Innovator's DNA

by Jeff Dyer

  Processes That Mirror the Discovery Skills of Disruptive Innovators

  Highly innovative companies have a culture that reflects the leader’s personality and behaviors. In other words, innovative leaders often imprint personal behaviors as processes within the company. Here are some examples of how innovative leaders institutionalize processes to encourage questioning, observing, networking, and experimenting throughout their organizations.

  Processes Can Turn “B” Players into “A” Players (and Vice Versa)

  Many leaders we interviewed claimed that a key to success is to always hire A+ players. Great advice—but doesn’t every company try to do this? What if you can’t attract A+ players, though? And even if you can get them, does this ensure that they will perform? An intriguing study by Harvard’s Boris Groysberg, Ashish Nanda, and Nitin Nohria provides some interesting answers to these questions.a They studied the performance of stock analysts over time, particularly “star” performers who moved to a different company. Star stock analysts were identified by rankings provided by Institutional Investor (rankings based on criteria such as earnings estimates, stock selection, and written reports). Analysts with higher rankings delivered more-accurate stock forecasts, and their reports produced bigger stock-price impacts. The same star analysts who moved to an investment firm with less effective processes and resources, though, experienced an immediate decline in performance that persisted for at least five years. Star analysts who moved between two firms with equivalent processes and resources also exhibited a performance drop, but only for two years. Thus, a firm’s resources and processes play an important role in star analysts’ performance. The researchers found that some firms, like Sanford Bernstein (now AllianceBernstein), were far more successful at growing stars because of key processes established to train, mentor, and support analysts. These findings are consistent with a study of 2,086 mutual-fund managers that reported that 30 percent of a mutual fund’s performance could be attributed to the individual and 70 percent was due to the manager’s institution.

  Most of us possess an instinctive faith in talent and genius, but it isn’t just people who make organizations perform better. The organization—its processes and philosophies—can also make people perform better. Companies can turn B people into A performers—or worse, A people into B performers—depending on the companies’ innovation processes and resources.

  a. Boris Groysberg, Ashish Nanda, and Nitin Nohria, “The Risky Business of Hiring Stars,” Harvard Business Review, May 2004.

  Discovery Process #1: Questioning

  By now, virtually anyone working in a manufacturing environment has heard of lean manufacturing, or—as it is known in the automobile industry—the Toyota Production System (TPS). The now-famous system was a leapfrog innovation over the mass-production techniques pioneered by Henry Ford. TPS propelled Toyota to become the global automotive leader in both revenues and profits for decades. Taiichi Ohno, a former engineer at Toyota who is known as the chief architect of TPS, put a five-whys questioning process at the core of his innovative production system. Many of the world’s most innovative companies have adopted variations of the process.

  The five-whys process requires that when confronted with a problem, ask yourself why at least five times to unravel causal chains and spark ideas for innovative solutions. To illustrate, in 2004, Bezos was visiting an Amazon fulfillment center with his leadership team. During the visit, he heard about a safety incident in which an associate had seriously damaged his finger on a conveyor belt. When Bezos learned of the incident, he walked to the whiteboard and began to ask five whys to get at the problem’s root cause:

  Question 1: Why did the associate damage his thumb?

  Answer: Because his thumb got caught in the conveyor.

  Question 2: Why did his thumb get caught in the conveyor?

  Answer: Because he was chasing his bag, which was on a running conveyor.

  Question 3: Why was his bag on the conveyor and why was he chasing it?

  Answer: Because he placed his bag on the conveyor using it as a table, but it then turned on by surprise.

  Question 4: Why did he use the conveyor as a table for his bag?

  Answer: Because there wasn’t any place near his workstation to put a bag or other personal items.

  Bezos and his team determined that the likely root cause of the associate’s damaged thumb was needing a place to put his bag, but having no such place around, the associate used the conveyor as a table. To eliminate further safety incidences, the team provided portable, lightweight tables at the appropriate stations and additional safety training to alert associates about the dangers of conveyor-belt work. While this innovation was minor, one Amazon member, Pete Abilla, said it was a transforming experience “that I carry with me to this day.” Abilla went on to describe several things that he learned.

  Bezos cared enough about an hourly associate and his family to spend time discussing his situation.

  He properly facilitated the five-whys exercise to arrive at a root cause: he did not blame people or groups (no finger pointing allowed).

  He involved a large group of stakeholders, demonstrated by example, and arrived at a root cause (solution).

  He is the founder and CEO, yet he engaged in the dirt and sweat of his employees’ situation.

  “In that simple moment, he taught all of us to focus on root causes,” says Abilla. “He demonstrated by example the importance of questioning.” If Bezos were the only one at Amazon to use the five-whys method, then it wouldn’t be a process that consistently contributes to innovations at the company. But Amazon teaches the five-whys questioning process in training programs, and employees frequently rely on it when problem solving.

  Our observations of Apple (number 5 on our first list) suggest that while it isn’t formalized, you could almost say the company uses a five what-ifs process as it brainstorms ways to wow customers. The iPad might never have been created had it not been for Jobs and his leadership team asking effective what-if questions. If they had asked, “How can we build a better ebook reader for the iPhone?” the innovative iPad might never have come into being. Instead, Jobs reportedly asked, “Why isn’t there a middle category of device, in between a laptop and a smartphone? What if we build one?”3 The what-if question sparked a discussion about a middle category that would have to be far better than either a smartphone or laptop in doing some key tasks like browsing the web, enjoying or sharing photographs, and reading ebooks. Consistently asking what-if questions is a key part of the culture at highly innovative companies. (For additional insights into how companies foster cultures of inquiry, see Questions Are the Answer: A Breakthrough Approach to Your Most Vexing Problems at Work and in Life, by Hal Gregersen.)

  Discovery Process #2: Observing

  One company that turned keen observations into gold is medical robot maker Intuitive Surgical (number 2 on our original list and still in the top 50). Fred Moll, a surgeon turned entrepreneur, used his firsthand observations and experiences to develop robots that can perform surgery. Moll licensed some technology from SRI, a company that had worked on a Pentagon-funded project to bring the operating room to the battlefield without putting surgeons in harm’s way. The key was to ensure that robots could precisely mimic what surgeons wanted robots to do.

  To refine the da Vinci robot prototype, Moll and Robert Younge (an electrical engineer and founder of Acuson, a maker of ultrasound devices) mounted forty sensors along the joints of the flexible “master” joysticks. The sensors register the surgeon’s hand movements, which are conveyed as digitized information to a computer and recalculated as wrist, shoulder, and elbow positions thirteen hundred times a second. Those movements are transmitted electromechanically to robotic arms and then to the “slave” handles that manipulate the surgical instruments. Moll’s intent was for the robots to be precise, but he knew that surgeons lack perfect hand control. So the computer filters out hand tremors, making the da Vinci robot extremely precise.
Even more important, Intuitive Surgical’s product developers continue to observe surgeons to create new da Vinci system tools, allowing medical robots to assist in doing more and different types of surgeries.

  Keyence Corporation (number 23 on our original list and still in the top 50), a Japanese company that specializes in factory automation devices such as electronic sensors, makes sure that 25 percent of the devices it sells every year are new products and more advanced than anything rivals can offer. New product ideas surface mostly from the hands-on experience of seven thousand salespeople who proactively head to the production floors of some fifty thousand customers. Salespeople are required to spend hours observing customer manufacturing lines to gain insights into their problems. By watching the production lines of instant-noodle makers, Keyence learned that noodle quality was compromised because the noodles were manufactured at variable thicknesses. So Keyence developed laser sensors that could measure noodles to 1/100th of a millimeter. Instant-noodle makers now depend on these sensors to keep noodle thickness consistent. Each year, thousands of observations like these by salespeople lead to hundreds of new factory automation devices for customers.

  Beyond observing customers, our leading innovators also find ways to observe other companies’ practices to spark new ideas. For example, in 2008, Google and P&G did an employee swap to spur innovation, despite the fact (or perhaps because of the fact) that the companies are quite different (P&G is a consumer-products giant that spends $9 billion on advertising each year but very little online, whereas Google is an online search giant that makes most of its money through online advertising). Roughly two-dozen human resource and marketing employees spent weeks sitting in on each other’s training programs and meetings where business plans got hammered out. The initiative allowed for up-close observation of each other’s practices—with some interesting results.

  For example, when Google marketing observers watched P&G launch an ambitious new promotion for its Pampers line (using actress Salma Hayek), they were stunned to learn that Pampers hadn’t invited any “mommy bloggers”—women who run popular websites about child-rearing—to attend the press conference. “Where are the mommy bloggers?” a Google marketing staffer asked in disbelief. In response, Pampers invited more than a dozen mommy bloggers to visit P&G’s baby division, where they toured the facilities, met diaper executives, and got a primer on diaper design. The bloggers claimed to have drawn anywhere from a hundred thousand to six million visitors to their websites.

  Another result of the swap was an online campaign inviting people to make spoof videos of P&G’s “Talking Stain” TV ad and post them to YouTube. The original ad for Tide to Go stain-removing pens, aired during a Super Bowl, shows a job candidate being drowned out by a talking stain on his shirt that babbles nonsense every time he tries to speak during the interview. Spoof campaigns can be risky because people might post something rude about your product or not participate at all. But with guidance from Google, P&G provided prospective spoofers a tool kit of official logos. In the end, 227 spoofs turned up, and a few were good enough to air on TV. The campaign was so successful that Tide plans to use more consumer-generated content in the future.

  IDEO’s David Kelley best summed up the importance of observing processes: “Asking questions of people who were there, who should know, often isn’t good enough. It doesn’t matter how smart they are, how well they know the product or opportunity. It doesn’t matter how many astute questions you ask. If you’re not in the jungle, you’re not going to know the tiger.”

  Discovery Process #3: Idea Networking

  Not surprisingly, innovative companies, like innovative people, are also great idea networkers. They develop formal and informal networking processes to facilitate knowledge exchanges both outside and inside the company.

  Internal networking

  Most companies have processes for sharing ideas among employees, but innovative companies take it to the next level. One popular internal-networking process at innovative companies comes from the American Idol model for finding new ideas. Basically, this process involves challenging employees to generate and submit innovative ideas, which a panel of judges screens and selects. For example, Google holds an “Innovator’s Challenge” four times each year. In this competition, employees submit ideas for top-management review; winning ideas receive the resources necessary to maintain momentum. Google also has a process for sharing new ideas internally that facilitates networking. Marissa Mayer, former director of consumer products and a champion of innovation at Google, held regular brainstorming sessions during which engineers had ten minutes to pitch new ideas. Mayer and a group of a hundred others would discuss the idea. These sessions were intended to build on the initial idea with at least one new complementary idea per minute. Mayer and her group developed an established process for deciding which projects were refined enough to present to the company founders (though they have not revealed the process).

  Innovation at Google is very democratic; it lets market forces determine which ideas move forward and which don’t. Once projects and ideas post to an internal electronic idea board, individuals throughout the company rate the ideas and provide feedback. Employees can also choose to spend 20 percent of their time working on projects of their own choosing. Google executives believe that the market forces inside the company are strong enough to reward good ideas and punish bad ones, much as the “real” market would if the ideas were actually developed and launched. Google also facilitates internal networking through free food. Google Cafe provides tasty, healthy, free lunches and dinners (prepared by the Grateful Dead’s former chef Charlie Ayers) to employees. “The free food at Google serves an important function beyond giving employees access to good, healthy food,” Gagan Saksena, a former software engineer at Google, told us. “It’s totally possible for you to be sitting by someone who has been working in an area that you were not interested in. And then suddenly a discussion with that person may trigger some new ideas for both of you.”

  External networking

  Over the last few years, companies have increasingly looked outside their own walls for new ideas. The term open market innovation has been used to describe this phenomenon. When Lafley became CEO in 2000, he established a goal of increasing the percentage of P&G’s new product ideas through external sources from 10 percent to 50 percent. By 2006, 45 percent of new product ideas came from external sources, and P&G had reduced its R&D from 4.8 percent of sales to 3.4 percent of sales, while launching hundreds of products based on externally sourced ideas. The company experienced this growth in external idea generation through its Connect + Develop (C&D) initiative. Through C&D processes, P&G teams work with independent researchers, other companies, and sometimes even competitors to generate ideas.

  P&G employs a number of different processes to gather ideas from these external sources. For example, the company uses NineSigma and InnoCentive, third-party matchmakers that link companies like P&G with outside technology. These companies help P&G prepare technical briefs describing problems it is trying to solve and then anonymously sends these briefs to thousands of researchers around the world. The process brings P&G into contact with people providing solutions on a contract basis. C&D has helped P&G develop many new products, such as Swiffer WetJet, Olay Daily Facials, Crest Whitestrips, Iams Dental Defense, Mr. Clean AutoDry, and Max Factor Lipfinity.

  Consumer-products giant Reckitt Benckiser (RB) (number 8 on our original list and 56 on our most recent list) has seen similar results using its RB-Idealink website, where it lists its “most wanted” jobs that need to be done and requests solutions. For example, RB launched Finish Quantum, a new dishwasher detergent designed to provide maximum clean and shine. The driving force behind Quantum’s “clean and shine” performance is three highly active chemical agents that are normally incompatible. The challenge was to combine them in a single product but hold them apart. Working closely with external experts, RB developed an innovative polymer system and proce
ssing technique to create a dissolvable shell with three chambers that separate each agent until it’s needed.

  Beyond networking for solutions to particular technical problems, RB also networks with entrepreneurs to help launch entirely new products using RB brands. RB does this by actively licensing its brands to entrepreneurs or companies with access to sales channels or product competencies that RB believes will add value to the equity of its brands. If an entrepreneur has a good new product idea, RB promises to complete the evaluation process and give a decision on licensing within three months. Through processes like these, RB’s innovation pipeline is so full that a new product launches or a product formula changes every eight hours. No wonder CNBC named CEO Bart Becht the European business leader of the year in 2009.

  Discovery Process #4: Experimenting

  Companies with high innovation premiums also institutionalize experimentation. For example, the innovation premium of Monsanto (number 9 on our original list and acquired by Bayer in 2018) results from creating genetically engineered seeds that make crops drought resistant and immune to herbicides and insects. It’s even working on making a lettuce with the crunch of iceberg and the nutrients of romaine, and heart-healthy soybeans with omega-3 (fish) oil. Its biotech crops come out of the same genetic-engineering revolution that produced companies like Genentech and Amgen.

  How does Monsanto do it? One secret is innovative software that allows for digital experimentation with seed genetics. Monsanto uses software that it calls the “molecular breeding platform” to accelerate plant production to bring higher yields and herbicide resistance. This custom software—with the help of robotics and data-visualization capabilities—tracks terabytes of information about plants down to the genotypes of individual seeds. Instead of spending years in planning and trial and error, Monsanto can use these digital planting experiments to predict good and bad crops and quickly get the information to researchers. Experimentation has been key to producing innovative seeds that have captured 90 percent of the US soybean crop and 80 percent of the corn and cotton crops.