Innovation Chat with Scott Anthony

Scott D. Anthony is managing partner of Innosight, the strategy and innovation consulting firm. He has advised senior leaders in organizations like Procter & Gamble, Johnson & Johnson, General Electric, LG, Credit Suisse, Cisco Systems, Ayala Group, and the Singapore Economic Development Board. Anthony leads Innosight’s venture-capital investing activities (Innosight Ventures). He also chairs the investment committee for IDEAS Ventures, a SGD 10 million fund Innosight runs in conjunction with the Singapore government. In 2009, he joined the Board of Directors of Media General.

Mr. Anthony has written extensively about a number of innovation topics including disruptive innovation and business model innovation. His passion is in enabling innovators around the world to realize their untapped potential. He is the author of Harvard Business Review article “The New Corporate Garage,” and co-author of the Harvard Business Review article “How P&G Tripled Its Innovation Success Rate” with Bruce Brown, P&G chief technology officer. He is also the author of The Little Black Book of Innovation, published by Harvard Business Press in January 2012 and author of The Silver Lining, published by Harvard Business Press in June 2009. He co-authored Seeing What’s Next with Harvard Business School Professor and Innosight cofounder Clayton M. Christensen and was the lead author of The Innovator’s Guide to Growth. He has written articles for publications such as Wall Street Journal, Harvard Business Review, BusinessWeek, Forbes, Sloan Management Review, Advertising Age, Marketing Management and Chief Executive, and serves as a judge in the Wall Street Journal’s Innovation Awards. He has appeared on Good Morning America, CNBC, and FOX Business. He also has a regular column at Harvard Business Online. Mr. Anthony received a BA in economics summa cum laude from Dartmouth College and an MBA with high distinction from Harvard Business School where he was a Baker Scholar. Here comes our interview with Mr. Anthony.

How do you compare the perception of Innovation 10-15 years ago, when you left business school with today´s business perception? How this perception has evolved?

The biggest change is what I would call the “mainstreaming” of innovation. When I left business school it was still a very niche topic. Obviously innovation happened – entrepreneurs formed great companies and intrapreneurs took their companies in new directions – but there was a stench of randomness to it. A few forward-thinking practitioners were challenging that notion, using the great research done by Christensen, Mintzberg, McGrath, Burglemann, Govindarajan, Utterback, and others to approach innovation like a management discipline. Today there is a growing understanding that innovation is a discipline that can be mastered and managed. Individuals can get better at it with careful practice. Organizations can dramatically improve their success rate and productivity through the right approaches. I don’t think it’s fair to quite call it a science today, as there still are many questions that lack good answers, but it has come a long way over the past decade.

What are the newest trends in Innovation?

One clear trend is the smart management of strategic risk. About 30 years ago, Henry Mintzberg co-authored an influential paper that identified in some circumstances the right strategy couldn’t be determined a priori. Rather, it emerged from trial-and-error experimentation. Rita McGrath and Clayton Christensen have further detailed this idea. Over the past few years the entrepreneurial ecosystem has really pounced on the idea. It started when serial entrepreneur turned business school professor Steve Blank detailed his “Customer Development” process. He teaches that a startup is a temporary organization searching for a scalable business model. Since no business plan survives first contact with the marketplace, entrepreneurs have to build products and learn through experience what works and what doesn’t. Eric Ries’ popular book The Lean Startup naturally followed from Blank’s work. The notion of scientifically managing risk isn’t necessarily new, but it has exploded in popularity over the past few years. Another growing trend involves using social media tools to increase participation in innovation. Whether it is running an internal idea contest, or creating a so-called open innovation program, more and more companies are using sophisticated tools to make innovation a much more participatory activity.

Do you see differences in the way multinationals from industrialized countries and multinationals from emeging countries manage Innovation?

That’s a great question. One thing I see is that generally multinationals from industrialized countries are more systematic in how they manage innovation. Take Procter & Gamble. The company is famous for the disciplined way in which it approaches innovation. It has been working for decades to develop systems to increase innovation productivity. The company views it as a key strategic part of its growth plan. After all, it is an $80 billion company that hopes to grow organically about 5 percent a year. Some of that growth comes naturally from the “rising tide” of the expanding middle class in markets like Brazil and Indonesia. But a point or two of that growth requires innovation. You just can’t count on randomness to deliver $1 or $2 billion in new ideas every single year! Multinationals based in emerging markets generally are a bit less disciplined in their approach to innovation. Part of this is because they don’t need to be. Many still have substantial room for growth by expanding today’s business model. Others still have innovation deep in their DNA – they have succeeded by being nimble and pouncing on market opportunities. There are a few I know of, like the Tata Group of companies in India, the Ayala Group of companies in the Philippines, or Haier in China, that are more disciplined in their approach. But that’s the exception, rather than the rule.

What do you suggest to a multinational from an emerging country which has just recently realized that innovation is key for its long-term success?

I’d say three things. First, recognize that as much as you love your people, you might have to bring in some new talent from outside. Look to some of the multinationals that have innovation at their core, like the IBMs, P&Gs, Unilevers, Philips, Nestles and so on. Those can serve as great sources of innovation talent. Second, recognize the importance of a common language. We find that even the word “innovation” is defined differently by different people. The best organizations not only have a clear definition of innovation, they identify specific types of innovation that are of strategic importance to the company. Citi, for example, looks for core innovations (improving what they are already selling), adjacent innovations (either bringing an existing product to a new customer, or a new product to an existing one), and disruptive innovations (creating new categories). Finally, pick a defined starting point. Instead of trying to get everyone in the company to focus on innovation, pick a product line, or business unit, or geography that can serve as a “test bed” for approaching innovation in a different way. That focus helps you to figure out what works for your company and your context.

What are the most common mistakes companies make when they start a process to improve innovation?

The number one mistake is a lack of understanding about what innovation actually is. I define innovation as “something different that has impact.” Note the definition doesn’t have the word “new” in it. Innovation is different from invention, or the creativity that precedes it. Sometimes the best way to innovate isn’t to invent, but to re-apply an idea that has been proven in another industry or market context. Note too the last word: impact. Many companies perceive that improving their innovation success rate is all about coming up with the right ideas. They bring in creativity consultants, run idea hunts, hold brainstorming meetings, and create teams to license technologies in from universities. These aren’t bad things to do, but remember the old line from Edison: “Genius is one percent inspiration, and 99 percent perspiration.” Most companies are swimming in ideas. Those ideas might be locked up in their employees heads, or might have been shelved in the past because they were before their time, but they are there. The big problem isn’t generating ideas. It is translating those ideas into impact. I call this the “first mile” problem, where companies take the vital first step from a plan on paper to an actual product or service that generates revenues, net income, and free cash flow. While letting 1,000 flowers bloom is great in innovation’s early stage, focus and discipline is critical in innovation’s first mile. So, instead of trying to generate more ideas that will sit on a shelf or will get under-resourced and struggle, pick a few ideas that seem promising enough, put reasonable resources on them, and get busy attempting to grow them. Odds are that each of those ideas is wrong in some material way, but you only can learn that through experience. As one-time boxer and sometime actor Mike Tyson notes, “Everybody has a plan, until they get punched in the face.” Take your punches and see what happens.

Final question: What do you suggest to a young business manager that want to work in the field of innovation?

I would offer two pieces of advice. The first is to invest the time to read the literature. Innovation is an intersectional field, so that means going beyond “pure” innovation books to look at marketing, strategy, finance, behavioral psychology, organizational behavior, and more. The second is to find a place where you can consciously practice. It’s like riding a bike. Reading the theory is nice, but until you get on the bike and pedal, and fall down, you don’t really know anything about it. This could be at a company like ours that provides advisory services, it could be starting a new business, or it could be working on something innovation-related inside large companies. The last option might feel the most foreign to people. For some reason many people have this notion that startups are the place where all the exciting innovations come from. That’s not true. There are some things only big companies can do. There are a growing number of companies that are blending entrepreneurial behaviors and difficult to replicate assets in ways that allow them to unleash big impact. Think about Nestle’s Nespresso, Apple’s iPad, Unilever’s PureIt water filtration system or Medtronic’s Healthy Heart for All program bringing affordable cardiac care to emerging markets. In my view, big companies are actually the best places to go to innovate. They have the capabilities, and increasingly have the desire as well

Mr. Anthony, many thanks for this interview about innovation – a fascinating subject

Thanks for the opportunity. I hope to visit Brazil soon. A lot of interesting things are happening in your country.

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Evodio Kaltenecker is responsible for innovation and strategy in US and European multinationals in several industries such as Oil &Gas, Energy and Infrastructure. Editor of the blog estrategiaparatodos.wordpress.com, which addresses innovation and strategy concepts and explain them to larger audiences. He has an MBA from Harvard Business School and works towards his Ph.D. degree in internationalization strategy of multinational companies from emerging market countries and innovation.