Quick takes

Citation

Gorrell, C. (2005), "Quick takes", Strategy & Leadership, Vol. 33 No. 4. https://doi.org/10.1108/sl.2005.26133dae.001

Quick takes

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.

1 The Bain 2005 management tool surveyDarrell Rigby and Barbara Bilodeau

Bain & Company’s 2005 Management Tools survey, the tenth in a series conducted since 1993, offers a window into what issues companies around the globe believe are important right now and what tools they are using to make changes to bottom-line performance.

This year, the news is that executives are thinking more about customers – acquiring them, keeping them, learning more about what they want, and then satisfying and delighting them. They know they must innovate to keep customers happy, but they are not entirely sure how to go about it. To free up cash, they are outsourcing like crazy – but not necessarily sending the work offshore. And they are relying on information technology to run their businesses more efficiently. Four themes emerge from this year’s data.

1.1 Theme 1: customer focus

Nearly two-thirds of survey respondents agree with the statement “insufficient customer insight is hurting our performance.” Respondents also feel they are not doing a good-enough job of satisfying the customers they have. Slightly more than half agree that their companies “focus on new customers when we should retain and grow our existing ones.”

Usage data on the tool known as customer relationship management, or CRM indicates how they address such issues. Three out of every four companies were using it in 2004, one of the largest and fastest usage increases ever recorded. It now ranks number 2 in the survey, just behind the perennial leader, strategic planning.

Another indication of the heightened focus on customers is the continuing widespread use of customer segmentation, which divides existing and prospective customers into discrete groups that share certain characteristics for the purposes of developing targeted products and services. Some 72 percent of companies relied on segmentation in 2004, tying it for fifth in popularity.

1.2 Theme 2: the innovation gap

Another gnawing concern for executives is the increasing commoditization of goods and services all over the world. The solution? Innovation. A whopping 86 percent of respondents believe that “innovation is more important than cost reduction for long-term success.” One tool that may be promising in the future is open-market innovation, in which companies partner with customers, vendors and others to find and develop the best innovative ideas. Right now only 26 percent of companies are experimenting with open-market innovation, and the tool ranks near the bottom of the satisfaction ratings.

1.3 Theme 3: finding the money

Of course, no company is ignoring the need to cut costs. This year the number 1 cost-related tool is outsourcing. Nearly three-quarters of companies use it, tying it for third place in the tool-use rankings. Meanwhile, 56 percent use the related tool of supply chain management, up from only 32 percent five years ago.

1.4 Theme 4: IT comes of age

For as long as Bain has been conducting this survey, tools based on extensive use of information technology (IT) have shown mixed results. For example, the IT-based tool knowledge management (KM) has had a checkered career. Long heralded as an essential management tool in the information age, it has grown in popularity. Still, it is used by only a little more than half of companies even now. Look more closely at the use of other tools, however, and you can see the fundamental role played by IT in management today. Total quality management, supply chain management, and scenario and contingency planning are all popular tools, and all rely heavily on computers, as does business process reengineering, which turned from fad to flop a few years ago, and has now rebounded. It is now utilized by some 61 percent of companies.

2 Three trips around the innovation track: interview with Clayton ChristensenDaniel J. Knight

Clayton Christensen is a professor at the Harvard Business School and author of three groundbreaking business books on innovation. Here are some condensed responses:

Q: What are the themes of your books?

A: The first two target operating managers. The first, The Innovator’s Dilemma, examines the causes of failure by leading companies after only a few decades at the head of the pack. The conclusion is not poor management but reliance on two conventionally accepted concepts: listen to your best customers and focus investments on the products with high profit margins. Research shows that these concepts sow the seeds of their destruction because companies that pay exclusive attention to their current top customers and ignore the first minute signals of disruptive forces emerging in their market will not adopt innovation that will make them successful long-term.

The second book, The Innovator’s Solution, offers the key reason why managers’ attempts to create growth through innovation fail: they are not aware of the theories that they are using when they make decisions. This results in random, unpredictable and risky outcomes. This is why 80 percent of venture capital-backed companies do not succeed, for example.

The third book, Seeing What’s Next, is aimed at investors, analysts, venture capitalists, strategists, and planners. It shows how to see ahead and predict what is likely to change in the future of industries, companies and technologies.

Q: Describe your approach to organization innovation.

A: The factors that affect what an organization can and cannot achieve with innovation fall into three brackets:

1. 1.

   Resources: people, products, money, brands, etc.

2. 2.

   Processes: ways of working together to get things done.

3. 3.

   Business models: formula through which revenues and costs are defined. This is the criteria used to prioritize choices.

Most innovations occur in resources, some occur in processes, but very few occur in business models. Yet it is the latter that offers the highest impact innovations.

3 Coordinating operations to enhance innovation in the global corporationPeter Koudal and Gary C. Coleman

A study of 650 companies (world-wide) shows that most hope to use “innovation” to drive their growth and corporate fortunes. Yet, of those betting their future on their current innovation projects, most are not prioritizing investment in the supporting processes and infrastructure. In fact, “building or restructuring business operations to profitably bring new products and services to market” is ranked near the bottom of their priorities. This is true across every industry.

But only by mastering the entire lifecycle of new products, can innovation be made to pay off. Then why have so few invested adequate resources in the infrastructure to support innovation? One reason: while operating around the world may help companies generate ideas for innovation, the complexity of the global network is likely to render the evaluation and optimal exploitation of innovation more difficult. Their operational priorities and capabilities – their plans for improving the value chains that create and bring new products to market – are rarely aligned with their strategies for growth:

• •

  Few companies have visibility and insight into where money is and potentially will be made.

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  Few companies are comfortable with their capabilities for lifecycle product management.

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  Most are insufficiently connected internally and with customers and their supply chain.

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  Companies lack the technologies to run the innovation and production lifecycle process effectively.

Decisive steps for corrective actions are highlighted in this article. These form the basis for a model to “synchronize” innovation. The focus is to create strong capabilities in two areas: synchronizing activities within each of the three value chain processes (product development, supply chain, and the customer operations of marketing, sales, and service); and synchronizing across those three major processes:

• •

  Step 1: create innovation – build an idea-generation machine.

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  Step 2: exploit innovation where and when it matters.

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  Step 3: invest in innovation capabilities for creating and sustaining a profit cycle. The four ingredients that make top-performing companies stand out are visibility, flexibility, collaboration, and technology.

4 Innovation at Xilinx: a senior operating manager’s viewBrian Leavy

Xilinx Corporation (headquartered in San Jose, CA and in Dublin for European operations) is the market leader in programmable logic segment of the semiconductor industry and ranks near the top on Fortune magazine’s list of best places to work. It has 2,900 employees and annual revenues of over $1.5 billion. Paul McCambridge is vice president of Xilinx EMEA.

Q: How has Xilinx sustained success as an innovative company?

A: The primary factor is our culture. Our industry competes with speed and innovation. We want to be on the breakthrough curve and have adopted a higher-risk business model to gain technology leadership. We have created a culture that supports taking risks. The culture assumes there will be learning and the opportunity to provide a solution in the future. The culture of trust is key. And this extends to customers and supply partners.

Q: Other aspects that create a climate for innovation?

A: First, a different business model is used for short-term and long-term projects. Second, successful engineers tie their creativity to customer-focused solutions, and are excellent, intelligent listeners. Third, the culture supports a solid understanding of the physical technology as well as creativity.

Q: How does Xilinx manifest itself as a learning organization?

A: We have many internal courses of study. But one of the future challenges facing our type of company is to balance the trend for innovation and technology specialization and the need for cross-functional cooperation. We need more people who can lead cross-functional initiatives. We need more leaders (vs managers). We have a class called the “Spirit of Xilinx” that is the path for the development of our leaders. We also have a class for new people to communicate the softer issues about how to be successful here. The emphasis on values is summed by the symbolic acronym CREATIVE. Key values are respect, integrity, and accountability. Integrity means do what you say you will do for the customer, for the shareholder, for each other.

Q: What is you management model?

A: Our mission statement has two main elements: technology leadership and setting the standard for managing a technology company. Our values are center to the trust that is essential for innovation. What differentiates Xilinx is not the uniqueness of our top technologists. It is our culture. The real trick is in sustaining the innovation and that is where the culture is crucial. Trust in the leadership is key. If you allow a gap to open in the credibility/trust area, it permeates the innovation process from employees right through to customers.

5 A leader’s guide to creating an innovation cultureBrian Leavy

In today’s competitive marketplace, innovation is recognized as the key to growth. But turning ideas into commercial reality requires persistence and discipline, and overall effectiveness ultimately depends upon top management being able to find the right balance between corporate creativity and efficiency.

Premise number 1: inventiveness is required in everything that is done by the company, not just in marketing or in new product development. CEOs can use the points and concrete examples cited in this article as a guide to inspiring their organizations to new levels in inventiveness.

Premise number 2: the first key factor in boosting innovativeness is establishing the right organizational climate to nurture the creative potential of employees as well as their knowledge of customers, competitors, and processes. P&G, 3M and Glaxo are cited.

Premise number 3: when leveraging the best practices of other companies, the mistake is to look at their innovation practices and policies. Look instead to their philosophy and values underpinnings. Four climate-setting factors are explained:

1. 1.

   Placing people and ideas at the heart of management philosophy.

2. 2.

   Giving people room to grow, to try and learn from mistakes.

3. 3.

   Building a strong sense of openness and trust and community.

4. 4.

   Facilitating the internal mobility of talent.

Premise number 4: the second key factor in boosting innovativeness is attracting and retaining more creative talent. Innovation depends upon ideas, and ideas come from a diversity of talented individuals.

• •

  Recognize the difference between creativity and intelligence. And note that most creative productions spring from unresolved emotional undercurrents, and creative drive is the effort to fashion external symbolic order out of some internal chaos.

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  Recruiting and managing innovation is paradoxical: talent is ideally individualistic yet must work well in an organization. Three useful guidelines are cited.

Premise number 5: striking the right balance between innovation and efficiency is the challenge and must be achieved on three levels:

1. 1.

   Within the innovation process itself (balancing play and procedure).

2. 2.

   Between the primary functions within the organization (balancing the bushy-haired geniuses and the crew-cut manufacturing operators).

3. 3.

   In the overall approach to corporate management – that is, getting the timing right to invoke shifts to balance innovation and efficiency (releasing talent and energy vs tightening discipline to bring more coherence to the overall development process).

6 Innovation networks: good ideas from everywhere in the worldStephen Fowles and Wayne Clark

Corporations are in an ideas-to-market race. As markets get more competitive, innovation becomes more critical to survival. It is no longer possible to rely solely on generating game-changing innovations in-house. The best and most innovative products and services come from new and varied sources.

Increasingly companies are establishing innovation networks. These are made up of offshore suppliers, distributors, customers, freelance scientists, government and university researchers and even competitors. An example: P&G has rebranded its R&D centers to be C&D centers, for “connect and develop,” to drive its internal mindset and culture toward looking outward for innovative thinking.

Besides getting access to more creative ideas, there are three additional benefits from this approach to innovation: risks are shared (given the complexities of today’s technologies and supply chains, no one can master it all); costs are shared; and time is reduced.

Protecting intellectual capital is a real concern but companies can take practical steps to reduce risk. Key insight: the best way to handle this threat is to face it head-on.

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  Know your partners – this requires knowing each partner’s perception of the relationship; some use a grid to map out points of view.

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  Structure the relationship, but not too much – each one is unique because the product will dictate the conditions and terms. The more the product can be commoditized, the more relaxed the agreement. At the other end of the risk spectrum, do not expose intellectual property that is also at the heart of a wider portfolio of products.

• •

  Define the mutual benefits, continuously.

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  Establish innovative performance targets – for example, the number of ideas generated from outside sources that the company actually uses.

Essential component: fostering a collaborative mindset in your corporate culture. Successful innovation networks rely more on trust than process. Catherine GorrellPresident of Formac, Inc., a Dallas-based strategy consulting organization (mcgorrell@sbcglobal.net) and a contributing editor of Strategy & Leadership.