Friday, July 28, 2006

How Failure Breeds Success

One of the key components in corporate innovation is how executives embrace failure to allow their companies to strive for those all important breakthroughs. BusinessWeek have interviewed executives from the likes of Coca-Cola, Virgin and Intuit to find out how they “cozy up to the risk taking that innovation requires” on how they manage, embrace and communicate failure within their organizations.

Communicating the message from the top that failure is part of the innovation process has been something that E. Neville Isdell, CEO and Chairman of Coca-Cola, did at their recent annual meeting in April 2006, where he declared that “you will see some failures. As we take more risks, this is something we must accept as part of the regeneration process”. Isdell wants Coca-Cola to take bigger risks, tolerate failures and change Coke’s traditional risk-averse culture. Failure is so important to the experimental process, without it you simply aren’t learning. The key is to have intelligent failures, and preferably those that happen early and inexpensively which lead to new insights about customers. Reflecting on failure and passing that knowledge on is paramount, so many companies embarrassed by failure want to quickly forget it ever happened. In a recent celebration of failure by its marketing team, Intuit Chairman, Scott Cook, emphasized that “it’s only a failure if we fail to get the learning”.

A clear example of this in practice can be seen by Virgin Atlantic J2000 angled reclining upper class seats. Whilst such seats had existed in upper class, Virgin was the first to announce its offering to the business class. However, a year later British Airways trumped them and rolled out a truly flat bed for business class. Whilst there had been initial excitement about the J2000, some people complained about the sliding movement of the seat and general discomfort. In the end the J2000 was wildly unsuccessful and widely recognized as inferior to their principal competitor. However, Virgin entrusted their head of design, Joe Ferry, with a huge $127 million overhaul of the airline’s upper-class sears to reclaim their lost position. Their new version was a solid success and exceeded their target to increase Virgin’s business market share by 1%. This re-design saw the business-class seat leap beyond just being flat. “Flight attendants flip over the back and seat cushions to make the bed, allowing for different foam consistencies for sitting and sleeping”.

If top executives employ faith in ‘intelligent failures’, people can and will embrace risk. By noting errors on the job, not repeating them but learning from them should not only be supported but valued. This is a great read on how to manage failure within innovation. Enjoy.

Wednesday, July 12, 2006 / Business Life - GE keeps innovation in harness

General Electric is a powerhouse of Global Research, employing 2,600 scientists on a site covering 550 acres with an incredible $500m a year budget. As you would expect from a company of its heritage, innovation is a key component in unlocking this R&D potential for GE. However, this is not a one off activity. Over the years GE have seen that even the greatest of their innovation breakthroughs, such as the light bulb, lasers and non reflective glass for optical lenses, become commoditised products.

“Companies need to keep innovating if they are to keep growing”.

Therefore, GE’s growth has been built upon its capability, sustainability and scalability to successfully innovate and bring new and better products to market. After all, as Mark Little, head of GE global research says “It is easier to sell good things than bad things”.

With the constant pressures from globalization and the emergence of low-cost manufacturing in Asia and elsewhere, other companies, if they are not already doing so, are rapidly coming to the same conclusions as GE and harnessing their innovation potential to drive growth in profits and market share.

Yet how do you keep 2,600 scientists from spending too much time and money perusing intellectually promising projects that maybe too difficult or costly to execute commercially and instead steer them to create workable inventions?

One of the key elements of this success has been GE’s decision to infiltrate there Global Research team with commercially minded business program managers who are given control of their budget, which creates an interesting dynamic within the group to ensure that the money is well spent. This article is an interesting examination, of these business program managers, as one of the key elements for a successful innovation program and is well worth diving into for a deeper read. Other key lessons and best practices from these business program managers include:

- Spread and manage risk
- Avoid overlap
- Communicate realistic expectation of innovations
- Develop clear paths for projects to market
- Be ruthless about failing projects