The New Innovation Challenge

E xc e r p t e d fro m

Innovation to the Core:

A Blueprint for Transforming the Way Your Company Innovates

By

Peter Skarzynski, Rowan Gibson

Harvard Business Press

Boston, Massachusetts

ISBN-13: 978-1-4221-5125-9
5116BC
 Copyright 2008 Harvard Business School Publishing Corporation
All rights reserved
Printed in the United States of America

This chapter was originally published as chapter 1 of Innovation to the Core:

A Blueprint for Transforming the Way Your Company Innovates,
copyright 2008 Harvard Business School Publishing Corporation.

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 CHAPTER 1

The New Innovation Challenge

I MAGINE IF EVERY PERSON in your rm came to work every day

believing their ideas could inuence the destiny of the company.
Imagine if every corner of your organization was pulsingat all
timeswith radical, rule-breaking concepts for new products, services,
strategies, and businesses, providing you with a continual ow of inno-
vations with which to delight your customers, confound your competi-
tors, and richly reward your shareholders.
Imagine you could go online 24/7 and get a comprehensive, real-
time window on your companys global innovation activitiesa dash-
board that showed you how many ideas were being produced, which
parts of the world they were coming from, how fast they were progress-
ing through the pipeline, when they were going to be commercialized,
and what their future nancial value was expected to be.
Imagine if every single one of your employees, at every level and in
every location, had been trained in the principles, skills, and tools of in-
novationgreatly enhancing their ability to discover new insights,
spot unexploited opportunities, and generate novel business ideas.
Imagine, too, that your company had a worldwide innovation infra-
structure where those people could quickly nd the cash, the talent,
and the management support they needed to turn their ideas into mar-
ket success stories.

1
2 Turning Rhetoric into Reality

Simply put, imagine if the notion of building and sustaining a deep,

corporate-wide capability for innovation were not just a vague aspira-
tion but a daily reality inside your own organization.
Now stop imagining. At some of the worlds leading companiesGE,
P&G, IBM, Whirlpool, Royal Dutch/Shell, CEMEX, Best Buy, W. L.
Gore, and othersmuch of the above is already happening.
In this book, you will learn how to dramatically improve your orga-
nizations own capacity for innovation by mobilizing and monetizing
the imagination of your employees, customers, and business partners
every day, everywhere. On the pages that follow, we will share the tools,
techniques, and methodologies we have used successfully for well over a
decade to help companies turn innovation into a core competence and
thereby outperform industry rivals.

MAKING INNOVATION HAPPEN

Innovation. From the boardroom to the business press, everyone is talk-
ing about it. Most senior executives would tell you that they get the mes-
sage. In any survey of management priorities these days, innovation is
almost always one of the top two or three items on the corporate agenda.1
But making innovation a priority is not the same thing as making it
happen. All too often, innovation becomes nothing more than a buzz-
word or a bumper stickerthe management theme du jourthat re-
ceives a lot of reverential rhetoric in company meetings, corporate ad
campaigns, and annual reports.
The difcult challenge for most organizations is how to turn all that
rhetoric into hard-nosed, revenue-growing realitynot just by making
incremental tweaks to existing products or services, or by pursuing a
once in a blue moon blockbuster, but by producing a constant stream
of breakthrough innovations that compound over time to build a for-
midable competitive advantage.
Very few rms have managed to pull this off. In the vast majority of
cases, pouring money and effort into innovation has produced remark-
ably little in terms of new wealth. After conducting studies of the
worlds one thousand biggest spenders on R&D, for example, consult-
 The New Innovation Challenge 3

ing rm Booz Allen Hamilton concluded both in 2005 and 2006 that
there is no discernible statistical relationship between R&D spending
levels and nearly all measures of business success, including sales growth,
gross prot, operating prot, enterprise prot, market capitalization or
total shareholder return.2 To illustrate the point, guess which U.S. rm
has spent more money on R&D than any other company in the world
during the last twenty-ve years? The answer is General Motors.3
Sure, business history is replete with examples of successful innova-
tion. Over the years, many a company has been able to take the lead in
an industryor invent an entirely new oneby leveraging a disruptive
technology, a radical new product idea, a truly novel service concept, or a
game-changing business model. But in case after case, those companies
eventually ceded their leadership position to a competitoroften a new-
comerthat later seized on a superior idea. Not many organizations
have so far managed to build a deep, enduring capability for innovation
one that consistently drives protable revenue growth and that enables
the company to maintain a competitive advantage over the longer term.
Not yet, that is. Right now, the list of major companies that are work-
ing methodically on the innovation management challenge is growing
rapidly, and the progress of a few pioneering rms provides hope and
inspiration for the rest of the business community. These leading-edge
players are demonstrating that large industrial organizations really can
tackle the challenge of innovation successfully in a broad-based and
highly systemic way.
Consider the well-documented efforts of GE and P&Gtwo of the
biggest and best-known companies on earthto drive innovation to
the core of their respective organizations.

GE: From Cost Cutter to Innovation Powerhouse

Since taking over the reins from Jack Welch in 2001, Jeff Immelt, GEs
chairman and CEO, has launched nothing less than a cultural revolution
at the company, pushing its strategic focus beyond continuous improve-
ment and bottom-line results toward the creation of bold, imaginative
ideas. His aim has been to grow the boundaries of the company, this
time organically rather than through acquisitionsby taking GE into
4 Turning Rhetoric into Reality

new lines of business, new geographic areas, and new customer segments.
Immelt knows this is the only way his company can continue to meet its
grueling nancial targets. Currently, he is under pressure to achieve an
incredible 8 percent of organic growth each year. For a company of GEs
magnitude, this represents around $15 billion of new revenue annu-
allyequivalent to adding a new business the size of Nike.4 To this end,
Immelt has worked hard to make innovation a deep, systemic capability
all across the companyan engine that will drive and sustain new rev-
enue growth.

P&G: From Not Invented Here to Open Innovation

Similarly, when Alan G. Laey became chairman of P&G in 2000, he

made it clear that he wanted innovation across the spectrumin how
the company invents, markets, manufactures, and distributes its prod-
ucts.5 The reason is simple. Like Jeff Immelt at GE, Laey is on the
hook to deliver relentless levels of protable growth each yeararound
$7 billion of new revenue annuallyand he needs to nd imaginative
new ways to fuel it. One of his major initiatives at the Cincinnati-based
consumer goods giant has been to break down the walls that used to
separate product categories, business units, sectors, and brands, thus al-
lowing innovation to ow freely across the entire organization. More
importantly, in 2001 Laey threw open P&Gs doors to innovators who
are not on the companys payroll, setting a goal for his organization to
source at least 50 percent of its innovations from outside the company
(up from roughly 10 percent at the time). Thanks to a new organiza-
tional model called Connect and Develop, the company has since been
able to bring hundreds of new products to the market that had their
genesis, in whole or in part, outside P&G.

Clearly, when Immelt and Laey talk about the innovation imperative,
its not merely rhetoricits something that is deeply transforming
their organizations. And the precedent these companies are setting is
not going unnoticed. Geoff Colvin writes in Fortune magazine, Immelt
and Laey are going down a road everyone in business will have to
travel. Watch and learn.6
 The New Innovation Challenge 5

THE NEW INNOVATION LEADERS

Some companieslike Apple, or Google, or W. L. Goreseem to have
been born innovative. But what if your organization is not one of them?
What if your rm is a whole lot better at disciplined execution than it
is at wealth-generating innovation? If so, theres only so much you can
learn from innovations usual suspects. Instead, you need to learn from
companies, perhaps like your own, that have transformed themselves
from innovation laggards into innovation leaders.
Consider two unlikely innovation champions. One is Whirlpool, the
global leader in domestic appliances, and the other is a Mexican rm
called CEMEX, one of the worlds leading producers of building mate-
rials (including, for example, cement, ready-mix concrete, and aggre-
gates). These two companies, among others, are demonstrating that its
perfectly possible to turn old-line industrial organizations into cata-
lysts for continuous, break-the-rules innovation.

Whirlpool: Thinking Outside the White Box

When Whirlpools former CEO Dave Whitwam set out to dene his
companys global innovation strategy back in 1999, the exact words he
used were Innovation from Everyone and Everywhere. This was a
huge aspiration, considering that at the time Whirlpool had 68,000
employees in 170 countries, as well as 50 manufacturing and technol-
ogy research centers around the globe. But today, Whirlpool has be-
come a best-practice model for the embedment of innovation as a
capability across a large, global enterprise.
Instilling innovation as a core competence at Whirlpool took a mas-
sive, broad-based effort over several years, involving major changes to
leader accountability and development, cultural values, resource alloca-
tion, knowledge management, rewards and recognition systems, tradi-
tional hierarchies, measurement and reporting systems, and a whole
host of other management practices and policies.
Here are just a few examples of these changes:
The appointment of vice presidents of innovation at both the
global and the regional level
6 Turning Rhetoric into Reality

The creation of large, cross-functional innovation teams in each

region employed solely in the search for breakthrough ideas
The introduction of a companywide training program aimed at
developing and distributing the mind-set and skills of innovation
The appointment of more than six hundred part-time innova-
tion mentors and twenty-ve full-time innovation consultants,
who act as highly skilled advisers to new project development
teams around the world
The creation of innovation boards in each region and each
major business unit, made up of senior staff who meet monthly
not just to review ideas and projects, set goals, and allocate re-
sources, but to oversee the continuing innovation capability-
building process
The organization of big communication events called Innovation
Days where innovation teams showcase their ideas to other Whirl-
pool people, the media, and even Wall Street analysts. Sometimes
these events are also held in suburban shopping malls as a way of
collecting feedback and additional ideas from potential users
The creation of a comprehensive set of metrics to continually
measure the companys innovation performance as well as its
progress in embedding innovation as a core competence
The establishment of a sophisticated IT infrastructure called
Innovation E-Space, which integrates all of Whirlpools people
into the innovation effort and allows them to track progress on
innovation activities across the corporation
The key objective to all of this has been to help every single employee
at Whirlpool think outside the traditional white box of home appli-
ances, and imagine exciting, customer-relevant solutions that create new
wealth for the company. The outcome has been a stream of breakthrough
ideas for products and businesses that have come from all over the Whirl-
pool organizationideas that deliver value to consumers in ways never
before seen either at the company or in the industry.
 The New Innovation Challenge 7

This has produced a steep upturn in the companys annual revenues

from innovative new productsrising from $78 million in 2003 to
$1.6 billion in 2006 (a gure over twenty times higher).7 Today, Whirl-
pool has well over ve hundred projects in its innovation pipeline, rep-
resenting expected future revenues of $3.5 billion. And the companys
innovation juggernaut shows no signs of slowing down. As current
CEO Jeff Fettig told BusinessWeek, If we keep innovating well keep
growing.8
Not surprisingly, Whirlpools overall revenues and prots are now at
all-time highs and growing at a brisk ratethis in a stagnating indus-
try where many of Whirlpools global rivals are struggling.

CEMEX: Remixing the Cement Business

One of the fastest-growing and most protable companies in the world

in the last few years has been a global building materials rm from
Mexico called CEMEX. BusinessWeek lists CEMEX among a new class
of formidable competitors from emerging markets that is rapidly ris-
ing up to challenge corporate America. Today, the company is number
three in the world cement market.9
Cement may not seem like an industry that inspires revolutionary
thinking or that attracts the creative, curious, and contrarian type. Yet
CEMEXs ability to reinvent both its industry and itself serves as an ex-
ample to any company aspiring to make innovation work.
Back in the early 1990s, CEMEXs CEO, Lorenzo Zambrano, de-
cided that the key to building a better future for his company was inno-
vation. He resolved to push CEMEX beyond its tradition-bound roots
by investing in the problem-solving skills of rank-and-le employees.
This vision has spawned a corporate-wide innovation capability that
has helped the company achieve sales and prot growth over the last
decade of more than 20 percent on average, and raise its operating mar-
gins by the same percentage, making them nearly twice as high as its
two global rivalsFrances Lafarge and Switzerlands Holcim. It has
also helped CEMEX become one of the most highly regarded employ-
ers in Mexico.
8 Turning Rhetoric into Reality

Here are some of the components of CEMEXs innovation system:

A dedicated innovation group, led by the innovation director,
with full-time employees responsible for millions of dollars in
annual budget
Multifunctional teams, each consisting of ten to twelve mem-
bers from across the company, whose mandate it is to generate
new ideas and breakout proposals around major platforms or
themes
An innovation board that is set up to screen and fund these pro-
posals, with initial funding ranging between a few hundred thou-
sand dollars and several million dollars
Hundreds of trained and highly visible innovation champions
in every part of the organization, who are there to guide and men-
tor any employee who comes up with an idea
Virtual, online ping-pong competitionsheld regularly and
judged by one of the companys innovation expertsin which
people bat exciting ideas back and forth across the organiza-
tion, improving them as they go
A dedicated IT platform that expedites the spread of new ideas
across CEMEX, featuring an online idea bank designed to make
it easy for employees to share their ideas, big or small
Annual Innovation Days, devoted to recognizing and celebrating
the work of innovators, which feature Oscars for the best imple-
mented ideas
At CEMEX, nobody has a monopoly on new ideas. Innovation is a
collective act that springs from a collaborative approach to solving
business problems. By tapping into as many minds and as many differ-
ent talents as possible, and by getting people to swap ideas, innovate
together, and feel jointly responsible for success, CEMEX has been able
to invent a variety of novel approaches to its business that nobody in
the industry had ever thought of before. The innovation process has
 The New Innovation Challenge 9

produced hundreds of opportunities in all aspects of the companys

business model, including new products and services, improvements in
the manufacture and distribution of cement, and ideas for radically
streamlining the companys operations, such as logistics. Some of these
ideas have delivered hundreds of millions of dollars in operations sav-
ings, sometimes in just a few months.

What the examples of Whirlpool and CEMEX teach us is that, with a

serious, broad-based effort and with the right set of design rules, inno-
vation can become a systemic capability inside any organizationas
ubiquitous as Six Sigma, cycle time, rapid customer service, or any of
the other complex processes that companies have been honing over the
last thirty years. These companies are proving that you can indeed turn
innovation from an ethereal, hit-and-miss thing into a deep core com-
petence, something that becomes part of a companys bloodstream.
Why is it, then, that in most organizations todayeven those where
organic growth and innovation are supposed to be top strategic priori-
tieswe still nd nothing that even remotely resembles a systematic,
corporate-wide approach to innovation?

MORE BUZZWORD THAN CORE COMPETENCE

Pick up the average annual report. Open it at the CEOs letter to the
stakeholders and look for the word innovation. Usually, you will nd it
in the rst few lines: We thrive on innovation, Were committed to
growth through innovation, We have an unwavering commitment to
innovation, and so on. But try this little experiment: visit that com-
pany and talk to some of its midlevel employees. Ask them a few ques-
tions like these:
Could you describe your companys corporate innovation system?
Do you believe that top management regards every employee in
your company as an innovator, potentially capable of shaping cor-
porate direction?
10 Turning Rhetoric into Reality

Have you personally been trained as a business innovator?

How important is innovation in your own performance metrics
and in your compensation?
How difcult would it be for you to get small amounts of experi-
mental capital to test a new idea?
Would you know where to go in your organization to nd coaches
and mentors who could help you push an idea forward?
In what ways do your companys management processesstrate-
gic planning, capital budgeting, and so onsupport your work
as an innovator?

Ask people these kinds of questions, and you will usually be met
with a blank stare. Its quite obvious that, in most companies, innova-
tion is still more buzzword than core competence. But why is this?
We certainly wouldnt put it down to a lack of sincerity on the part of
senior executives. Most corporate leaders understand quite well that
there is only one way to drive the kind of aggressive top-line growth that
investors demand from them year after yearand that is not through
tired old management practices like cost cutting, restructuring, buying
back shares, or mergers and acquisitions. They realize that in the longer
term, if they want to stand any chance of growing faster than the indus-
try average or the overall economy, they have no alternative but to innovate
in their products, their business models, and, indeed, their manage-
ment systems.
They also know that, with todays intense competition and rapidly
changing market dynamics, strategy life cycles are getting shorter.
Most senior managers recognize, therefore, that what they really need is
not just another incremental efciency program, but some fundamen-
tally new strategic thinkingthat radical innovation is the only option
they have left for creating new wealth.
The reason for the large and yawning gap between rhetoric and real-
ity concerning innovation is that most organizations have not yet de-
veloped a clear modelreected in management practiceof what
 The New Innovation Challenge 11

innovation actually looks like as a highly distributed, all the time,

everywhere capability.

TOWARD A SYSTEMIC UNDERSTANDING

For an analogy, think back to the quality movement of the 1970s.
When the rst Western executives went over to look at Japanese com-
panies a few decades ago, they initially failed to recognize that quality
was a deep, systemic capability in those organizations. Most of them
came back with a very supercial understanding.
Quality is not very difcult was the typical response; its about
quality circles. These people meet on Friday afternoons; they sit around
for a few hours talking about how to improve quality and . . . presto!
Quality goes up. So lets have quality circles. Many Western compa-
nies did just that. And they found that it made no difference to their
quality whatsoever.
At that stage of the game, many organizations said, Okay. We tried
that . . . it didnt work, and they quietly closed down their quality ini-
tiatives. It took several years before they had the courage to make an-
other attempt.
Eventually, when those companies went back and studied what the
Japanese were really doing, they realized that quality was a much
deeper discipline than they had originally imagined. This time their re-
sponse was Gosh, theyre training people. Theyre training thousands of
people. Theyre giving them tools to use. Theyre completely changing
the metrics. Theyre empowering ordinary workers. Theyre giving
shop-oor employees the authority to stop a million-dollar production
line. That was when Western companies began to grasp that quality
could be an intrinsic and ubiquitous capability rather than a specialized
functionthat it could actually be embedded and institutionalized in
an organizations core DNA.
In other words, the initial failure with many quality initiatives did
not reect any lack of conviction or seriousness on the part of top man-
agement. What it reected was a lack of knowledge about the processes,
12 Turning Rhetoric into Reality

the tools, and the mechanisms that were critical for making quality
happen. Those executives simply didnt understand how to make qual-
ity systemic.
The bleeding edge for companies is no longer quality; its innova-
tion. But right now, innovation is still more or less where quality was
in the late 1960s. The problem today, as it was back then, is not top
management complacency or hypocrisy. It is the fact that making inno-
vation work inside a large organization is a much more complex and
multifaceted challenge than most people imagine. It simply cannot be
solved with some Band-Aid or silver bullet.
We might compare it to a Russian matryoshka doll. From the outside,
the doll appears simple and straightforward. But, as we all know,
theres much more to it than rst meets the eye. When we open it up,
we discover that its actually made up of many nested layers, one inside
the other, and that it takes every one of those layers to make the doll
complete. So, too, when we move beyond a supercial understanding of
innovationwhen we begin to dig downwe nd that it is a deep,
systemic challenge that involves considerable effort across a whole
range of interdependent dimensions. As with quality, innovation re-
quires new training, new tools, new IT systems, new metrics, new val-
ues, new management processes, and so on, and all of these mechanisms
must be tightly integratedor nested togetherfor the system to
function effectively.
Many senior executives may never have even considered innovation
in these terms. They might think of innovation as breakthrough tech-
nology, or cool product design, or individual creativity. Or they may
know it as a specialized unit called R&D, or new product develop-
ment, or corporate venturing. But they have probably never con-
templated the idea of recalibrating all their core management systems
and processes to make innovation an everyday part of the system
something that becomes reexive and natural to everyone.
Up to now, the management literature on innovation has not been a
big help in this regard. Much of it has focused on playing creative
thinking games, or improving brainstorming techniques. Other books
and articles have made a more serious contribution to helping compa-
nies understand innovation as an organizational process, but so far, none
 The New Innovation Challenge 13

of them seem to have had a deep enough impact on management think-

ing. According to innovation strategist Larry Keeley, The eld has ad-
vanced to about the same state as medicine when leeches, liniments and
mystery potions were the sophisticated treatments of the day.10
No wonder innovation has gone through a crisis of credibility in
many organizations, just as the quality movement did in its early years.
In the absence of any reliable guide, companies have often wasted con-
siderable time and money on innovation initiatives that were doomed
from the outset. In most cases, these efforts have delivered little in the
way of new wealth-creating products, services, strategies, and business
models. A global study in 2007, for example, involving almost twenty-
ve hundred senior executives in fty-eight countries, revealed that
more than half of all executives surveyed were still dissatised with the
nancial returns on their companys innovation investments.11
Thats why, for decades, innovation has been something of a side-
show in many rmsnice to have, and nice to talk about, but not
doing very much to contribute to growing the business. Like those
long-departed auto executives who underestimated the complexity of
the quality challenge, many companies have simply concluded, We
tried innovation. It didnt work.
The central tenet of this book, however, is that innovationwhen
systemically applieddoes work. We argue that it is entirely possible to
boost your companys innovation performance in a dramatic and endur-
ing way, but it can only be done if you are prepared to make innovation
a systemic enterprise capability. Nobody can hope to achieve anything
by throwing a light switch and saying, Okay, from Monday morning
were all going to be a lot more innovative. Anyone who seriously
wants to inuence the values and dynamics of a large-scale, distributed
human system is going to have to roll up their sleeves and get ready for
some really hard work.
Despite the gargantuan nature of the challenge, building a deep, sys-
temic capability for innovation is now the inescapable imperative for
every companyas important to an organizations success and survival
as the quality movement was in its day. Granted, in the short run, there
may be some substitutes for innovationsome quick ways to prop up a
companys share price and earnings over the next few quarters. But in
14 Turning Rhetoric into Reality

the medium to long term, there are absolutely none. In todays innovation-
based economy, where organic growth and strategic renewal are the new
business mantras, either companies learn to drive innovation to the core
or they risk becoming footnotes in the history books.

INNOVATION TO THE CORE

Making such a profound cultural change requires time, money, and
commitment. In our experience, it can take an organization three to
ve years to build the kinds of skills, tools, management processes,
metrics, values, and IT systems that are required to support ongoing,
across-the-board innovation. But as James Andrew and Harold Sirkin,
senior partners at The Boston Consulting Group, argue in their book,
Payback, managing and mastering innovation as a disciplined business
activity can help an organization reap dramatic nancial rewards.12
Of course, it cant be done piecemealan innovation reward pro-
gram here, a corporate venture fund there, or a few days of brainstorm-
ing somewhere else isnt enough. But the message is that it can be done.
If companies like GE, P&G, Whirlpool, and CEMEX have taken on this
challengeand are already achieving extraordinary resultsyour com-
pany can do the same.
Again, the quality movement sets an encouraging precedent. Look
how adept todays organizations have become at systematically manu-
facturing world-class products. Who would have thought that what
once seemed so daunting could become almost run-of-the-mill business
practice? In the years to come, we see no reason why corporate innovation
systems shouldnt become just as efcientand just as commonplace
as corporate quality systems.
Already, the innovation movement is gathering momentum. The
challenge of building a systemic innovation capability has become the
focus of increasing attention in both business and academic circles
around the world. Companies everywhere are asking themselves exactly
what they need to do to drive innovation to the coreto make innova-
tion an all the time, everywhere reality inside their organizations.
 The New Innovation Challenge 15

Thats why we felt it was time to write this book. Having spent more
than ten years helping companies tackle the innovation challenge our-
selves (learning rsthand about what works and what doesnt), we be-
lieve we can now begin to talk in a practical way about how your own
company can embed innovation as a systemic enterprise capability
using an approach suited to your organization.
We are not by any means claiming to have cracked the code on inno-
vation; there is still very much to be learned. But what we do have is a
considerable body of knowledge and frontline experience, along with
many practical tools and techniques that we believe can be very useful
to your own organization. This book is an attempt to share as much of
that as possible with you. Its purpose is to give you and your company a
sense of what it takes to create the organizational conditions within
which radical innovation can continually ourish. Our hope is that it
will not only make a convincing case for innovation embedment, but
also help set the agenda for making innovation a way of life inside more
and more organizations.
For too long, innovation has been viewed as a random, often serendip-
itous, act. In this book, we describe the basic principles, techniques, and
methods common across all successful innovators and innovative compa-
nies. Whether you are an executive leading innovation from the top or a
frontline innovator with a passion for addressing unmet customer needs,
you can learn to apply these basic principles and techniques to spur prof-
itable growth through winning innovations.
Perhaps you picked up this book because you are looking for a way to
increase the quantity and quality of new ideas entering your innovation
pipeline. Maybe it was because you want to know how to build a port-
folio of strategic growth opportunities or how to derisk a bold idea. It
might be because youd like guidance on how to organize effectively for
innovation or how to overcome one or more of the challenges innova-
tors commonly face. Possibly it was because you and others in your rm
have already recognized the need to deeply and profoundly change your
companys approach to innovation. Whatever your motivation for read-
ing this book, we invite you to read on and nd helpful answers on all
of these issues.
16 Turning Rhetoric into Reality

Here is what awaits you on the pages ahead:

In the rst part of the book, we will examine three critical precondi-
tions for making innovation happen inside your company. We will also
show you how to systematically build a foundation of novel strategic in-
sights that can serve as the raw material for game-changing innovation.
In part 2, we will provide you with a set of design rules for enlarg-
ing and enhancing your companys innovation pipeline. We will share
market-proven methodologies for dramatically improving your rms
ideation efforts and for innovating across every aspect of the business
model.
In part 3, we will look in detail at how to evaluate the potential of
new growth opportunities by asking the right questions at the right
time. Next, we will describe how your company can construct an inno-
vation architecture that will enable you to frame those opportunities in
the context of your corporate strategy.
Part 4 is where you will nd useful guidelines on how to manage and
multiply your organizations resources for innovationboth nancial
and intellectualas well as on how to pace and derisk your innovation
investments.
Finally, in part 5, we will provide some pragmatic advice on measur-
ing and ne-tuning innovation performance. We will outline the four
key organizational components that need to come together to institu-
tionalize innovation as an enterprise capability, offering some practical
guidance to help you make organizing decisions. We will also share
what we and others have found to be critical if you want to make inno-
vation sustainable in your company.

In writing this book, we have endeavored to make the content as hands-

on as possible. To this end, we cite a rich variety of cases from the real
world, illustrating how companiesmaybe similar to yourshave
met and overcome the same innovation challenges you might be facing.
We also incorporate practical elements, wherever possible, to assist you
in turning innovation from rhetoric into reality. These include focused
sets of diagnostic questions, as well as a recurring feature at the end of
each chapter called Innovation Challenges and Leadership Impera-
 The New Innovation Challenge 17

tives. These elements are intended to help you assess your own situa-
tion, jump-start your organizations innovation engines, and facilitate
progress on actually making innovation a core competence.
So, if you are up for the challenge of building a deep innovation ca-
pability inside your own company, lets waste no time. The following
chapters will show you how to get started.
 NOTES

Chapter 1
1. James P. Andrew, Harold L. Sirkin, Knut Haans, and David C. Michael, In-
novation 2007, Boston Consulting Group. The bibliography references additional
innovation surveys by other leading consulting rms.
2. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, Money Isnt Every-
thing, Strategy and Business, December 5, 2005.
3. Michael Schrage, For Innovation Success, Do Not Follow Where the Money
Goes, Financial Times, November 8, 2005.
4. Geoff Colvin, Laey and Immelt: In Search of Billions, Fortune, November
27, 2006.
5. Ben Franklin Forum on Innovation: What Can You Learn from the Worlds
Top Innovators? Knowledge@Wharton, February 27, 2006.
6. Geoff Colvin, Laey and Immelt.
7. Whirlpool Corporation 2006 Annual Report.
8. Why Whirlpool Is Cleaning Up, BusinessWeek, July 30, 2004.
9. Jeffrey E. Garten, A New Threat to America Inc., BusinessWeek, July 25,
2005.
10. See http://www.doblin.com/TeamIndexFlashFS.htm.
11. Andrew et al., Innovation 2007.
12. James P. Andrew and Harold L. Sirkin, with John Butman, Payback: Reaping
the Rewards of Innovation (Boston: Harvard Business School Press, 2007).

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