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

 
 

The Global Innovation 1000: Why Culture Is Key

This structure inevitably causes some tension with the business units — indeed, it’s designed that way. “We are intentionally trying to create trouble for our business units,” says Banerjee. “The businesses are looking in the short term for the next six months, next year. That’s why a third of our activity involves assisting them with their current problems. But two-thirds of our activity is to create disruptive technologies.” Because the business units continue to benefit from the short-term research, and are involved through the lab’s advisory board in developing what Banerjee calls “the wacky, crazy ideas,” they continue to support those ideas as potential breakthroughs.

Reading the Market

The automotive supplier sector, hard hit by the recession and the problems plaguing the auto industry in general, has only recently begun to recover. Among the companies at the center of the upswing is the Visteon Corporation, which produces a variety of systems, including climate electronics, interiors, and lighting solutions, for the world’s leading car manufacturers. Its business depends heavily on working with its customers to determine exactly what they need and then building those products as cost-effectively as possible.

That puts Visteon squarely in the camp of the Market Readers, those companies that carefully monitor markets and listen to their customers in order to gauge what the market is looking for, and then work closely with suppliers and partners to provide it. As Tim Yerdon, Visteon’s global director of innovation and design, says, “Most people think about innovation as just adding technology products. But it’s more than that. What we’re doing is taking a step back, looking at our industry, and asking ourselves, ‘How do we enhance life on board the car?’ A lot of the innovation involved in that is now being done in collaboration both with our supply base and with our customers.”

This approach is in line with the innovation goals we have identified among Market Readers, including customizing products for markets and making sure those products have a clear advantage in the market, in terms of both quality and cost. That, in turn, is supported at top-performing Market Readers by a culture that fosters collaboration across functions and geographies, and openness to external ideas. Together, these goals and cultural elements help sustain the set of capabilities that enable these companies to succeed.

These capabilities include not just a willingness to pay attention to the market and work with customers but also to run a very tight product development ship, using capabilities such as product platform and resource requirement management. Says Yerdon, “In product development, we have a phase-gate process that goes through four different gates to achieve what we feel is an appropriate level of robustness in products and technologies that are developed for sale to a customer. It’s very highly governed and metricized.”

But it is the effort to instill a culture of collaboration that has most transformed Visteon’s innovation efforts. Behind all the company’s innovation efforts — whether they be concept prototypes or new climate control systems — lies a big increase in the amount of collaboration that takes place, across functions, geographies, and joint-venture partners. It used to be, says Yerdon, that groups would work in the same building and never talk to one another. But Visteon teams have been working hard to change that aspect of their culture, in part because collaboration has become a necessary capability now that the various systems that make up cars have become so integrated.

Seeking Needs

As successful as many Market Readers and Technology Drivers are, there is something different about Need Seekers. It has to do with their strategy — working closely with customers to develop products and get them to market first. It has to do with their innovation goals — ensuring that those products have a distinct advantage in the market. And the best Need Seekers have put together a winning set of capabilities, including the judicious use of technology, a disciplined approach to product development, and the ability to generate deep insights directly from regular contact with end-users of their product.

 
 
 
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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.