Friday, March 5, 2010

A century of systematic innovation: From Edison to Lafley

Conventional wisdom says that innovation goes hand in hand with creativity and perhaps with serendipity. Hence, many believe “systematic” and “innovation” don’t go together. Can we really innovate systematically? To answer this question, I started studying the method of innovation starting from 19th century. In the process I discovered Thomas Edison, the father of systematic innovation. In 1876, Edison founded world’s first “Invention Factory” in Menlo Park, New Jersey with a clear understanding that said “Anything that won’t sell, I don’t want to invent”. Nobody dared to use the factory metaphor in the context of innovation in the next 130 years until A G Lafley of P&G. AG says in Game changer (2008): We started from the premise that it is possible to run an innovation program much the same way we run a factory. In Game-changer AG along with Ram Charan depicts how P&G ran the innovation factory from 2000 to 2008. I consider AG to be the torch-bearer of the systematic innovation in today’s times. Question is: What has changed since Edison? And what hasn’t? Let’s start with the second question first.

What hasn’t changed? There are two things which are common to Edison and Lafley’s approach.

1. Idea funnel management: Managing idea funnel involves systematically seeking ideas that create new businesses, products, processes, customer experiences and/or improve existing ones. Edison says, “To have a great idea, have a lot of them.” And also, “As soon as I find that something I am investigating does not lead to practical results, I drop it.” Lafley says, “For every 300 ideas that enter the funnel, 1 reaches market. However, for every 2 ideas that reach the market 1 succeeds”. AG calls the success rate batting average.

2. Rapid experimentation: For both Edison and Lafley, the process of clarifying assumptions why an idea will succeed is at the heart. “Validating an assumption” is also known as experimentation. Outcome of an experiment is learning telling us “what works in what context” and “what doesn’t work in what context”. Both Edison and Lafley paid a lot of attention as to how to organize for rapid experimentation.Edison’s lab had “every kind of screw made, every size of needle, every kind of cord or wire” and much more (see the wikipedia page and search for “teeth”). P&G created enabling structures such as Clay Street that foster rapid experimentation.

What has changed? 130 years is a long period and it would be a big surprise if we find nothing has changed. Indeed, the method of systematic innovation has evolved. Let’s is how:

1. Putting customer at the center: For Edison, the customer or market data was important in identifying opportunities. However, he paid less attention to customer input on the back-end of the idea funnel. In a response to a dealer’s complaint about lack of popular artist in the music catalog, Edison said, “We care nothing for the reputation of the artists, singers or instrumentalists. We intend to rely entirely upon the tone and high quality of the voice”. P&G, on the other hand, gives significant importance to customer feedback. In fact, brand differentiation is core to P&G’s strategy and brand is all about customer perception. P&G also focused on immersive research in identifying unarticulated needs.

2. Opening the idea funnel: For Edison, the idea funnel was mostly closed and all experiments were performed within the confines of his lab. P&G opened the funnel so that ideas can flow from all corners of the world. Indeed, P&G’s Connect + Develop program one of the most successful open innovation programs around. This increased the capacity and efficiency of the innovation process.

3. Scope of innovation: For Edison, innovation meant patent-led products and new businesses. For P&G, innovation also meant new/improved brands and new channels to reach market. See 4-types of innovations.

For more info see the paper on the same topic. In the next article I will write about the questions participants asked me when I presented this topic in a dozen organizations.

Related articles:

A century of systematic innovation: Frequently Asked Questions (FAQ)

A century of systematic innovation: My favorite milestones

1 comment:

  1. This is an excellent and informative piece Vinay. I learnt a few things today.