Tuesday, March 15, 2011

Innovation pipeline: a popular lead indicator metric on innovation

It is no use hearing the fire alarm after the fire engulfs you. The real value of any metric system is in raising alerts so that you have time to take action. Innovation pipeline seems to be the most commonly used lead indicator metric by CEOs to track innovation in the company. In fact, GE CEO Jeff Immelt told his top leaders, “If you can do only one thing well, this is what I’d pick: Make sure this pipeline is always full”. What kind of strategic actions are taken by CEOs after reviewing the innovation pipeline? Let’s look at a few examples from 3M, GE, Biocon, HUL and Infosys.

Following story is narrated in 3M’s storybook “A century of innovation”: One Saturday morning in 1940 CEO McKnight analyzed the “birth rate” of 3M products. He ticked them off: Wetordry waterproof sandpaper in 1921, Scotch masking tape in 1925, Scotch transparent tape in 1930, Colorquartz roofing granules in 1933 and rubber cement in 1934. Then there was a six-year dry spell. Although Scotchlite reflective sheeting was created in 1937, the rewards of that new product had not yet been recognized. “While these dates are only approximate and are really predicated on when the product commenced to yield some profit, it indicates rather a long period of hunger . . . nothing appears to have been developed since the rubber cement birthday,” McKnight wrote Carlton. McKnight took an action the same day and 3M’s New Products Department was born. In a memo dated October 12, 1940, McKnight wrote, “3M is spending a substantial and an increasing amount on research every year. It’s time to create a department to cooperate with all interested parties in studying the commercial value of each research project upon which money is being spent.”

One of the initiatives that Jeff Immelt kicked off when he became CEO of GE in 2001 was “Imagination breakthrough”. It is a pipeline of ideas that could generate more than $100M in incremental revenues. Out of the 30 ideas that entered the pipeline in the first year, about 20 of them turned out to be good projects. Today the pipeline is managed by CMO Beth Comstock and has 100 plus ideas in the pipeline with everything from new stroke technologies that are offered to ambulances to solar or wind energy technologies. Immelt tracks about 30 of them every month.

I am sure Indian CEOs review their innovation pipeline as well. Biocon CEO Kiran Mazumdar-Shaw has mentioned in the annual meeting in 2007 that there is an “enviable research pipeline” and she mentions a few programs in the pipeline like oral insulin, an antibody for Rheumatoid Arthritis etc. In a Q&A session at India Knowledge @ Wharton HUL CEO Nitin Paranjpe mentions that “We have a robust innovation pipeline across categories.” Similarly, Sandeep Dadlani, Head, Retail, consumer goods and logistics at Infosys mentioned following in the analyst meet in July last year, “There is a significant innovation pipeline of new ideas, new solutions, new IP at Infosys which is being evaluated literally every month. Business plans are being reviewed and approved.”

If everybody tracks innovation pipeline, what is the differentiator? Is it about how some of those ideas are linked to customer’s anxieties and aspirations at a deeper level? Perhaps coming out of an immersive research like P&G does or a “dreaming session” with customers like Immelt does? Is it about a discipline of funding & protecting investments in the good ideas and parking the rest? Is it about ensuring the speed of experimentation and customer feedback cycle? I don’t know. Any thoughts?

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