A White Paper prepared by Andy Martin and Helmut Albrecht on how to create a culture of innovation.

1. AUGUST 2010
creating a culture of
innovation
nurturing successful
business innovation
Prepared by
Helmut Albrecht and Andy Martin
Innovation. According to Wikepedia, innova­ fill a void of customer needs that otherwise
tion is defined as “a change in the thought had gone unfulfilled. It focuses on editing and
process for doing something, or the useful ap­ carrying out the right ideas and introducing
plication of new inventions or discoveries.” In them to market in an expedited manner. A
different industries it implies different meanings question all businesses should be asking is
and thought processes. It has become the “are we currently embracing innovation as a
buzzword for global companies seeking new part of our business strategy to drive growth
strategies as a result of the economic crises. and improve our chances of market share
Companies both small and large are beginning dominance. And if not, what are the obstacles
to understand a new truth in understanding preventing us from moving forward in explor­
that by implementing effective innovation ing innovation as a catalyst for creating new
strategies beyond product and price or incre­ business strategies?”
mental innovation, businesses can attract a
host of extra clients but most importantly gen­ It’s no surprise that many businesses shy
erate innovative new revenue streams for long­ away from investing in innovation during a re­
term growth. cession with the common misperception that
in order to innovate, millions of dollars must
Innovation in the 21st century means much be spent in order to generate new outlets of
more than introducing new products. Innova­ innovative business options. For those com­
tion today encompasses business reinvention panies willing to view a downturn as a catalyst
and introducing new products and services that for innovation and a prime opportunity to

2. 2 AUGUST 2010
focus on generating new business strategies, with a greater brand presence and a growing
the payoff can far exceed the company’s ex­ tribe of loyal customers and clients. So how
pectations. Few consumers recall that the can you nurture a smooth and effective inno­
IPod was launched only a month and a half vation environment that will not break the
after the September 11, 2001 attacks. And bank, but be impactful?
yet another brand that was launched during
times of economic stress. Federal Express Common Pitfalls & Mistakes
was launched nine months prior to the 1973
oil crisis, creating a new industry amidst eco­
nomic disorder. Companies like Apple, Dis­ One of the most important things companies
ney, and McDonald’s are prime examples of need to learn and learn quickly during an inno­
how innovation in an economic downturn can vation process is the ability to fail effectively.
produce iconic results in different industries. This may sound like an oxymoron but wouldn’t
The notion of innovating as a result of crisis you prefer to rapidly identify poor innovation
or a downturn is no secret to Bud Paxson, co ideas, rather than invest months or even years
­founder of the Home Shopping Network on development, branding and marketing only
HSN who began his career as the owner of to find that there is no niche for your product,
an AM radio station and ultimately created or a firm elsewhere has developed the same
one of the most successful and innovative idea faster, cheaper and already introduced it
retail markets. A concept that has been repli­ to market?
cated worldwide since its inception. During a
recent executive briefing, Paxson provided
details of how HSN came to be, a creative
response to an impossible dilemma which
“Intelligent failures ­­
ultimately led to the creation of HSN those that happen early
“pioneering the concept of the viewer shop­
ping for items in the comfort of their own and inexpensively and
home.” that contribute new in­
Upon facing a difficult commercial dilemma
of finding a way to sell 112 electric can open­ sights about your custom­
ers that he had received from a client who
had refused to pay for his airtime, Paxson ers ­­ should be more than
was presented with the opportunity to create just tolerable. They
an entirely new and innovative category of
retail commerce. He ultimately solved his ini­
tial dilemma which was to make his next should be encouraged. ”
payroll. He encourages businesses to view
the recession as a time to outthink their com­ Business Week
petition, gain an increased market share, and
emerge from the economic tunnel stronger,

3. 3 AUGUST 2010
Steps should be put in place in order In many cases management turns to either
to identify new products or processes option­narrowing or rule following. They either
that will likely be successful, and most apply logic to define and narrow down a
importantly eliminate rapidly those that seemingly complete set of options or they fol­
will not. So, what are the most common low a formula of behaviors that have proven
mistakes firms make during this process successful in the past. However, both ap­
that lead to the following statistics: proaches are ineffective at delivering truly in­
novative strategies.
An estimated 46 percent of all To truly introduce innovation to business
resources allocated to product de- strategies, companies need to learn from in­
novative thinkers from other domains, such as
velopment and commercialization
chess, military, and athletics. Truly creative
by US firms are spent on prod- strategists abandon logical approaches and
ucts that are cancelled or fail to utilize time­tested patterns such as:
yield an adequate financial re-
turn. Partner
with someone unexpected
Less than 10 percent of proposed
innovations reach the target mar- Respond quickly
ket. to market opportunities
Only 1 out of every 4 projects Lock up
that enter development – make it resources
to market. Join forces
with an ally in such a way that it
Despite research and planning, forces your competitor to compete with
at least 1 of every 3 products you in more than one area of business
fail at launch.
Introduce
Less than 10 percent of new a new piece to the game board when
products succeed in the market- the direct approach is ineffective
place.
Combine & coordinate
independent elements within your en-
vironment to orchestrate much greater
power
Embrace ideas
that others may abandon

4. 4 AUGUST 2010
Unfortunately, it is all too easy to rush forward into an innovation initiative without applying
much thought to the best approach to leverage your firms’ managerial, time and financial commit­
ment in order to reduce risk. Though many businesses state their commitment to innovation, it is
easy for their innovation attempts to fail for a number of reasons. In addition to making sure that
you have agreed upon a challenge among your leadership team, companies should take into
careful consideration the following common innovation mistakes:
1 2 3
Business Culture Criteria, Metrics Training and
and Idea and Fuzzy Front Innovation
Management End Processes
If your firms’ business culture does
not honor ideas and support risk­
Assuming your business has an
environment open to innovation and is “Only 21 percent of
taking, innovation will be stifled even
before it reaches the drawing board or
using time tested patterns; a wealth of
great ideas will be generated. But
innovation survey
enters upon the initiation phase.
Business culture can certainly
without clear metrics being estab­
lished to prioritize and sort ideas in
respondents had
change, although it is a slow yet es­ advance, a rational means for evalu­ received training on
sential process. Agreement from the
highest levels of management, effec­
ating ideas will be absent. This often
will result in companies moving for­ how to participate
tively communicated to subordinates
and team members can facilitate the
ward with seductive ideas that don’t
fall into a set of pre­defined criteria.
in innovation
process a company must undergo in
order to gradually change the internal On the other side of the coin, don’t
teams.”
The Innovation Network
culture. invest a significant amount of efforts
on an in­depth modeling and feeding Training and coaching are essential
An idea­management system is evaluation engines. Some of the most components to successful innovation.
essential in effectively moving innova­ competitive companies prioritize their A recent survey indicated that only
tive ideas towards the development, innovation “options” by only consider­ 21% of respondents had some train­
modification and refinement phases ing achievability and attractiveness. ing on how to participate in innovation
when applicable. teams, and less than 10% had any
To obtain the very best innovative training as part of the innovation
Furthermore, it is equally important ideas your business should seek new team. A clear process also needs to
to move ideas from the innovation insights externally, not just internally be set in place, to prevent innovation
funnel into the ‘non­viable’ list and to for suggestions, feedback and market reviews 6 or 8 weeks after a new
continue moving forward with the opinion. This may include talking with innovation kick­off which may result in
more marketable and feasible prod­ your customers, vendors, brokers and finding that ‘innovation isn’t working’.
ucts. clients, comparing your business to
your competitors and leveraging the The innovation process must enable
Without a strong idea­management knowledge gained to create new and people to focus on the right chal­
system, companies can build a range different ideas that could generate lenges and should ultimately lead
of innovative ideas that simply gather opportunities for a breakthrough. them through organized steps to
dust, and never move beyond the unlock strategic creativity, evaluate
idea stage. Using a “company incuba­ results and hold them accountable.
tor” for those currently “non­viable” This should prevent non­viable prod­
ideas will keep them fresh and usable ucts and ideas from moving into the
as soon as the environment is condu­ implementation and launch process.
cive and the viability for success is
much greater.

5. 5 AUGUST 2010
4 Framework for Innovation
Strategy and Understanding the basics of innovation strategy provides a good foundation,
however, it is equally important for firms engaged in active innovation initiatives
Managerial to remain flexible and continually adapt their process and approach to maxi­
mize chances of success. Innovation requires new ways of thinking and new
Adoption skills. Developing a just­in­time, active­learning training process ensures that
innovation teams develop the desired results effectively and efficiently.
Your corporate strategy should be You may want to ask yourself what type of innovation you want to pursue –
broad enough to allow for exploration sustaining innovation or disruptive innovation? Sustainable innovation focuses
into related areas for innovation, but on making improvements to existing products or services, and typically benefits
narrow enough to define your core incumbents, whereas disruptive innovation favors new entrants into the market,
competencies. Furthermore, business such as cellular phone companies enhancing phones to incorporate MP3 mu­
unit managers should be engaged in sic players to take market share from Apple iPods in the portable music mar­
the innovation process from the start, ket.
so that they have the opportunity to Although disruptive innovation is key to new growth, companies should never
buy­in to new concepts before they ignore their core offerings and should continue to pursue sustaining innovation
devote both time and budgets to to maintain that growth. They should devote resources to disruptive strategies
them. Without early adoption from which will enable them to profit before someone else does and to build a foun­
managers, innovations tend to fail. dation of growth for the future. Developing the strategic priorities as the next
Going through an exercise of describ­ step after imagination and ideation, the “no brainers” (highly attractive / highly
ing your current reality and trajectory achievable”) have to exist in cozy company with the “crazy ideas” (highly at­
as well as agreeing on a long­term tractive / perceived as “low achievability”) and measurements need to be taken
vision and near term aspiration will to transfer them to become “no brainers”.
help to define the real challenges you
are faced with. Other important factors to incorporate into an innovation framework include:
5
 Learning and rapid adjustment should be incorporated into your emergent
strategy.
 Remember to be “impatient for profit, patient for growth.”
Resources  Pursue and obtain information that you can gather quickly which will in­
crease your confidence and support the idea that you are moving in the
and Diversity right direction.
 Static strategies are risky! If you learn that your strategy appears less
Innovation takes time, energy and attractive in the initial phase, don’t be afraid to eradicate a fundamentally
money – CEO’s need to be willing to flawed strategy. Consider how to shape it in directions that will give an
devote resources, new skills and increased chance of success. Bud Paxson called this process “learn when
systems to support innovation for to hold and when to fold.”
success to be likely. Additionally, it is
equally important for companies to  Assumptions are key. Testing key assumptions will help you reduce the
embrace as much diversity as possi­ venture’s risk by finding the right strategy more efficiently and with more
ble into the innovation process, incor­ targeted investments in time, money and manpower.
porating people of all ages, races,
genders and thinking styles along with
 Have defined milestones and check those points along the way to facili­
competitors, customers, suppliers and
tate an effective process.
stakeholders. The CEO’s and presi­
dents of companies need to be on the
forefront of innovation. They should  Continually revisit your strategy. As the innovation process moves for­
follow the example of companies like ward, assumptions that may have appeared to be important will become
Becton Dickinson, where the “Leaders less so, and new assumptions will emerge that need to be tested and
as Teachers” approach is fully inte­ validated.
grated in the innovation mindset of
the organization.

6. 5 AUGUST 2010
Partner Selection
Given the expense, time and money required to nurture innovation in any business, it is becoming increasingly com­
mon to share efforts with external parties, often providing a fresh approach, outlook and generating a multitude of
ideas. If you are looking for outsourcing assistance with innovation to jump­start your product or process development
and improvements, company repositioning or new marketing messaging, there are some key points to take into consid­
eration:
 Seek partners who can help you fill your innovation funnel – establishing partnerships and promoting activities
such as innovation clinics, workshops and brainstorming sessions.
 Make sure your partner is in a region with a reliable infrastructure – first move advantage in a remote location
comes with high­infrastructure costs. When working with a partner, you don’t want to be paying for basic infra­
structure such as PC’s windows licenses, broadband etc.
 Use a local agency or consulting firm to help narrow down the field of choices.
 Match your partner with your company size. If you are a start­up or a small group within a large company, work
with a relatively small partner of around 200 or fewer people, where you can still garner the attention of their senior
management.
Summary Contact
Successful innovation directly drives economic
growth, but nurturing a successful innovative business
KaiMethod
environment is challenging, with most new innovations (www.kaimethod.com) is a strategic creativity methodol­
failing to realize an increased profit or market share. If ogy that helps large and medium sized companies seize
particular steps are taken within your organization to strategic options others ignore, unlock innovation and
foster a nurturing and open innovation environment build strategic thinking skills.
based on time tested patterns of success, the chances
of successful innovations beyond product and price are
greatly increased.
Helmut Albrecht
is an Executive Consultant with KaiMethod and a certi­
fied SMART Conversations® facilitator and helps his
At KaiMethod, we strongly recommend a balance
clients to outthink their competition. Helmut Albrecht can
between sustained and disruptive innovation initiatives,
be reached directly via email at helmut@kaimethod.com
to give your firm the best chance of leveraging and
and his LinkedIn profile can be viewed at
nurturing innovations that will work in your market, for
www.linkedin.com/in/helmutalbrecht.
your business. We encourage companies to consider
partnering with someone unexpected to drive innovation
projects, as this can reduce your risk while simultane­ Andy Martin
ously increasing your chances of success.
is a general manager and international entrepreneur
experienced in both start­up and established organiza­
Good companies measure innovation with sales
tions. He has a broad range of expertise that includes
growth figures. It is important to establish and maintain
strategy development, innovation, and operations lead­
metrics for your initiatives, to “align the parts with the
ership. Today Andy serves as co­founder and Executive
whole” and to create a simple review process that will
Vice President at Utopia, Inc. – a dynamic and rapidly
be part of the rhythm of your organization. If you plan
growing data management company with worldwide
on growing your business by 10%, it is essential to think
operations. Andy is a West Point graduate and also
of how much growth comes from innovation and how
holds an MBA from Northwestern University. For more
much is coming from existing products or services?
information about Andy, visit www.Andy­Martin.us