Wednesday, January 7, 2004

Focusing Innovation Programs

Business history is replete with examples of organizations that have expended tremendous efforts on innovation programs that when brought to fruition had little direct value in the marketplace. The failure of Polaroid's "instant movie camera" in competition with video cameras, the limited success of Kodak's disc camera when it had to compete with improved electronic 35mm photography, the ill-fated venture of Exxon into the world of office machines, and Xerox's office automation system illustrate the fact that poorly conceived innovation projects lead to poor results. In fact, the improper focusing of innovation programs can be almost as dangerous to an organization as a "sit still" innovation policy.

Polaroid's instant movie camera was an incorrect response to a correctly understood customer need. Where Polaroid failed was in letting the response be driven by internal capability and not understanding competitive response and technological capability. Since they had instant film technology, it was natural for them to build on it. However, video technology was improving too quickly, and the window of opportunity closed before Polaroid could improve instant movie film technology to the point of customer acceptability.

The failure of Kodak's disc camera was slightly different. Again, the market demand for simple, quality photographs was understood. The failure was in the strategy Kodak chose to take advantage of the opportunity. Kodak's primary business is film. Through the disc camera, they were attempting to develop proprietary film technology that would give them an advantage over competitors like Fuji. They also failed to understand the impact of the integration of electronic circuitry onto chips. This made the automatic 35mm camera a reality, bringing a higher-quality image to the mass market.

Exxon's mid-1970s venture into word processors was doomed by a failure in the understanding of the technology. Exxon correctly identified office automation as a significant opportunity. Also, they correctly understood that they shouldn't attempt to develop a product internally. In purchasing Vydec, they misjudged how fast the technology was going to move and what it would take to stay in the game. In addition, the culture of a petroleum company and that of a word processor company are and need to be vastly different. The cultures were too different for the venture to last.

Xerox's first office automation system effort was based on a misjudgment of the time frame of the opportunity. They correctly understood that office automation was a significant opportunity, but they misjudged how fast the opportunity was going to develop. They became technology and innovation driven. They wanted to be advanced and different. As a result, their concepts and technologies were years ahead of the market; many are now being utilized by successful companies.

On the other hand, many organizations have better understood the overall market and the environmental driving forces and have succeeded by targeting their innovative efforts more effectively. The development of aspartame by the NutraSweet Company, of the Walkman by Sony, and of a truly laptop computer by Compaq illustrate how product innovations can be successful. The commitment of Motorola, Black & Decker, and Ford to improved production processes has provided each with markedly enhanced competitive positions, while the skyrocketing growth of Dell Computers and Wal-Mart shows that new procedural approaches can also produce impressive results.

The point is that innovation effort is valuable if it is properly targeted. Contrary to the emerging opinion that incremental innovation in manufacturing processes is a panacea for all industries, the truth is that there is no innovation strategy that is appropriate for all companies in all situations. What is needed is a method for effectively analyzing the overall environment in which an organization operates, and for developing an innovation program that matches the needs of the customers, the realities of technological progress, the impact of competition, the desires of stakeholders and the capabilities & capacities of the organization.

Innovation in products and services, in processes and in operational procedures is essential to the success of any organization. Whether the innovation is incremental, distinctive, or breakthrough should be determined by the future needs of the market. Effective targeting must include analysis of developing customer needs, emerging technologies, the total competitive environment, internal capabilities, and basic organizational goals. An efficient organization has both formal and informal mechanisms to properly align these elements and convert the analyses into productive innovation programs.

Paul Schumann & Donna Prestwood


No comments:

Post a Comment