Leveraging leadership to improve innovation.
"The environment we create for our high-tech innovators is extremely important to our ability to recruit and maintain the best talent [from] around the world," CEO William Nuti explained to business leaders gathered for a Summit discussion on leading innovation. Nuti noted that his $5.4 billion global technology company's commitment to creating a culture that nurtures innovation goes well beyond a space where engineers can re-energize with a quick game of baseball or grab some chips and a soda. "It's about everything from the type of person you hire and how you drive innovation to the places around the world where you conduct it," he asserted. "For example, moving an R&D center to India, China or the Czech Republic is not just about cost. We find that innovations coming out of countries like India are more break-through in scope. There's more disruptive innovation thinking going on."
Champions and Checkpoints
In the post-economic downturn environment, incremental and game-changing advancements are viewed by many CEOs as more important than ever. At the same time, pressure to cut costs demands that business leaders instill discipline around R&D endeavors.
That's a challenge that Bill Hickey, CEO of Sealed Air, takes personally. In 2008, when his $4.6 billion packaging company responded to the economic downturn with a 5 percent across-the-board cost reduction, he exempted R&D from the cuts. "The CEO has to [be a] champion of innovation," he explained. "I made the decision to keep the innovation budget intact. My management team looked around and said, 'Everyone is giving some. Why not R&D?' I said, 'Because that's where the future will be.'"
In addition to defending investment in innovation, CEOs must also provide air cover to the mavericks who often drive it. "Organizational white cells typically attack these people," said Hickey. "Part of the CEO role is providing protection for people who are different, but who can be valuable contributors. We file about 200 patents a year and I can attribute a good 15 percent of those to the six or seven mavericks in our organization."
At NCR, Nuti balances encouraging the development of new ideas with checks and balances that seek to contain the costs of experimentation. While the company has rigorous processes in place to ensure that engineers deliver projects on-time, on-budget and on-spec, it also sets aside both time and money for innovation. About $50 million a year goes into a slush fund allocated to new development, and engineers can spend 10 percent of their time pursuing "anything they think will be a blockbuster hit," said Nuti, "We know going into the process that if you do 10 programs, seven will fail. But two will be O.K. and one might be an absolute grand slam."
Ultimately, the best innovators are those who find the delicate balance between long-term growth and near-term return on investment, noted Peter Temes, president of ILO Institute. "Companies that succeed at innovation find ways to protect their brand and organization from the inevitable failures," he said. "If you can tolerate failures, you'll find more successes.
"The best innovators don't have a higher batting average, they get up to the plate many more tunes because they require less time and money to experiment."