenneth Lombard is the former president of Johnson Development Corp. (JDC)/Magic Johnson Theatres and co-managing partner of Canyon Johnson Urban Fund. Lombard served as JDC president from 1992-2004, where he negotiated partnerships with Loews Cineplex Entertainment (Magic Johnson Theatres), Starbucks Coffee Company (Urban Coffee Opportunities), T.G.I. Friday's and Washington Mutual Bank. He has also served as a consultant to former New York State Comptroller Carl McCall. For the latest news about Kenneth and Starbucks' digital music strategy, be sure to check out the Starbucks archives over at Paid Content.

Q: How does the entry of Starbucks into music correlate with the company’s commitment to innovation?

Kenneth Lombard: Innovation has been instrumental to the success of Starbucks from the beginning. Above all, our goal is to enhance the Starbucks Experience. We provide much more than a premium cup of coffee -- our stores are a community gathering place where people come together to connect over coffee. Whether it is through the development of an innovative new beverage, food item, merchandise or service, or establishing the brand as the “third place,” we consistently strive to find ways to surprise and delight our customers by offering the highest quality products and services.

Our move into music is another example of how we are continuing to innovate. Music has always been a part of the coffeehouse culture and is an essential part of the Starbucks heritage and in-store experience. In recent years we noticed that our customers have responded exceptionally well to our music offerings, so we decided to expand them. We seized a unique opportunity to leverage our strengths and core competencies to transform an ailing music industry, and as a result, in a time where the music industry is searching for ways to increase sales, Starbucks has truly become a destination for musical discovery. It’s a win-win situation – we’re offering a new distribution channel for the music industry, and our customers are benefiting from an enhanced in-store experience and an expanded selection of music across a broad array of music genres.

Q: Why has Starbucks' entry into the music business been so successful?

Kenneth Lombard: One of the reasons we’ve had so much success with our music strategy is that we identified a problem and recognized we had a unique vision and set of assets to solve it. As the music industry reached a critical time in its history, we recognized we had a unique opportunity to reach disenfranchised music consumers who are interested in music beyond the typical Top 40 selection offered by current broadcast radio and big box retailers. These are people with busy, full lives who still have a huge love of music but who have been overlooked by the traditional marketing channels of the music industry.

We serve approximately 35 million customers per week worldwide; the most loyal of these customers visit 18 times per month. This unmatched level of customer loyalty and frequency enables us to introduce our customers to quality music as part of their daily coffee routines. We’re finding that they trust the curatorial voice of Starbucks Hear Music, because we offer them unique and compelling music selections that they wouldn’t be exposed to anywhere else.

By elevating the music experience in our stores and instilling a renewed sense of value to the discovery and acquisition of music in our customers, we have created a powerful new distribution channel for the music industry – one that we believe is transforming the way labels, artists and music fans connect. The success of our music initiative demonstrates the company's rich history of innovation while supporting our long-term growth strategy.

Q: What is the most important thing that needs to happen before innovation inside a company can occur?

Kenneth Lombard: The most important thing a company needs to have in place is a strong sense of identity and customer trust in the brand, so that you can innovate while staying true to the core of the business.

When we began thinking about expanding our music strategy, we knew we needed our customers and our partners to give us permission to enter the music business, and we had to execute in such a way that would not dilute the coffee experience. We’ve done so strategically by incorporating key learnings from past initiatives, listening to customer feedback on our music offerings, and taking a critical look at the competitive landscape. At our core we are a coffee company and we are very mindful that the music should always complement the coffeehouse experience, not distract from it.

Q: Who should be responsible for innovation at a large corporation?

Kenneth Lombard: Innovations should come from employees at all levels, not just senior management. A company that constantly and successfully innovates is one where the employees feel inspired and empowered to create.

A perfect example of this is how one Starbucks employee, Timothy Jones, rose through the Company. Starbucks' journey into music began in the late 1980s, when we had just over 100 stores. Around that time, Howard Schultz visited a Starbucks in Seattle’s University Village, where Timothy, then a store manager, was playing his own music mixes and constantly soliciting feedback from customers to see how it was received. Howard eventually took Timothy’s suggestion that Starbucks sell music in its stores.

Today Timothy manages development of many of the Starbucks Hear Music CD compilations as well as Starbucks in-store music programming. Timothy’s innovative thinking and the Company’s willingness to explore his idea was instrumental to the development of the overall music strategy and key to the building the Starbucks brand.

Q: Does the structure of your department directly impact Starbucks ability to implement innovation?

Kenneth Lombard: Absolutely. When it comes to Starbucks Hear Music, everything is a team effort. I credit our team with making tremendous strides in forming strong, innovative alliances with companies, labels and artists alike. These mutually beneficial relationships have contributed to some of our biggest successes, including the co-production, marketing, and distribution of Ray Charles’ Genius Loves Company, Herbie Hancock’s Possibilities and, most recently, Rolling Stones’ Rarities, all of which speak to our strength as a viable entrant to the music industry and our clout as a distributor. The success of these albums has been instrumental to extending the loyalty of our customers who have learned to trust in the curatorial voice of Starbucks Hear Music.

Q: Can you innovate without having access to large amounts of capital? If so, how?

Kenneth Lombard: Innovation is free. It consists of creative thinking, empowerment, and above all, passion for the growth of the company. To execute against an innovative idea, a company will need some amount of capital. But my philosophy is, if the idea makes sense for the company and more importantly, our customers, the capital will follow.

Q: How can failure lead to innovative breakthroughs in business?

Kenneth Lombard: True failure occurs when you do not learn from your missteps.

Innovative breakthroughs come when you take calculated risks and optimize your approach based what you’ve learned. With more than 4,700 company operated stores in North America, we met with some initial challenges to executing our music strategy from a logistical standpoint.

Merchandising music is much different from merchandising coffee, so we faced a steep learning curve for making our music selection really stand out. By working closely with partners across the company, we were able to leverage the knowledge and key learnings from the earliest days of growing the Starbucks business to improve our execution as it relates to music, and as a result we’ve come up with some powerful and effective ways to enhance the music experience in our stores.

Q: What specific innovations can you point to that have been the most successful for Starbucks?

Kenneth Lombard: Innovations such as creating signage to spotlight our music offerings and the introduction of standing floor fixtures as a way to merchandise multiple CD titles simultaneously and effectively have been instrumental to the success of our music strategy. We also have carefully selected music playing overhead in all Starbucks locations, something we feel is very important to what we do, because it provides such an enhancement to the Starbucks Experience.

In addition, we’ve developed various strategic alliances to strengthen and further our entertainment initiatives. Our XM Satellite Radio channel, Starbucks Hear Music Channel 75, features programming in support of our CD projects. We also offer complimentary multimedia content delivered via the T-Mobile HotSpot network, which, with more than 4,300 stores Wi-Fi enabled, is one of the largest Wi-Fi networks in the world.

Pitney Bowes and Customer-Centered Innovation

In an 8-page whitepaper called The Practice of Innovation: Customer-Centered Innovation at Pitney Bowes, James Euchner, VP of Advanced Technology at Pitney Bowes, describes how the company has "turned the traditional innovation process inside-out" to focus more on customers as it develops innovative solutions in areas like mail management and document management. Using this customer-centered approach to innovation, Pitney Bowes is now able to develop new products and services that are within the strategy and capability of the company, technologically feasible, financially worthwhile and targeted to the needs and values of its customers.

As proof of the company's "deep and continuing reliance on the customer for direction," James Euchner explains that four of the five strategic steps that define the Pitney Bowes innovation process focus explicitly on the customer:

* Understand the customer needs
* Invent into the customer needs
* Create new value propositions for users
* Conduct trials with real people in realistic settings

After setting up this innovation framework, James Euchner's whitepaper then works through each of these strategic steps of the innovation process, using a simple strategic question as a guide: "How can Pitney Bowes develop solutions to meet the needs of those currently paying for their postage with stamps?" By observing first-hand how small businesses and larger enterprises interact with each step of the mailing process, Pitney Bowes was able to understand the common "frustrations and desires" surrounding the mailing process - and then devise new solutions meant to address these wants and needs.

As far as whitepapers go, it's an easy read filled with easy-to-understand graphics (hint: we like Venn diagrams). The full 8-page whitepaper from Pitney Bowes is available for download here.

What's cool, too, is that the author of the whitepaper, James Euchner, was honored last year as a co-winner of the Inventor of the Year award by Pitney Bowes for his work on a new invention now used by eBay:

"Pitney Bowes announced the winners of its 12th annual Inventor of the Year award at a special ceremony held recently at its world headquarters in Stamford. This year, the award was shared by a team of seven inventors including: Feliks Bator, David Chamberlin, James Euchner, Thomas Foth, Andrei Obrea, David Rich, and David Riley.

The winning patent issued in September 2003 by the U.S. Patent and Trademark office covers “Instant Online Postage.” The invention is the foundation for the Internet postage application that was deployed earlier this year for eBay. This invention allows users to download postage easily over the Internet without the need for special software. Millions of packages have already been shipped since the new service’s launch, attesting to the popularity and convenience of the solution."

James is also a speaker at the upcoming FORTUNE Innovation Forum in New York, where he will be participating on a panel discussion on the topic of "New Innovations in Traditional Industries."

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November 21, 2005

Linda Sanford: Innovation that matters

In coordination with the upcoming FORTUNE Innovation Forum in New York City, Linda Sanford, Senior VP of Enterprise On Demand Transformation & IT at IBM, joined us for a brief Q&A on business innovation. Linda touches on the important link between education and the future of innovation, discusses IBM's innovation agenda and shares her insights about the future of innovation in America. At the FORTUNE Innovation Forum, Linda will be participating in a roundtable discussion on how the U.S. can retain its lead as a global technology innovator.

One of the highest-ranking women at IBM, Linda Sanford is a member of the Women in Technology International Hall of Fame and the National Association of Engineers. She has been named one of the "50 Most Influential Women in Business" by FORTUNE Magazine, one of the "Top Ten Innovators in the Technology Industry" by Information Week Magazine, and one of the "Ten Most Influential Women in Technology" by Working Woman Magazine.

Q: In your opinion, what steps must American corporations take to ensure that the U.S. remains a "hotbed of technological innovation"?

Linda Sanford: It's clear the U.S. is lagging behind other nations in producing science, technology and engineering talent, and businesses have a role to play in reversing this direction. Input from businesses is essential to a regular review of academic standards, ensuring that elementary and secondary schools are encouraging innovation and supporting students in their efforts to master math and science. Businesses also can share their experience using data for decision-making and other business approaches that can help education leaders improve school operations and outcomes.

Industry can also be a co-sponsor in programs to provide high quality math and science instructional content, provide mentors to individual students - even e-mentors - and provide opportunities for young people to learn about math, science and engineering first hand. IBM launched EXITE camps about five years ago to introduce middle-school girls to the wonder and promise of technical careers. Since its inception, more than 4,000 girls have participated in EXITE Camps around the world and, following their experience, approximately 85% said they would pursue an engineering or technical-related degree when they go to college. Businesses throughout the nation should support and create innovative ideas like EXITE in order to reach every middle and high school student - with a particular focus on developing and bringing more young women, African-Americans, Hispanics and Native Americans into technical fields.

To develop the next generation science and math talent, we need great math and science teachers - and we need them now. With retirement looming for many existing teachers, we need to look for new sources of talent. IBM recently launched an initiative called "Transition to Teaching" which will be piloted next year in New York and North Carolina. Through the program, we will pay qualified mid-to-late career employees to take the education courses they need to pursue new careers as math and science teachers. Next year, 100 IBMers ready to make this transition will be chosen to participate. Think about it. If just nine other companies committed to a program like this, we could produce a thousand highly-trained math & science teachers every year. And imagine the impact if that figure were nine times nine.

Q: At IBM, is the greater emphasis placed on "technological innovation" or "business model innovation"?

Linda Sanford: At IBM it's no longer an either or proposition. Our innovation agenda is focused not only on technology and business model innovation, but on innovation across services, business processes, even policy innovation as a way to drive sustained value for our clients and for ourselves.

It manifests itself in collaborative innovation with companies like Sony, Cisco and Medtronic who leverage our research, assets and expertise to transform their products - from gaming systems to medical devices - into customized, adapatable and networked products. We're also helping companies from Bharti to Enel build radically new business models - from the "networkless" telco to real time supply chains using our Component Business Model and our deep knowledge of Service Oriented Architecture. And we're working with clients, governments and universities to develop new policies and societal innovation - from open standards, to finding the right balance between intellectual property and intellectual capital.

So, I'd say that our emphasis is on innovation that matters - to IBM and to the world.

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November 17, 2005

Richard N. Foster: The evolution of theories of creativity

At the upcoming FORTUNE Innovation Forum in New York City, Richard N. Foster, Managing Partner of Foster Health Partners and author of the best-selling business book Creative Destruction: Why Companies That Are Built to Last Underperform the Market--And How to Successfully Transform Them, will be moderating a roundtable discussion on the topic of "Innovation, Risk and the Threat of Failure." Panelists - including executives from Genentech, Xerox, Hewlett-Packard and a partner at VC firm Kleiner Perkins - will be discussing how innovators can overcome the specter of failure, especially when faced with the opportunity to make big bets.

To kick things off, Dick Foster has provided the following excerpt from a paper ("Who Designed Brunelleschi’s Dome?") that uses the example of Brunelleschi's Dome as a starting point to explore different notions of creativity. During the Renaissance period, Brunelleschi's Dome was considered one of the true engineering marvels of its time - a "big bet" that paid off thanks to an innovative gamble. Looking back at how the dome was designed and built, it's possible to understand the trade-offs between innovation and risk and the factors responsible for breakthrough creative advances, as Foster explains below:

"Brunelleschi's Dome is one of the great architectural works of the 15th century, renowned for many innovations including its design and construction techniques. Many scholars give Filippo Brunelleschi (1377-1446) creative credit for his dome, but researcher and writer Mihaly Csikszentmihalyi asked, "Who designed Brunelleschi's dome?"

Rather than give a straightforward eponymous answer, Csikszentmihalyi tells us:

“Brunelleschi and his friends found themselves in a stream of thought and action that started before they were born, and then they stepped into the middle of it. At first it appears that they initiated the great works that made the epoch famous, but in reality they were only catalysts for a much more complex process with many participants and many inputs. One could say that the stimulation was provided by the city’s bankers."

Csikszentmihalyi’s thoughtful argument underscores the core of two contemporary theories of “creativity”: the first focuses on the individual and his or her methods – Brunelleschi in this case. The second theory, which only clearly emerged in the last four decades, focuses on the context – social, historical, political – in which the “creator” carries out their work.

Needless to say, these are two entirely different, but not independent, models for the creative process. As a consequence, the methods for improving creative output depend on one’s belief’s about which one of these processes is dominant, or the precise way in which they interact. Getting an accurate understanding of the intricacies of the creative process works is thus an essential prerequisite to developing ways to improve creative output. Gaining that understanding is not simple.

There are several factors that contribute to this difficulty...

First, the creative process covers vast territory – including the creative processes invoked by scientists, engineers, authors, financiers, painters and poets. Is one to assume that the “creative” process is the same in all these cases? Or is one to assume that the “general” concept of creativity has no meaning; only the “specific” creative process, such as the process of the biologist, or the mathematician, or the poet, can be understood?

Second, as essential to productivity as creativity is, most scientists, engineers, authors, financiers, painters and poets believe they have some measure of understanding of the creative process, even if there is not yet a "standard text" that lays out the way creativity "works" in the way we have standard texts for such disciplines as cellular biology, medicine, circuit design and software engineering. Reaching an understanding of the creative process is an interdisciplinary exercise melding aspects of psychology, sociology, and economics--yet the challenge of understanding creativity is central to none of these disciplines. Accordingly, if pressed, many would concede that their knowledge of the creative process is more tacit than explicit. Given our confidence that we already understand how the creative process "works" in practice, there is little emphasis on understanding the theoretical underpinnings of why it works.

Third, creativity is very different from almost all other processes we seek to manage. When one tries to define an explicit model of creativity several familiar problems are encountered: It does not respond well to precise measurement and correction. The goals of "creative efforts" are often murky and indeed do not even emerge until the solution to an unknown problem is found. The relationships between control, permission and the assumption of risk are very different in creative systems than from those in conventional operating systems. In operating systems, one often wants to minimize risk; in creative systems, one can be rewarded for taking risk. As such, managing creativity is a profoundly difficult exercise. It is so difficult. in fact, that many organizations, and countries, fail to find ways to improve the productivity of their creative enterprises, except by chance. Managing creativity may require a different mindset from other areas of management. If that is to be the case, then we need to know how and why creativity works. If we do not, we may never increase the productivity of creative processes.

Lastly, creativity is a highly non-linear process. At its heart, creativity is a social-psychological process involving several steps that are not necessarily sequential. It is not, in some respects, unlike the processes one uses to grieve, as Elizabeth Kübler-Ross has described them. Kübler-Ross has identified five stages in dealing with personal tragedy: denial, anger, bargaining, depression and acceptance. One can proceed through these five stages in any order, often repeating steps. There are hundreds of “normal” sequences. It is the same, as we shall see, with the creative process; there are hundreds of “normal” processes. This fact makes it very difficult to pick out and repair, if necessary, abnormal processes."

[...]

The paper goes on to discuss the historical and contemporary development of two major streams of thought about the creative process:

"The first is a cognitive psychological view of the solitary individual as a creative “genius”. The second is a view of the “creative genius” within a shaping and supporting social context that enables creativity to flourish. Not only are both views accurate and important, but the integration of, and feedback between, these views, as Csikszentmihalyi’s discussion of Brunelleschi’s Dome illustrated, offers promise for increasing creative output of our institutions in the future..."

For those of you interested in reading the entire paper, here's a preview of what you'll find:

"This paper presents a selective, but representative, view of what is known and what remains to be known about the process of creativity. The simple chronological story line facilitates understanding of the growing precision and completeness of our understanding of the creative process. The paper begins with historical view of the evolution of the word “creativity” and words that are close in meaning to it. The world has been wrestling with the concept of creativity for a long time. The paper then goes on to describe the development of the basic concepts of creativity in the chronological order they were first developed, labeling the period after the leading thinkers of the time. The paper ends with a summary of the author’s view of the most important lessons learned about the creative process for those who seek to improve their own creative output and the creative output of the institutions of which they are a part.

This paper does not seek to be the "end of the story"; rather it is a beginning. Certainly the model of the creative process will evolve and become more useful in the future. Experts in specific fields will find a great deal to be corrected and completed in this paper. Hopefully, they will add their thoughts to the thoughts expressed in this paper, or write wholly new papers on this important topic. This author would be quite disappointed if, in ten years time, we did not have a much more accurate, much more fact based, and much more useful view of creativity than we do today."

EDITOR'S NOTE: The full 31-page paper is available for download here. There's also an excellent book available from Amazon called Brunelleschi's Dome: How a Renaissance Genius Reinvented Architecture. The image of the dome is from The Brunelleschi's Dome Web Site.

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November 16, 2005

Burt Rutan on Innovation

At the upcoming FORTUNE Innovation Forum in New York City, Burt Rutan, winner of the Ansari X Prize and the aerospace developer of SpaceShipOne, will be a featured speaker, offering insights into how he became one of the world's foremost innovators. As the winner of the Ansari X Prize, Burt Rutan launched a new era of space exploration and demonstrated the power and effectiveness of innovation competitions in spurring truly breakthrough accomplishments.

With two weeks to go before the FORTUNE innovation event, Burt Rutan has generously offered his take on the current state of business innovation, including valuable insights into how innovation occurs and the importance of taking market-changing risks.

Q: Who should be responsible for innovation inside a large corporation?

Burt Rutan: Innovation, of course, can take a wide variety of forms. Thus, just about anyone can come up with innovative ideas. Innovation takes a wide variety of forms. My particular area involves technical breakthroughs where we combine innovation with risk-taking to try something new. While many think advances come from the scientists and creative engineers, I’ve found that breakthroughs can just as easily be inspired by shop employees.

Q: What are the key steps that must occur before innovation inside a company can occur?

Burt Rutan: Management must create a working environment with rules that allow employees to take risks. It is OK to fail during the search for a breakthrough. In addition, managers should work shoulder-to-shoulder with engineers and engineers should work shoulder-to-shoulder with the shop.

Q: How much do you rely on research and analysis to guide the development of new innovative services and products.

Burt Rutan: Analysis is a task used mainly during development. Research is not development. If more than 50% think something is impossible, then trying to make it work is research.

Q: What innovative companies do you most admire?

Burt Rutan: Google now. The Lockheed Skunk Works in the 40's, 50's and 60's.

Q: Can you innovate without having access to large amounts of capital? If so, how?

Burt Rutan: You don't need large amounts of capital to innovate. Go to a remote area (the mountains, a beach) to be alone — and think of a new solution to a problem. Innovation cannot be bought by just throwing money out there. It comes by taking risks. This usually happens without big budgets.

Q: How can failure lead to innovative breakthroughs in business?

Burt Rutan: Failure can change your mindset, put pressure on the need for a breakthough, thus force you to take risks.

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November 15, 2005

Navi Radjou: The importance of global innovation networks

In this special feature for the FORTUNE Business Innovation blog, Navi Radjou, Vice President of Forrester Research, shares his thoughts and opinions on the importance of global innovation networks to long-term business success. In fact, as Navi explains below, Forrester has recently created a new framework for understanding innovation called Innovation Networks.

At the upcoming FORTUNE Innovation Forum in New York City, Navi will be moderating a panel discussion on the broad topic of "New Innovations in Traditional Industries." Joining Navi on the panel will be executives from BASF, Pitney Bowes, Georgia-Pacific, and the Allstate Corporation, as they discuss ways that their companies are embracing innovation to drive top-line revenue growth.

Q: How critical are partnerships for innovation success?

Navi Radjou: Innovation is a hot theme among CEOs who view it as the main catalyst for top-line growth. Responding to this trend, Forrester recently focused its Executive Strategy Forum on innovation. Similar in nature to the upcoming FORTUNE Innovation Forum, the Forrester event included CEO-level speakers and attendees. Both events are helping to shed light on new partnership-based innovation models that Fortune 500 CEOs are embracing to grow their firms' top line.

Traditional innovation models, which rely exclusively on in-house inventions and an own-and-protect approach to intellectual property (IP), are obsolete. This happened because Fortune 500 firms serve increasingly global markets. Rather than repurposing US-made products for foreign markets, US multinationals are forced to invent wholly new products and services that cater to local markets in Asia, Europe, and Latin America. US firms now generate $160 billion in revenue from overseas markets. But the 3 billion consumers in India, Brazil, and China have different needs than the 300 million US consumers. So US firms are forced to tap a global ecosystem of partners to design, build, and sell products and services that cater to the unique needs of emerging market consumers. Secondly, America no longer enjoys a monopoly on the best ideas and talent. Facing a talent shortage, US firms now scout for the brainiest workers worldwide. Likely winners: talent-rich countries like Russia and Asian superpowers like India and China. The focus on internal American talent no longer works because the US is suffering from a talent drought. For instance, since the mid-1990s, the number of engineering and physics Ph.D.s in the US declined by 15% and 22%, respectively. Worse: Foreign student enrollment in US science and technology graduate programs is down by 8% to 10% since 2000.

As CEOs of US firms look to serve markets beyond American borders and source ideas across national boundaries, they are ditching their rigid, US-centered innovation approach in favor of a fluid market ecosystem which Forrester calls Innovation Networks. This dynamic, partnership-based market structure matches global demand for innovation with worldwide supply. Forward-thinking CEOs have begun to map internal and external resources to the four value-delivery services in the Innovation Networks model: Inventor, Transformer, Financier, and Broker.

Inventor. Smart CEOs recognize that neither their R&D departments nor the US as a whole has a monopoly on idea generation for products, services, or business processes. Rather, they seek creative input from a wide range of sources from within and outside their firm: frontline employees, universities, foreign subsidiaries, customers, and even competitors. For instance, at Dell, senior management spends 40% of their time with customers whose feedback becomes the input for our innovation process.

Transformer. Discerning CEOs are distinguishing inventions from innovations, striving to optimize the process of transforming internal and external inventive ideas into market-relevant innovations with business impact. Process-savvy CEOs, especially those in customer-facing industries like high-tech, financial services, and transportation, consider the Transformer role even more important than that of the Inventor. To quote Hector Ruiz, Chairman and CEO of AMD: "We (AMD) are not in the business of inventing technology but of innovating with technology. We want to partner with [external] service providers to develop (and transform) products that serve global customers' needs."

Financier. Cost-conscious CEOs at least want to keep internal R&D budgets flat if they are not able to trim them. Like VCs, they favor innovation projects with a sound business plan and well-defined ROI — even if they bet some dollars on a few high-risk, high-reward innovations. In addition, CEOs are asking their firms' corporate venturing groups, which traditionally funded internal skunk projects, to fund external innovation service providers. For instance, Verizon’s CEO Ivan G. Seidenberg believes that the telecom industry’s future growth is in services. Therefore he is shifting his firm’s R&D dollars from product inventions to breakthrough service innovations.

Broker. While some CEOs, such as Procter & Gamble's A.G. Lafley, are putting top execs in charge of connecting internal innovation requirements with external capabilities, other CEOs are assigning that role to all of their customer-facing employees. And global-minded CEOs are tapping brokering services from joint-venture partners or US-based agencies, such as the Invest in France Agency — North America, to gain access to international talent pools. For instance, at Best Buy, the ‘blue shirts' — sales and service employees — are a key part of the retailer’s Customer-Centricity Program. They act as the innovation brokers: they collect and communicate customer needs back to merchandising.

Q: Can you give us an example of an innovation network in action?

Navi Radjou: AT&T — with its Bell Labs — has long typified the vertically integrated invention-to-innovation model. David W. Dorman, AT&T's chairman and CEO, quips that "AT&T invented ‘not invented here'!" But under Dorman's leadership and the supervision of Hossein Eslambolchi, AT&T's CTO and CIO, the telecom carrier is reinventing its innovation model by:

1. Linking R&D to customer needs. In the past, 80% of AT&T's R&D was academic, 20% applied. Eslambolchi flipped that ratio and prioritizes funding for inventions with clear payback and value added to AT&T customers. Some scientists are even directly involved with customers to transform the researcher's inventions into tailored business solutions.

2. Partnering with external service providers. Rather than reinventing the IT wheel, AT&T partnered with IBM and Cisco Systems to deploy standards-based technologies, such as VoIP and Wi-Fi. And AT&T cut a deal with former rival Sprint to use its inventive wireless network as a transformation platform for AT&T's B2B content and service innovations, such as IP data management solutions for corporate customers.

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November 14, 2005

John Hagel: Do not measure innovation by R&D spending or number of patents

On his Edge Perspectives blog, John Hagel comments on a controversial op-ed piece ("For Innovation Success, Do Not Follow Where the Money Goes") by Michael Schrage in last week's Financial Times. In sometimes strident terms, the op-ed piece questioned the link between corporate R&D spending and innovation. After quoting some of the "juicier" comments from the FT piece, Hagel throws his support behind Schrage:

"Right on! In my consulting career, I have participated in many analyses seeking to draw a correlation between R&D spending and business performance in specific industries. The conclusion: there is absolutely no correlation – what you get is a scatter diagram."

Hagel also points out the "patent fallacy" - the trap that many corporations fall into, equating the number of patents with overall innovation:

"At least this approach focuses on outputs, rather than inputs, but it focuses too narrowly on only one kind of output. In effect, it equates innovation with invention. This immediately narrows the focus to product innovation and largely ignores process and business model innovation. The longer I work on innovation, the more convinced I have become that process innovation is far more powerful than product innovation – it has a multiplier effect that product innovation can rarely match."

The best metric for measuring innovation? According to Hagel, the "rate of productivity improvement in an enterprise," also defined as the growth in value added generated per employee, provides the best benchmark for corporations concerned about innovation and keeping up with the competition.

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November 9, 2005

Shantanu Narayen interview: Innovation at Adobe

At the upcoming FORTUNE Innovation Forum in New York City, Shantanu Narayen, President and COO of Adobe, will be participating in a roundtable discussion on whether the United States is still a "hotbed" for IT innovation. As a senior executive at one of the leading U.S. software companies, Shantanu Narayen is uniquely positioned to offer his views on whether the U.S. can stave off the competitive challenge from India and China.

Narayen oversees Adobe's day-to-day global operations and sets the vision for Adobe's diverse product lines. Together with CEO Bruce Chizen, Narayen has grown Adobe's business to more than $1.67 billion in annual revenues. In addition, Narayen has been a driving force behind Adobe's innovation and expansion into new markets. He has also played an instrumental role in growing Adobe's India technology development center and starting Adobe's Product Technology Integration Group to focus on customer workflows. In 2005, Adobe was ranked as one of the "100 Best Companies to Work For" by FORTUNE magazine.

With three weeks to go before the FORTUNE innovation event, Shantanu Narayen has generously offered his take on the current state of business innovation, including insights into product innovation at Adobe:

Who should be responsible for innovation inside of a large corporation? Why?
Shantanu Narayen: It’s important to have a senior-level champion of new ideas who can help build support for initiatives that otherwise might not surface. That said, at Adobe we believe new ideas and inspiration can come from anywhere inside the company. Innovation is an inherently unpredictable, organic process and the challenge for companies is to invest wisely in the future.

What is the most important thing that needs to happen before innovation inside a company can occur?
Shantanu Narayen: Employees must be given the permission to innovate. The spirit of innovation has to be a core value of the corporation, and it has to be applied systematically. Innovation must be recognized and failure must be tolerated. Also, one should consider innovation across product, financing, marketing, personnel and other functions. Don't just think of traditional forms of innovation. Even employees who aren’t responsible for developing new technologies or product breakthroughs can innovate by identifying ways to do things better. If a company truly values innovation, then that philosophy should inform everything from hiring choices and major strategic decisions to the way people approach day-to-day challenges – and everything in between.

It’s also vital to know where to focus your innovation efforts. Just because you can innovate in a particular market doesn’t mean that you should. Every company has to identify where it can make a unique difference, and have the will to allocate the resources required to capitalize on those innovations.

Is there an innovation success story within your business that you are most proud of?
Shantanu Narayen: The invention of Acrobat software and the Portable Document Format (PDF) is a prime example of a powerful idea that was ahead of its time, and where we anticipated a market before it even existed.

Soon after the founding of Adobe in the early 1980s, our co-founder John Warnock wondered whether he could use Postscript – Adobe’s core technology that enabled reliable, high-quality printing from computer desktops for the first time – to also recreate a complex image on the screen. He tested the idea by programming an IRS tax form, and it worked.

But he put the idea on the shelf until 1991. Warnock then began thinking about the proliferation of networks – even before the explosion of the Internet – and the need for a way to share information and documents across different platforms. The gulf between Macs and PCs was especially problematic at that time.

The project led to the invention of Acrobat, which could produce these universally viewable documents, the Adobe Reader, which allowed a user to view and print the document, and PDF, which was the new file format that created this new paradigm in technology. Acrobat and PDF were a real departure for Adobe when they were first introduced. Customers had a hard time understanding their value, partly because they didn’t seem like an obvious fit with our other graphics products. Although we realized that new products take time and investment to be successful, some people inside Adobe questioned whether it made sense to keep investing in this area, and there were many inside the company who wanted to kill the product.

Ultimately, we continued to invest and believed that if we created a standard we would have a major advantage in building applications that could take advantage of it.

Now, Acrobat has become one of our most profitable products, Reader and PDF have become essential to online communications and we’ve created a franchise and market reach for Adobe that few others can match. PDF has become so entrenched in day-to-day life that people take it for granted.

We’re continuing to innovate with PDF technology to enable new business opportunities, particularly by offering server software solutions. For example, last year we introduced a 2-D barcode technology that captures all the information as someone fills out a PDF form and then populates that data into a barcode at the bottom of the document that can be scanned – kind of like a UPC symbol in the grocery checkout line. If the user needs to print out the form to sign it – for example, in a tax form or mortgage application – the employees who then process the form can just scan the signed paper copy and have all that data go right into their back-end systems without having to re-key it. The impact on costs and productivity are enormous, and that is only one of many solutions that we have built around PDF. We see even more exciting opportunities for Acrobat and PDF ahead.

Is there a formal process for tapping into the knowledge of your workforce?
Shantanu Narayen: We have several ways to capture and act on new ideas. One of the main ways is a dedicated organization for cross-company innovation called the Office of Technology. The Office of Technology develops new technologies critical to the long-term success of Adobe and transfers these technologies into existing and new Adobe products. This is similar to the “labs” that reside in some of the largest tech companies, but our focus is a tighter working relationship between the product organizations and the scientists.

We also have a process to identify and fund new ideas inside the company, outside of the Office of Technology. These could be entirely new product line ideas, or technologies that are promising but too early to match with products. We handle these ideas much like a venture firm manages its portfolio of startup businesses, with “seed” funding for promising ideas and checkpoints prior to additional funding to make sure that the ideas are progressing into worthwhile business opportunities. Once a quarter we review all the seed projects to demonstrate company-wide commitment and backing for innovation.

One key driver of internal innovation is hiring the right new talent. We’ve built a program called Entrepreneurs in Residence, which is focused on identifying very senior entrepreneurs who have founded and run successful startup companies in the past, and bringing them into Adobe to find the next “big idea.” Our Entrepreneurs in Residence program gives us a way to infuse fresh ideas and nurture new products and business opportunities.

How much do you rely on research and analysis to guide the development of new innovative services and products?
Shantanu Narayen: Research and analysis have their place but can’t drive innovation on their own, particularly if you want to be a “first mover” in the market. To be successful as a first mover, you have to get into your customers’ heads. There’s no research that will tell you absolutely whether the market is there for something that’s truly new. It’s always a leap.

What innovative companies do you most admire?
Shantanu Narayen: Yahoo and Apple certainly come to mind. 3M also has a history of innovation.

How can failure lead to innovative breakthroughs in business?
Shantanu Narayen: Failure provides an important learning opportunity. For example, when we first launched the Adobe Reader, we charged for it. Adoption was slow. The problem was that there wasn’t enough of an incentive at the time for people to purchase it. Yet proliferation of the Reader was critical in order for Acrobat to catch on. And, the whole value of PDF was in everyone being able to access content no matter what system they were using or where the content came from.

We went back to the drawing board to re-think our strategy and ultimately decided to distribute the Reader for free. This was a significant policy shift and a radical approach at the time. The move was a controversial one inside Adobe… many didn’t believe in the idea of giving away such sophisticated technology. It was a strategic decision to sacrifice revenue in order to make the Reader universal and establish PDF as a standard.

Now it’s a major competitive advantage for the company. It drives the adoption of our products, from creative tools like Photoshop and Illustrator software to our rapidly growing line of enterprise server technologies. Customers know that anyone who needs to view, print and interact with their information can do so because the Reader is ubiquitous.

Does the importance of innovation to your organization vary depending on where you are in the business cycle?
Shantanu Narayen: You have to invest in innovation during good times and bad – it has to be a consistent commitment. You have to keep that core talent no matter what. Our R&D investment has remained steady over the years, between 18 and 21 percent of our revenue, and we have credited that with our continued market success.

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November 8, 2005

Horst Schulze: The C.A.R.E. and feeding of innovation

horst schulze.gif At the upcoming FORTUNE Innovation Forum in New York City, Horst Schulze, the Founding President and former COO of The Ritz-Carlton Hotel Company and current Chairman and CEO of The West Paces Hotel Group, will be a guest speaker on the topic of "BRAND and TALENT: Continuous Change and Innovation." During his presentation, Horst Schulze will be sharing insights and tips on how companies and brands like The Ritz-Carlton Hotel Company have been able to change and re-invent themselves as needed in order to respond to customer demands and expectations.

Within the hotel and hospitality industry, Horst Schulze is considered a leading innovator and visionary. In 1991, Mr. Schulze was recognized as "corporate hotelier of the world" by HOTELS Magazine. In 1995, he was awarded the Ishikawa Medal for his personal contributions to the quality movement. In 1999, Johnson & Wales University recognized him with an honorary Doctor of Business Administration degree in Hospitality Management.

With three weeks to go before the FORTUNE Innovation Forum, Horst Schulze has generously offered an advance peek at his view on innovation.

Who should be responsible for innovation inside of a large corporation? Why?
Horst Schulze: No one. Innovation should be encouraged by leadership and should occur in a spontaneous fashion – in an open and empowered environment – from all levels of the organization. Obviously, there must be proper evaluation by top management to ensure effective implementation.

What is the most important thing that needs to happen before innovation inside a company can occur?
Horst Schulze: There must be an environment that encourages trust at all levels. Employees must be able to speak up and cannot be afraid to provide their input.

Is there an innovation success story within your business that you are most proud of?
Horst Schulze: Yes – the “C.A.R.E. Program.” C.A.R.E. = Clean And Repair Everything. This was not an innovation or a new “thing” or product. Instead it was a new process that focused on hotel guest rooms. Each room was to be thoroughly cleaned and maintained completely on a rotation basis every three months. The results were numerous: (1) we had the cleanest and best maintained hotel rooms in the industry, (2) an extended longevity of the quality of the rooms, (3) savings of millions of dollars in renovations, etc. and most importantly 100% Customer Satisfaction with the appearance of the rooms. It is worth noting that the need for renovation of guest room averages every 4 – 5 years (depending on occupancy). Our guest rooms survived in excellent condition up to 8 years. This program was employee driven. The process innovation was implemented in response to the demands of our guests for a 100% maintained room.

Is there a formal process for tapping into the knowledge of your workforce?
Horst Schulze: Yes – via processes and benchmarks for the entire organization. Innovative ideas are then communicated throughout via the intranet and other internal communication methods.

How much do you rely on research and analysis to guide the development of new innovative services and products?
Horst Schulze: We rely 100% on Customer Research and Feedback regarding their expectations and trends.

What innovative companies do you most admire?
Horst Schulze: Google.

Can you innovate without having access to large amounts of capital? If so, how?
Horst Schulze: In most cases – no money is needed… assuming your organization aligns their minds (not only the function) of the entire workforce to ensure that they are behind the objectives -- out of it comes innovative ideas for solutions.

How can failure lead to innovative breakthroughs in business?
Horst Schulze: Failure forces an organization to break from established habits.

Does the importance of innovation to your organization vary depending on where you are in the business cycle?
Hors