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hi I'm Dave Heckman I'm here with
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Professor George day to interview him
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about his new book Innovation prace
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George welcome to knowledge at Warden
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thank you Dave I'm I'm very very excited
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about sharing my thinking on uh my new
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book Innovation prowess and uh the
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subtitle is leadership strategies for
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accelerating growth so uh let's start
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out by putting a question mark behind
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that title and say what's the question
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I'm trying to answer and I I've been
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working on this for now over 25 years to
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understand what distinguishes consistent
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growth leaders that is companies that
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grow organically with their own
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resources and what separates them from
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growth laggards so I'm looking at growth
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leaders like IBM uh Samsung
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Lego uh and companies of that caliber to
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try to discern over many many years what
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sets them apart uh the answer is comes
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in two parts firstly they have uh what I
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call growth seeking discipline and this
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is sort of symptomatic uh uh and
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resonates with Peter drucker's notion
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that Innovation is a skill just like
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learning the piano that uh you build
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when you practice and invest a lot of
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time so it's a it's a replicable and
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discipline skilled but that's only half
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the story so you got this growth seeking
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discipline you have to marry that
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closely with Innovation ability so
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Innovation ability is uh got three parts
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to it your culture which uh really
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overwhelms everything so culture and
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leadership are the uh first factors and
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so it has to be uh not obviously a
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growth seeking but risk tolerant and
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experimenting there's a lot of aspects
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to culture that are
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important the second two pieces of this
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uh uh organizational ability to innovate
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our capabilities and I'm looking at a
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number of uh interesting adaptive
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capabilities which these growth leaders
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have they can experiment they uh really
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invest heavily in understanding their
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markets uh they're very very good at
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open Innovation and partnering and
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sharing and uh they do a lot of
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experimenting they don't feel they have
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the answers but they're going to try a
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lot of different things they'll uh
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follow that Mantra of start small uh but
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think big fail fast and scale quickly if
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you get it right and so they they just
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get ahead of the liards and they stay ah
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hit the liards are always catching up so
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two parts uh you have discipline plus
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ability and that's what I mean by
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prowess fabulous many senior leaders
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really can't see their way to achieve
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next year's growth objectives how can
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Innovation prowess help them uh let me
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uh frame that David that's a great
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question uh but it goes back to I I I
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think it can be understood through a
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question uh that uh a research study
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posed uh a few years back to senior
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officers of a whole array of global
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companies and the result they found was
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that only
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29% of this sample of senior Executives
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were very confident that they could
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reach their ambitious organic growth
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objectives now I have shared this with
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many many uh executive teams and uh uh
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executive program participants and they
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all get it they say well uh what about
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the other 70% who are only somewhat or
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not at all confident they can reach
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their growth objectives and they can
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give me dozens of reasons and embedded
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in those reasons why there's a lack of
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confidence comes the pathway to building
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prowess uh so for example uh I hear a
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lot of uh explanations around
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short-termism and so demand for
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short-term performance drives out long
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run Investments uh lack of leadership
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commitment uh and lack a discipline
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being
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reactive uh we see an awful lot of
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explanations around uh unwillingness to
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make long-term Investments or we do make
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them the short-term profit pressures
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pull the resources back out of uh the
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long-term to meet short-term demands
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from the Salesforce from the customers
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and these are all important uh but they
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they take away from the growth engine
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and then lastly and and and perhaps most
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interesting people are very averse to
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the big risks that come from uh
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substantial Innovation now I've arrayed
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all of the on a spectrum between what I
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call small eyee Innovation which is what
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You' got to do to uh stay in the game
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these are upgrades uh new
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versions the next generation of
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Technology but you're still in your same
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business and you're simply staying
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competitive that's the small eye end the
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Spectrum big eye is breakthrough blue
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ocean and uh I've done a lot of research
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through the max Center here at Wharton
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and we have a pretty good sense of just
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how risky they are but you're looking at
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85 to 90% failure rates in the big eye
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end of the
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spectrum what we have figured uh and
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learn and and it's consistent with what
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other researchers and uh Consultants
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have found that a The Sweet Spot is
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really
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adjacencies that is that they're
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adjacent in uh terms of drawing on your
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technology base your production press
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and so forth they also are adjacent in
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that they um leverage your brand so your
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brand promise mean something you have
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some understanding of the market you
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know how to get to the market the
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channels and so forth are important so
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uh we we we focus a lot on uh
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maintaining consistent focus on these
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adjacencies as the as the real growth
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engine thanks George any advice you can
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offer about allocating capital and
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resources towards Big ey and little eye
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Innovation I mean I think there's a lot
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of of confusion around where to invest
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to to align with strategy the uh that's
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that is a uh question that has both a
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shortterm and a long-term answer to it
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in the short run the research is fairly
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consistent in showing that companies
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that want to grow uh above the industry
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rate uh probably invest
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70% of what I'll call those small eye
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Innovations because that's what you got
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to do to stay competitive to meet the
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needs of uh Channel partners and
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customers but between uh 10 and 20% on
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this area of adjacencies now that's the
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initial resource allocation the problem
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is uh many companies start out that way
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but they um start sucking resources back
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from the the riskier adjacencies and big
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ey
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Innovations in order to fund the
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short-term stuff and by the way meet the
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short-term profit targets so the uh
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allocation often starts out in an
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optimal fashion but then it
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loses uh
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that
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uh Focus so you you now are not
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investing as much as you should and uh
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we're seeing this played out uh in in in
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a lot of organizations which allow the
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operating managers control over
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long-term uh big eyee Innovations and
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adjacencies now that's not all bad but
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let's look at the story of partrick
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gamble recently they uh have not had uh
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anywhere near the the past track record
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in breakthrough innovations that they
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used to have and they traced that back
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and this is their diagnosis that uh some
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years ago we gave that is Proctor gamble
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gave the operating managers the division
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general managers uh control over the
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Innovation
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budget and uh inevitably the short-term
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pressures one out contrast that with GE
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where Jeff immelt has had imagination
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breakthroughs for uh many years now and
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these are big big projects like getting
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into batteries which is not a business
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they've been in before and he
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personally uh through a strategic fund
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uh invests in those but more importantly
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he's watching those constantly so every
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time he goes into uh a business he's got
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with him a dossier on an imagination
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breakthrough that this company should be
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working or this division should be
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working on so management commitment is
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sustained resources are sustained they
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don't get siphoned off into short run
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issues and and opportunities so that's
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the way uh you you you stay in the game
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so you have discipline in finding these
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big opportunities and then you have the
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ability to stay committed and focused
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that's great George um the late Apple
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CEO Steve Jobs once said don't let the
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voice of others drown out your own
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internal voice um how do you connect
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that with outside in versus inside out
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thinking and how do you reconcile that
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balance within the organization's
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Innovation process so the um the
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distinction between outside in an inside
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out is uh question where you
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start and uh and and that's uh true in
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divining a designing a competitive
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strategy or uh an innovation strategy
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and carrying that out by outside in I
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mean you start with the market and the
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latent needs frustrations problems that
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the customers have but you also start
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with the competitors where they are so
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uh you're looking for in ations that
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create new value for customers that
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they're willing to pay for so that's the
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outside in perspective you standing in
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the shoes of the customers who by the
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way um won't be able to tell you what
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the product looks like they can tell you
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vividly about their frustrations and
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their problems and the uh if you think
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about uh Apple's uh breakthroughs uh
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they're often built upon the
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inadequacies of say MP3 players and
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where the iPod was a a brilliant example
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of understanding why people why why the
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15 companies with MP3 players weren't
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getting anywhere it was a terrible
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experience and Steve Jobs saw that had
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the vision with his team and uh of
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course spends an enormous amount of time
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with his design Chief and they're really
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thinking through every piece of that
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customer experience to deliver Superior
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customer customer value
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so that's the outside in perspective
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keeping in mind the customer's
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experience satisfying their latent needs
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trying to anticipate them but you have
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to mesh that and this is this again this
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marriage notion uh you also have to have
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powerful Inside Out capabilities you
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need to have Mastery of the technology
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but and and you have to have the
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engineering skills the production skills
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the supply chain skills so it's uh
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it's it's a question of where you start
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if you start off with just the
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technology looking for a solution you
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won't get there great thanks George you
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you describ in your book that it's
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somewhat counterproductive to frame the
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choice between uh organic and inorganic
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growth rather than finding the right
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balance can you talk a little bit about
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that yeah the uh the book is um first
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and foremost about growth leaders
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defined as Superior rates of organic
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growth that is with their own resources
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um and the distinction I draw here is
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with inorganic merges and Acquisitions
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and so forth but these in fact are
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highly complimentary so let's think
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about
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Cisco they uh view their Innovation uh
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Alternatives along a spectrum starting
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with uh build if you like which is uh so
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so to to build it is organic growth and
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at the other end of the spectrum is buy
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you you buy a uh an access to a market
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so they have they're masterful at
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acquiring and integrating firms uh but
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along this spectrum if if you uh think
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about all the things they do they've got
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uh what I would call closed Innovation
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everything is done
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inhouse uh open Innovation they got a
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lot of Partners they're very good at
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partnering but they have internal
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incubators which uh are independent of
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the rest of the
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organization and that's sort of halfway
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along the Spectrum then they have uh
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external Venture groups and Venture
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partners that they invest in and then
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finally mergers and Acquisitions but
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even an acquisition can be in service of
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an organic growth strategy because you
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may want to use that small tow hold
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acquisition to get insights into a
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market or to buy a technology you don't
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have and by the way IBM is another
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company that is masterful at uh making
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these kinds of Acquisitions in service
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of organic growth so they it's uh I I
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think it's misleading to distinguish
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sharply and say it's either or in fact
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it's both and in fact it's all of them
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you just have to figure out uh how
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ambitious your growth aspirations are
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and then how much you willing to invest
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in each of these areas thanks George in
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the book you uh one of the centerpieces
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of the book in fact are these 14
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Innovation Pathways uh in closing can
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you just talk a little bit about what
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those are what inspired you to develop
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them and how they can help organizations
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Drive their Innovation so this is
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probably a good way to kind of pull
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things together uh so we have discipline
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on one side and ability on the other and
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the discipline piece you've got to have
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an aggressive growth strategy that
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really signals your aspirations second
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part of that discipline is what I'll
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call uh Divergence so you're casting a
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pretty wide net looking for attractive
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growth opportunities you want uh not
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just what comes to you that's sort of a
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reactive approach but you're
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aggressively seeking uh growth
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opportunities and then the last step in
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this disciplined approach to growth
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seeking is convergence where you select
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the best and you aggressively screen out
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okay back to full spectrum Innovation
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where does one look and I'm talking
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about active looking not just passive
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waiting for ideas to come to you but
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where does one look so the the notion of
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full spectrum innovation has 14 growth
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Pathways in it uh and so I created these
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growth Pathways by essentially
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decomposing uh strategy into two parts
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the the value proposition and the
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business model and there's eight
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different Pathways to expand and
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elaborate your value proposition but
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another seven or eight uh are equally
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feasible for business model Innovation
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including different ways to generate uh
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and capture value uh so modifying
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processes uh new monetization methods uh
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and this work uh really does build on
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the shoulders of many others so a lot of
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work we've done in the Mac Center um but
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work by people like Ido Kay Christensen
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have all contributed my understanding of
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what the possible pathways are and then
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I've applied them with many of my
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clients so uh my clients are the first
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ones to tell me by the way whether I've
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got a good idea or not they that's the
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discipline I live with and uh I've been
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very fortunate to have really really uh
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demanding interesting and challenging
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clients well thank you George thanks for
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being with us and thanks for taking the
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time to tell us about your new book
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Innovation prowess thank you very much
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daav
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