In today's economic climate all sectors of industry are being challenged to increase their focus on innovation to help drive growth.. But innovative approaches don't stop with product development In this dialogue Larry Keeley, co-founder of Doblin Inc., exchanges views with Gregg Zank, Chief Technology Officer for Dow Corning, about the many opportunities for innovation that lie beyond the Research & Development arena.
Q. In your book, The Taming of the New, you identify 10 types of innovation. How did you identify them?
Q. How do partnerships and networking spur innovation?
Larry Keeley: We did the analysis seven years ago by taking more than 3,000 highly diverse things generally agreed to be innovative-from Cirque du Soleil circuses to Big Bertha golf clubs-and analyzed them, using conventional cluster analytic methods. This helped us identify ten separate dimensions that contribute to innovation success. The ten types themselves cluster into four categories, as shown overleaf. Subsequently, Doblin and several other organizations have found them to be very useful for both analyzing and planning innovation strategies.
Gregg Zank: Dow Corning has broken away from the notion that innovation means new products through our solutions offering and our two-brand strategy. Recognizing there are 10 ways to innovate helps us offer the right solutions to customers. It doesn't mean that we're deemphasizing products because that's what we make and sell. It's really more about augmenting our product concepts and existing products at different points in their life cycles by finding additional ways to innovate to serve the customer.
Larry Keeley: The strategic significance of this form of innovation is simple: it moves the cost and risk of innovating off your balance sheet onto someone else's. This is precisely what Wal-Mart has done to become such a juggernaut. All the Wal-Mart suppliers feel the heat every day to help deliver cool stuff at very low prices. Target is even more interesting: they get great innovation to happen every day, with the vast majority of the costs borne by someone else. And it is paying off - store by store, their growth and profits exceed
Q. What are some of the best examples that you've seen regarding innovation in brands or in the customer's experience?
Gregg Zank: Look at your distinct competencies and what you have that works well, and then consider what your customer, channel partner or supplier-or another party - has that complements your strengths and allows you to create something entirely new. The best partnerships bring together diverse skills, material expertise, or different technologies that let you move faster. In today's marketplace, going fast is a lot more important than doing it all on your own.
Larry Keeley: Brand innovators include firms like Virgin, NIKE, Swatch, Mini Cooper, and Absolut vodka. The virtue of brand innovation is that it helps customers be more willing to try something new - even distinctively different - from a company they have come to trust and like. Customer experience innovators include firms like ClubMed, Apple (especially in music), American Girl, Amazon, FedEx, and Starwood hotels. Experience innovation is very valuable - customers are grateful for it, and it is tough to copy. Great companies often combine great innovations in brand and customer experience at the same time. Typically this makes both types of innovation stronger.
Q. How are business models changing, as companies innovate together?
Gregg Zank: One thing we've done is to offer choices in the customer's experience. We now offer a solutions approach - listening to the needs of the customer, then being creative and offering them total solution packages. For customers who can buy in bulk, want a set delivery date, and know how to process the materials, our Xiameter brand has been well-received. For others who are evolving in their development or require innovation or assistance, we provide a range of solutions. Offering customers different experiences allows them to choose how they want to receive it. This continues to be the key strength of the Dow Corning brand.
Dell is the classic example. By fully integrating with its suppliers, it has popularized its cash conversion cycle metric to ensure that every time they sell a computer, they get 8 days net positive cash flow. This blows away the industry norm of 38 days net negative cash flow. Wal-Mart has also played this game well with so much emphasis on supply chain integration and just-in-time responsiveness. Target has updated the Wal-Mart approach lately by emphasizing not just cost, but a deep focus on innovation-relentlessly, department by department. But we should all remember that it was Toyota that integrated many of these advances first-a great company to learn from. But most people miss the deeper kind of business model innovation that happens when you re-think an industry more fundamentally.
Gregg Zank: Our Xiameter business model changed the way we think. We've also recognized that innovation often happens at the interfaces, such as the interface between a company and its customers. That's where our solution strategy comes in. Sometimes innovation involves offering customers something they were doing themselves but wasn't one of their core competencies. We now provide help in setting up a lab or a piece of equipment that dispenses our materials. Another example involves our offering licensing and intellectual property rights, as we
are doing in Ireland where we partnered to offer atmospheric pressure plasma processing. Combining efforts allows companies to leap ahead of the competition through new kinds of partnerships.
For More Information about Dow Corning's solutions approach or to download a copy of Doblin's
white paper on "Building an Innovation Competence," go to: www.dowcorning.com/innovate
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