The Other Side of Innovation

Solving the Execution Challenge

Vijay Govindarajan, Chris Trimble

• Publisher: Harvard Business Review Press
• Year: 2010
• Print ISBN: 9781422166963
• eBook ISBN: 9781422162309
• Topic: Business
• Subtopic: Business Communication
• Index: Business

In their first book, Ten Rules for Strategic Innovators, the authors provided a better model for executing disruptive innovation. They laid out a three-part plan for launching high-risk/high-reward innovation efforts: (1) borrow assets from the existing firms, (2) unlearn and unload certain processes and systems that do not serve the new entity, and (3) learn and build all new capabilities and skills.In their study of the Ten Rules in action, Govindarajan and Trimble observed many other kinds of innovation that were less risky but still critical to the company's ongoing success. In case after case, senior executives expected leaders of innovation initiatives to grapple with forces of resistence, namely incentives to keep doing what the company has always done--rather than develop new competence and knowledge. But where to begin?In this book, the authors argue that the most successful everyday innovators break down the process into six manageable steps:1. Divide the labor2. Assemble the dedicated team3. Manage the partnership4. Formalize the experiment5. Break down the hypothesis6. Seek the truth.The Other Side of Innovation codifies this staged approach in a variety of contexts. It delivers a proven step-by-step guide to executing (launching, managing, and measuring) more modest but necessary innovations within large firms without disrupting their bread-and-butter business.

PART I

Build the Team

JUST AS THERE IS A WIDE VARIETY of innovation initiatives, there is a wide variety of teams that push them forward. However, all these teams have something in common. They are all internal partnerships.

The two entities in the partnership are the Performance Engine and a Dedicated Team. We will refer to the subset of Performance Engine personnel who are directly involved in executing the innovation initiative as the Shared Staff. Therefore:

project team = Dedicated Team + Shared Staff

To be completely clear with our terminology:

• The term project team refers to the partnership.

• The Dedicated Team is, as the name suggests, dedicated to the innovation initiative full time.

• The Shared Staff is part of the Performance Engine. It executes or supports a portion of the innovation initiative part time. Simultaneously, it sustains excellence in ongoing operations.

The partnership is tricky because the Dedicated Team and the Shared Staff are, of necessity, quite different from one another. The Dedicated Team is custom-built for the project, and it has a new and unfamiliar organizational model. The Shared Staff’s organizational model, by contrast, already exists and does not change.

The combined organizational model, depicted in figure 1-1A, is very flexible. Any division of responsibility is possible. In some cases, the Dedicated Team will execute nearly all, say, 90 percent, of the initiative. But a fifty-fifty split or a ten-ninety split is also possible. It depends on the nature of the innovation initiative and the capabilities of the Performance Engine.

FIGURE 1-1A

Organizing an innovation initiative

Project team = Dedicated Team + Shared Staff
The Dedicated Team is custom-built for the initiative.
The Shared Staff retains its existing responsibilities and supports the initiative.

The big-picture steps for building the project team are intuitive:

1. Divide the labor. Decide how responsibilities for executing the initiative will be split between the Dedicated Team and the Shared Staff.

2. Assemble the Dedicated Team. Determine who will serve on the Dedicated Team and how to define their roles and responsibilities.

3. Manage the partnership. Establish clear expectations for each partner and mediate the inevitable conflicts that will arise between the two.

We will explore these three steps in the next three chapters.

CHAPTER ONE

Divide the Labor

AT SUPERCOMPUTING 2004, IBM announced that it had built the world’s fastest computer, dubbed Blue Gene. The design was revolutionary because Blue Gene was not powered by the world’s most powerful microprocessors. Instead, it was powered by a massive network of rather ordinary computer chips. As such, the design effort was different from any prior IBM product development effort. Rather than relying on the Performance Engine, IBM created a Dedicated Team to get the job done.

In late 2005, Deere & Company won a gold medal at a prestigious industry conference for its about-to-be-launched tractor for large-scale agriculture. The 8030 tractor was cutting edge, a best-in-class technological marvel. Over four years in development, the 8030 was an innovation that Deere & Company took great pride in. Yet, Deere did not build a Dedicated Team for the job. It was tackled, in its entirety, by Deere’s Performance Engine.

The Performance Engine Has Limitations

When launching an innovation initiative, step one is to decide what parts of the project you need a Dedicated Team for and what can be left to the Shared Staff. To make the right choice, you must accurately assess the capabilities of the Performance Engine. The choice is crucial. In some cases, as with IBM, a Dedicated Team is needed for much of the job. In other cases, as at Deere, one is not needed at all.

Because building a Dedicated Team takes time, energy, and money, it is tempting to ignore the need for one. There is great excitement at launch. Thinking about how to organize a Dedicated Team can seem like a distraction. Indeed, it is rarely as much fun as working on the innovation itself.

Therefore, the natural preference is to give as much of the task as possible, even the entire initiative, to the Performance Engine. Unfortunately it is very easy to overestimate what the Performance Engine is capable of. Rare is the company that assigns too little to it. We have only seen situations in which companies ask too much of it. And in speaking with executives about innovation, we almost never come across one who is eager to admit that a particular innovation challenge is beyond the capabilities of the existing organization. Their pride is understandable. They see impressive capabilities. They have a “can do” spirit. Nobody likes to say “no, we can’t,” and in most contexts, this is a positive trait.

Remember, however, that whatever role the Performance Engine takes on, it must simultaneously sustain excellence in ongoing operations. To do so, the Performance Engine must sustain its insatiable drive for efficiency. Inevitably, as the Performance Engine becomes more efficient, it also becomes more specialized, and its flexibility in supporting innovation diminishes.

It is a mistake to ask the Performance Engine to operate outside the confines of its specialty. The limits are rigid. Simply asking everyone involved to think differently or behave differently will not work. If you ask the Performance Engine to tackle a task that is outside its limits, it will either fail at the task or succeed only by disrupting existing operations.

Neither outcome is acceptable. Building a Dedicated Team is preferable, despite the extra effort required and even though it may appear to cost more because a Dedicated Team may require a formal budget approval, while a part-time effort from the Performance Engine may have no explicit cost.

Understanding the Limitations

The Performance Engine faces two limitations. The first is intuitive. To take on a task, the individuals within the Performance Engine must have the necessary skills.

That rule is much easier to state than to follow. It is natural to overestimate the capabilities of people you know when the alternative is taking a risk hiring someone you don’t know. A simple question to check yourself: if you were building a new company from scratch to pursue the innovation initiative, would you make it a priority to lure people away from your current company? If the answer is yes, then your Performance Engine passes the first test. It has the necessary skills at the individual level.

The Performance Engine may not pass the second limitation, however, which is far more constraining and far more frequently overlooked. In fact, the most common reason that companies overestimate the capabilities of the Performance Engine is an instinctive but flawed logic that equates the capabilities of the Performance Engine with the sum of the capabilities of the individuals within it. It is easy to see immense individual talents and conclude that the organization as a whole can achieve almost anything.

But the limitations of the Performance Engine are a function both of the skills of the individuals and the work relationships between them. What person A and person B can accomplish together is not just a function of A’s skills and B’s skills; it is also a function of how A and B are accustomed to working together.

As a result, the capabilities of the Performance Engine are always much narrower than the aggregate total of the capabilities of the individuals inside. Those individuals have been tied together, that is, their efforts have been organized for a very specific purpose.

Work relationships evolve to meet the needs of the Performance Engine. They adapt to achieve efficiency through specialization of labor and through repetition. The work relationships in the Performance Engine are defined, in part, through formal understandings and arrangements about who is responsible for what and who has power and authority. But they also evolve informally. After you work with someone for a while, you develop many implicit agreements about how you work together.

Once in place, the work relationship between a pair of individuals is very difficult to change. Even under the best circumstances—removing the pair from their Performance Engine roles and responsibilities—it takes a conscious, explicit, and determined effort to do so. There will be substantial inertia. The pair will naturally continue to relate to each other in the way that they always have, even if the work challenge in front of them has changed dramatically.

But we are not talking about the best circumstances; we are talking about what the Performance Engine can handle even while it sustains excellence in ongoing operations. Changing work relationships under these conditions is impossible. The demands of ongoing operations are constant and pressing and act not to change but to reinforce the existing relationships. As long as A and B remain under Performance Engine pressures, there is no chance that their work relationship will change. Therefore, if the work relationships inside the Performance Engine are inconsistent with what is needed for a certain portion of the innovation initiative, then that portion must be assigned to the Dedicated Team.

This is the rule that should guide the division of responsibilities between the Dedicated Team and the Shared Staff for any innovation effort, whether it is a new process, new product, or entirely new business; whether the innovation is incremental or radical; whether it is disruptive or sustaining. But how do you assess whether Performance Engine work relationships are consistent with the demands of the innovation initiative?

Work relationships have three essential dimensions—depth, power balance, and operating rhythm. In the remainder of this chapter, we will define these dimensions and describe their significance using several examples. We start with several illustrations that show the limits of the Performance Engine within the product development function. We chose these examples because they are particularly vivid. The same rules apply in every function, however, as we will show toward the end of the chapter.

Limitations of Deere & Company’s Product
Development Organization

Product development teams are often considered the centers for innovation within a company. As such, it is natural to assign existing product development groups heavy responsibilities in executing innovation initiatives.

But be careful. Product development teams are like any other part of the Performance Engine. They have limitations that are tied to the nature of the work relationships within them.

Deere & Company’s product development group, the one that built the award-winning 8030 tractor for large-scale industrial farming, provides a fitting illustration. The group excelled at Performance Engine innovation. Over a period of about fifteen years and four design iterations (the 8030 was preceded by three models, the 8000, 8010, and 8020, launched at roughly four-year intervals), the group mastered the innovation = ideas + process approach.

Deere did not start from scratch with each design. Each was an improvement over the previous design, incorporating new features and technologies without fundamentally redesigning the tractor. Nonetheless, in each iteration, the stakes were high. The 8030 was the most capital-intensive product development effort in Deere’s history. And Deere faced a tough constraint. The time line for 8030’s launch was fixed. Due to tightening regulations for diesel emissions, Deere would not be able to sell the 8020 tractor after January 1, 2006.

Therefore, developing the 8030 was a job that had to be on time, on budget, and on spec. In short, it was a job for a Performance Engine, and Deere’s product development team was a Performance Engine in every sense. The group documented the design process in great detail to make the process more repeatable. It also gathered extensive data during each design effort so that the process was predictable. The leadership team set specific time and budget expectations for each step in the process.

The group was disciplined and accountable, and it delivered. Deere launched ahead of the January 1, 2006, regulatory change. Customers responded enthusiastically. They particularly welcomed the 8030’s remarkable fuel efficiency at a time of rising oil prices.

Deere’s product development capability is valuable. Nonetheless, in its effort to stay atop this market, Deere also takes on numerous innovation challenges that are beyond the capabilities of this particular product development team. Thus, the company is constantly confronted with decisions about when to work within its well-oiled product development process and when to work outside it.

To understand Deere’s product development organization—to understand what it can and cannot do—some background is necessary.

The Modern Industrial Tractor

Modern machines have made agriculture incredibly efficient, freeing millions from the labors of the field. “Tractor” may not mean much more to you than “big lawn mower.” If so, you’d find it eye opening to actually ride the 8030, a $300,000 machine when fully loaded.

You’d probably be surprised, for example, when you found yourself looking skyward just to glimpse the top of the rear tire, nearly seven feet off the ground. Once up the ladder and inside the enormous enclosed cab, you might be just as surprised by the ubiquity of electronics, including computer screens. And, once in motion, you might be caught off guard by the comfort of the ride. An independent electrohydraulic suspension eliminates 90 percent of the vehicle’s vertical motion as it passes over bumps, ruts, and rocks.

You would also find the turning radius impressively tight for such a large vehicle, an engineering feat accomplished by building a special drop-box transmission that enables the engine to be mounted high and the wheels to maneuver underneath. But, really, did you expect to have to steer? Full-time steering is a dated notion. Not only do the 8030’s onboard computers plot the most efficient route to cover every inch of field, they handle most of the steering too.

The tractor is the workhorse of farming. Yet, for all its technological sophistication, it does little on its own. It tows or pushes farm implements for all crops and all seasons—tillers, planters, sprayers, cutters, scrapers, harvesters, and more.

Farm Economics

While there are still many individuals who farm as a hobby and as a lifestyle, large-scale farming is a business. The tractor, at the center of the action, is a major capital investment. The economics of farming are closely tied to the economics of owning and operating a tractor. For farmers facing the tough realities of unpredictable weather and volatile commodity prices, tractors are one of the few economic drivers that farmers can actually exert some control over.

To run the farm as efficiently as ...

Table of contents

• Cover
• Copyright
• Dedication
• Preface
• Introduction: How to Make Innovation Happen
• Part I: Build the Team
• Part II: Run a Disciplined Experiment
• Conclusion: Moving On, Moving Up
• Assessment Tools
• Scholarly Foundations
• Acknowledgments
• About the Authors