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Published: October 25, 2011
 / Winter 2011 / Issue 65

 
 

The Global Innovation 1000: Why Culture Is Key

Driving Technology

Over the four years since we began our analysis of the three models of innovation, the Technology Drivers strategy has been the most frequently employed around the globe and across industries. And this year it continues to be the most common model among the world’s 10 largest spenders on innovation.

Successful Tech Drivers can no longer depend solely on the ability of their researchers to develop ingenious products that consumers are dying to have. Now, in order to succeed, Tech Drivers must strike the proper balance between the pure R&D efforts that in the past led to high-tech breakthrough innovations, and the more market-oriented activities of their less tech-centered brethren. That’s why the most successful Tech Drivers, like Google, have developed both the capabilities shared by all outperforming innovators, such as the ability to translate consumer and customer needs into product development and engagement with customers, and the capabilities specific to their own strategy: a deep understanding of emerging technologies and trends, and the capacity to manage the life cycle of their products and projects.

Few companies exemplify both the long history of technology innovation and the new, more customer-centric demands better than Hewlett-Packard Company. Famed for its critical role in the founding of Silicon Valley and its long history as a pioneer in a variety of technologies, HP has made a conscious effort to integrate its innovation efforts more tightly with the business, and to ensure that both its strategic goals and the innovation culture that supports those goals are aligned with that overall strategy. And although the company’s overall strategy may change as a result of the recent arrival of Meg Whitman as chief executive officer, the tight link with the innovation culture is likely to continue.

The close alignment of innovation with the business can be seen clearly at HP Labs, the company’s central research organization. Prith Banerjee is HP’s senior vice president of research and director of HP Labs, which has seven locations around the world. In this capacity, he both oversees the company’s researchers and works with its five major business units — each of which has its own R&D unit — to ensure the transfer of ideas and innovations into products and services. “[The] mission of HP Labs,” says Banerjee, “is fourfold. One is to create absolutely breakthrough technologies. The second one is around creating new business opportunities for HP. The third one is to advance the state of the art in whatever we do. And the fourth one is to engage with customers and partners.”

To that end, says Banerjee, “We take a portfolio approach within HP Labs: A third of our research agenda is very basic research looking 10 years into the future. Another third is tied to current products, so it looks maybe six to 18 months into the future. And the remaining third is in the middle — what we call applied research — which looks two to five years into the future and is tied to some applications, but not products.”

That is entirely in keeping with the strategic goals of Tech Drivers: to ensure superior product performance and quality, at the lowest cost possible. And it goes without saying that the entire effort must be imbued with a stronger spirit of respect for technical talent and knowledge, as well as openness to ideas from external sources, including academic researchers from universities around the world. HP Labs makes a concerted effort to involve the company’s customers: It invites more than 500 customers a year in to see what its researchers are working on, and works directly with some customers on “customer co-innovation” projects at the farthest reaches of its research vision.

 
 
 
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Resources

  1. Soumitra Dutta, “The Global Innovation Index 2011: Accelerating Growth and Development,” INSEAD, 2011: A report on the conditions and qualities that allow innovation to thrive, and the role it can play in a nation’s economic and social development.
  2. Barry Jaruzelski and Kevin Dehoff, “The Global Innovation 1000: How the Top Innovators Keep Winning,” s+b, Winter 2010: Last year’s study showed how highly innovative companies outperform by focusing on critical capabilities and aligning them with their overall business strategy.
  3. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: This study identified the three distinct innovation strategies: Need Seekers, Market Readers, and Technology Drivers.
  4. Barry Jaruzelski and Richard Holman, “Casting a Wide Net: Building the Capabilities for Open Innovation,” Ivey Business Journal, March/April 2011: Why many organizations are unable to make open innovation work, and what they need to do to succeed.
  5. Zia Khan and Jon Katzenbach, “Are You Killing Enough Ideas?s+b, Autumn 2009: How companies can improve their innovation performance by getting their formal and informal organizations in sync.
  6. Paul Leinwand and Cesare Mainardi, The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Review Press, 2011): How to construct a strategically coherent company in which the pieces reinforce one another instead of working at cross-purposes.
  7. Randall Stross, “The Auteur vs. the Committee,” New York Times, July 23, 2011: Why Apple’s leadership structure, with decisions reflecting the sensibility of Steve Jobs, is more conducive to innovation than the conventional approach of companies like Google.
  8. Booz & Company’s Product and Service Innovation practice.
  9. The 2011 Global Innovation 1000 Overview Video: Barry Jaruzelski and John Loehr discuss the results of the world’s largest corporate R&D spenders, focusing on the links between culture, organization, and innovation strategy — and their impact on financial performance.
  10. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/innovation.

Online Innovation Strategy Profiler

For an assessment tool from Booz & Company designed to help evaluate your company’s R&D strategy and the capabilities required, visit: www.booz.com/innovation-profiler.
 
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