Business is a field not of theory but of practice. The central intellectual inquiry of the science of management is simply this: What works?
That, it seems, is the best way to examine the steady rise in the practice of innovation management. A search of the database of the professional networking site LinkedIn found that more than 700 people listed their current job title as “chief innovation officer” and that nearly 25,000 had the word “innovation” in their job title. Many others may not have the word in their titles, but their job is to pursue opportunities that result in new products, services and more efficient ways of doing things.
So what does work in the innovation game? No single formula, to be sure. However, some recent interviews with executives, consultants and academics can be distilled into three recommendations: think broadly, borrow from the entrepreneurial Silicon Valley model and pay close attention to customers and emerging user needs.
Here, then, are three innovation works in progress that include those ingredients, whether or not the efforts will ultimately prove to be winners:
NEW MARKETS
John Tao joined Weyerhaeuser, the wood and pulp producer, two years ago as its vice president for open innovation, coming from Air Products and Chemicals. At Weyerhaeuser, Tao has led an initiative to find new markets for lignin, a chemical compound that binds cellulose fibers together in trees. Lignin is extracted during pulp-making as a black liquor and is typically recycled as a fuel for pulp plants.
Yet lignin can also be converted to a solid and serve as a chemical feedstock for the making of a range of products. Tao, a PhD chemical engineer, and his staff studied the market, including the curbs on carbon emissions that chemical producers will likely face in the future.
Lignin can be a nonpolluting alternative for producing goods as different as seat cushions and carbon fiber. Automakers, for example, are beginning to use carbon fiber as a lightweight but strong substitute for metal to improve fuel efficiency.
As a chemical feedstock, lignin is worth 10 to 20 times its value as a pulp-plant fuel, Tao said. Weyerhaeuser has a pilot plant in North Carolina to produce specialized lignin chemicals. Tao has met with chemical companies, carbon fiber makers and the Department of Energy to try to nurture new lignin markets.
“You have to have some technical background, but a lot of this work is market analysis, communications and networking with industry partners,” he said.
For innovation champions, titles matter far less than their independence, breadth of knowledge and corporate clout, experts say.
“Whatever you call it, there is a real need for a senior-level executive to be able to reach across a company and beyond to tap ideas, skills and resources,” said Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley. “It is this systems integration aspect that is central to innovation as a field and a discipline.”
Money helps too. Rick Rommel, a senior vice president of the new-business group at Best Buy, says his unit has “an internal venture capital mind-set.” Best Buy gave his group additional financing this year to sharply increase investments in experimental ventures that, he said, “explore what customers think and what technologies are ready for widespread adoption.”
The new-business group has been working with a startup, Shopkick, which is introducing an application for iPhones, and later for other smart phones, that retailers can use to track when shoppers have entered a store and reward them with discounts.
CUSTOMIZED DISCOUNTS
When linked to other online browsing and buying data, the discount offers can be not only immediate, when a person is in the store, but also tailored to individual interests. A person who has browsed computer Web sites, for example, might be offered a 10 percent discount on a notebook computer.
“This really moves toward one-to-one marketing,” Rommel said.
At Citigroup, Deborah Hopkins, chief innovation officer, is also in charge of the bank’s venture investing arm. This year, she decided to move from New York to Silicon Valley to be close to its entrepreneurial networks.
“It’s a small community out there,” she said.
One Citigroup investment is in Bundle.com, a social media startup where users can compare their spending and saving habits with those of others. The idea came from the Citigroup innovation unit, and Bundle’s CEO, Jaidev Shergill, came from Citigroup. The other investors in Bundle are Microsoft and Morningstar.
“The whole social networking phenomenon is moving so fast, and we need to be invested in some way,” said Don Callahan, Citigroup’s chief administrative officer, who oversees the innovation unit. “Whatever the outcome, we’re going to learn a lot.”
Hopkins sees her role as “being a catalyst, to challenge people to think differently, but also pursue new ideas with a lot of rigor.”
An example of that systematic approach to innovation is Citigroup’s “bank of the future” project. The first two redesigned bank branches opened in April in Japan, but the concepts will eventually be transplanted to the US, tailored to local markets.
BANK OF THE FUTURE
The overhaul began with a shift in mind-set, from one oriented around banking products to one focused on customers. Months of extensive customer and demographic research resulted in personality profiles of four customer types, from up-and-comers in their 30s to retiring baby boomers. Customer service and marketing were geared toward those four affluent groups.
The branches have been remade as digital banks, with touch-screen workstations and videoconferencing links to financial experts. Traditional banks have up to 100 paper forms, while the redesigned branches are almost paperless, says Darren Buckley, president of Citibank Japan. The design imprint of Eight Inc, a firm that worked on Apple’s stores, is evident in the open, minimalist interiors of the new branches.
“We’re incubating ideas, but what we’re doing in Japan is absolutely something that can be scaled out elsewhere,” said Chris Kay, a managing director of Citigroup’s innovation arm.
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