Building an engine that produces a steady stream of innovative growth businesses is difficult, but companies that are able to do it differentiate themselves from competitors.
Many of the case studies describing how established companies have created new growth businesses focus on a single success. The companies that get it right — such as ING Groep NV, with its ING Direct online banking model, and the Procter & Gamble Co., with category-creating products such as Febreze and Swiffer — surely deserve respect and admiration. Big company managers know how hard it is for market leaders to create innovative growth businesses.
The punishing thing about innovation, however, is that the contest never ends. Create a new market, and other companies come flooding in. Parry one threat, and up pops another attacker, hungrily eyeing your core business. Success requires being able to go beyond isolated wins to develop deep capabilities that allow companies to disarm disruptive threats and seize new growth opportunities repeatedly. It requires the ability to churn out successful growth businesses year after year, over and over again.
InThe Innovator’s Solution, authors Clayton M. Christensen and Michael E. Raynor discuss how to institutionalize innovation. They argue that companies should begin planning for innovation well before they need to by appointing a senior manager to oversee the resource-allocation process, creating a team of “movers and shapers,” and training employees to identify disruptive ideas.1
This article builds on those ideas and incorporates our field-based insights from working with companies on innovation issues over the past five years.(See “About the Research.”) Companies that create blueprints for growth, construct innovation engines and support the engines with the right systems and mind-sets can establish favorable conditions for substantial innovation. Although institutionalizing innovation is hard work, companies that build and maintain this capability can create substantial shareholder wealth and differentiate themselves from competitors.
About the Research
The findings described in this article come from three streams of research. First, we conducted in-depth interviews at more than 40 organizations representing a range of industries, including retailing, chemicals, financial services, telecommunications, consumer packaged goods and high-tech. The purpose of the interviews was to understand how the organizations structured for and supported innovation. Second, we conducted a detailed survey of managers involved in innovation activities in conjunction with International Business Machines Corp. and the American Productivity & Quality Center Inc. Managers from close to 100 organizations in 14 countries provided information about innovation metrics and practices in their organizations.