Fostering a Culture of Innovation:
The Role of Leadership
Jaideep Prabhu
October 2018
Innovation & Leadership
What is innovation?
The challenges of innovation
What is an innovation culture?
The role of leadership in fostering innovation
What is Innovation?
“The successful commercial
exploitation of new ideas”
Joseph Schumpeter
(1883-1950)
What is Public Sector Innovation?
“A product, program, service, or process that
is new, creates value and changes the status
quo of government services.”
“To be impactful, innovations must also be
scalable, not merely one-off novelties.”
Innovation.gov
Types of Innovation
New products or services
New processes
New business models
Product/Service Innovation: The iPod
Payoff from the iPod
$55,000
$45,000
$35,000
Capitalization $ mill
Apple
$25,000 Napster
Creative Tech
Sony
$15,000
$5,000
2003 2004 2005
$(5,000)
Year
Process Innovation: Larsen & Toubro
Manual project management
Little collaboration between L&T units
Difficulty engaging external partners
Electronic project management
Online knowledge-sharing across business units
Streamlined collaboration with external partners
Faster turn-around cycles for infrastructure projects
Avoids costly paper trail (all electronic)
Avoids penalties for late project delivery
Amazon.com
Customer benefits: more assortment, cheaper, 24/7,
customer reviews
Revenue structure: exploit long tail of customers who
want rare books or buy occasionally
Cost structure: use technology to reduce costs of
holding inventory and investing in physical location
Should Innovation for Emerging Markets
be Different?
1. Frugal/affordable
2. Flexible
3. Inclusive
Thinking Outside the (Ice) Box
WHAT IF your fridge
can operate without electricity?
Source: http://gizmodo.com
Source: http://www.mitticool.in/
Mansukh Bhai and the Mitti Cool Fridge
Thinking Outside the (Hot) Box
The Demographic Pyramid
India’s Changing Class Structure
2005 2020
Upper-Middle
$10,000+ PPP(1)
Middle
$5,000-10,000 PPP
Emerging
$2,500-5,000 PPP
Poor
Under $2,500 PPP
Follow the Money
Product Innovation: The Nokia 1100
Specifically for emerging markets:
Dustproof keypad and front face
Non-slip sides for humid weather
Built-in flashlight
Over 200 million sold since late 2003
World's best selling handset and consumer electronics device
The Proposition Is Simple
Cash In Cash Out
Person 2 Person Transfer
Airtime Top-Up
Merchant Payment
Bill Payment
ATM Withdrawals
Social Payments
International Transfer
Page 18
Reuters Market Light: The Pain
“If I had known timely and accurate information
about the price of mustard in Latur market, I
would have made 40% more money.”
“Heavy rains decayed my coffee berries. Had I
known this in advance, I would have harvested early
and reduced my heavy financial loss.”
“I get a very poor price for my crop. I do not trust
my buyer. I take my produce to the market and have
to accept his money. I am not treated with respect.”
Source: Omkar Joshi, Reuters
Reuters Market Light: The Solution
RML provides accurate, relevant and customized
information that impacts customers livelihood and
productivity through mobile phones
Local Spot Prices Local Weather Crop related news
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Source: Omkar Joshi, Reuters
Business Model Innovation: Dr Mohan’s Mobile Diabetes Clinic
Source: http://www.drvmohan.com/ Source: http://www.worlddiabetesfoundation.org/composite-2731.htm
Harish Hande and SELCO
Innovation in the Indian Government
Think about this individually, then discuss with your neighbours
Thinking back:
1. What is a recent example of innovation you have been involved with
2. What was the process by which this innovation was identified, tested and
implemented?
3. What were the obstacles to and drivers of success?
Thinking forward:
1. What would be a good innovation to introduce?
2. What should the process be by which the innovation should be identified,
tested and implemented?
3. What would the obstacles to and drivers of success be?
Innovation & Leadership
What is innovation?
The challenges of innovation
What is an innovation culture?
The role of leadership in fostering innovation
The Incumbent’s Curse
Radical innovations often seem to come from
small entrepreneurs
Incumbents seem to stall, ignore or fight
radical innovations
Dominant Firm Quotes...
“Who the hell wants to hear actors talk?”
Harry M. Warner, Warner Brothers, 1927
“Television won’t be able to hold on to any market it
captures after the first six months. People will soon get
tired of staring at a plywood box every night.”
Darryl Zanuck, head of 20th Century Fox, 1946
More Dominant Firm Quotes
“What use could this company make of an electrical
toy?”
Western Union president William Orton, rejecting
Bell’s offer to sell his struggling telephone
company for $100,000
“There is no reason for any individual to have a
computer in their home”
Ken Olsen, President and Founder of DEC, 1977
Researcher Quotes: Incumbents…”
“underinvest” in radical product innovation, and are
“incompetent” at it (Henderson 1993, p. 248)
are prone to “technological inertia” (Ghemawat 1991,
p. 161)
fail to innovate because they “listen too carefully” to
current customers (Christensen and Bower 1996)
Are Dominant Firms Doomed to Fail?
Are dominant firms:
Inert?
Arrogant?
Incompetent?
Stuck in the past?
Consumer Electronics: Partial List of Significant Innovations
Air conditioner AM radio Laser disc player
Analog answering machine Analog quartz watch Magnetic tape player (R-To-R)
Autofocus color CR camera B&W celluloid roll camera Mechanical color TV
Ball point pen Camcorder Mechanical refrigerator
Cassette tape player CD player Mechanical vacuum cleaner
Cellular phone Color celluloid roll camera Mini-disc player
Desktop computer Digital answering machine Phone set with cord
Digital camera Digital quartz watch Portable computer
Digital video disc player Disposable shaver Single-player video game
Dot-matrix printer Dry Ink (electrostatic) copier VCR
Electric blanket Electric blender Laser printer
Electric can opener Electric clothes washer Mechanical B&W TV
Electric dishwasher Electric fan Mechanical dishwasher
Electric garbage disposer Electric percolator Mechanical typewriter
Electric shaver Electric toaster Microwave oven
Electric typewriter Electrochemical fax Palm computer
Electronic black & white TV Electronic color TV Phonograph
Electronic desktop calculator Electronic pocket calculator Safety shaver-disposable blades
Electronic watch Fluorescent lamp Photoelectric scanning fax
FM Radio High definition television Voice mail
Incandescent vacuum lamp Instant camera
Internal combustion automobile Laptop computer
Source: Chandy and Tellis 2000
Who Introduces More Radical Product
Innovations: Incumbents or Outsiders?
Proportion of radical product innovations from incumbents vs.
outsiders:
a. 90% incumbents 10% outsiders
b. 75% incumbents 25% outsiders
c. 50% incumbents 50% outsiders
d. 25% incumbents 75% outsiders
e. 10% incumbents 90% outsiders
Results: Incumbency of Radical Innovators
Incumbent: A firm that manufactured and sold at
least one product belonging to the preceding
product generation
Non-Incumbent Incumbent
53% 47%
Source: Chandy and Tellis 2000
Incumbency of Radical Innovations By Time
80%
73% 74%
70%
60%
50%
% Non-incumbent
40%
% Incumbent
30%
27% 26%
20%
10%
0%
Pre WW II Post WW II
Source: Chandy and Tellis 2000
In Recent Years….
Technologies are more complex
New organizational forms have become popular
Innovation is more international
Incumbents may have learned from the mistakes of their predecessors!
Advantages of Dominant Firms: Resources
Technological resources
Human resources
Marketing resources
Financial resources
But even the largest firms can’t have all the ideas
P&G Innovation Metrics: 2000
9,000 R&D personnel (1,000 PhDs)
$1.8 Billion in R&D expenses
~27,000 patents (10% being used in current products)
Stagnation of new R&D: only 35% of new products met
objectives
Increasing costs: Always: $10 mn in the 80s, $40-50 mn
by 2000
P&G from 2002 Onwards
Something changed!
Sales started to grow
Stock-price improved
Sustained Sales Growth
Organic
Target
thru
FY 2010
+4% to +6%
Acquisitions & Divestitures
Organic
P&G vs. Dow Jones
P&G
Dow Jones Ind. Av.
2001 2002 2003 2004 2005 2006 2007
How?
A Call to Action
“We will acquire 50% of
our innovations from
outside P&G”
A.G.Lafley
President and Chief Executive
The Procter & Gamble Company
P&G and Pringles
In 2002, brainstormed ways to make Pringles novel and fun
Traditionally would have spent budget on developing a
workable process, in-house plus ink-jet printer company
Instead, created a technology brief that defined the problem
and circulated throughout the global network
Small bakery in Bologna run by a university professor
Double digit growth for Pringles US
Examples of C&D . . .
Crest Scratch N Sniff Pkg.
Mr. Clean Autodry
Pringles Dips
Mr. Clean Magic
Swiffer Duster SK-II Airtouch
Eraser
Foundation
SK-II Facial Mask Metamucil
Capsules
Charmin
Fresh Mates
Pantene Kandoo Wipes OTC Drug
Sonic Registrations
Comb Tide Stainbrush Crest New Tubes
Olay Vitamins
Glad Press N Seal Clairol In-Store
Prilosec OTC Shade Selector
Olay White
Radiance Facial
Mask
Olay
Regenerist
Pantene Hair Olay Daily PuR /
Styling Products Facial Pillows Whirlpool Old Spice Shave
Refrigerator Visia Beauty Imaging
Gel Crest Liquid
Filters Dentifrice
Open Innovation: Implementation
Mindset
“Not invented here” to “Proudly found elsewhere”
People
Idea scouts: technology entrepreneurs
Tools
InnoCentive, YourEncore
P&G Technology Entrepreneur Network
Results of C&D
By 2006, 52% of products had elements from
external sources (up from 15% in 2000)
R&D productivity increased 60%; R&D spending
down from 4.8% of sales in 2000 to 3.4% in 2005
P&G launched 5 of the top 10 consumer products in
the US in 2005
Doubled share price
Not Just P&G
Goldcorp: a mining company
Shared geological data for $575,000 prize money
2 weeks, over 1,000 ideas, 80% yielded gold
$100 million business to $9 billion
BBC backstage
Developer network uses BBC content feeds
Create new prototype services
Firm Size and Innovation
Dominant incumbents
Introduce more radical product innovations
Gain more from their innovations
Resources matter
Nevertheless, dominant firms face significant challenges
to remain innovative over time
Innovation: A Garden of Paradoxes
Pre-empting the future, yet operating in the present
Developing competencies, but preventing rigidities
Maintaining continuity, yet adapting and changing
Deepening functional expertise, yet being cross-functional
Diversifying and growing, but staying focused and lean
Innovation & Leadership
What is innovation?
The challenges of innovation
What is an innovation culture?
The role of leadership in fostering innovation
Which firm had the most
computer inventions in the
1970s?
Inventions of Xerox in the 1970s
Laser copier
PC
Printer
Laptop
Mouse
Windows
Word processing
Ethernet
PC networking
Email
Xerox 9700 Laser Printer (1977)
Xerox Personal Computer 1973: Alto
Kids Playing with Xerox Alto
By 1980s all that was history?
Why?
Innovation in Firms Across Nations
Gerard J. Tellis
Marshall School of Business, University of Southern California
Jaideep Prabhu
Judge Business School, University of Cambridge
Rajesh Chandy
Carlson School of Management, University of Minnesota
Journal of Marketing
January, 2009
What Drives Sustained Innovation Across Nations?
Popular belief: Ethnicity
Sociologists: Religion
Social-psychologists: National culture
Geographers: (Distance from equator)2
Legal scholars: Intellectual property
Economists: Inputs
Our thesis: Internal culture of firms
Surveyed 4000 Firms in 17 Countries
Australia 123 Japan 409
Canada 154 Korea 333
UK 383
USA 843 China 183
Singapore 176
Germany 315 Hong Kong 167
Switzerland 80 Taiwan 243
Netherlands 62
Sweden 113 India 130
France 242
Italy 99 Total 4074
Pooled Database
Primary Survey Data
Secondary Firm Data
Financials
Patents
Secondary Country Data
OECD and World Bank
World Economic Forum
Main Finding
Firms’ cultural traits drive innovation across
nations
Firms’ Cultural Traits Drive Innovation
Effect on Radical Innovation of:
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Religion National Distance IP Patents R&D F. Culture
Culture from
Equator
What Do We Mean by Firm Culture?
Three attitudes
Future focus
Willingness to replace current products/processes
Tolerance for risk
Three practices
Innovation champions
Asymmetric incentives
Internal markets
What About Xerox?
Force Behind Xerox Innovations
Innovation Champion
CEO Joe Wilson
Why Xerox did not Leap Forward in 1970s?
Innovation champion (Wilson) died
Two silos: scientists versus managers
Managers afraid of replacing current products
Did not see future wealth in electronic office
Refused to commercialize innovations
Innovation Audit
How do these attitudes and practices relate to
your role in the government?
How does your organisation or department
perform in terms of its culture of innovation?
Case Study: The City of Boston
Mayor’s Office of New Urban Mechanics (MONUM)
Design studio within government: prototypes
solutions free from bureaucratic constraints
Innovations include:
Citizens Connect, an app for reporting problems to
city officials
Boston Saves, a program designed to help kids in
public school put money away for college
MONUM Process
MONUM only takes on projects with the potential
to prototype, scale and have impact
Avoids ideas that are too costly or time-
consuming
Once a project is chosen, MONUM researches,
designs, tests, and evaluates it
If it is a success, hands it to a city department, or
calls it a failure
Tolerance for Risk
How to gain the respect and trust of government
employees, many who are taught to avoid, not
tolerate, risk?
“If departments don’t trust you, they’re not going to
listen to anything you say. You have to create the
cultural context for this type of work — which
means building risk tolerance in government.”
Nigel Jacob, co-founder & chair of MONUM
Asymmetric Incentives
Departments may worry about having their name
attached to something that might fail, or may be
uncomfortable using their own budget
“If a new project tried by a department doesn’t
work, we try to absorb as much of the bad news as
possible, so they can push all the negative publicity
our way. If it does work, we try to give as much
good credit to these departments as possible.”
Nigel Jacob
Innovation Champions
MONUM chooses people who are comfortable working
within the rules civil servants must follow, but with an
entrepreneurial streak that can push against the limits
“We try to hire hustlers. We want people who are
comfortable navigating big bureaucracies, but still
creative.” Nigel Jacob
Innovation Champions
MONUM identifies early adopters across
departments
“There are a small number of innovators spread
between departments that helps us subvert
bureaucracy. After all — bureaucracy is just
people.” Nigel Jacob
Innovation Champions
Also engages citizens: Citizens Connect, an app for
reporting problems to city officials
The Boston Saves program, which gives children in
kindergartens $50 savings accounts to get them to save
for university, uses family “champions”
MONUM brought in members of the community to co-
pilot and co-own the program, which gets people
talking about Boston Saves, and builds trust with
families
Fostering a Culture of Innovation: Summary
Inputs (resources) are not enough!
Creating a culture of innovation is crucial
The right attitudes and practices are needed
Innovation & Leadership
What is innovation?
The challenges of innovation
What is an innovation culture?
The role of leadership in fostering innovation
Innovation Starts at the Top
What Were They Thinking?
“The PC is the stupidest thing I ever
heard of”
An Wang, CEO of word processor maker
Wang Labs
What Were They Thinking?
Ken Olsen, CEO of minicomputer maker
Digital Equipment Corporation
"There is no reason anyone would want a computer in
their home"
Forbade his employees from using the words “home
computer” or “personal computer” in the firm
Future Focus
Emphasis on future customers and competitors,
relative to current customers and competitors
Thinking About the Future
“Senior management is devoting less than 3% of its
energy to building a corporate perspective of the
future”
Hamel and Prahalad (1994)
Bill Gates: Think Week
Summing Up
What is innovation?
The challenges of innovation
What is an innovation culture?
The role of leadership in fostering innovation
Take Aways
Innovation is critical ('do or die')
Innovation isn't easy
Creating and fostering a culture of innovation
can help
Your Role: Leaders of Innovation
Visionaries
Future focused
Risk Takers
Experimenters
Architects
Community builders
Champions
Technical, market, and organizational
Thank you for innovating!
