Novel Thinking as a Survival Tactic
04-01-06 Revista de Prensa
by William J. Holstein
LARGE American companies, not just small start-ups, are capable of breakthrough innovations, says Vijay Govindarajan, professor of international business at Dartmouth. He is co-author, with Chris Trimble, of "10 Rules for Strategic Innovators: From Idea to Execution," (Harvard Business School Press, 2005, $29.95). Here are excerpts from a conversation:
Q. Why is the subject of innovation so hot these days?
A. In the 1990's, people were just rolling the dice and spending billions of dollars. It was reckless innovation. Post-9/11 and the dot-com bursting, people went back to cost-cutting. But now they also said, "After Act I is over, we must create growth and innovation." This time, they're saying, "We want to grow, but minimize risks and grow profitably." Innovation has come back with a different twist. It's very much on the agenda of chief executive officers. Without growth and innovation, organizations die.
Q. Is this fascination with innovation being driven by the emergence of new competitors from China and India?
A. The emergence of India and China has made innovation extremely critical. Together they are about $2 trillion in gross domestic product. That's only 5 percent of the world's G.D.P. But if these two economies grow at the rate at which the World Bank and Goldman Sachs predict, then tens of trillions of dollars worth of economic activity will be created in the next 25 years.
Q. Are larger companies a more important source of American innovation than smaller ones?
A. I would not say it is "either" or "or." We need small start-ups to continue the innovation stream. But I believe that only large companies like General Electric can solve big, complex problems, which can make a huge difference to humanity.
Q. Which are the most innovative large companies today?
A. There is no perfect example. G.E., eBay, Johnson & Johnson and 3M come to mind. This is a topic that almost every company is concerned about. When you are a large, established, tradition-bound company, to fundamentally innovate, it's not in your genes. Fundamental innovation implies that you have to selectively forget some of the things you're doing well today. That's not so easy.
Q. You say that Apple is among the best innovators in the technology world. Which other companies belong on that list?
A. Motorola. They stumbled in the 90's and missed the boat on several things. But in the past three or four years, it has regained its dominant position. A third company is Google. Some people said it was just a fad and would disappear. But they have created a whole new space and continue to change the rules of the game.
Q. The largest 500 companies in the country have been net shedders of jobs. Shouldn't they be considered consolidators, not innovators?
A. Yes and no. It is true that if you look at Fortune 500 companies, many of them have focused on cost-cutting, re-engineering and restructuring, all of which means shedding jobs. It will be a real shame if companies go bankrupt because they just simply shed jobs. The question is, how do we stop it? They have a lot of capabilities. We as a country must help these companies to maintain an innovative spirit.
Q. Say I'm the chief executive of a major company. Is there a secret to achieving innovation in my company?
A. First, strategic innovation is critical for you. Don't ignore it. In addition to continuous process improvement, focus on strategic innovation. Secondly, coming up with a new idea is only the starting point. You need to pay attention to execution of the idea.
Q. What else do I need to do?
A. You must be able to forget some of the success formula by which you are succeeding today. By definition, that's irrelevant. Secondly, you must be able to borrow one or two of the core assets of your company and lend them to the new idea.
Q. What's the final part of the challenge?
A. The new venture must learn to resolve uncertainties. There are always questions about the size of the market, what the customer needs, what the technology solutions are - these are always unknown. It's the person who resolves the uncertainties and learns the fastest who will win.
Q. Exactly who should manage the hot new idea?
A. You must hire an outsider to run the breakthrough idea because insiders are always wedded to orthodoxy and the inside success formula. You must also hire liberally from outside. Hiring from within kills breakthrough innovation. And the business should report to the C.E.O. even if it is very small. It must get the same organizational status as other business units or it is going to be suffocated.
Q. So would you say the chief executive has an important role in making breakthrough innovation possible?
A. A tremendously important role. I consider the C.E.O.'s role in the modern corporation to be building the capacity to continuously innovate in a breakthrough way. The C.E.O. doesn't create the strategy, but should be listening to the voices of people who are able to see the future. It is the role of the C.E.O. to spot and encourage them. Then, once an idea has promise, you must help build a separate organization around that person.
William J. Holstein is editor in chief of Chief Executive magazine.
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