Historically, recessions have been a time when new companies are born and good companies separate themselves from their competition. When times are tight, people look for new, less expensive ways to do old things. For example, a new industry of buses has sprung up to transport passengers from New York City to Washington, D.C. at ridiculously low costs (as low as $5 at times!), stealing business from Amtrak.
So is this the time to put innovation on hold due to tight economic circumstances or to exploit innovation opportunities? Firms that adopt the first approach do so at great risk. If you don’t take advantage of opportunities, your current and future competitors will.
So how do you keep costs down, while maximizing company resources? This question continues to be asked by our CIO members of the SIM Advanced Practices Council (APC), who recognize that CIO in fact stands Chief Innovation Officer. APC members get answers to the question from researchers, other thought leaders and by sharing among themselves. Following are some examples from APC members of innovative opportunities and solutions from staff, partners, suppliers, customers and well beyond.
Innovative Opportunities and Solutions from Staff
AT&T developed The Innovation Pipeline (TIP) to surface creative ideas for converting its rich patent portfolio into revenue-generating ideas for products and services to customers. According to CTO John Donovan, the goal was to “drive innovation throughout the corporation.” Each innovation cycle takes three months and consists of three phases. In phase one, there is an open call for revenue-generating ideas. Anyone can contribute, discuss and vote on ideas entered. Each staff member is granted $10,000 in virtual currency (TIP dollars) to place bets on ideas most likely to succeed. An individual’s virtual currency increases or decreases based on whether they select winners or losers. At the end of this phase, ideas that have attracted the most TIP dollars are selected for phase two and given funds to develop a prototype and business case. The AT&T Intellectual Property Group helps in developing the pitch as well as with needed research.
In phase two, prototypes and business cases are each given an opportunity for a 15-minute pitch to internal AT&T TIP VC investors (executives). Decisions are made immediately, and successful idea founders leave the room with a green light and money for the project. In phase three the project moves from prototype to production.
On average, more than 500 new ideas are submitted monthly. Tens of millions of real dollars have funded dozens of ideas from customer service enhancements to new technology offerings.
Allstate launched a “round the clock 48 hour app attack” – a staff contest to build internal mobile apps that could improve staff and agency effectiveness or customer interactions with Allstate. Everyone was encouraged to participate. IT experts were available to help contestants design and build their apps.
Nearly 30 apps were submitted for consideration. Ideas ranged from location-based services, such as an employee locator and a facilities finder for making Allstate social networking tools mobile. Several apps expected to drive significant business value were selected to advance and are now being further developed. Challenge and competition motivated teams to achieve incredible feats of technology in a very short period of time. They also demonstrated the ability of employees to solve tough business problems and surface game-changing ideas.
Creative Ideas from Staff, Partners, Suppliers, Customers and Beyond
Given the successes of companies such as AT&T and Allstate with employee innovation practices, why reach beyond organizational boundaries for ideas and solutions? First, partners, suppliers and customers have useful knowledge and expertise waiting to be harnessed. IBM’s best new ideas for emerging businesses originate from customers and venture capitalists rather than IBM researchers, who are focused on advanced technologies five to seven years out.
Second, there are many more ideas and smart people outside the firm than you could possibly afford to hire. And emerging market talent is cheaper and, in many cases, more motivated. Third, large firms often find it difficult to do cost-effective innovation. In “The Innovator’s Dilemma,” Clayton Christensen demonstrated the cultural barriers to innovation inherent in successful organizations, including the reluctance to cannibalize currently successful products. A case in point: The upstart Amazon developed the online book purchase business model, not Borders or Barnes & Noble.
Chubb Group of Insurance Companies
Chubb launched its first Innovation Jam in 2008 to generate ideas from staff, partners, independent agents, and suppliers for profitable growth ideas. A major communications campaign encouraged widespread participation. People voted by placing one to five stars on the best ideas. Jim Knight, Chubb’s CIO, emphasized the value of having a disciplined approach and structure with six phases, each complemented with an enabling structure:
Originators of the top 24 ideas were given significant resources totaling $5 million to develop the ideas.
Daru Darukhanavala, BP’s CTO, charged his Digital Technology Scanning Team of individuals with deep knowledge of BP’s businesses and broad appreciation for technology to identify game-changing IT-enabled business opportunities. The team meets regularly with business executives to ferret out potential business opportunities that could provide competitive advantage and then matches those opportunities with solutions garnered from their extensive network of leading suppliers, consultants, venture capitalists, academics, business practitioners and industry associations.
Once potential solutions are identified, they go through three levels of filters: relevance, technical readiness and economic viability. The surviving 40 to 50 percent of solutions are considered by business executive sponsors for pilots. Five to 10 pilots are selected for broader adoption each year. At least one game changer initiative per year has generated business impacts up to $100 million. According to Darukhanavala, “the team’s first job is to change mindsets and evangelize about the possibilities, helping the business envision what can be done.”
The InnoCentive website was launched by Eli Lilly in 2001 to harness collective brainpower around the world to identify solutions to unsuccessful research and development projects. Today 34 companies, including Boeing, DuPont, Novartis and Procter & Gamble, use InnoCentive to find solutions from 250,000 solvers in more than 40 disciplines across nearly 200 countries. Scientists receive payments of up to $1 million for their ideas, which have launched innovative products such as P&G’s Swiffer floor mop.
Innovation Success Factors
Surfacing high-payoff innovative ideas and solutions doesn’t have to be costly if you engage the people who know your business or have potential solutions using technology. Successful companies have discovered several success factors. Up-front commitment of money (to fund initiatives and reward innovators) and executive time (to encourage participation and to select winners) are essential. A disciplined process that includes structures and limited time frames (three months seems to be the secret) facilitates effectiveness. And creativity in creating challenges and injecting fun elements ensures active participation.
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