How Customers Drive Innovation

The annual Booz Allen Hamilton report on the world’s 1000 largest corporate R&D spenders has just been published.  As with previous BAH reports, the surprising finding is that the amount of R&D spending is not correlated with any financial measures of corporate performance.  It’s not how much you spend, it’s how you spend it.  In their analysis, Booz Allen found that the companies that get the most bang for their buck–what they call “high leverage innovators”–are the ones that integrate customers and users deeply in every stage of the innovation process.  These successful innovators involve customers in idea generation, in selecting the best ideas, and in refining and elaborating ideas.

For example, one company they interviewed, Parker Hannifin, reports that they require a lead user to be on every development team.  A second company, DeWitt (maker of professional power tools) has their engineers and marketers spend hours each week at construction job sites.  Once a prototype is ready, they take it straight out into the field, lend the prototype to the workers, and then check back in a week to find out how it worked out.

This finding reflects my own research finding: that companies that build collaborative webs with their customers are the most innovative (see Chapter 10 of my book Group Genius).  As I’ve found, it’s not good enough to simply do market research or focus tests.  Customers have to be deeply involved, participants in the internal conversation.

There’s one finding in the BAH report that conflicts with my own research: after interviewing a smaller subset of the 1000 companies (they don’t say how many, but it’s probably less than 20), they report that all of those companies interviewed used a tightly managed stage-gate process.  At each stage, approval to proceed was based on measurements of a variety of critical factors.  Frankly, to me that sounds like attempts to apply Six Sigma to the innovation process.  These are misguided and almost always kill innovation (see my previous blog posting).  I’d be very surprised if the most innovative companies were all doing this, so I wonder how representative the companies interviewed really are.

Thanks to Booz Allen Hamilton for providing this service each year!

Harvard Creativity Conference

Today I’m sitting at Harvard Business School, participating in what promises to be a seminal conference about creativity and innovation–with business leaders including Kim Malone Scott (Google) and Scott Cook (Intuit), and top scholars like Howard Gardner (Harvard) and Bob Sutton (Stanford).

The session opened this morning with four top business leaders, who were each asked: “What are the most important unresolved questions about creativity and innovation?” The first to speak was Kim Malone Scott, a senior manager at Google who is director of AdSense online sales and operations. Her question: “Can creativity scale?” Creativity is most active in a small collaborating group: the most innovative companies are small startups. But eventually, as the company grows, collaboration becomes bureaucracy. So how can a company keep benefiting from the power of collaboration, even as it grows? At Google, Kim reported a few ways that Google was trying to solve this problem: (1) permission isn’t required to start something, but you have to tell everybody first; (2) avoid ownership, because that creates silos; most businesses at Google do not have a single top manager. No one is the manager of the Internet search business at Google. (3) Redundant projects, and frequent failure, are absolutely necessary.

Next was Diego Rodriguez, head of the Palo Alto office of the legendary design firm IDEO. His key question was: “How can we move from depending on the lone genius, to tapping the power of collaboration?” As successful examples, he provided Proctor & Gamble’s Innocentive idea marketplace; Mozilla’s open source code base; and Threadless, the web site where you can post t-shirt designs and then vote on your favorite designs. He emphasized that collaboration occurs across boundaries, when you don’t know who’s in charge, and when everyone is intrinsically motivated.

Third, Mark Fishman, head of research at the pharmaceutical company Novartis, asked “Can a company be both efficient and innovative?” Efficiency is critical at a pharmaceutical company, when it can take 10 years and $1 billion to develop a single new product.  One comment of his that stood out for me: “Six Sigma kills innovation.”

Finally, Scott Cook, founder of Intuit (the maker of the Quicken software) asked “Do we even need management anymore?” In his analysis, innovation today almost always results from emergent discovery out in the field. At Google and many other innovative companies, the best ideas emerge from employees or customers, not from managers–who often seem to just get in the way of innovation.

All four of these legendary executives seemed to be reading from the book Group Genius, where the message is that creativity is never about a lone genius, but is rather about collaboration and social networks. However, I’d be surprised (although delighted) if any of them had read my book. What’s really going on here is that the idea of “group genius” is broadly out there, in the culture.  This is my argument in the book: that even though I am the author of Group Genius, my book is just one manifestation of a collective revealing of knowledge about the importance of collaboration.

After this panel, the legendary Howard Gardner spoke on the topic of “Creativity and Responsibility”: can you be both creative and responsible?  Later speakers on Friday included Harvard’s Amy Edmondson (on the role of failure in creativity) and Stanford’s Jim March (on adaptability and creativity).

Kudos to the organizing panel, led by Theresa Amabile.  This is a highly significant event.