Memo to CEOs: Stop Blathering About Innovation and Do Something

Posted by: Thomas D. Kuczmarski on March 20, 2012

 

I have come to realize how much time is wasted teaching managers about the practical skills of innovation. It is the chief executive officer that needs the lesson. Everything else that is central to reaping the fruits of innovation emerges from this simple observation.

It is a truth that is masked in rhetoric. It is impossible to find a CEO who does not speak the words of innovation. I often hear: “Innovation is the lifeblood of our business” or “We need to innovate to grow.” The simple truth is that far too many leaders don’t act on those words—and that is where the rubber misses the road.

My colleagues and I did a survey of 87 U.S. product and service companies. We wanted to get behind the catchword “innovation” and learn more about the best practices of companies that are successful innovators and find out why others consistently come up short. In doing our survey, we defined a company as a “successful” innovator if more than half its new product or service launches met the firm’s criteria for success relative to projected revenue and profit. Those at 49 percent or less, we labeled “unsuccessful.”

Here are a few of the things we found.

An innovation strategy counts. Fully 66 percent of the successful companies have an explicit innovation strategy that is aligned with the overall corporate strategy. Only 22 percent of the unsuccessful firms have such a strategy.

Focusing on high-risk—but higher-return—innovations matters. In successful firms, 26 percent of new product and service revenues come from new-to-the-world innovations. Among the unsuccessful, the figure is just 7 percent.

Innovation leadership is central to success.There is a clearly defined innovation leader in 64 percent of the successful companies; 50 percent of unsuccessful firms have such a leader. The two numbers seem oddly close until you understand that in the successful firms, the innovation leader reports to the CEO in 47 percent of the cases—compared to 15 percent among unsuccessful firms.

The CEO must be the innovation leader. In 62 percent of the successful firms, the CEO is active in the process of planning new products and services, compared with 30 percent of the unsuccessful firms.

The reasons we heard for the failure of new products or services include poor planning and execution, lack of understanding of market needs, and lack of internal support. Overall, fully 68 percent of the reasons given for innovation failure were things that can be controlled by an organization.

Finally, words matter. The words we heard from successful companies in describing their innovation culture include invigorated, collaborative, aggressive, and growing. At the unsuccessful firms, we heard: lacking, constrained, isolated, weak, and aspirational.

Innovation is a word that is easy and convenient to say. Making it happen is an important leadership role. Any CEO who wants to bring the revenue of innovation to the bottom line has to recognize that it requires a culture that involves every corner of the organization. Making that happen starts at the top.

Thomas D. Kuczmarski is founder and president of Kuczmarski & Associates, an innovation consultancy based in Chicago. The author of five books, Kuczmarski has also taught product and service innovation at Northwestern University's Kellogg Graduate School of Management for 29 years.

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