Lessons Learned from Outstanding Corporate Innovators
The Outstanding Corporate Innovator Award Committee
Originally published: 2012 (PDMA Visions Magazine, Issue 3, 2012 • Vol 36 • No 3)
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For the past 24 years, PDMA’s Outstanding Corporate Innovator (OCI) Award has recognized companies that have demonstrated sustained and quantifiable innovation success, and the winners have provided a valuable set of lessons learned. This article takes “a look under the hood” of past OCI winners to identify the practices and processes that have contributed to their success.
Introduction of the OCI Award
Since its beginning in 1988, the PDMA’s Outstanding Corporate Innovator Award Committee has used a rigorous process to screen and evaluate nominees using the following criteria:
- Sustained record of success in launching new products over a five-year period;
- Significant and quantifiable business results delivered by new products;
- Consistent use of a set of teachable new product development practices; and
- Distinctive innovative organizational characteristics and intangibles.
hrough 2011, 44 companies have been selected as award winners, including:
||Merck & Company
||Advanced Cardiovascular Sys., Inc.
Harris Corporation, Broadcast Division
New Pig Corporation
||Safety Kleen Corporation
Marriott Lodging Group
Nabisco Biscuit Company
||Bausch & Lomb, Eyewear Division
Pepsi-Cola Company Senco Products, Inc.
3Com (US Robotics)
||Cincinnati Machine Tool
Rockwell Collins Inc.
||Window Fashions Division – Hunter Douglas
||BMW Group AG
Air Force Research Laboratory
Bank of America Global Consumer & Small Business Bank
Mine Safety Appliance (MSA)
||Royal DSM NV
PGi – Premiere Global Services
Common Practices of Award Winners 1988-2003
Two retrospective reviews of OCI winners conducted in 2003 and 2010 captured significant learnings about the practices and processes that contributed to the winners’ success. These reviews also showed the important changes in innovation best practices over time. Comparing lessons learned from OCI winners in the 1988-2003 period to lessons learned in the 2004-2010 period, it is clear that innovation best practices are not stagnant, and, to be successful, companies must adapt their practices to changing global trends and market conditions. Figure 1 provides an overview of the changes observed in innovation best practices.
One of the most significant changes ob-served was that for the most recent OCI win-ners, innovation has become the corporate strategy and is critical to corporate business performance and success. Innovation has also evolved in complexity, as evidenced by the proliferation of toolkits, the need for extensive knowledge at the front end and the increased role of external collaboration throughout the innovation process.
In the 2003 retrospective look at the winners from 1988-2002, winners demon-strated similarities in the following notable best practices:
- A well-defined product development pro-cess unique to the market and technology environment;
- A strong commitment to cross-functional teams as the fundamental organizational construct for executing new product de-velopment;
- A strong presence of voice of the cus-tomer input;
- A robust process at the front end to drive innovation in the product portfolio; and
- A strong linkage of new product de-velopment to the company’s corporate strategy, which ensures top management commitment.
Although a clear set of common practices could be defined across these past award winners, the implementation detail of those common practices varied across the group, driven by their market, technology and organizational environment.
In 2010, the OCI committee took another retrospective look at the practices that appeared to differentiate the more recent OCI winners. In a period characterized by economic turbulence, resource reduction, globalization and the digital explosion, the common practices of the winners in the 2004-2010 time frame emerged as quite different from those identified in the earlier analysis. The best practices observed in the more recent winners included:
- Corporate strategic commitment to in-novation;
- Innovation strategy as a critical driver of business performance;
- Innovation driving corporate transforma-tion/survival;
- Open innovation/collaborative develop-ment; and
- Intense focus on the front end;
While not all of these are new best practices, the strategies were much more prevalent and better defined than in the previous time period.
Corporate Strategic Committment to Innovation
For the winners in the 2004-2010 time frame, innovation was a corporate strategic core value. This commitment was not mere lip service, as it is reflected in the following practices:
- Senior management involvement;
- Dedicated cross-functional resources;
- Career paths in innovation;
- Innovation process owners to ensure best practices;
- Continuous improvement in innovation practices; and
These companies also put in place well-defined metrics to measure their innovation success. They developed cultures that were comfortable with managing risk and not afraid to fail.
For example, the 2010 OCI winner, Kennametal Inc., demonstrated an impressive corporate commitment to innovation. During turbulent economic times, Kennametal used its commitment to innovation to provide unique customer solutions and to gain a competitive advantage. Key to the company’s success was the establishment of an innovation strategy to introduce new products at a market leading pace and to be a breakaway company in its industry (see Figure 2).
Innovation Strategy is a Critical Driver
The innovation strategies of recent OCI winners are quite diverse but each reflects the companies’ core competencies, market environment and competitive situation. The strategies define where they will play and how they will win.
All of the winners had a well-articulated innovation strategy that was understood by all those involved in innovation and drove all innovation efforts in the corporation. The innovation strategy provided business focus, defined platforms for product development and drove resource allocation.
Corning Incorporated, a 2008 winner, has one of the best examples of an innovation strategy (see Figure 3).
As a major supplier of optical fiber to the telecom industry, Corning Incorporated saw its business significantly decline during the collapse of the telecom market in 2002. It immediately assessed its portfolio and decided that it needed to diversify and have a well-defined plan for growth in the future. The innovation recipe that was created at that time has provided strong direction for new product and new business development efforts and has contributed to Corning Incorporated’s success.
Innovation Driving Corporate Transformation and Survival
One of the significant findings from the recent retrospective was that innovation was not just a component of the corporate strategy but an essential driver of corporate success and sometimes survival. Winners realized that cost cutting, resource reduction and process improvement would not guarantee a successful future, and that they needed a more intense focus on innovation for survival. They discovered that incremental innovation was not sufficient to ensure future success and turned their focus to disruptive/breakthrough innovations.
Part of the transformation observed in many companies was that innovation involved having both a market and a technology focus from the beginning of the process.
For example, DuPont, a 200-year-old company deeply rooted in science and technology, transformed itself into a new enterprise strongly focused on growth via market-led innovation. In the late 1990s, DuPont found its innovation had stalled, and it was focusing on business maintenance and cost control of current business. Management realized that its science and technology development resources had to be deployed against significant market needs in order to achieve product and business innovation renewal (see Figure 4).
Open Innovation/Collaborative Development
While several OCI winners before 2004 engaged in external partnering as part of their product development efforts, for many of the 2004-2010 winners, open innovation was a key corporate strategy, playing a role throughout the innovation process from discovery to launch. Companies that adopted open innovation saw the value of having access to extensive and diverse resources to enhance their product development efforts and to improve their speed to market. Companies also benefited from shared risk and reduced need for internal resources.
To be successful in external partnering, companies had to make cultural changes, going from a “not invented here” mindset to a “proudly found elsewhere” (a term used by Royal DSM NV, a 2009 winner) mindset. New practices and processes had to be put into place to adapt to the complexities of working with different external partners. DSM made the decision to commit to open innovation as a fundamental corporate strategy and source of competitive advantage. To support this commitment, DSM put together market-driven innovation processes and an organizational structure and culture. Their innovation model, totally built around open innovation, steered its innovation pipeline using various forms of open innovation (see Figure 5).
Intense Focus on the Front End
Numerous research studies have shown that the primary reason new products and opportunities fail is insufficient time and resources spent at the front end of the innovation process. The 2004-2010 OCI winners were clearly aware of that reality and made a commitment to focus on the front end to build an extensive knowledge base before moving on in the new product development process. One of the most important benefits of investing in the front end is “failing fast,” avoiding the investment of significant resources in products or services that either do not fit the corporate strategy or are not viable long-term opportunities.
Spending time at the front end no longer just means obtaining voice of the customer input; it involves understanding global trends that will impact the opportunity, gaining the diverse perspectives of thought leaders and conducting detailed competitive analyses. Incubators are often used to provide a safe haven for high-risk and long-term projects. While in the incubator, additional information about the opportunity can be obtained and difficult challenges addressed without exposure to intense management scrutiny.
Ownership of the front end of innovation among the OCI winners no longer resided just in the marketing or the technical function but was jointly owned from the discovery phase. An example of this can be seen in Xerox’s depiction of the intense customer focus in Figure 6.
To improve innovation effectiveness and efficiency, many of the recent OCI winners employed comprehensive tool kits (see Figure 7) throughout the new product development process. Toolkits bring discipline, consistency and a common language to the innovation process, which reduces risk and uncertainty. Typically, these toolkits and the innovation process are owned by a corporate innovation process function that facilitates the use of the tools and provides full-time expertise on the innovation process. The process owners also have responsibility for ensuring that the tools being used are best practice and state of the art.
Learning from OCI Award Winners
Applying lessons learned from leading practitioner companies is a very effective method for companies facing challenges in improving their new product and service development performance. PDMA’s OCI Award winners are companies that have met the award’s rigorous criteria of sustained quantifiable innovation success and thus provide a valuable set of such learning experiences.
Clearly, innovation best practices are not stagnant. To be successful, companies must adapt their practices to changing global trends and market conditions. Recent winners had to adapt their practices to the very turbulent marketplace. Through corporate commitment to innovation, innovation strategy as a critical driver, collaborative development and intense focus on the front end, this elite group of companies demonstrated exemplary success at survival, transformation and growth.
About the Authors
The Outstanding Corporate Innovator Award Committee: Sally Kay, Doug Boike, Wayne Fisher, Thomas Hustad, Stan Jankowski, Deborah Mills, Barry Novotny, Albert Page and Bill Riggs
Editor’s note: The content of this article is from the Lessons Learned From Outstanding Corporate Innovators chapter of the “PDMA Handbook of New Product Development, Second Edition,” which will be released in early 2013.