In our first ever call-in episode, we answer questions submitted by our listeners. Special guest Hari Nair, a current fellow at Harvard University and a former Global Managing Director at Kimberly Clark, shares advice from his 25 years of experience in the innovation space. InnoLead’s Managing Editor Kelsey Alpaio contributes insights from her reporting.
During the episode, Nair and Alpaio answer the following questions:
- If only 10 to 25% of startups are successful, how do I set the right expectations for organic or external innovation research projects with a company that expects all R&D projects to be successful?
- What are the kinds of metrics that you should be paying attention to very early on in your innovation activities? What are the best ways to communicate some of the achievements that we’re beginning to have? How else do you help to engage others within your company?
- How do you, as an innovation team, assess which ideas and opportunities you should pursue when it comes to resourcing it? … How do you sort of put [ideas] all in line and think about which wants to pursue?
- Everyone thinks [innovation is] cool and wants to participate. But when it comes down to actually doing the work, they’re focused on their day jobs. How do other companies overcome the thought that innovation isn’t a part of their jobs when it either is or should be?
- How can we not be a siloed organization of innovation, but take that concept and the culture of innovation and spread it throughout the company?
- We’re looking for a benchmark for the percent of projects that make it through each stage of the innovation funnel. So what’s going into testing? And of those, what’s going into the development stage? And of those, what percentage get launched and successfully scaled?
- I agree that the ‘Anything is Possible’ attitude is the key to [FAANG’s] success. But would love to follow up question and ask, just because you can should you?
- Do you feel like Kimberly Clark is still following Good to Great? Or do you see that…the world [is]so fast, or digital transformation [is] so strong…that Good to Great could use a little bit of an update?
- Who does transformational innovation? Well, and do you have any best practices or process overviews on this front?
Transcript
[SPONSOR MESSAGE]
This episode is sponsored by Kalypso, a professional services firm dedicated to helping companies discover, create, make, and sell better products with digital. With deep roots in innovation, Kalypso provides consulting, process, technology, and people-focused services to drive real value from digital transformation. Their team is so excited to work with you. You can learn more at kalypso.com.
[MUSIC]
Kaitlin Milliken: Hey, you’re listening to Innovation Answered, the podcast for corporate innovators. I’m your host, Kaitlin Milliken. Usually, we focus on one roadblock to innovation at large companies in each episode. But today, we’re tackling a few questions — nine to be exact — submitted by our listeners.
Two special guests are joining me today. We have Kelsey Alpaio InnoLeads,Managing Editor and a regular on this show. And Hari Nair, a current Fellow at Harvard University and a former Global Managing Director at Kimberly Clark. Thanks, Hari and Kelsey, for joining us today.
Kelsey Alpaio: Yeah, thank you for having us.
Kaitlin Milliken: We got a bunch of questions for members, things they’re struggling with, and they’re really looking for advice. Some of them are written. Some of the questions are voice memos.
Q. Setting Expectations for Innovation
The first asker wants to know, “If only 10 to 25% of startups are successful, how do I set the right expectations for organic or external innovation research projects with a company that expects all R&D projects to be successful?”
Hari Nair: Yeah, I found this question to be really interesting, because I worked in R&D most of my career. And so, first question is not all R&D projects are successful. In fact, if that’s the mandate for your R&D, then I’d say that you’re probably not doing a lot of R&D. You’re probably doing mostly commercialization of things that you already know how to do. So that’s kind of the first thing is really defining the role of R&D and what success of R&D looks like. And for a lot of companies that’s creating new revenue or something like that. Contributing to product upgrade or you know, Horizon 1, Horizon 2 kinds of development. So I asked the questioner to say, you know really get clarity around the role of R&D and its contribution.
But the success, a good R&D organization will have like failures along the way, because that is called research, right? So you would have that. And I don’t think the success rates, at least from my experience, is not that much better than startups. So in typical R&D, you’d probably find that, you know, certain types of innovation will have a very high success rate. But there are going to be innovations that are really new Horizon 3 type stuff that are really out there, that you should expect a higher failure rate. And the question is really setting that expectation with management before you start negotiating with startups and start doing those kind of things.
Kaitlin Milliken: So I know when it comes to working with startups, and defining success and failure, we have a lot of content about that on our website. Is there anything that resonates with you, Kelsey, when you hear this question?
Kelsey Alpaio: Yeah, I mean, I think what resonates with me is that it really sounds like a cultural issue first and foremost.
So I remember somebody telling me recently about kind of this approach they take where at every meeting they have at senior leaders, they started with a statistic of some sort that helps set those expectations. So it could be that 10 to 25 percent statistic or something similar that really kind of lays the groundwork and shows like, “Hey, this is what it’s going to look like. Just FYI,” and always keep that ingrained in their minds.
Kaitlin Milliken: Yeah, I did a story with Aflac, as well. And I know they talked about bringing senior leadership into pitch meetings. So they get face time with the startups. But also upfront, saying, “Hey, this is a risky type of world, we’re going to do a lot of scouting, not everyone’s going to be a great fit. And that’s just a part of being in this environment.”
Hari Nair: Yeah. And even the 10 to 25 percent, the last real study I had looked at on startups was it was called a Startup Genome Project. It was you know, several years ago, and I think they had something like one and 4000 startups are really commercially successful and they require a lot of work. So, you know, 10 to 25 just seems like a number that people kind of say in folk lore. But if you really look at startups, it’s a lot fewer than that that actually become scaled, when the company wants to compare it to the kind of successes they’re used to. So the odds are that your R&D team is going to have a much higher success rate than a startup, you know, just based on the statistics out there.
Q. Metrics, Communicating Wins & Engagement
Kaitlin Milliken: So startups are outside of the organization. And we have another question that touches on that from one of our members.
Kevin Little: My name is Kevin Little I am Senior Alliance Director with Novo Nordisk, which is a Danish pharmaceutical company. Doing new innovation outreach activities really stem from, I guess building up the innovation capabilities from the ground up, especially when you’re not seated within headquarters. So some of the questions that we have really are probably similar to other companies. What are the kinds of metrics that you should be paying attention to very early on in your innovation activities?
What are the best ways to communicate some of the achievements that we’re beginning to have? How else do you help to engage others within your company particularly, unleash some more of the creativity of our own scientists and help to create more bridges between them, and some of the external partners that they’re interested in working with.
Kaitlin Milliken: So I know that was a few questions together. Kevin also has the best voice I’ve ever heard. It sounds like he should be doing movie trailers on the side. But I think the heart of it really comes to this: As an organization that’s starting to work with folks externally, how do you build trust, communicate wins, and build confidence in your team?
Hari Nair: Right. You know, I think Kevin is asking a lot of really good questions on innovation broadly, I think one particular challenge in the industry that he’s working in is like a Pharma-type companies generally have a very deep R&D culture, built in where they’re kind of rewarded for building up their drug pipeline or whatever it may be. So the idea of doing external innovation has probably been there for a long time, but actually getting output out of that becomes a challenge.
So, what you do see, though, is that a lot of companies are partnering early on with other drug companies to do early stage drug development, just to get the cost down, right. But I think the kind of things on really doing external innovation mostly on the commercial side of this spectrum, like if you want to go and do some things in marketing or supply chain and other areas where there could be some great partnerships, I think you gotta first talk about the value of that in terms of accelerating the time to market or saving some money or something like that. Right. So I think you have to show the business case for external innovation first, to get people excited about it.
And the second thing I would say, there are great examples, you can look at in different companies who’ve done it well. Procter and Gamble, for example, really had a great program on Connect and Develop, which started off as sort of a separate program. But now it’s sort of baked in the company that a lot of the innovations that come from P&G, from the very beginning, the R&D people are scouting externally to see what’s available technology, and its incentivized. And that’s the third point, which is you really need to incentivize external innovation in your metrics when you reward people.
Kaitlin Milliken: I think that’s really interesting, especially when it comes to showing the business case. Something that was mentioned in an earlier episode was when you’re talking to different folks in the business, speaking their language. So if it’s the folks on the money side, tell the money story. If it’s the scientists tell the science story. That way you can shape your success in a way that resonates with the people at the other end.
I know there was a question about metrics in there as well, and a few other different topics. What resources do we have for Kevin to learn from?
Hari Nair: So so I think a couple of couple of thoughts on on KPIs for external innovation, specifically. I think, first of all, having some sort of a metric around the number of touch points you have with external partners, because not all partners are going to be successful. So you actually want to have some sort of a funnel of partners that you’re reaching out to every quarter or every year as a KPI to say, “Are we actually walking the talk? And externally, are we getting those touch points with potential partners?” Right, so that’s one fairly easy measure you could do.
The other one is obviously the success rate. So how many of these potential partners are we potentially moving into a, maybe a development agreement or some sort of agreement where we actually can develop something together with them? So obviously, that’s going to be much lower. It’s going to be maybe, you know, 25 percent of the hundred that we start with. So I think that type of metric is really important.
What I actually find very helpful on all innovation is the time to answering critical questions, right? I think a lot of these innovations start off with a lot of assumptions that we don’t know the answers to. So how long are we taking to answer those really critical early stage assumptions? And you know, are those 60 days, 90 days, and you should have a target. And I think, again, that’s about agility and moving things faster, because you don’t want to waste their time and your time. And this particular metric is true for all projects. But in particular, for external innovation, I think it’s important to put a timeline on that you can answer some critical early stage questions.
Kaitlin Milliken: Kelsey, do you have anything to add on that?
Kelsey Alpaio: Yeah, just to bring in some data from our Benchmarking Report, which was released recently, we asked a question about non-financial metrics and the top five I think are really applicable here. Most people said that they use progress metrics — so things like stage gates, project in the pipeline, number of projects that get launched, learnings, insights generated, number of ideas generated, and employee participation rates was also one that people measured. I also think little bit lower down on the list, about 19 percent of respondents said that they use customer touch points and interactions as a metric.
Q. Creating an Innovation Portfolio
Kaitlin Milliken: Great. The next question is from Tamara who works in insurance.
Tamara: My question is, how do you as an innovation team, assess which ideas and opportunities you should pursue when it comes to resourcing it? When it comes to thinking about what should be further looked at versus moved into providing a team and capital behind in order to see whether there’s a fit for it? How do you think about all the ideas that are coming in that are big and small? How do you sort of put them all in line and think about which wants to pursue?
Kaitlin Milliken: So I think at the heart of it, this is a portfolio question about building out what you should be working on. Kelsey, I know we spend a lot of time talking about that at InnoLead, can you start us off?
Kelsey Alpaio: The first thing that comes to mind for me is this idea scorecard that we created. That’s on our website. And basically, it’s kind of this whole Excel spreadsheet where you can input all the ideas that you have or are working on and put them through different screens. And there’s a couple questions that I pulled out from that I thought were really interesting that you can kind of ask yourself when it comes to screening ideas. So things like, does the idea have a champion to automatically pass through? Is the idea out of the scope of the current innovation strategy? Should it be combined with another idea? Things like that, those types of questions, I think can be really helpful when it comes to figuring out what’s right to pursue and what’s not as appropriate right now.
Hari Nair: Yeah, I think I think that’s an excellent tool and something I’ve also used often as a very helpful prioritization tool is something called the jobs to be done methodology was actually pioneered by former advisor of mine, Clayton Christensen. And what that talks about is really prioritizing your innovation in terms of the jobs that you’re solving in people’s lives. So there’s to me that’s a very useful framework because you can then look at the importance of that job, the frequency of that job, and how good are the alternatives today, right. And if I look at those three dimensions, you can you can kind of see you know, are there some really painful jobs to be done out there that you’re currently not solving, very customer centric and then developing your innovation around that. So I like idea scorecards. I think they’re great. I like using risk adjusted MPVs, all these wonderful metrics that are out there. But I think the job scorecard is something that is sort of my default option whenever I need to prioritize something. That’s generally what I do.
Q. Making Time to Innovate
Kaitlin Milliken: We have another question. From Kristine Schleede about making time for innovation. She writes, “I’m interested if other companies find barriers to resources and having time for innovation. Everyone thinks it’s cool and wants to participate. But when it comes down to actually doing the work, they’re focused on their day jobs. How do other companies overcome the thought that innovation isn’t a part of their jobs when it either is or should be?”
Kelsey, why don’t you kick us off?
Kelsey Alpaio: Yeah, barriers is something we’re really interested in. We always like to kind of figure out what are the biggest challenges and how to solve them. And, you know, to bring it back to the Benchmarking Report again. This wasn’t one of the top challenges that people brought to us. It was really cultural issues in politics, but I think that really plays into this question. And in the other section, we had a lot of people write things in like, “too busy with business as usual projects” or “competing priorities for key people’s time and focus.” So it’s definitely a huge issue.
And I would say that one of the ways to combat it is to actually use time to innovate as an incentive. So if you say have an idea challenge or somebody comes to you with an idea, rewarding them with one day a week where there’s no pressure to think about daily tasks to just kind of give them that time to innovate and work on that project. And, you know, to bring data back into it. As part of this survey, 26 percent of our respondents said that they do offer time as an incentive and 15 percent offer seed funding. So it’s a really interesting concept.
Hari Nair: I actually think that these sort of models personally, again, in practice having run organizations that sort of had those things. In practice, they sound really great in terms of getting employee appeal, but in actual output in terms of value creation, fairly limited, okay? There’s always the 3M example somebody throws out about, you know, how they invented post-its on a Friday or something. But in reality, I have seen that not work as much.
It’s similar to things like, let’s do the one day hackathons, and let’s do the deep dives. So there’s all this sort of vernacular that out there that people who want to do innovation put out there, right. But at the same time, in practice, real value creation has not — you just you don’t see a lot of success. So what I do generally in this question is a really good one. Because it’s very common problem is, when I see innovation, not getting kind of their level of, say, prioritization after that event that you do, it’s usually because that individual or the organization has has not really tied in the innovation to the strategy of the company. And having kind of been in that role, where I’ve had strategy and innovation, one of the first impediments I saw in not getting the whole organization to innovate was the whole organization really didn’t understand what the company’s strategy was, and the fact that innovation was sort of core and vital in it and their role in innovation.
So I think really getting strategy aligned with innovation is really important. Otherwise, you will have a lot of people chasing a lot of different things that, frankly, are not going to help the company. So I do think that if that is a problem in your organization, I would really ask is the strategy department totally disconnected from the innovation department? And I’d say in a lot of organizations, that is the case. You have innovation lead out of maybe R&D, or some other part of the business, and then you’ve got strategy, you know, that’s completely working maybe with the CEO or the board. So I think that sort of alignment is vital. And then I think you could start doing some of these other programs, but in a focused sandbox where the company knows it needs opportunities that’s consistent with their strategy.
Kaitlin Milliken: I think this question is also really interesting because there’s a training component to it. There are challenges and activities that you may not encounter in a normal workplace, depending on where you are. How much of getting innovation from everywhere comes from training?
Hari Nair: I think training has a role. But it you know, in practice, though, I think what training helps do is getting everybody on a common language of innovation. So there’s some languages, like I mentioned jobs to be done earlier, which is a very specific type of approach and methodology that if you understand it, you know, if the whole organization understands that’s helpful.
But really, you know, I don’t see there’s any real training that is going to sort of make you innovative. You have to be innovative by doing innovation. So training is important. Certainly, you can get the get the actual sort of language of innovation down. But you get good at innovation by doing it and failing a lot. And then also, learning from sort of repeated attempts at innovation is how you start building that capability. Over in the long view, that’s what I see. But training has a place of course.
Kelsey Alpaio: I totally agree with everything you’re saying to like none of this works if you don’t have the strategy aligned, if you don’t have the culture in place that fosters innovation. For sure.
Q. Preventing Silos
Kaitlin Milliken: We have another question from an innovation leader who works in software.
Anonymous InnoLead Member: Question on my mind would be, how can we not be a siloed organization of innovation, but take that concept and the culture of innovation and spread it throughout the company? Because it’s so easy to do things in isolation and not interact and, and include everybody enough. I mean, it’s not about letting them know what we’re doing. It’s about including them in the whole vision and process of developing that.
Kaitlin Milliken: That’s another culture question. Kelsey, why don’t you get us started with that.
Kelsey Alpaio: You know, kind of towards the training element, which I think does help get people a little bit more involved in innovation in a slower process. I just wrote a story about the Nature Conservancy in New York and they have a really small innovation team there. It’s just one person right now. And part of her job is to spread innovation across the organization.
That is a really tough job and a tough thing to figure out. And, you know, one of their first steps was doing trainings for people who are interested and actually wanted to do innovation and take that training and, and put it into action, like you said. And so I think it was partly taking it slow and utilizing that training and then spreading it across the organization. So once they had a small group who was interested, they took it, they scaled it up, and had a lot of people, the whole company in New York there, go to this training, and it was about human centered design. So I think that’s part of it. But I know there’s a lot more as well.
Hari Nair: Right. And I think this question really, in terms of sort of diffusing this across the whole organization, it is about culture and mindset. And I like to use the word mindsets more than culture because culture gets overused, but you know, to me, they’re sort of four… If you want to be innovative — small or big in any organization — they’re sort of four key mindsets, you have to sort of embrace. And the company has to do that. So it has to start from the leadership, the CEO, the senior management. So if you’re like a mid level person in a company, and you’re not seeing these four critical things, day-to-day in terms of sort of the mindsets by your leaders, it’s unlikely what training you provide will really provide you innovative output.
So first one is trust. I think trust is sort of the key element here because trust that you’re wise to make the decisions and kind of what you want to do. You trust the company, the company trusts you.
The second one, obviously, is agility. We talked about that before. You know, time matters, right? So I think the idea of just, even if you invest a day in a workshop or in a training, you got to really say, “How am I going to take that and become more agile? And how I’m going to get more and be more innovative?” I think that’s the second piece.
The third one, I think and again, it varies by company, but I call it sort of customer centricity, right? And even if it’s a supply chain innovation or a human resource innovation has to have a customer driven component to that I think is really vital to sort of have that. And these are all mindsets, in my view, right? Trust, agility, and customer centricity.
And the last one is valuing talent. I think you know, talent, meaning more broadly, that you really value the people in your organization. So if you get these mindsets — and they’re more than these four, but at least these are the four — if an organization sort of got these as their high priorities at a senior leadership level, then I believe that no matter what, how big they are, how resource they are, what training they go to, they can be an innovative organization. And if you’re not, if you don’t have these elements, a lot of my time is focusing on getting those four things right, and then getting the innovation thing going because innovation really will be fueled by those mindsets. So that’s kind of my view of how to look at this problem.
Kelsey Alpaio: Something that came to mind for me when thinking about this question is champions and having champion networks, is that something that you’ve seen success in?
Hari Nair: Again, champion networks like are great. But often, again, what you don’t want to have is a group of champions just having kind of a group meeting of champions. You want the champions to actually influence and shape others in the organization. And again, that’s where often there’s challenges because the champions have been anointed champions, but then they’re working in an organization where the leadership is not necessarily…they don’t report to the champions or they don’t you know. So that gets back to how the whole organization sees the champions. But I do think there’s a role…there’s a value in role modeling innovation’s best practices. And I think champions play a great role with that.
We’ve also had like, subject matter experts in certain things that we just invested in one person in the organization who really knows this type of methodology really well. So they become almost champions of that methodology. And that happens a lot in organizations. And I think that’s really successful.
Kaitlin Milliken: So it’s almost from the top and the bottom at the same time, like you’re hiring people who are new to the organization, which is coming from the employee side, and also support from the top.
Hari Nair: Yeah, I mean, one of my former colleagues at a company I work for used to always say, “Innovation ideas are like butterflies, and the role of management is not to clip the wings.” Like, you just don’t want to clip the wings early. Right? And that so often, what you get is a lot of these ideas from the bottom up. And what management is doing is just literally walking, walking around with scissors, kind of clipping the wings. And you got to kind of find that balance — certain butterflies are okay, and certain ones are not — so that you can build that sort of relationship with your team.
Q. The Innovation Pipeline
Kaitlin Milliken: We have another portfolio question. And this one is about the innovation pipeline and it’s from an anonymous member. We’re looking for a benchmark for the percent of projects that make it through each stage of the innovation funnel. So what’s going into testing and of those, what’s going into the development stage? And of those, what percentage get launched and successfully scaled?
Obviously, that varies from company to company, but I don’t know if they’re really solid numbers in those categories that you guys want to share?
Hari Nair: I was thinking about the type of… So I think, first is, it varies by the type of innovation. So if it’s Horizon 1, Horizon 2, if everybody knows what that is, that’s more of the kind of day to day, new and improved type innovations, just standard upgrades, right? I would imagine by the time they make it into your portfolio, there’s a high degree of confidence that they’re likely going to be successful. So those numbers are going to be a lot higher in terms of managing the stage gates, and I’d say they’re relatively high because your funnels not going to have these crazy ideas that are just for new and improved, just slight improvements to your product.
Where I think this becomes more useful is on the Horizon 3, longer term real breakthrough stuff, where, again, it depends on the kind of risk appetite the company has. If you have companies that are sort of like Amazon who are playing with big bets all the time, they have, you know, I just read recently, remember the dash button that they had? It was this software where you could just push a button and it would order? Well. they just they stop selling the last dash button like a few months ago and and so you know, now it’s all on Alexa. Right? So, I’m sure that was an example of a company that bet on something and then you know, commercialized it and then they scrapped the whole thing to start something different because they’re constantly making relatively big bets, I would say.
For other companies in Horizon 3, you know, you’d want to have, you know, a balanced portfolio where you’d say, I’ve got some, you know, two or three big bets, and maybe only one of them is going to really make it right. So I think that’s more realistic. And so I, I wouldn’t take those percentages, I’d say, just make sure that you know, the type of innovation you’re going after, and then, you know, have your expectations set accordingly.
Kaitlin Milliken: I know the hit rate can be something that can be a challenge at companies. I recently talked to someone that basically said, “Yeah, we have a very high success rate. But that means exactly what you’re saying, because we’re not pushing the envelope enough.”
Hari Nair: We used to say this, you know, and it might show up before, I’d say, “You know, do we have a funnel, or do we have a pipe?” Simple question, right? So if it’s a pipe, then you’d expect all the stuff that you start to get out there, right? But if it’s a real funnel, you ought to be able to that first stage, you ought to be filtering quite a bit. And I think when you look at the kind of near term innovations, they often look like a pipe and not a funnel. And so you get the hype. You just launch to a whole bunch of stuff and that that’s the reality. But that’s not necessarily a wrong thing because that’s the type of innovations that your company’s comfortable with.
People measure all this stuff, right, especially now there’s stage gate software that gives you success rates and all that so, or progression rates. But in the end, you know, you get what you put it in, right? So if you put in a lot of really easy, you know, you know, two foot putts for innovation, you’re going to make a lot of those, right? But if you got 30-foot-birdies in there, and you don’t make a few. And that’s the assessment that generally doesn’t happen.
Q. Ethics
Kaitlin Milliken: So the next question comes from Christian and it’s sort of about, “We can do these things, but should we?” Or what I like to call the premise of the movie Jurassic Park. He writes, “I loved your last podcast episode on FAANG. I agree that the ‘Anything is Possible’ attitude is the key to their success. But would love to follow up question and ask, just because you can should you? I think this would be interesting because all except Netflix have been caught up in some scandal related to technology going too far for comfort.”
I know we recently had a roundtable that touched on some of those topics that you attended, Kelsey.
Kelsey Alpaio: Yeah, it’s actually really funny because I watched Jurassic Park over the weekend. And this was like, kind of the opening of my answer to this, which was, that’s just like the case study of like, don’t just do things because you can.
And yeah, the roundtable that I attended. We did talk a lot about data and kind of the issues that come with that. And I think a lot of the stuff that we have seen like Facebook and you know, other companies that have got caught up in different scandals has to do with data and jeopardizing the data of their users.
And so, it definitely comes down to, are you actually solving a problem that your customers want solved? Have you asked them if they want algorithms that filter out fake news or whatever? I think it’s really important to take a step back in whatever you’re doing innovation wise and be customer centric, and ask yourselves and ask them, is this an innovation that is worth pursuing?
Kaitlin Milliken: I think this question is really interesting, because there’s almost a legality element to it. And I was talking to Steve Blank about a year or so ago, and he said that innovative companies just do things and then deal with the regulations once they happen. Does that have anything to do with this?
Hari Nair: Yeah, I think I think a lot of the tech startups, which is where I think these questions sort of come from, it’s sort of like, “Yeah, I’ll ask for forgiveness later. Let me just get it out there.” And frankly, the VCs and sort of reward that right. So that’s sort of like, you know, let’s get this out there. But actually, I think this is a really important question. I look at the legacy companies, the ones that are not tech who’ve been real stewards of their brands and kind of the brand promise. I think there’s a lot of careful consideration around the impact of something going wrong. Let’s say, look at a non tech business, a toy, or a soap, or toothpaste. I mean, the kind of testing and the kind of regulations that you have to hit to commercialize, It’s quite significant, right?
So there’s a lot the tech industry could learn from, in my view, from the sort of the legacy companies who’ve had brands that have been around for 50, 100 years. I feel like there’s not enough appreciation for the value and the brand promise. When these brands get launched, they don’t realize that they’re actual brands. There’s a promise you’re making with it, and then the technology just gets ahead of that promise the brand is there for. So I do think it’s really important.
I think right now, if you look at the conversation today, there’s a big shift between sort of shareholder capitalism and stakeholder capitalism. And, they’re looking at like, “Okay, the impact of my technology, or my product, or my innovation on society as a whole. Right?” So I think that conversation is happening, but I still believe it’s like a decade away before it actually starts to bake into choices. But at least I’m encouraged that it’s starting to happen. I think, as more stakeholders start to influence the board of the companies, I think this will become more, you know, sort of standard practice.
Kelsey Alpaio: Something that I was also kind of trying to debate with myself on this question is the idea that a lot of these tech companies, they’ve created solutions to problems that we didn’t even know we had. So it’s kind of that scenario of, if you ask somebody if they what they wanted, they would have said a faster horse, not a car. So how does that play into this? Do we have any thoughts on that?
Hari Nair: You know, I’m thinking I’m thinking about something I did yesterday. I don’t know if this answers your question. But yesterday I was using Google Maps. And if you got a relatively new iPhone, you would probably have Google Maps, you’ll have now an augmented reality button on the Google Maps, right? So I thought, “Okay, what is this thing?” I press the button, and all of a sudden, the camera turns on and you pointed to the road, and you can start seeing like street signs and other things that are superimposed onto this thing.
And I thought, “Okay, this is interesting, but how what kind of data is Google collecting on?” This is my first question, you know. They already have maps. They already have street view, but this… So I was sort of like, you know, they probably had something here. But the interesting thing was, it was a really lousy execution of augmented reality because what I really wanted was, “Is this going to tell me when should I make a turn? Is this street exactly what I’m seeing here?” And they’re not they’re not close to that yet.
So the lesson here for me was, you know, Google, obviously is learning. They just threw something out there. They probably did test it. It was good enough. Let’s get some feedback. And then after I stopped using it, it asked me a quick question. How was your experience? And obviously, I gave it a pretty poor rating right now. But, you know, few years from now maybe even a year from now, they’re going to be a lot better. And so I think the reality is that the tech companies are going to keep pushing the envelope on new technology. I think that’s how we get real breakthrough. I don’t think we get, unless somebody pushes the envelope, I don’t really think we get the breakthrough. So I’m not necessarily against that. But I do think there is real questions around the kind of data that they’re collecting. And is that scrubbed enough where, you know, they can use this to leverage whatever business they’re going to do.
Kaitlin Milliken: Knowing what’s being collected and being able to opt into it, instead of having it behind the curtain. That’s really important.
Hari Nair: You know, like, for example, I was totally my decision to opt into that because I was curious about what this new button was. But you’re right, I think it would be good for for the that to be much more transparent to people. And I don’t again, there’s a balance here, right? Like do I want to keep checking off every box before I launched something and say, “Hey, you know, are you sure you want to do this?” I don’t know what the right balance is, but I do think that there are going to be like, for example, augmented reality or, you know, that type of technology is going to probably save lives in countries, right where you can do already, you’re doing remote surgeries and things in different parts of the world.
So you can kind of say there’s a good for these technologies that are going to become really real for people. So how do you prevent that, versus some of these side effects that come into play. Right, and that’s a balance that I think these companies have to strike.
Kelsey Alpaio: Yeah, I’ve started to kind of see it as almost a barter system where like, if you’re not paying for something it’s because you’re paying for it with your data. And that’s something that kind of like, very recently, and so coming to terms with that, And, you know, not growing up with this kind of stuff. And so now learning it as an adult, and that kind of barter system is come to mind for me.
Hari Nair: Absolutely. And I think I think that’s good that people are realizing that if it’s free, then it is not really free. Right. I think, you know, and I think that will force people to make that question. Now that said that this could also be an excuse for people to just start to price things that are that are generally free, and still exploit your data too. So that’s a that’s a different thing altogether.
Q. Good to Great
Kaitlin Milliken: So the next question is really for you, Hari. It’s about Good to Great and mentions the company used to work for, Kimberly Clark. So let’s play the tape on that.
Clayton Levins: Hi, my name is Clayton Levins. I’m an innovation project specialist at the Haskell company. So obviously Good to Great by Jim Collins, sort of a classic read for a lot of folks in business. Kimberly Clark was a part of the book, was a key study feature for Collins, and was one of the companies that went from good to great because they followed in enacted a lot of the principles that were laid out in the book.
After Collins’ study of top executives of Kimberly Clark and others, and I guess the question on the table is, you know, how are you seeing or do you feel like Kimberly Clark is still following Good to Great? Or do you see that it is the world so fast, or is digital transformation so strong, or our sort of our economic times have they changed so much, that that Good to Great could use a little bit of an update?
Kaitlin Milliken: So Good to Great, what are your thoughts?
Hair Nair: Yeah, I mean, Good to Great is a classic book, but I do agree that I think it could use a bit of an update. And I think, you know, the company’s featured in Good to Great, I think part of what Collins was trying to show was sort of the systemic ways companies sort of grew and reinvented themselves over time. And I think that’s it that was, you know, it’s still a really good book. But I think I think one of the challenges today and, you know, Kimberly Clark and other companies are also affected. GE, I mean, is a great example. Is what made you great in the last century, not what’s going to keep you great in this century. And I think there’s a couple of elements to that, that are that are really a challenge right now.
Number one, I think the idea of try to be very shareholder focused over the last say, 25 or 30 years for a lot of these companies, I think, when you look back in American history of companies right, there was shareholder focus in the 1960s and 70s. But I’d say in the 90s, we focused a lot on returning cash back to shareholders.
And then a lot of companies focused on cost reduction, as in cost savings and whatever other things they can do to maximize extract value back to the shareholders and share buybacks, that inhibited innovation as a whole personally, right. So I think, you know, for every amount of dollars we gave back to shareholders least I’m talking about the good to great companies. The real question is what was the opportunity cost of not investing that in some new transformative innovation?
Contrast that with the top ten market-cap companies in the market today versus 20 years ago, right? You got Amazon, Apple, Microsoft, they’re constantly investing in R&D and growing. So I do think that one of the reasons why the good to great, sort of construct needs to be refreshed is I’d really like to see, you know, what would these companies have done something differently Had they not just focus laser focused on shareholder returns? And I’m not picking on Kimberly Clark, I think I’d pick a whole number of companies that focused on that. And I think that would be an area to focus on versus could they have been more innovative and transformative? And I think the answer to that, at least for me, my research tells me that definitely. There were opportunities, there are still opportunities today for these companies to transform.
But how aggressive are they looking at these spaces? Right? Kimberly Clark in particular is near and dear to my heart, because, you know, I worked there. It’s is a great company. I grew up in Wisconsin, where Kimberly Clark was sort of founded and the whole area, if you look at the Midwest, you know, a lot of the manufacturing and a lot of the innovation belt of the company, for the country came out of the Midwest. And that sort of jobs, and those sort of opportunities have kind of left in some ways. So you’d really like to see a revitalization of that economy through innovation. So I’m really a big fan of these companies doing better but they have to make some bets and really push for it.
Q. Horizon Three Innovation
Kaitlin Milliken: Thanks so much for taking a dive into that. This is our last question. And it’s from a member that works in insurance and lives in Australia. He writes, “Who does transformational innovation? Well, and do you have any best practices or process overviews on this front?” I know we answered this question on our website recently, but if you want to start us off, Kelsey, I know you have a role model in mind.
Kelsey Alpaio: Yeah, the first person that came to mind for me in terms of role models for H3 innovation was Embraer, which is they make commercial and military aircrafts. And they have kind of a group called EmbraerX, its focus specifically on H3 disruptive innovation. And basically, their whole mandate is to create solutions that have the potential to not only reinvent what Embraer does, but what the entire transportation industry does itself. And one of the things that they’re working on right now that just seems completely insane and really cool, is they’re working with Uber on electric powered air taxi, which I’ve already heard have started running in New York and all these places. And it just seems kind of crazy to me. And so that to me stands out as a company that’s doing H3 innovation. Do I actually know what’s going on inside their organization to make that happen? Not completely. But I know that that’s happening.
Kaitlin Milliken: I recently talked to someone at their innovation team. And one of the things they mentioned was having support from across the organization, especially from the CEO was huge for their initiative. Embraer had a change of CEO and even the new person that came in recognized the project was one of their important future events. And that was something we heard from a lot of our community: Get support from the top, get a couple folks, and get outside the business to get started. Do you have any other examples, Hari?
Hari Nair: Embraer is a great example. I think one of the common things you see with companies who are doing Horizon 3 well is sort of that carve out of the teams that are doing Horizon 3, with almost clear line of sight to the leadership. A company that I’m again a big, big supporter and fond of this company is Procter and Gamble. In recent years, P&G has really shifted it’s sort of what they call their GrowthWorks or GrowthLabs. It’s really focused on creating the next. I call it the next big brands for p&g, and one of the successes just recently launched was a brand called Zevo, which was really getting in for P&G to get into insect repellents, but in a much safer, breakthrough way. And one of the common denominators you see with companies who are doing Horizon 3 well, is besides carving it out. There is a real focus on customer centricity. There’s some unique technology. They understand the customer really well or the job really well.
Air taxis in New York is a good job to be done that today is its frequent. It’s important, and its current. The alternative is really are terrible, right? So aligning that and then being able to kind of go and create a team with a bit of autonomy and then having senior leaders sort of be available is really important if you’re going to see these Horizon, 3 things be successful.
Kaitlin Milliken: Awesome. Thank you so much for joining us. I think that’s all we have on our list. And thanks to everyone who submitted a question.
Kelsey Alpaio: Thank you.
Hari Nair: Thank you.
[ACKNOWLEDGEMENTS]
Kaitlin Milliken: You’ve been listening to Innovation Answered. This episode was produced by me, Kaitlin Milliken. Editorial assistance was provided by our intern, Molli DeRosa. Special thanks to Kelsey and Hari for sharing their insights. Looking for more answers to your questions? Visit innovationleader.com to check out our Frequently Asked Questions page and to read our latest case studies. You can also send voice memos for future ask us anything episodes of our show to our email: podcast@innovationleaer.com. Thanks for listening to our first ever call-in episode, and see you soon.
[SPONSOR MESSAGE]
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