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15 INNOVATIVE WAYS (BIG AND SMALL) TO INNOVATE

Friday, February 22, 2013

Dawn Calleja, Shane Dingman, Tavia Grant, Jessica Leeder, Iain Marlow and Nathan VanderKlippe

Silicon Valley Toyota Cisco Eli Lilly Netflix Google Facebook Wattpad PEBBLE Disney Kraft GE/Apple Patagonia BBC IBM

How have these companies risen to the top of their respective industries? By consistently coming up with killer ideas that crush their rivals. Yet, as all of them will tell you, the ideas don't happen in a vacuum or materialize in a flash of inspiration. It takes deliberate planning to create an environment ripe for aha moments. Here are some of their secrets

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Silicon Valley

One size doesn't fit all

To build tech clusters, countries shouldn't just try to replicate the business-academic ecosystem that exists in Silicon Valley, according to Tom Jenkins, executive chairman and chief strategy officer of Open Text. Clusters arise out of a set of competitive advantages unique to an area. Regions that don't accept this, he says, will fail: "It's sort of like being in Northern Ontario and saying, 'Well, I want to be a beach resort just like Miami.' "

RANDOM FACT

253,155 - Record number of patents issued by the U.S. Patent and Trademark Office in 2012

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CISCO

Harness the power of millions

With almost 100,000 employees, Cisco is eons away from being a nimble start-up. But size, too, has its merits. Take, for instance, the experience of Guido Jouret, chief technology officer of Cisco's Emerging Technologies Group, a division that incubates new technologies and ideas. One of Jouret's initiatives is the I-Prize. Launched in 2010, the prize is an open call "to help identify new potential billion-dollar business ideas for Cisco," says Jouret. Up for grabs: a $250,000 grand prize. The first I-Prize was bestowed on the creators of SmartGrid, a system that helps large utilities save money and electricity. The most recent competition drew 824 ideas from 2,900 participants in 156 countries. The I-Prize has proven so effective that Ireland, the U.K. and Russia have asked Cisco if they can use the same model to run national innovation challenges.

Jouret also presents a quarterly list of "problem space" ideas, culled from hundreds of employee suggestions, looking for that billion-dollar spinoff. Indeed, Cisco's success rate is about the same as that of venture capitalists in Silicon Valley: "Our idea-to-business ratio is about 2%," he says. For the venture giants, it's about the same, 50:1. Here's the big difference: At the end of the day, Cisco still owns all the innovations in which it invests.

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TOYOTA

Keep asking why

When Taiichi Ohno became a production manager at Toyota in the 1940s, the carmaker's productivity ranked far below that of Detroit's Big Three. Determined to catch up, he began pushing for radical innovation on the line - changes that eventually became known as the Toyota Production System or, in North America, Lean Manufacturing. Ohno (who died in 1990) saw every problem as an opportunity for kaizen, or continuous improvement. To get at the root of issues - most of which turn out to have a human genesis - Ohno suggested that problem-solvers ask "why" five times. "The root cause of any problem," he said, "is the key to a lasting solution." Take this problem: A welding robot goes down on the shop floor.

1) Why did the machine stop? There was an overload and the fuse blew.

2) Why was there an overload? The bearing was not sufficiently lubricated.

3) Why was it not sufficiently lubricated? The lubrication pump was not pumping efficiently.

4) Why was it not pumping efficiently? The shaft of the pump was worn and rattling.

5) Why was the shaft worn out? There was no strainer attached, so metal scrap got in.

The solution: Install a filter.

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ELI LILLY

Embrace failure

It's probably not the kind of award most employees dream of, but in a bid to encourage its workers to embrace risk, Tata Group, India's largest conglomerate, hands out an annual "dare to try" prize for best failed idea. "Failure is a gold mine," said the company's former chairman, Ratan Tata, who retired in December.

U.S. drug maker Eli Lilly understands this. It started holding "failure parties" in the 1990s to help dissect what had gone wrong on given projects and to decide whether some initiatives should be discontinued.

The wording has changed over the years, but the concept remains: Embracing failure is a necessary part of innovation. Eli Lilly now holds "R&D outcome celebrations," quarterly gatherings where scientists present the latest results of their studies and colleagues ask questions. The aim is to stimulate free exchange of information and spark cross-pollination of ideas among people in different occupations. As Lilly Research Laboratories president Jan Lundberg likes to say, in science "success and failure are both learning experiences worthy of celebration."

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NETFLIX

Hire grown-ups and then trust them

Netflix lets its highly paid and trained engineers make crucial decisions. That means it has few layers of management; no IT operations team; and junior developers aren't working on critical code.

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GOOGLE

Share a drink. Share ideas

When is a bench not a bench? When it's a silo-busting, chance meeting spot for brilliant Google computer engineers who may - or may not, of course - clear a final coding hurdle and launch a new, billion-dollar line of business. In short, a bench is more than a bench when it is deployed - very deliberately - along with beanbag chairs and stocked kitchenettes to lure employees away from the soft glow of their laptops into impromptu gatherings.

In Google's Kitchener-Waterloo office in Southern Ontario, one such powwow took place in March, 2011, shortly before the launch of Apple's iPad. It was a time before the tablet craze, and mobile browsers weren't superpowerful. Derek Phillips, now an engineering manager, was having a conversation about the future of mobile - and about how they could make Google's Gmail service work well on a tablet. "A couple of us sat down in the beanbag chairs," he says, "and started talking."

They were near the kitchenette, and as other staffers came for coffees and snacks they overheard the conversation - and sat down and joined in. Soon, about 10 people were discussing broader conceptual issues such as what people were going to think of tablets and how they were going to use them - and what all this would mean for Google. They discussed how they should adapt Gmail and came up with some ideas. "A few of us just ran off and coded this up," Phillips says. Then, when the iPad came out, he and a few others drove to Buffalo and bought one. They soon had a sleek-looking, tablet-centric Gmail web app and it was all because of that impromptu gathering. When Google moved to a new office in a converted tannery, "we designed the space," Phillips adds, "to have even more spots like that."

This sort of innovation-booster is doable, of course, when you're Google and collaboration is part of your DNA. Another obvious way to amp up collaboration is to use technology: Google maintains one of the world's largest civilian video conferencing operations. Its engineers keep open digital calendars so they can invite, at the touch of a button, colleagues to join Google+ hangouts - anywhere in the world.

RANDOM FACT

$26.5 billion - Amount VC firms invested in the U.S. in 2012, funding 3,698 deals

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FACEBOOK

let the kids loose

Equal parts brainstorming and partying, Facebook's internal and external all-night "hackathons" allow coders to crack into projects they would otherwise never get to work on. The result? Features such as chat and the "like" button.

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WATTPAD

Think big

Toronto-based Wattpad is the world's most popular online publishing platform. Think of it as YouTube for writers. Co-founder and CEO Allen Lau's vision is very big indeed: "Gutenberg invented the printing press over 400 years ago, and I believe we are creating a product that will define how people share and connect through stories for the digital age." It's not just talk. With an audience of close to 10 million regular readers, the start-up was able to bypass Bay Street last year and go straight to a select group of Silicon Valley venture capitalists - including Khosla Ventures and Yahoo co-founder Jerry Yang - for a $17.3-million (U.S.) cash infusion.

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PEBBLE

Pitch to the people

Pebble could do for timekeeping what the iPhone did for the long-distance call. It's a sensor-laden watch that can link to a smartphone and display all manner of information, from incoming texts to distance on a golf course to a cyclist's speed. Only Pebble, the brainchild of Eric Migicovsky, a Canadian now in California, isn't the product of a multibillion-dollar company. It's the product of nerds and tech hounds, about 65,000 of whom shelled out 150 bucks each to fund its development - over $10 million in total - and in return will receive their own Pebble watch.

Pebble is among the highest-profile projects to come through Kickstarter, a web-based funding platform that promises to do for fundraising what the Internet did for information: democratize it. It's assembled some impressive "crowd-funding" statistics, with over $400 million (U.S.) raised for successful projects across a broad range of categories, from dance to publishing to video games. Last year, a tenth of Sundance films had Kickstarter backing.

It's a phenomenon missed by no one in finance. "There's a lot of potential for it to be new and big and be a whole new way that people fund companies," says Brett Shellhammer, who has worked with numerous new digital ventures, including Pebble. But there are obstacles: securities concerns about the involvement of unsophisticated investors - and more pointed worries about what they're investing in. Pebble, for example, was many months late in shipping. Shellhammer has invested in five Kickstarter projects. He's only seen one product. "That's been the biggest dig on Kickstarter: It's purely speculative. A lot of these guys can't build the thing they want to build."

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DISNEY

No "buts"

That's a cardinal rule for Gert Garman, the global creative and development director at Disney Destinations. For every 10 minutes that team members waste discussing why something won't work, they could instead be coming up with another 10 ideas. So, banish all budgetary, legal and HR considerations during brainstorming.

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KRAFT

RETHINK. DON'T REINVENT

Innovation doesn't have to be about invention.

Instead of reinventing snack foods, Kraft created 100-calorie snack packs. Health-conscious consumers loved them. So did competitors like Coke, Hershey and Frito-Lay, which followed suit.

RANDOM FACT

$179 billion - china's spending on R&D between 2005 and 2010. China now accounts for 13% of global R&D spending. Canada's over the same period: $24 billion

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GE/APPLE

Who builds it is as important as who designs it

Let's say you want to make a widget. You design it. You call China. You send over some drawings. Next thing you know, your widget is pouring off the assembly line. Easy, right?

It might be, if not for the fact that the path between schematic and factory can be fraught with all manner of difficulty. Manufacturing, it turns out, is not just a matter of coming up with a brilliant idea and finding someone to make it real. It is becoming ever more clear that much of an idea's brilliance is forged and refined in the process of building it. Genius happens as much on the factory floor as it does on the computer screen - what the academic world, in an area of research that is gaining sudden new prominence, calls an "iterative" cycle of innovation.

"The ability to produce is intimately tied to the design because there is learning in the process of production," says Mitzi Montoya, dean of the college of technology and innovation at Arizona State University, who has worked with a long list of major global manufacturers, including Xerox, the Dow Chemical Co., IBM and Raytheon.

One of the key weaknesses in the trend toward offshore production has been the vast distance - physical, intellectual, cultural - between those who conceive of products and those who fabricate them. Bridging that gulf can be so costly, and the end product so shoddy, that it more than offsets the cost savings that drove manufacturing offshore in the first place.

But the insight that creating something is interwoven with dreaming it up also underlies one of the most optimistic trends in North America today. Flickers of a manufacturing revival have begun to emerge, as companies as diverse as GE and Apple discover new savings in building hot water heaters and computers next door to where they are designed. After two decades of decline, enrolment in manufacturing, engineering and automation programs has begun to rise. The latter is especially important: Robots can replace repetitive manual work, freeing up these workers for the heady, often highly paid work of envisioning how something new can be made.

This potential is perhaps nowhere more striking than in the field of fashion - which, Montoya says, is one area where the process of production hasn't traditionally been important: Virtually all of the value in a piece of clothing lies in how it looks. Yet the textile industry, after decades of decline, is staging a comeback in places like North Carolina. That's because products like non-woven medical fabrics are so complicated to build, they have made garments into a high-tech industry.

"It's a very technical, complicated, advanced manufacturing process that takes a level of sophistication of manufacturing systems that is far advanced beyond the textile mills of old," Montoya says. She calls that "a great example" of a manufacturing process that requires extensive engineering to not only make the material but design the process of making it. "And that's not," she says, "low-skill work."

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PATAGONIA

Be counterintuitive

A clothing company that takes out a full-page ad in The New York Times on Black Friday urging consumers to buy fewer products may seem like its committing an act of corporate suicide. But for California-based outdoor apparel retailer Patagonia, it was just business as usual. The company's practice of using "business to inspire and implement solutions to the environmental crisis" is no New Age mumbo-jumbo. The proof is in the sales - $500 million (U.S.) in 2011 and growth of 30% annually over the last couple of years. The retailer is doing so well, even Walmart took notice. After signing a partnership with the global giant, Patagonia attracted 60 companies - representing more than a third of worldwide apparel and footwear production and sales, including Nike, Adidas, Target and Gap - to join its non-profit Sustainable Apparel Coalition. The coalition's mandate is to nudge the industry toward a greener place: increased operational efficiency and lower energy use, greenhouse gas emissions, water consumption, chemical use and waste.

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IBM

Let the best ideas stick

We're all familiar with the Einsteins, Edisons and Alexander Graham Bells and their cumpulsion to keep on inventing. That's also what innovative companies do - and few of them do more of it than IBM, the king of patents. The world's largest technology-services provider filed a record 6,478 patents last year, topping the annual list of U.S. patent recipients for the 20th year in a row. Its patent count for last year exceeded those of Accenture, Amazon, Apple, EMC, HP, Intel, Oracle and Symantec combined.

The culture of innovation and R&D is so entrenched, it permeates the whole company, says Manny Schecter, IBM's chief patent counsel. Staff are rewarded for innovation through monetary prizes (ranging from a few hundred bucks to "well up" into the thousands), public recognition, plaques and career advancement.

David Danovitch is grateful for IBM's passion for patents. He holds 41 and counting, and has written a slew of technical publications in his three decades at IBM Canada. The senior technical staff member looks at microelectronics and packaging processes for manufacturers. "There's a lot of cross-pollination and collaboration across the entire food chain," says Danovitch. "It's just a lot of fun for those who like experimenting and playing around with new ideas and seeing them come to fruition." Pragmatism is vital, he adds. "A good idea is only a good idea if it gets in users' hands when they want it, and at a price they are willing to pay."

The multicultural, multilingual nature of IBM's workforce also sparks creativity - the company's patent haul last year came from inventors in 35 countries. "We have bright people all over the world bringing their talents and cultures," Schecter says. "It's like internal crowdsourcing."

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BBC

Take a flyer

Ricky Gervais's mockumentary series The Office failed the BBC's traditional screening process in 2000. But the Beeb had created a gambling fund to take flyers on risky shows just like that one. So far, the original 14 episodes have aired in 80 countries, and at least six nations have Office versions of their own, including, most recently, China.