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

 
 

The Global Innovation 1000: Why Culture Is Key

But what really sets the best Need Seekers apart is their ability to execute on their strategy — to combine all these elements into a coherent whole. As we have seen, the innovation strategy that Need Seekers follow is significantly more aligned than either of the other models, on average, and their culture is most likely to support their innovation efforts. Such companies are more profitable and boast higher enterprise value, and a disproportionate number of these highly aligned companies are following the Need Seeker model.

Need Seekers are different in other ways as well. Our study shows that significantly more of the technical leads at companies classified as Need Seekers report directly to the CEO, and that their innovation agendas are much more likely to be developed and clearly communicated from the top down. In the survey, they were nearly twice as likely to point to product development as the function with the most influence in their company’s power structure. And Need Seekers even outperformed in terms of the management of the innovation process: They rated their portfolio management processes highest for both consistency and rigor.

The advantage of the Need Seeker model is evident when the biggest R&D spenders are compared with the most innovative companies. Just two of the top 10 spenders are Need Seekers, whereas six of the 10 most innovative are: Apple, Facebook, 3M, GE, IBM, and Procter & Gamble. (See “The 10 Most Innovative Companies,” below.) Moreover, Silicon Valley companies are often viewed as Technology Drivers, but in fact almost half of the companies we surveyed that hail from the Bay Area are actually Need Seekers. (See “The Silicon Valley Advantage,” below.)

Agilent Technologies Inc. is one of those Silicon Valley Need Seekers. Formed as a spin-off from HP in 1999, the company concentrates on instrumentation and measurement solutions for the communications, electronics, life sciences, and chemical industries. CTO Darlene Solomon puts the distinction this way: “Agilent definitely has the technology focus in our roots, and we want to continue to be a technology leader, not a follower. But to succeed, you need to be balanced in terms of focusing on the customer and understanding the market. There is a lot of great technology we can work on, and no shortage of technical challenges. But we need to choose the areas where, if we make a contribution, the customer and business value that can result is clear.”

The trick for Agilent, as for many other companies, is to balance short-term R&D with long-term thinking about the kinds of things that will need to be measured in five or 10 years. Says Solomon: “It’s really about making sure that we’re at the leading edge of where our customers are going in the near term, and more than 90 percent of that work takes place in the businesses. In Agilent’s research laboratories, we have to make sure that we are placing the right bets now so that we have the right technologies in the future, at the right time, when they’re needed.”

This is a balancing act at which Agilent excels. It is evident in how the company gathers insights from customers and outside innovators alike. Researchers at the lab reach out regularly not just to academics, but also to customers like government labs, to help acquire a better understanding of the future of technology and its customers’ needs. Meanwhile, capturing insights on what customers need now is the responsibility of not just business unit researchers but all customer-facing employees.

When asked what holds all this activity together, Solomon turns the discussion to culture. “There’s a very strong innovation culture throughout the company, and a culture of teamwork. Agilent really encourages that. Innovation is not just R&D in Agilent,” she says. “We’ve really tried to make clear that it’s about everybody questioning the status quo and looking to do something better than what’s been done before. Each year, we recognize and reward innovation through the Agilent Innovates program, with innovation categories ranging from customer satisfaction to employee- and market-centered contributions.”

 
 
 
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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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