Amoeba metaphor and structures enabling innovation: P&G story

It is believed that “freedom in creativity” can have good one night stands with “structures and systems” but not a sustainable marriage. Is this really true? When innovation-guru A G Lafley was asked about structures enabling innovation, he said – I believe in the amoeba as the best model for organization and what I love about amoeba is that they continuously change their shape to eat and survive. Well, AG didn’t exactly succeed in creating amoeba structure at P&G. But I think he came pretty close and more importantly the structures did help P&G become more innovative. Let’s take a look at the structures enabling innovation at P&G in brief.

There are broadly four kinds of structures: (1) those that fund innovation (2) those that manage idea funnel (3) those that catalyze idea funnel (4) those that open the funnel and connect it to the outside world (open innovation). Let’s see examples of each kind below:

1. Structures funding innovation: Like most large organizations, P&G has a corporate venture fund called Corporate Innovation Fund (CIF). CIF specializes in high-risk/high-reward ideas. It is led by CTO and supported by the CEO and CFO. It’s primary objective is to provide the “seed money” to either create totally new businesses and/or create major disruptive innovations. CIF budget is separate from Business Unit budget. But CIF funds projects lead by innovation teams that reside in different organizations throughout P&G. Swiffer and Crest Whitestrips are examples of products that came from CIF funding.

2. Structures managing idea funnel: P&G has two structures that manage idea funnels: one outside of business units and the other within each BU. FutureWorks consists of multidisciplinary team, led by a general manager. Its primary objective is to seek out innovation opportunities that create new consumption eventually resulting in new sales and profits. They are primarily funded by CIF. Although FutureWorks reside outside BU, its innovation efforts are not off in “never-never land”. A BU “sponsor” is identified early on for each FutureWorks project to provide pragmatic business input up front and, more importantly, take responsibility for the commercialization phase in case the project qualifies for it.

New Business Development (NBD) resides within each BU. It focuses on creating disruptive and incremental innovation for a specific category, like laundry, home, or skin care. Innovation led by NBD are usually based entirely on ideas, products and technologies that are developed inside the business, for example, Downy Single Rinse fabric enhancer.

3. Structures catalyzing idea funnel: Hot zones get the innovation structure closer to amoeba. Their purpose is to identify, develop ideas and test ideas especially through the eyes of the consumer. P&G has created innovation centers around the world – in Kobe, China, Geneva, Singapore and Cincinnati – that are designed to represent real-world home and shopping environments. “Clay Street” is a combination of think tank and playground. There are desks and whiteboards, computers and conference areas. And there are also crayons, toys and chalkboard walls and storytelling is common. Cross-functional teams spend 3 to 6 weeks solving a critical business problem or addressing a deep consumer insight and creating a breakthrough product or packaging.

4. Structures that open-up the idea funnel: Connect + Develop works with a global innovation network that contributes to idea funnel in all stages. It creates a permeable wall between P&G and outside world. It nurtures partnerships with customers, suppliers, technology entrepreneurs and even competitors and leverages them to create and capture new value. More about this in: Open innovation insights from P&G Connect + Develop.

More open innovation insights from P&G Connect + Develop

What was the biggest challenge P&G faced when they started the open innovation initiative? And how did they overcome it? Let’s explore answers to these two questions in this article.

In his interview Chris Thoen, Director Innovation and Knowledge Management at P&G says: the biggest challenge was changing the culture: shifting the mindset from “only invented in P&G” to “proudly found elsewhere”.

What were some of the anxieties in P&Gers mind?

A G Lafley explains in Game-Changer – Initially, many people at P&G thought this was the fad du jour. Some were defensive about what C&D could mean to their positions. Some were fearful – was this outsourcing in disguise? Some were worried – does my technical expertise still matter?

How did P&G overcome the mindset challenge?

1. Setting concrete goal: As AG says in Game-changer, “I knew the only way we would dramatically step up our approach to innovation was to establish a measurable target.” The goal was to partner 50 percent of innovations with outsiders. Why 50 percent? AG says – It seemed like an ambitious but possible goal; it was specific and easy to remember (At that time the figure was around 15 percent).

2. Training: P&G introduced new training programs in order to build ambidextrous leaders – those who operate and innovate. For example, a program helps people focus on running an open architecture operation where you need to be truly open-minded in order to be connect and develop. In another program people learn how to build innovation strategy where you create a program that stretches over five, six, seven years. There are innovation specific assignments such as Future Works (funds new game-changing ideas) and corporate innovation fund.

“Clay Street” an idea borrowed from Toy industry creates 6 to 12 week experience where participants work on the fragile front-end (ideation) and any business can send a team in. At “Beckett Ridge” innovation center participants work on the commercialization side (fuzzy back-end).

3. Incentivization: In 2001, two thousand current & former P&Gers were interviewed to isolate leadership behaviours that result in success. In 2003, a new performance evaluation was introduced to all employees. Innovation project teams were evaluated on depth of customer understanding in each step of innovation development, qualification process to improve odds of commercial success, collaboration with a diverse team etc. Success stories were identified and marketed. Those who were passionate and on-board were spotted and made heroes for the rest of the business.

4. Respect for failure: AG says in Game-changer – companies that really want to show their commitment to innovation, and fearlessness when it comes to failure, can promote someone whose project failed – and make the promotion totally transparent. The only reason to punish someone because an innovation project failed is carelessness or laziness. P&G’s feminine care introduced Presidents Fail Forward Award to the “team or individual that enabled the organization to significantly learn from a failure”. In Game-changer there is a page (109) containing “A G Lafley’s 11 biggest innovation failures”. You can see the table here.

If you find this article useful, you may like these related articles:

Open innovation insights from P&G Connect + Develop

Saying, “We need a culture of innovation” is mostly correct and useless

Does God still innovate?

Considering various products he has created so far, nobody would doubt whether God did innovate. However, it has been 200 thousand years since he launched his last innovative product on earth (human being). And it is debatable whether that product is a successful one. Question is: does he still innovate? or has he hit innovator’s block?

God might say the next version is in the making and it is going to be much better. But who cares about incremental changes? How much difference a pair of eyes on back is going to make? And how many of us are going to be happy watching our back and butt? Some might say his strategy of launching complementary products: a man and a woman simultaneously was a major flop. Would he then drop the old strategy and launch only a single product next time? Perhaps he is tired of incremental changes. I feel if God still has guts he would be thinking radical.

But, wait a minutes…Doesn’t conventional wisdom say “Prototyping is a shorthand for innovation”? This means if God is serious about innovation, he must be prototyping. Did you read anything shocking recently? I read about someone climbing the tallest building in the world in Kaulalampur. Would that be one of his prototypes? Why would he waste his time creating spidermans? Humans have already visualized them. They aren’t that shocking.

What if he decides not to change outer appearance at all? Then it is going to be more difficult to find out if the person sitting next to me is a prototype of the next generation human. What about the so-called enlightened souls like Jesus, Mohammad, Buddha etc? Would they be his prototypes? And if they were, then he has a long way to go before his real launch. Look at how much confusion & fighting that got added because of them. But then in an innovator’s laboratory, failed prototypes count as much as successful ones. Perhaps cost of innovation is getting out of hand for God. Has he considered off-shoring? It is time we show CMM certificates to him.

What is systematic innovation?

When we hear about “Systematic innovation”, it is mostly like blind men touching different parts of an elephant and mistaking it to be the complete elephant. Some say it is primarily about managing research or R&D, some say it is about using technique like TRIZ, some say it is about managing change systematically, others say it is about taking new products to market systematically. Well, what kind of a beast is this “systematic innovation”? Let me attempt to present my view using an example of Tata Motors.

Let’s look at Tata Motors situation from three perspectives:

• Year 2009 would be a year of contrasts in the history of Tata Motors. On one hand, it is proud to roll-out its already-iconic product Nano to the masses. On the other hand, it has suffered a massive quarterly loss of Rs.2,505 Crores in quarter ending June, primarily due to its expensive acquisition of Jaguar and Land Rover (JLR). Swaminathan Aiyar in his swaminomics blog says, Tata Motors is already in a survival mode.

• Seeing a family of four riding a scooter and deciding to create a 4-wheeler which is affordable to the family is a story that will be told and re-told in India for generations to come. The manner in which Tata Motors went about transforming Ratan Tata’s insight into developing Nano is a matter of pride for the nation. It involved rapid prototyping, it involved out of the box thinking, it involved massive collaboration and much more.

• When Tata Motors engineers met its partners and talked to them about the small car project and the critical role they will be playing, nobody believed them. There were two reasons: (1) They thought it to be a crazy idea, good for prototyping but not for real business. (2) They knew that engineers at Tata Motors hold car design close to their chest. With 75% of the design of cars like Indica and Ace done internally, partners thought Tata Motors engineers will never relinquish the control. As it turned out, Nano has less than 20% design done internally in Tata Motors. This was a huge transformation in mindset.

I view “systematic innovation” as a three-legged stool.

First leg rests on the theory of business which obeys laws of capitalism and creative destruction. At the end of the day it is the return of capital employed that matters and how you protect your competitive advantage or what Buffett calls business moat. And cost of capital like JLR acquisition makes a huge difference to the game you are playing.

Second leg rests on the process of idea management. It operates at the intersection of creativity and discipline. And it involves research not just in technology but also in marketing like immersive research and it involves business model exploration (see CEO model).

Third leg rests on the theory of human psychology especially social psychology and the laws of gravity associated with it. We humans don’t like change and we suffer from what Edgar Schein calls “learning anxiety”. In fact, unlearning is more difficult to us than learning. Letting go is even harder, like Tata Motors engineers letting go of their design control.

For building an innovation engine that is sustainable, you need to look at all the three legs and their relationships. When addressed in isolation, it can take you to a place worse than where you already are.

Related articles:

1. Organizational innovation eco-system

2. How innovative are you? A simple innovation dashboard

What can innovation movement in India learn from Quality movement?

Dr. Mashelkar writes about how the “innovation buzz” is getting stronger everywhere and getting voiced in places like President of India’s address in Parliament (7^th June), Obama’s Cairo address (7^th June), creation of I-20, the first Global Innovation Leaders’ Summit (fashioned on G-20) held at San Francisco (3^rd Jun to 5^th Jun). Mashelkar represented India at this I-20. In his article, he has written about on how innovation can become 21^st century India’s mantra. At this point, it certainly looks like a dream. I can see three possible ways in which innovation movement in India can pan out over the next decade:

1. Innovation movement not only creates more global brands from India (like Tata, Reliance, Infosys), but takes the innovation capacity of India to the next level. (Most optimistic scenario)

2. Innovation movement goes up and down its hype cycle and ends up initially increasing innovation capacity for India but also creates a number of dysfunctional processes and systems, eventually becoming a gaali (bad word).

3. Innovation movement never takes off and goes into oblivion like a passing fad (most pessimistic scenario)

If I sense the buzz correctly, I feel it is very unlikely that innovation will be a passing fad. Innovation becoming a gaali is a distinct possibility. Question is: Can we learn from a past movement which eventually became a gaali? And this brings me to the quality movement which dominated Indian industry over the past decade, starting with ISO and then bringing all sorts of new acronyms like TQM, CMM, CMMI, PCMM until people got sick of it all.

I believe all movements start with good intent. Where did the quality movement take the wrong turn? Let’s look at what one of the fathers of the movement, Dr. Edward Deming felt when he was at the fag end of his life (age 90). He writes in his letter to Peter Senge (given in Fifth Discipline):

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning.

What Dr. Deming is saying that as we became obsessed with creating quality processes we lost touch with human nature, we forgot our anxieties and aspirations. We mistook means as the goal. As a person who can now relate to anthropology more than technology, I can see that changing management psyche is not easy. But are there things that can be learnt from the quality movement? Here are a few things I can think of:

1. Simplicity: Systems should be simple to use and maintain. CMM and its variants are far too bulky and one is easily lost in creating checkboxes.

2. Flexibility: Systems should separate “weighing scales” and “fitness programs”. Weighing scales should be easy to use and fitness programs should offer lots of options. CMM is far too normative in its implementation.

3. Accountability: It should need very little or almost no support staff. The army of so called “Quality engineers” actually gave a feeling to the manager as though quality is someone else’s responsibility.

Any thoughts?

Assessing capacity of innovation engine using CEO model

I wrote last week about the innovation engine here. Innovation engine is best understood by contrasting it with the delivery engine whose job is to fulfill current customer demand – efficiently and productivity. In contrast, innovation engine (1) anticipates and creates new demand and; (2) establishes business viability to fulfill it. Every organization has an innovation engine in some form or the other. Even your corner grocery store has one and hopefully someone there is thinking about how to protect its margins from the onslaught of organized retail stores and big malls. One important question is: Can you assess the capacity of your innovation engine? Is it more like 100cc or more like 300cc? Let’s explore this using the CEO model.

I wrote about the CEO model of innovation last year. Since then I along with my customers have been tinkering with it and making it more usable and robust. For example, I found that the metaphor of a 3 cylinder engine is more suitable than the factory metaphor used earlier. The picture above shows how it looks currently.

Here are a few observations about the engine:

• Each cylinder has a capacity
• All cylinders fire simultaneously
• “Experimentation” is at the heart
• “Communication” link is critical

Combination of Opportunity identification and part of experimentation (O + half-E) is typically known as “fragile front-end” of innovation engine. The remaining part: half-E + Commercialization is what I call: “fuzzy back-end”. Capacity of opportunity identification cylinder is measured in terms of number of insights gathered from market. Capacity of experimentation cylinder is measured in number of prototypes created. Capacity of commercialization cylinder is measured in number of products/ideas in market testing phase.

Now, one can start asking interesting questions like: Where does customer fit in this picture? And you say, wouldn’t he be the “petrol” without which the engine has no meaning? Then you ask – What would correspond to the gears that help engine go faster? And now the story starts becoming more interesting. This is what makes the engine metaphor a generative metaphor.

Generative metaphors: Disney’s “cast members” vs Subway’s “sandwich artists”

Metaphors and analogies are useful in communicating abstract ideas. For example, when Arun Shourie calls BJP “kati patang” (adrift kite) we get the point immediately. Some metaphors are so useful they don’t merely shed light on a concept; they actually become platforms for novel thinking. Dan and Chip Heath call these powerful metaphors “Generative Metaphors” in their bestseller “Made to Stick”. Let’s see how they explain this concept using two examples: one from Disney and the other from Subway.

Disney calls its employees cast members. This metaphor of employees as cast members in a theatrical production is communicated consistently throughout the organization:

· Cast members don’t interview for a job, they audition for a role

· When they are walking around the park, they are onstage.

· People visiting Disney are guests, not customers

· Jobs are performances, uniforms are costumes

Beauty of generative metaphors is that they help you predict things associated with the concept. For example, one can guess that employees are not allowed to be on break while in costume and in public area (An actor would never have a chat and a cigarette in mid-scene). Street sweepers are evaluated on criteria other than cleanliness of their sidewalks. That’s because they are highly visible onstage and obvious target for customer questions. “Employees as a cast member” is a generative metaphor that has worked for Disney for more than fifty years.

Let’s contrast this with a non-generative metaphor, “sandwich artists” which Subway created for its frontline employees. As Chip brothers explain, this metaphor is “utterly useless” as a guide to how employees should act. Defining trait of an “artist” is individual expression. And anyone who has been in Subway knows how much individual expression frontline employees have – in dress, in interaction, in the presentation of sandwiches.