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Are you empowering innovation?

Are you championing innovation in your organization? Or are you killing it with red tape, overly complex systems, and the wrong incentives? CEOs discuss the necessity of innovation - and examine how they may be hindering it.

After years of cost-cutting, restructuring, and downsizing, it is clear that rationalization is no substitute for building the business. Any intelligent growth strategy must have innovation at its center. But how does one intelligently go about fostering innovation beyond the usual platitudes?

The pace of innovation is becoming more frantic. Silicon Graphics CEO Ed McCracken is fond of saying that anything that works must be obsolete. Shorter product life cycles, market deregulation, and the relentless march of global competition have created an environment in which the latest innovative product or service often comes from a previously unknown source.

The following roundtable, conducted in partnership with Coopers & Lybrand L.L.P., examines the willingness of CEOs to scrutinize the standard model of innovation. The linear approach - where ideas hatched in R&D move to production testing, and then to manufacturing and marketing - has maintained a hold on our consciousness, even though it's not what often happens.

Does innovation have bottom-line implications? An OECD study on innovation and competitive advantage failed to find a positive link between companies that innovative and corporate performance. Consider Sony's Betamax VCR system, which was clearly superior technologically to the VHS standard, but it was the latter standard that prevailed in the marketplace. Apple's operating system is still said to be easier to use than MS DOS, but to little avail, since Microsoft is used on more than 90 percent of today's PCs. As our assembled CEOs in this roundtable agree, there's more to innovation than introducing something new. Nor does an innovation require breakthrough technology. Sony's success with its Walkman had little to do with technology. It was the result of planning, marketing, speed, and promotion.

Encouraging people to be more creative only addresses part of the challenge. It isn't always clear how best to establish the link between individual creativity and company success. 3M, Merck, and Siemens, for example, try to create an environment that is tolerant of mistakes. John Holland, professor of Computer Science at the University of Michigan, who created a biological model for computer software that enables software to "learn" from experience, says that "unless you are failing at least four times out of five, you are not trying hard enough to do new things."

With the performance bar continuously being raised, the task facing today's CEO with respect to innovation has become more acute. Among the challenges CEOs face are:

* Innovation rarely comes from a top-down approach. Often, it comes in spite of it.

* Increasing competition often means companies don't have the luxury of time. New concepts may take too long to sort out teething problems - which may result in fewer truly innovative products getting through.

* Measuring the performance of the innovation process has tended to use indices such as R&D, which are too aggregated, or values of engineering projects too narrowly focused to gauge the innovation process as a whole.

The organizational and cultural issues surrounding the management of innovation are key. Multifunctional teams consisting of engineers, designers, production, and marketing personnel are becoming the mechanism du jour to overcome internal barriers. Companies such as Hewlett-Packard even reward employees for specifically taking an idea outside the organization and developing it. This tends to work well in fostering incremental innovation. But some argue that this comes at the expense of radical innovation. This is why big breakthroughs tend to come from small companies with less cultural baggage.

Can large companies try for the quantum leap? If they make it, can their organizations sustain it? Our CEOs believe one has to try to do both. Dana Corp.'s Woody Morcott says his company demands that every employee receive at least 40 hours of education or training per year and that each employee generate at least two ideas per month. These are not all product-related but can result in modest efficiencies that lead to improved service. Lexmark International's Marvin Mann argues for integrating the customer into the innovation process. His company uses "customer councils" as a formal mechanism for tapping into specific needs that can give his office equipment company an edge in niche markets.

As most of the gathered CEOs agree, the best path to innovation is cultural, because capturing the value of new ideas depends upon an organization's ability to break down the internal organizational barriers that block the view to the future.

J.P. Donlon

BUILDING BRAIN-POWER BUSINESSES Ellen M. Knapp (Coopers & Lybrand L.L.P.): If we use the bumper-sticker test of current management philosophy, we clearly have exited the process era and are entering the knowledge age. If the 1980s and early '90s were an era of cost reduction, where the focus was on size and process, the same amount of intensity now is being applied to issues of knowledge, management, intellectual capital, and the resulting value-creation.

Companies that are most focused on pursuing knowledge are the most likely to harness the power of innovation. We are in the process of building brainpower companies and brain-power industries. And part of your role as chief executives and management teams is harnessing brain-power technologies.

And it's not just about innovation or creativity. Innovation creates value, wealth for stakeholders, and growth. That's the kind of innovation we're interested in.

Let's look at the three bestselling products in terms of dollar sales introduced in the last 20 years: video cameras and video recorders - which were invented in America - the fax, also invented in America, and the CD player, which was invented by the Dutch. Who owns all these products now in terms of employment, profits, and revenue? The Japanese - and they invented none of them. So it's not just about innovation; it's about making sure that innovation creates value, and the value creation benefits our own organizations, rather than benefitting other parts of the world.

If we look for case studies, we should look for models where corporations not only innovate, but capitalize on that innovation. Rubbermaid is one such example. It's interesting to note that 90 percent of the new products that come out of Rubbermaid are successful, and the average for corporate America is the reverse: Some 90 percent are flops.

On the flip side of the coin, we need to understand why it is that Xerox has left more money on the table in the form of underexploited innovation than any other company in history.

T.J. Dermot Dunphy (Sealed Air Corp.): I find a little fault with your comment about Japan, since the world benefits from innovation, no matter where it ends up. Some companies are innovators, some are commercializers, some are exploiters. And it may not be that one company can do all these things simultaneously. I don't see it as a failure that a company develops something and another commercializes and exploits it.

J.P. Donlon (CE): Do you think any company seamlessly interfaces innovation and commercialization?

Dunphy: Bell Labs' time has come and gone. Today, we must face the reality that while you never give up looking for original ideas in your own organization, you're more likely to get them from still-smaller firms. At Sealed Air, we have a joint venture with 3M. They think we're nimble, innovative, low-cost, low-over-head manufacturers. Frankly, it's not true. We've already got hardening of the arteries. So we look outside to the next level. We find an invention or an embryonic development, a little company where the innovator has taken it as far as he can go, he's out of money, and we acquire him. I wouldn't criticize him and say, "You should have taken it all the way through." He did what he was good at, and now we'll do what we're good at: commercializing and developing that embryonic invention.

Dean A. Mefford (Viskase Corp.): But innovation isn't only new products. Look at the computer industry: The innovation may have been the microchip, but now it's simply improving what's already there.

And innovation doesn't only come from research efforts, but from having an organization in which you listen to the people who actually make and market the product, those people who hear what the customers say.

Waiter R. Young Jr. (Champion Enterprises): The whole idea of "controlling innovation" - which is what this discussion is about - is an oxymoron to me. It just doesn't work that way: You have to push it down as far as possible to the market. And if you're lean, politics won't get in the way, and committees won't be able to kill things.

Donlon: How does your organization do it?

Young: Let's take the purchasing process: Let's say we wanted to know how much more quickly we could do our purchasing. Someone on staff comes up with an idea, and within two days it could be implemented. We don't have approvals - which is scary for the accountants. We don't centralize purchasing, and 20 of our units are doing the same thing in different geographic markets, which sounds chaotic from an accounting standpoint. But if I take one leg of responsibility away from that local guy, the team breaks apart.

Phillip Ashkettle (Reichhold Chemicals): Do innovative ideas come from centralized or highly decentralized organizations? It has to be a blend of both. We should remember the Jack Welch statement of trying to find the magic - of being big and small at the same time. All of us are struggling to find a way to get the right degree of information networking while still allowing the business units to operate freely.

Manuel M. Ferris (Harvard Pilgrim Health Care): A lot depends on what industry you're in. In health care, we're trying to improve the health of our membership by coming up with innovative ways of encouraging people to change their lifestyles. We're also trying to be innovative in how we manage diseases. And that's done in teams of people who try to improve such things as hip replacement, knee replacement, and bypass surgery. We can't buy that from outside.

Donlon: But your business is highly research-intensive - which is a traditional model. So you deviate from that?

Ferris: We're trying to do two things at the same time: first, to improve the health of our members and be measured by them. Second, we also want to reduce the cost of doing business, and that will only come about through innovation.


Arnold B. Pollard (CE): What are the key differences between the companies that have been successful at innovation - 3M, the old Rubbermaid, for example - and those that haven't - Xerox, the new Rubbermaid?

Knapp: Both Rubbermaid and Xerox are known for innovation - they got that part right. But there's the part after that, which says, "We have a culture that fosters innovation, but can we implement it as well?"

The difference is how well a company can implement its own innovative ideas. Look at traditional reward mechanisms and incentives. The heroes are people who are on blue ribbon panels, on the cover of magazines. At Xerox, implementation is a pedestrian activity, and the heroes are the innovators. Innovation and creativity are looked upon as personal or individual achievements. Implementation typically isn't personal; it takes teamwork, and we don't have good mechanisms for rewarding that.

Donlon: How many of the people sitting at this table reward the implementors at their companies as opposed to the innovators? [Three bands are raised.] Only three.

Gonzalo J. Dal Borgo (Agribusiness-Americas/Ralston Purina International): To me, the question is who recognizes people that try things that don't work. You don't have to reward them, but simply recognize the effort.

Peter Kim (McCann-Erickson Worldwide): In my business, advertising, the strategic assets go down the elevator at the close of the business day, and those people usually have long hair and pierced body parts. [Laughter.] The question is whether there is a bridge between what is considered creative, out-of-the-box thinking and strategic discipline. Without the strategic discipline, which includes not only the idea but its implementation, we can't offer value.


Southwood J. Morcott (Dana Corp.): You'll survive long in this business if you have a bias toward process change rather than product change - but you do need to have them both. We've had to engender change and innovation throughout the process as well as our product, since the demand to lower costs is always there. Fortunately, we've been able to lower prices by 3 percent per year for 10 years. But we've been able to do this because we have a culture that stimulates the thought process, an atmosphere of change and education.

Let me put my money where my mouth is: We've grown for 25 years at a compound growth rate of 11 percent in what's considered a flat, dead industry. The last five years, we've grown at a compound average growth rate of 15 percent, and productivity improvement of 9 percent. At Dana, you must have a 5 percent per year productivity improvement in your factory just to keep your job. We have about 300 factories.

We expect every employee to come up with two ideas every month on how to get better. And we expect management to implement 80 percent of the ideas. The power of that is incredible.

Charles Klatskin (Charles Klatskin Co.): That's why you're gray and you're only 32. [Laughter.]

Morcott: I just got a note from a South Carolina plant. They are getting an average of 3.5 ideas per month, per person, with a 75 percent implementation rate. The power of this continuous improvement is incredible. That's how you get 5 percent productivity improvement. And out of that comes product and process; it's team- and individual-driven.

We augment this with education: Every employee gets 40 hours of education every year. We have 25 full-time instructors at our own Dana University, where we offer sessions on how to come up with better ideas.

We have best practices days, and reward systems for engineers, where we reward for papers presented, books written, whatever. It's interesting that a good idea for a new material we use came out of Siberia. Literally. We scoured Russia for ideas coming out of the space program, and we brought over three engineers from Siberia and hired them.

My philosophy is to measure: If you don't measure it, you can neither control it, nor improve it. So we measure everything, including ideas.

Klatskin: How does an idea get processed? Who gets it and what do they do with it?

Morcott: It's driven at the plant location. A typical plant would have 15 or 20 teams, and they meet from time to time and throw ideas out and record them on bulletin boards. You need to play ideas off other people, move them around, and then you can come up with something that works.

Mefford: What if the idea requires substantial capital to be implemented?

Morcott: We have different levels of capital approval. Typically, most foremen can approve $10,000 of capital with no approval from anyone. Some of our plants allow employees $500 in capital expenditures without even the foreman's approval. You'd be amazed at how carefully they spend that money.

Mefford: With a highly leveraged company such as mine, we scratch and dig for capital all the time, and often we have to delay a good idea because we just don't have the capital.

Morcott: That's a good point. But my seat-of-the-pants guess is that 75 percent of the ideas our employees generate don't take much money.

Gerald G. Garbacz (Nashua Corp.): I spent 30 years with the U.S. Marine Corps, which I think is an extraordinarily good implementor. It has three mechanisms for success: first, a very clear mission; second, a set of common values, in which the organization's value system supplants the individual's; third, the supporting arms are aimed at that basic mission. All individuals who are in technical specialties are blended into a team that has the same sense of focus. That's how you get good implementation.

Kim: I agree that there's a need for a set of beliefs that govern a highly diverse organization. As we get away from running a rigid hierarchy, which we know is counter to the need to be innovative and adaptive, we must build bridges to connect a disparate organization of teams doing whatever they feel is necessary without harnessing the full synergies of the organization.

What are those things? A common vision or credo, a covenant with the employee, since today the basic covenant we once had with our employees is gone. Therefore, we need to construct a new covenant that explains fully what the employees' rights and responsibilities are.


Knapp: If knowledge and people are the innovative asset, then why are we throwing them out the door with the speed we have in the last 10 years? Ten years ago, we didn't have conceptual models or mechanisms to capture knowledge from workers before they left the organization.

Donlon: Can one develop a system for accounting for mental processes and innovation?

Knapp: One company - the Skandia Corp. in Scandinavia - publishes an intellectual capital balance sheet annually at the same time it publishes its annual financial reports. That company believes that you can't improve what you don't measure. If intellectual capital and knowledge are the assets we most have to understand, manage, and leverage for commercial success in the next century, then senior executives should be as accountable for them as they are for productivity improvement and revenue growth.


Marvin L. Mann (Lexmark International): Product innovation in today's highly competitive markets with leaner staffs and budgets is extremely important. It's critical to our business, but it alone is not enough to grow and sustain market position. No matter how advanced a new technology may be, if it doesn't satisfy the customer's needs and you don't have a competitive delivery system, the odds of success are against you.

We've used innovation to improve our performance in a number of ways. One is innovation of structure and processes. Another is innovation in marketing; another is in identifying and solving problems. Another is in external alliances. These are some of the key initiatives that are driving our technology leadership, enabling us to differentiate ourselves from our competition.

First, structure and process: We're structured for speed. That's easy to say and hard to do. But as a vertically integrated company, with integrated units within it, and small integrated teams and sales groups within units, we have developed the speed and flexibility to get hardware and software technology to market faster and at lower cost than our competitors. The design, development, and implementation of innovative processes by these small integrated teams have driven our advancements. We've achieved dramatic improvements in cycle times - productivity and development cycle times. Our product-to-market times have been reduced by almost 50 percent on average. Our development and productivity is up by a factor of more than three times what it was when we started. Innovation and new products are important to us, since in 1996, about 60 percent of our revenues will come from products developed in 1995 and '96.

Second, there's problem identification and solving. We have a highly trained marketing and sales force and technical support organization that focuses on large accounts. Like our competitors', our products are distributed by resellers, but our direct sales force differentiates us from competitors and has enabled us to gain market share. This marketing approach lets us learn about our customers' needs in detail. Information-sharing between those who work with customers all day - the sales force and systems people - and our development people is one of the most important ingredients for product innovation.

Third, marketing. We've targeted the fastest-growing segments in our industry, those growing 20 percent to 30 percent compounded annually, while the overall market is growing 7 percent to 8 percent. This is enabling us to meet revenue growth goals of 15 percent per year and profit growth of 20 percent per year.

Finally, we've formed strategic alliances. We work with software and services and forms companies that provide systems solutions to their customers. We work with them to incorporate Lexmark's advanced printing functions into their systems.

Let me give you a couple of examples: A major pharmacy chain needed laser printers that would support custom-designed labels and forms. We modified our printers to accommodate the forms, and worked with the forms company to design them. Our engineers created a gum-removal process to carry the gum from the labels out of the printers, since the printers that had been tested previously would fail after they had printed 10, 15, or 20 documents. The engineers built this capability into our standard product line, to serve all pharmacies and other industries with difficult-to-handle forms. There were other factors, such as low life-cycle cost and ease of use by non-technical personnel, but the key was that we developed a reliable, cost-effective product that did the job. Now, all 10 of the top pharmacy chains use Lexmark printers. We've had similar successes in retail banking and retail chains, where nine of the top 10 banks and 36 of the top 50 retailers use Lexmark printers in their branches and stores almost exclusively.

Pollard: Which processes did you change and how did you accomplish those changes?

Mann: We changed our development processes by using an integrated cross-functional team composed of development, manufacturing, marketing, and finance people who figured out how to improve cycle times and development productivity. We said, "The name of the game isn't who gets the best idea, but who takes the best ideas and implements them and builds on them better than anybody else." After development, we did the same thing with manufacturing processes, marketing, and so forth.

Ferris: What sort of compensation system did you develop?

Mann: First, we gave everyone stock in the company by putting it in their 401(k) plan. Second, we gave all employees stock options. Third, we put in a comprehensive team-based incentive and motivation program that works this way: The corporation's performance determines how much money in total gets paid out. The second determining factor is each unit's performance against specific measurements: How does it do on profit, revenue growth, and cash flow, and those objectives are defined by both teams and management working together.


Knapp: One of the interesting challenges for very large firms is how to link innovation across geographically scattered and highly decentralized business units. Let me give you an example: 3M had a lot of customers that were unhappy when their steel pads rusted. To address the problem, 3M brought together people from adhesives, abrasives, coatings, nonwoven materials, and a variety of disciplines, most of whose competencies were in a particular business unit. And they got together to develop a product that in its first 18 months on the market took 30 percent of the market share in soap pads.

O. Kenton McCartney III (Jefferson Bankshares): Can a company be successful over a long period of time and not be what any of us would call innovative?

Donlon: The No. 2's and No. 3's?

McCartney: The companies that are always No. 2 or No. 3 and that won't go from No. 1 to 25 or No. 1 to Chapter 11.

Knapp: One thing that's interesting to note is that of the 12 largest American companies in the year 1900, only one is left that is still a world-class company: General Electric. My point is that it's difficult, but possible, to be innovative over the long haul.


Donlon: Are one's innovation efforts best directed toward creating completely new products and services and processes, or toward incremental and continuous innovation?

Richard H. Vissers (Computer Travel Systems): I think incremental innovation is the way to go. If innovation is not incremental, it's sudden, creates change, people don't like it, and suddenly you have fear.

Mefford: I'm trying to push the culture of innovation from the top to the bottom, all the way down to the machine guys. Whether it's big innovation or incremental change to improve productivity, we like to think that a team concept is how it can come about.

Klatskin: The tone of innovation today is how to affect the bottom line, how to make it cheaper.

Dal Borgo: To have incremental innovation, you must have a complete process. Some companies have put together a complicated and sophisticated system to promote innovation within their organizations. Normally, those systems don't work, because the employees don't understand them.

We must find a continuous source of new ideas, coming from the field, customers, or line personnel, and we have to treat those ideas, which are fragile, in a way that they might be implemented. We also must eliminate the red tape, because most ideas are killed when people become frustrated by bureaucracy.

Garbacz: It's important to focus on the incremental process, because that's what happens every day. But, on the other hand, when the breakthrough arrives, you need the guts to make a bold move. Nicholas G. Moore (Coopers & Lybrand L.L.P.): In the service business, much innovation is incremental. But probably the key variable is people, the innovative strategies we create to bring and retain the best people in the business. The ability to create good teams, delivery systems, the sorts of things that have the best people in place and do it quickly and globally, is where a company should focus its innovative efforts.

RELATED ARTICLE: A Who's Who Of Roundtable Participants

Phillip Ashkettle is president and chief executive of Reichhold Chemicals, a $1.2 billion polymer and polymer systems company based in Research Triangle, NC.

Gonzalo J. Dal Borgo is chief executive of St. Louis-based Agribusiness-Americas, a $1.2 billion unit of Ralston Purina International.

T.J. Dermot Dunphy is president and chief executive of Saddle Brook, NJ-based Sealed Air Corp., a $725 million protective packaging products and systems company.

Manuel M. Ferris is president and chief executive of Brookline, MA-based Harvard Pilgrim Health Care, a $2.1 billion health maintenance organization.

Gerald G. Garbacz is president and chief executive of Nashua, NH-based Nashua Corp., a $450 million business products company.

Peter Kim is vice chairman and chief strategy officer of New York-based advertising agency McCann-Erickson Worldwide, a $1.2 billion unit of the Inter-public Group of Companies.

Charles Klatskin is chairman of Teterboro, NJ-based Charles Klatskin Co., a privately held commercial real estate company.

Ellen M. Knapp is vice chairman, chief knowledge officer, of New York-based Coopers & Lybrand L.L.P., a $1.9 billion professional services firm.

O. Kenton McCartney III is president and chief executive of Jefferson Bankshares, a Charlottesville, VA-based commercial bank with assets of $2 billion.

Marvin L. Mann is chairman and chief executive of Greenwich, CT-based Lexmark International, a $2.2 billion computer printer and supplies company.

Dean A. Mefford is president and chief executive of Chicago-based Viskase Corp., a $650 million flexible packaging and casing company.

Nicholas G. Moore is chairman and chief executive of New York-based Coopers & Lybrand L.L.P., a $1.9 billion professional services firm.

Southwood J. Morcott is chairman and chief executive of Toledo, OH-based Dana Corp., a $7.6 billion manufacturer of vehicular and industrial components.

Richard H. Vissers is chief executive of Computer Travel Systems, a privately held software company servicing the travel market.

Walter R. Young Jr. is chairman, president, and chief executive of Auburn Hills, Ml-based Champion Enterprises, a $797 million maker of pre-fabricated housing and mid-size buses.


Rubbermaid has a legendary reputation for innovation; the $2.3 billion consumer-goods giant averages more than one new product introduction every day. But so many different sizes, shapes, and colors can bloat an organization, as Rubbermaid found to its dismay last year when a 15-year streak of steadily increasing profits was broken.

The gaps lay in manufacturing, warehousing, and distribution. How could a company so glorified for and capable of product innovation have stumbled over getting those products to market?

"We hadn't done a good job of simplifying and streamlining," Chief Executive Wolfgang Schmitt concedes.

Now Rubbermaid is faced with developing its most important and difficult innovation yet: revamping operations to boost sagging performance and shareholder value. Changes include eliminating many of the inventory options that the Wooster, OH-based company offers retailers.

For example, instead of several hundred colors, which once included 18 shades of black, Rubbermaid now limits the spectrum to several dozen for its product line. With less complexity, Rubbermaid intends to ship only the goods retailers continuously demand, sharply reducing inventory and storage costs.

At the same time, plants and distribution centers are closing, and warehouse space is being cut. And Schmitt has his cards on the table. "Our top managers understand the implications of this and how it will affect their roles," he says.

Some changes apparently are beginning to register. This streamlining, combined with technology, has decreased Rubbermaid's time to market; what might have taken a year to 18 months to produce now averages just four to eight months.

Can Rubbermaid regain its lead? "We talk a lot with our companies about avenues of growth," Schmitt says. Corporate units communicate and compete with each other in an effort to foster creativity and innovation. "We try to keep a creative tension in the organization," the CEO adds. "It's O.K. to criticize or critique, as long as you offer an idea to do it better."

Rubbermaid has 21 small, entrepreneurial teams around the world, each charged with the task of developing new products. These cross-functional groups are encouraged to spot trends - political, technological, fashion, social - and act on them.

"We try to have the top of the funnel full of ideas," Schmitt says. "Then you distill that down as quickly as you can to the things that have the most commercial impact."

Most often, Rubbermaid's product innovations are hardly market-shaking. But they can be useful. One Rubbermaid unit redesigned a basic laundry basket, giving it a kidney shape that fits neatly on the hip for back-saving portability. Another team invented ice-cube trays that drop out the cubes without twisting and pulling.

Such innovations don't come without at least a little pain, however: The new ice-cube trays cannibalized Rubbermaid's existing product and rendered about $1 million worth of tooling obsolete, Schmitt says. But, he points out, the new trays simply worked better - and that's what counts.

"Innovation is how you keep things fresh," Schmitt explains. "That's how you reinvent your future sales and earnings stream and keep the consumer pleased with your efforts."

- Jonathan Burton


On Innovation - and Bell

Perhaps no company is as synonymous with consistently applicable innovations as Bell Laboratories, now a part of AT&T spin-off Lucent Technologies.

After all, Bell Labs is the company that improved upon the optical amplifiers used in fiber-optic cables and now is angling to transform futuristic information and communications technology into user-friendly devices.

And few executives understand the process of innovation better than Arno Penzias, who until last year was Bell Labs' Nobel Prize-winning head of research. Penzias is now chief scientist at Bell Labs, spending much of his time searching among the start-ups of Silicon Valley for technology that Lucent might consider valuable.

Penzias sees a dramatically shifting innovation landscape for corporations in the future, driven largely by shorter product lifetimes. The dizzying pace of technological change renders the greatest new devices obsolete in a whisper - making it all the more difficult to be heard.

"If products last half as long as they used to," Penzias explains, "then we must generate new ones twice as fast."

But if demands on innovators have changed, the essence of innovation has not. "All innovation," Penzias says, "ultimately has to start with a desire to change the world in which your customers live. Twenty years from now, every toaster is going to have an Internet protocol address. How do you get there from here?"

At Bell Labs, researchers may work in teams or alone, but the line between departments is horizontal. and links remain close. Penzias says the key to a successful process is "shoe leather" - physical presence and personal discussion. "In a sick organization, people are managing upward," he observes. "In a healthy one, people are looking peer-to-peer."

Every system needs a plan. Managers laud innovation as a gateway to a corporate Utopia of communication, cooperation, and entrepreneurial competition. But, ultimately, innovation boils down to one question: What does the customer want?

"The trick is to decide what to build, not how to build it," Penzias says. "We work hard at understanding the difference between invention and innovation. That is, there are plenty of inventions, but real innovations are focused on the real world."

Did the real world ask for 500 television channels - which have been brought to you, in part, by Bell Labs' efforts? Maybe not. But once innovation offers customers more choices, these customers tend to like their ability to choose, and want more.

At Bell Labs, innovation ripples across business lines without discrimination, Penzias says, keeping everyone on their toes. New Bell Labs coding technology, for instance, leads cable television companies to update their capabilities. To keep pace, telephone companies, already heavily invested in telecommunications, also buy more operating equipment.

"Products don't live by themselves," Penzias explains. "Events in another industry will affect yours. To produce something that's economically viable, we have to recognize a lot of interdependencies."

- J.B.

RELATED ARTICLE: Do You Stimulate OR Obstruct Creativity?

Research by Teresa M. Amabile, currently a professor at the Harvard Business School, in conjunction with the Center for Creative Leadership in Greensboro, NC, reveals that certain organizational traits can either help or hinder the creative process. The following is a list of creative stimulants and obstacles within organizations. How does your company stack up?

Stimulants To Creativity

* Challenging work: A sense of having to work hard on challenging tasks and important projects.

* Sufficient resources: Access to appropriate resources, including funds, materials, facilities, and information.

* Supervisory encouragement: A supervisor who serves as a good work model, sets goals appropriately, supports the work group, values individual contributions, and shows confidence in the work group.

* Work group supports: A diversely skilled work group in which people communicate well, are open to new ideas, constructively challenge each other's work, trust and help each other, and feel committed to the work they are doing.

* Organizational encouragement: A culture that encourages creativity through the fair, constructive judgment of ideas; rewards and recognizes creative work; has mechanisms developing new ideas; maintains an active flow of ideas; and is committed to a shared vision.

Obstacles To Creativity

* Organizational impediments: A culture that impedes creativity through internal political problems, harsh criticism of new ideas, destructive internal competition; an avoidance of risk; and an overemphasis on the status quo.

* Workload pressure: Extreme time pressures, unrealistic expectations from productivity, and distractions from creative work.

Source: The Center for Creative Leadership.
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:includes related articles
Author:Donlon, J.P.
Publication:Chief Executive (U.S.)
Article Type:Panel Discussion
Date:Jul 1, 1996
Previous Article:Mothers of invention.
Next Article:The people/performance paradox.

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