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Volume 18, Number 15 • Copyright ©2001 Business Book Review, LLC • All Rights Reserved

The Art
of Innovation
Lessons in Creativity from IDEO,
America’s Leading Design Firm

Tom Kelley with Jonathan Littman

Foreword by Tom Peters

©2001 Tom Kelley and Jonathan Littman1

Adapted by permission of Random House, Inc.
ISBN 03-854-9984-1

Reviewed by Lydia Morris Brown

Chapter One: Innovation at the Top

When attempting to create and sustain an innovative culture, companies need not worry about being the best in every
category but how to achieve true excellence in a few areas and strength in many. The total score—the ability to beat
the competition in the full range of daily tests that every company faces—is the ultimate goal. In this regard, IDEO has
developed and continually refined an effective methodology of five basic steps that works for everything, from creating
simple toys to launching e-businesses.
IDEO begins by understanding the market, the client, the technology, and the perceived constraints on the problem.
The firm observes real people in real situations to discover their latent unaddressed needs. It visualizes new-to-the-world
concepts and the customers who will use them. It evaluates and refines prototypes in a series of quick iterations. And,
IDEO implements the new concept for commercialization.

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

Chapter Two: Winging It in Start-Up Mode to become IDEO Product Development. Since that time,
David Kelley began his career in rather boring the company has continued to grow, diversify, and make
engineering roles at Boeing and NCR. Then he entered profits.
Stanford University’s Design Department to earn a master’s
degree and then a doctorate. However, when companies Chapter Three: Innovation Begins with an Eye
began asking the department for someone to solve their Because inspiration (whether it’s art, science,
engineering and product design problems, Kelley decided technology, or business) often comes from being close
to start his own firm, which
“As we’ve built expertise and credibility in some areas, we continue to
he launched in 1978. From the
‘wing it’ with new experiments in alternative business models.”
beginning, he treated business
like he had treated his childhood amusements—he to the action—from seeing, smelling, and hearing, IDEO
winged it (there was no business plan) and had a lot of is not a big fan of focus groups or traditional market
fun. He hired people he liked and respected, and who had research. Instead, the firm goes to the source—the actual
a well-developed sense of horseplay. Their pranks not only people who use a product or something similar to what the
energized the team, but also created an atmosphere where it designers want to create. Uncovering what comes naturally
was natural to take chances. Mistakes were always allowed, to people, and having the moxie to change the rules, is the
as long as the blunders moved them forward. kind of observation-fueled insight that makes innovation
Although Kelley didn’t have much experience, neither possible. Seeing and hearing with one’s own eyes and ears
did anyone else in Silicon Valley. Thus, all kinds of is a critical first step in improving a product or creating a
companies were looking to people like Kelley to help them breakthrough—IDEO calls this process “human factors.”
solve novel engineering and design problems in computers IDEO has come up with some very effective methods
and other high-tech devices. When he was stuck with a to increase the quality of their observations. It is a big
tough obstacle he didn’t understand, he networked and advocate of a principle called “being left-handed,”
talked to all the smart people he knew. And, it helped that developing empathy for the needs of consumers who are
he was involved with some groundbreaking companies different and creating products/services that embrace
like Apple, whose confidence and iconoclasm were those differences. It asks well-chosen “why” questions
infectious. to discover the underlying psychology of an individual’s
At places like Boeing and NCR, engineers were treated interactions with products/services. And, understanding
like mere cogs in the wheels and kept behind the scenes. that people who follow directions perfectly aren’t very
But, in the high-tech industry, executives really cared about helpful, the company observes those who break the rules,
product innovation, and soon David Kelley Design was take short cuts, and force a product to do something the
working for major corporations and Kelley was working manual says it can’t.
one-on-one with company presidents. In 1991, responding IDEO also finds it useful to see products in motion—to
to client requests for “one-stop shopping,” the company think of them in terms of verbs rather than nouns. Seeing
merged with Moggridge Associates, ID Two, and Matrix products, services, and spaces as animated devices that
people integrate into their lives makes one more attuned
to how they are actually used. Watching people and
About the Authors
products in motion is a good way of looking for ideas
Tom Kelley is IDEO’s general manager. In this that leap traditional boundaries. IDEO thinks this “cross-
position, he has been responsible for such diverse pollination” approach is a kind of alchemy of innovation.
areas as business development, marketing, human Sometimes it is possible for individuals to find
resources, and operations.
inspiration by observing themselves when they are off the
Jonathan Littman is the author of The Fugitive beaten path (e.g., traveling abroad, driving an unfamiliar
Game and The Watchman. He is also a contribut- car, or trying a new activity). At these times, people are more
ing writer for Red Herring magazine. open to discovery—more likely to ask “Why?” and “Why

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 2
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

not?”—which leads to innovation. Whenever people are in of achievement in getting anything done. The team was
this kind of new-to-the-experience mode, they should pay irreverent, nonhierarchical, well-rounded, and respectful
close attention (especially to the problems) and take notes of diversity. It worked in an open, eclectic space that
allowed optimum flexibility, group work, and
“If something’s broken, it can be fixed. Just keep your eyes brainstorming. And, the team felt empowered
open for inspiration.”
to connect with the outside world to get the
about their impressions, reactions, and questions. IDEO answers they needed.
calls these notes “bug lists.” Understanding that the status quo impedes innovation,
IDEO also celebrates diversity and, as a matter of course,
Chapter Four: The Perfect Brainstorm packs its teams with such characters as the visionary,
Brainstorming is the idea engine of IDEO’s culture— the troubleshooter, the iconoclast, the pulse taker, the
opportunities for teams to “blue sky” ideas early in a project craftsman, the technologist, the entrepreneur, and the
or to solve a problem when it crops up. And, the company has cross-dresser.
seven principles for making these sessions buzz: (1) Sharpen
the focus by beginning with a well-honed statement of the Chapter Six: Prototyping Is the Shorthand of
problem (or simple question) that also focuses outward Innovation
on a specific customer need rather than inward on some Almost anything can be prototyped—what counts is
organizational goal. (2) Have playful rules—don’t start to moving forward and not wasting time. Prototyping is a way
critique or debate ideas. (3) Number each idea that bubbles of making progress when a project is especially complex.
up. (4) Build and jump -build the momentum, and when it Once the team gets in gear, some of the solutions appear
begins to plateau, keep the energy up by jumping back to easily because new possibilities of discovery are exposed.
an earlier idea or forward to a completely new approach. (5) Moreover, because prototypes are tangible, they are
Use the power of spatial memory and write the flow of ideas much better than pictures. It’s easy to reject a lifeless report
down in a medium visible to the whole group. (6) Stretch or a flat drawing, but models make it easier to accept new
mental muscles by doing some form of group warm-up. ideas or to make hard choices, such as abandoning costly
(7) Get physical—for the purposes of visualization, move and/or complex features. And, if the project has a service
beyond two dimensions and use real physical objects, build or human component, sometimes it helps to prototype via
crude models of a concept, and/or “bodystorm” (i.e., act out an improvisational skit.
product behavior/usage patterns). Prototyping is also a way of soliciting early feedback
The buzz of this kind of brainstormer infects IDEO and incremental reviews. IDEO pitches presentations in
teams with optimism and a sense of opportunity that carries stages, showing the rough sketch or the cheap foam model,
them through the most difficult stages of a project. and using them to get back on track before it’s too late. In
addition, prototyping can also be a reminder that the most
Chapter Five: A Cool Company Needs Hot obvious and simplest solution is the best.
Groups
Although companies are naturally about groups and Chapter Seven: Build Your Greenhouse
teamwork, too often these groups are simply the result of Innovation flourishes in greenhouses—workplaces
inertia. At IDEO, hot project teams (groups infused with where the elements are conducive to fostering the growth
purpose and personality rather than with the purpose of of good ideas. Many companies consider office space
defending and preserving the group’s status) are the heart secondary to the innovation process, but IDEO considers
of the IDEO method. the way office space takes shape, and teams work together,
A good example is the IDEO Nightline shopping cart its premier asset. Nonetheless, it’s not about forward-
team. It was only together for a week, but it displayed many looking architects, trendy buildings, or master plans.
of the characteristics of a traditional hot group: It was totally Instead, the company has created office space that works
dedicated to achieving the end result. Because it faced down and looks good by abiding by the following tenets:
an “impossible” deadline, there was a tremendous sense

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 3
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

1. Build neighborhoods—places for impromptu It is a reality that IDEO capitalizes on by expecting the
meetings, comfortable blends of openness and unexpected and approaching projects with the humility and
privacy, spaces that encourage a celebration of knowledge that answers may come from the least expected
work and hobbies. places. This approach, which the company calls “looking
2. Think in terms of projects. Encourage every- cross-eyed” and “cross-pollination,” is liberating and
one to sketch out his or her own identity, but powerful. When teams launch a project with the assumption
ensure that everything—partitions, files, desks, that cross-pollination may help them innovate, they are
etc.—is easily movable. more likely to be ready to take the necessary leaps of
3. Use foam building blocks to make impromptu creativity.
conference room partitions and/or amphithe- Bringing quirky Tech Box items to brainstormers
ater-like seating. They are fun and they help often sparks people to think beyond the norm. Thus, at
teams innovate. IDEO, the Tech Box is a conscious exercise in cross-
4. Draw inspiration from adversity. Encouraging pollination. In addition, IDEO teams actively “idea wade”
people to solve their space problems spurs (browse magazines, books, and the Internet). They take
innovation.
“Is your company sending the right signals, or is its office
5. Prototype office space. This kind of proj- space contradicting its corporate policies?”
ect offers workers great opportunities to
expand their notion of office, work, and play. on the perspective of film directors, break the world down
6. Create a team icon. When it’s not possible to into scenes, and watch people perform small everyday
turn part of a project into inspirational space, tasks. The company encourages mental diversity, hires
create an inspirational team icon instead. outsiders who will introduce new ideas, and periodically
7. Watch the corporate “body language.” holds informal open houses in order to learn from the
Companies must be aware of the silent signals comments of its visitors. Teams often create compelling
their office spaces emit. characters to represent possible users of new products/
8. Keep it simple when creating or updating services. And, they cross-train, spending time learning
space. from noncompetitive industries.
9. Remember that hierarchy is the enemy of cool
space. Beware of the natural tendency to reward Chapter Nine: Barrier Jumping
superiors with superior offices. Despite the fact that teams effectively observe,
10. Give every worker a view. The space that most brainstorm, and prototype, barriers (i.e., culture; social
companies give to executives is ideal to greet norms; the FUD factor—fear, uncertainty, and doubt;
or entertain clients, eat lunch, collaborate, or and patents) often stump the best innovators. In addition,
fashion into a corporate library. barriers in the mind and/or the office can sap creative
11. Tell stories. Display current projects front and strength like a virus. Thus, companies need to periodically
center in a place that makes employees proud clean out their organizational and mental attics and discard
and lets clients and visitors see what’s going hierarchy, bureaucracy, anonymity, tidy office spaces and
on. organizational structures, and self-described “experts”
12. Make junk sing. Create a “Tech Box”—a who shut teams off from new learning.
centrally located lending library of the odd Once these barriers are removed, they must
materials and quirky artifacts that people have be replaced with “bridges.” Teams must be willing to
collected in the hopes that they might one day embrace ideas from any source and to encourage autonomy.
prove useful. Employees must be made to feel comfortable enough to
poke fun at each other and even at the boss. Stimulating
Chapter Eight: Expect the Unexpected messiness must be allowed, along with tinkering to improve
Innovation does not occur via central planning. It things and ideas. And, the importance of evangelism, effort,
comes from left field, accidentally and with serendipity. and clever persistence must be instilled.
Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 4
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

Chapter Ten: Creating Experiences for Fun and is a soapbox derby sponsored by Silicon Valley venture
Profit capitalists to raise money for Safe Rides, which offers kids
Because innovation is a very goal-oriented process, safe transportation home if they are under the influence of
when moving through it, it is more effective to focus on alcohol or hanging out with kids who are. IDEO believes the
verbs—the action (i.e., the creation of experiences). From competition is a no-lose proposition. The cause is a good
this perspective, the goal is not a more beautiful store (a one, and building a gravity-powered, aerodynamic racecar
noun), but a better shopping experience and creating more has been an excellent way to challenge the company’s
value for the brand. prototyping competence.
Many innovative companies and powerful brands
are linked with the concept of experience (e.g., the Lexus Chapter Twelve: Coloring Outside the Lines
experience, the Nordstrom experience, etc.), and customers Every executive and team leader must face the reality
understand clearly what is meant by the term. This can be thethat innovation means taking risks. Throughout a project,
case with any company. As it goes through the innovation risk taking always happens on the microlevel, but the big
process, there are plenty of opportunities to seek out the risks that define what a product will and won’t be are
verbs and turn almost any product/service into a better- the runs that are the most challenging. In these cases,
designed experience. One way to begin is to break the sticking with the status quo always seems safer, however,
product/service down into its component elements—its this approach loses in the long term. Waiting for the
DNA—and ask how a better experience can be delivered. “riskless breakthrough” or the “ideal risk” doesn’t work.
A good portion of the work IDEO does also involves Fear—thinking about the possibility of losing market share,
revenue, one’s status, or job
“Major retailers were among the first to recognize that they were selling makes it nearly impossible
themed entertainment [experiences] as much as the merchandise on their
to make the leap into the
shelves. I think there’s a lot to learn from their successes and failures.”
unknown. That’s why the
exploring new uses for existing technology or services. No big new ideas usually come from small companies or
matter what the product or service is, ultimately it’s about from big ones that know how to act small. Good companies
some sort of human experience—some way of connecting embrace a culture of mini-failures, and IDEO believes
with people. In fact, in some markets, coming up with that companies must “fail often to succeed sooner”—a
compelling reasons for people to use a product/service is philosophy that goes to the heart of the firm’s prototyping
a question of survival. However, it’s not about complexity; methods.
even the smallest devices or services can inspire well- Failure helps risk takers recognize which rules can be
designed, worthwhile experiences. broken and which rules exist to teach a hard lesson. Thus,
every company or individual needs at least one big joyful
Chapter Eleven: Zero to Sixty failure in order to gain lots of experience. And, juggling
Speed counts. It gets products to market in time for the is a perfect metaphor for understanding how to survive
holiday shopping season. And, it leapfrogs the competition these joyful letdowns. Juggling provides the right mindset
and implants a brand in the hearts and minds of the that everyone must drop the ball occasionally. The trick is
consumer first. Great brainstormers and strong prototypes to avoid starting with rocks, which can hurt, or with balls,
are meaningless, if deadlines and shipping dates are missed. which roll away and require too much energy to retrieve.
Nonetheless, though a company is good at working fast, it Beanbags are ideal, however. They put a small price on
sometimes needs a refresher course to ascertain if its teams failure, which encourages individuals to keep juggling
are as good and as fast as they would like to be. until they become expert enough to move up to balls, then
Over the years, IDEO has found that entering rocks, and even knives. In the business world, companies
the Sand Hill Challenge, and other competitions, has can “juggle beanbags” by doing lots of prototyping in
become a critical part of reinvigorating the IDEO Way, inexpensive materials and by presenting ideas and rough
emphasizing the playful and speedy side of innovation, “drafts” to supervisors and clients early on.
and keeping everyone “battle ready.” The Challenge

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 5
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

Nonetheless, when taking risks, one must be careful to Chapter Fourteen: Live the Future
constantly evaluate what constitutes too much risk. Flying No one gets ahead by copying the status quo. No
off into outer space, pursuing a completely independent company will get many breakthrough solutions from
trajectory, may cause a company to lose its ability to help watching other firms in the same business or industry.
itself or its customers. The ultimate goal is to try to maintain However, an enormous amount can be learned about how
a continuous orbit that avoids becoming snagged in a morass to do things simply and cheaply from tearing apart the latest
of rules, regulations, policies, and mindsets. toy. Designers can learn about new materials or shapes by
exploring bicycle shops and studying the wondrous mix
Chapter Thirteen: In Search of the “Wet Nap” of elaborate fittings and cables of sailing apparatus. They
Interface can also watch how people play with the latest toys or
Feature creep, the enemy of innovation, can happen recreational equipment.
at nearly any point in the development or refinement of a If a company sells products/services to seniors,
product/service. When design is done by committee, the retirement communities and coffee shops become excellent
goal is ambiguous, or the details are allowed to overrun places for observation. Research and work for the disabled
the objective, feature creep is not far behind. Providing is also ripe with possibilities. Innovations for this segment
simplicity in design is like providing clear
“We’re all in search of … the Wet Nap Interface, products
directions. If customers are not forced to take
built to be used as simply as the directions on those little
too many turns, they are more likely to reach
most towelettes … ‘Tear open and use.’ ”
their destinations. Essentially, product design and
refinement involves determining what is not needed, even of the population are likely to spawn innovations for the
if at first glance these unneeded components seem to be general public.
holding everything together. It is a simplicity factor that Those wanting to know what the future holds should
applies to all kinds of products/services. seek out the early adopters. If you are interested in the
When starting to create the next new great product/ future of cellular telephony, go to Finland. If you want to
service, teams need to keep in mind the importance of know the future of athletic apparel, stroll Venice Beach.
making a great entrance—of striving to make customers If you’re concerned about the security of your company’s
feel welcome and comfortable when using a product. They computer system, hang out on Internet Relay Chat and listen
should use metaphors as a means of guiding product designs to hackers brag. And, for acquiring a broad sense of the
and objectives so that these designs/objectives focus on the distant future, science fiction is a good place to start. Finally,
true needs and wants of the customer. They should conceive cultivate and then listen to the sages in the company. Every
of products that people will grow attached to like they are firm has some very bright people right down the hall—it’s
attached to their briefcases, PowerBooks, and cell phones. just a matter of taking the time to get acquainted.
Color should be a pivotal, early step in the design process—
that’s when it’s the most inspirational. Products/services Chapter Fifteen: Getting in the Swing
should be made to work faster and simpler—one click is Successfully building a culture of innovation is like
better than two—and they should be goof-proof—come putting together the perfect golf swing. There are 17 things
with “autosave” and “undo” buttons. Design teams should to keep in mind during the swing, and each is very easy. The
think of the physician’s creed and, “first, do no harm.” difficult part is putting them all together in real time, and
Before beginning a project, they should make a checklist then doing that consistently throughout the course. Still, it is
of the “essentials”—the minimal elements the product/ as simple and as difficult as “hitting the practice range”—
service needs to be accepted in the marketplace. Teams sifting through the ideas presented here and adopting (or
should remember to add the fine details that can carry a adapting) those that fit the situation. Teams must get out
product—customers respond to the right small touch. And, and observe the market, customers, and products; they must
companies and executives must spend more time “driving” brainstorm like mad and prototype in bursts. However, an
their own products as if they were trying them out for the important aspect of putting it all together is knowing when
first time. to “go live.” Brainstorming and prototyping can only go on

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 6
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

for so long, and it’s not about perfection. Companies should consistently won numerous Business Week awards for
expect to “shank” a few before their swings smooth out. industrial design excellence. It’s an impressive track record,
and The Art of Innovation demystifies the process by
* * * sharing insights into the company’s “secret” blend of
A subject index is provided. methodologies, work practices, culture, and infrastructure
that senior executives, product managers, R&D team
leaders, and business unit managers can use to create a
culture of innovation in virtually any business.
Remarks IDEO is unique in that it is both a design firm and a
consultancy—they are expert at both doing and teaching.
IDEO has years of experience in many different Thus, Kelley not only provides general guidelines and
industries and specializes in the areas of strategic insights into the how of innovation methodology and
services, human factors engineering, concept development, culture (culled from the experiences of others), he provides
industrial and interaction design, manufacturing support, additional channels of understanding by describing IDEO’s
medical and health care, toy invention, and mechanical, own products and processes. Nonetheless, there are no
electrical, and software engineering. From conception minutely detailed step-by-step implementation techniques,
through production, the firm has defined, developed, and no comprehensive process charts, no in depth methods of
created products, services, and environments for industry market research, and no ponderous theoretical ruminations
leaders and start-ups that want innovative new ways to on the concept of innovation.
provide value to their customers. These clients include such What Kelley provides is broad insight that he draws
diverse companies as 3Com, Amtrak, BBC, Cisco Systems, from entertaining stories about the serendipitous inventions
Eli Lilly, Health Hero, Hewlett-Packard, Hoover, Logitech, and uses of a wealth of diverse products from every
Midwest Dental, MIT, the Museum of Modern Art, NCR imaginable source—everything from elliptical exercise
Knowledge Lab, NEC, Nike, Organ Recovery Systems, machines to grocery carts, snowshoes, Liquid Paper, beach
Palm Computing, Pepsi-Cola, Polaroid, Rubbermaid, chairs, milk crates, Duct tape, and Breathe Right nasal
Steelcase, TDK, TiVo, and Xerox. strips—not to mention many state-of-the-art high-tech
Multidisciplinary teams, consisting of specialists in products. In addition, the reader is treated to descriptions of
the fields of human factors, cognitive psychology, business imaginative processes, such as Hollywood-like systems for
strategy, design planning, architecture, mechanical and quickly building teams around projects and disciplines and
electrical engineering, software, manufacturing, and taking on the role of a movie director in order to understand
industrial, interaction, and graphic design, form the how people use products/services.
backbone of IDEO’s innovation. Identifying appropriate From this fun and serendipitous basket of goodies,
technology, materials, and processes for their clients, some very concrete, practical lessons emerge. First, the
these teams have helped design some of the world’s most method to IDEO’s magical madness—the firm’s process
successful products, including the original Apple mouse, of understanding, observing, visualizing, evaluating and
the Palm V organizer, the Polaroid I-Zone instant camera, refining, and implementing—can work for launching
the fat-handled toothbrush for children, the self-sealing customer-focused services as well as cool products. Every
water bottle for bikers, the stand-up toothpaste tube, all- organization, even the National Park Services, can gain
in-one fishing kits, high-tech blood analyzers, flexible an edge by creating an IDEO-like culture of innovation.
office shelves, and the piano-type hinge on the DynaBook Second, creativity is not some unique mythical creature,
laptop. like the unicorn, but resides in the very ordinary people
These successes have helped IDEO grow dramatically found in every ordinary workplace. Everyone has the
in size and influence and have led to its being dubbed potential for creativity, and that creativity will emerge
“the world’s most celebrated design firm,” “Imagination’s if the culture encourages it. Third, products/services are
Playground,” and “Innovation U.” Moreover, IDEO has about people—not about “expert” marketing research.

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 7
The Art of Innovation Tom Kelley with Jonathan Littman, Foreword by Tom Peters

If designers neglect to find inspiration by watching real

people, they will invariably create offerings that people
don’t want, can’t use, don’t understand, and that make their
lives more complicated. Fourth, “routine is the enemy of
innovation.” And, finally, “the proverbial blister in your
shoe just might be tomorrow’s innovation”—all designers
have to do is pay attention.
In today’s economy, these are important lessons
because, as Gary Hamel has predicted: “Out there in some
garage is an entrepreneur who’s forging a bullet with your
company’s name on it. You’ve got one option now—to
shoot first. You’ve got to out-innovate the innovators.”
Increasingly, companies are beginning to agree and to
seek to put innovation at the epicenter of their strategies
and initiatives.

Reading Suggestions
Reading Time: 6 to 8 hours, 307 Pages in Book
Whether you’re reading for general information or
specific tips, you’ll be able to zip right through the book
with a minimum expenditure of time and effort. Kelly’s
enthusiasm is so palpable and infectious that you will
probably find yourself sprinting expectantly from one
great story and guideline to the next.
Each chapter deals fully with a different aspect of
the innovation process, allowing you to pick and choose
whatever interests you. However, if you skip and skim,
you’re likely to miss many inside stories on some great
products. Moreover, the chapter titles don’t provide much
substantive detail on the contents; in some instances,
you’ll have to read a page or two of a chapter to ascertain
what the material is about. And, even this might not be
sufficient. In conformance with IDEO’s color-outside-the-
lines approach, the structure of each chapter is somewhat
unpredictable; thus, a preliminary reading is unlikely to
reveal every salient point to be discussed in that section.
Given these factors, we strongly suggest that you prepare
to read most, if not all, of the material to avoid missing any
information of interest.

Business Book Review™ Vol. 18, No. 15 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 8
 Book
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We Select and Review Only the
B ™
Best Business Books You Should Read.

Volume 21, Number 5 • Copyright ©2004 Business Book Review, LLC • All Rights Reserved

Breakthrough
How Great Companies Set Outrageous
Objectives—and Achieve Them

Bill Davidson

©2004 Bill Davidson

Adapted by permission of John Wiley & Sons, Inc.
ISBN: 0-471-45440-0

Reviewed by Leslie Johnston

Introduction
Author Bill Davidson, a former USC management professor, and now a management and corporate leadership
consultant, bases his 2004 book, Breakthrough on classic examples of high-profile, turnaround businesses such as
IBM, Caterpillar, and American Standard. These companies illustrate successful breakthroughs. No matter how strong
the performance, all corporate success cycles do, eventually, end—unless a company’s leadership has the foresight to
plan for further innovation.
The breakthrough principle—and its potential for either success or failure—is, surprisingly, not based on a company’s
size, resources, market position, or age. The secret that breakthrough companies share is the determined pursuit of what
Davidson describes as “outrageous” objectives. Because most firms go through a success cycle only once, it can be to a
company’s advantage to look at other organizations for lessons that will make an inevitable process more efficient and
more effective.

Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved
Breakthrough Bill Davidson

MANAGEMENT CAN HAVE ITS CAKE, AND EAT IT leader in substandard (high risk) auto insurance coverage,
TOO not only successfully defended a foray by Allstate, a strong
Breakthrough is, according to Davidson, an innovation number two inner-circle competitor in the standard auto
that triggers superior performance and provides the insurance market, into its niche, but subsequently, as a result
transition from one success cycle to the next. It is a bridge to of employing a breakthrough strategy, turned the tables on
higher market positions, in terms of value share and market Allstate by breaking out of its niche and “storming” into
share. It is innovation that has to occur on an enterprise- the standard auto insurance market. “Many of the most
scale, significant enough to shape an emerging company, or spectacular examples of breakthrough innovation and
to re-invent and redefine an established player. The result is subsequent success cycles originate in the niche master
a completely new business model that exhibits, according zone,” says Davidson. “Allstate’s foray into Progressive’s
to Davidson, “superior operating and
The lofty positions of market and sector champions mark the
profit performance, leading to both a
peak of the success cycle. These orbits, once achieved, are
new corporate profile and a new market
not sustainable without further rocket thrusts.
position for the breakthrough company.”
Although breakthrough can occur anywhere within an segment had triggered a series of forces that would reshape
industry’s structure, from start-up to market leader, the much of the insurance sector. Progressive’s innovative
most common place for a company to “break through” is response to invasion by a larger inner-circle competitor
at the entry point to the market. provides a classic example of the breakout niche strategy.
An alternative to using breakthrough as a bridge to A number of the most successful insurgents in our research
higher market positions is to use it to establish a company sample are breakout niche players—established, secondary
in the position of “niche master”: to focus on “securing competitors who use innovation and industry experience
and defending” a specialized success zone in which the to seize market leadership.”
company can compete successfully, thereby avoiding head- Within a market or industry, breakthrough innovations
to-head competition with the larger primary players in an must fundamentally alter customer service standards, cost
industry. A “niche market master” supplies a distinct market positions, cycle times, and value propositions. In doing
need, and serves a distinct customer set with a distinct so, they lead to “differentiated, disruptive offerings” that
supply and value chain. A number of companies, however, “shatter the competitive equilibrium, creating space for the
have also used breakthrough to make the “niche switch.” breakthrough company.” To accomplish this, breakthrough
Progressive Insurance, for example, which was the niche innovations must come from large-scale, long-term
initiatives that make use of advanced technologies and
radical process innovations to achieve leaps—not just
About the Author
advances—in operating performance, financial results,
Bill Davidson was a tenured professor and market position. It is the nature of breakthrough
of management at the Marshall School innovations that often results in multi-dimensional
of Business at the University of Southern competitive advantages—cost leadership, superior
California from 1985 to 1998. He is the
customer service, and increased market and value share.
author of several other books on manage-
Countrywide Credit, for example, in its breakthrough in
ment, including The Amazing Race and 2020
the home loan market became a cost leader by reducing the
Vision (with Stan Davis), which was selected
as Best Business Book of the Year by Fortune average transaction cost to $748, from an industry average
magazine in 1992. He is currently chairman of $2,357. It became a service leader by achieving dramatic
of MESA Research, a strategy and leadership improvements in customer service, and by reducing loan
services group. approval cycle times by 90 percent or more. It became a
product leader, as well, by adding product enhancements,
For more information, please visit:
such as the ability to lock in interest rates at any point in
www.mesaresearchgroup.com
the cycle. Improvements in quality, service, and product

Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 2
Breakthrough Bill Davidson

features, according to Davidson, offer superior value to developed at a cost of $30 million, paid for itself in less
the customers while cost and cycle time reductions drive than two years because it did, in fact, streamline the claims
improved margins. process so well, and then served as a springboard for next-
Market leadership comes to firms who can achieve generation services for Progressive. Finally, breakthrough
these kinds of breakthroughs. The first step is to focus strategies drive increased benefits to all stakeholder
on a breakthrough strategy. “Reality tends to favor new groups—at the same time.
entrants,” says Davidson, “yet agile incumbents can seize To make these breakthrough innovations possible,
sources of innovation . . . by thinking about their businessan enterprise principle that both underlies and connects a
from the perspective of a new entrant.” First and foremost, strategic mindset and a leadership philosophy has to be at
breakthrough strategies focus on “outrageous goals,” goals work. For large-scale initiatives to be implemented across
that force companies to consider alternative processes and an entire company, there must be a commitment to a single,
technology platforms. Breakthrough companies are “early integrated plan, or strategy, which is focused on innovation
adopters” of new technology, and are often involved in and outrageous objectives. Breakthroughs cannot be
the developmental stage of new technologies, though they achieved in business environments where entrepreneurship,
typically, according to Davidson, do not invest more than independence, autonomy, and decentralization are the
defining core concepts of the company. This
Progressive Insurance provides customer service that is was the task before Lou Gerstner when he
profoundly superior to its peers while cutting the cost of auto took over IBM in 1993: he had to change
repair at the same time. USAA’s customer satisfaction and the company’s strategic direction, business
loyalty levels are the envy of its industry, as are its costs. model, culture, and management mindset.
the average company; they concentrate their investments Gerstner approached the company from
on leading-edge solutions that support a focused strategy. the customer’s standpoint, and he focused on integrating
In addition, they focus on great leaps forward, rather than business units rather than dismembering them, as many
on incremental improvements. “Breakthroughs focus on IBMers advocated when Gerstner took over the company.
creating tomorrow’s processes, not on improving today’s.” He created a Strategic Leadership Council, in which senior
Breakthrough companies emphasize customer care over leaders met to develop, and then execute, a core strategy
cost reduction, and they make creative use of their human for the company, a strategy that would focus on solutions
resources by providing the flexibility to fundamentally and services. IBM’s “mainframe mindset” had to change
redefine job descriptions and roles to make the best use to a solutions-and-service centered approach. By 1995,
of employees’ talents and skills. Breakthrough strategies IBM was reinforcing its integrated business model with
create new business growth opportunities as a result of innovations built around the power and reach of the Internet.
the technologies and processes the company develops. By 2000, “Old Blue” was once again “Big Blue” by virtue
Progressive Insurance, for example, with its original of being “Breakthrough Blue.”
innovation in claims settlement methods, not only IS YOUR COMPANY A CANDIDATE FOR
repositioned itself in the market, it also dramatically BREAKTHROUGH?
redefined the auto insurance industry. A thorough knowledge of your company—its resources,
It is Davidson’s philosophy that “breakthroughs current profile, core competencies, and core identity—as
smash traditional trade-off logic by offering radical well as knowledge of the external environment in which
gains in multiple dimensions in operating performance.” your company operates, are essential considerations before
Pursuing operating excellence in existing core areas leads, launching breakthrough strategy planning. Firms that have
he predicts, to growth in new areas. And, the investment a decentralized management structure are poor candidates
in infrastructure is paid back quickly from immediate for breakthrough strategies, says Davidson. Key factors
operating gains, which then provides free platforms for new in pursuing a breakthrough strategy are the capacity to
business development. Progressive Insurance’s investment focus on a single, core strategy for three to five years, or
in the automated claims management system (PACMAN), longer, along with continuity in senior leadership. “The
Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 3
Breakthrough Bill Davidson

fundamental question is who has the insight and gumption says, Davidson, Dell’s breakthrough was more than just
to shape and launch a breakthrough strategy in any market a sales channel innovation. Dell was the first to embrace
and the persistence to stay focused as a team to execute mass customization of PCs. “Dell was the first company to
it.” perfect a now-generic breakthrough strategy that combines
Breakthrough strategies are not for all companies. mass customization; customer-specific product design;
Competitive considerations are extremely important. just-in-time supply chain solutions; and rapid, remote
Companies considering initiating breakthrough strategies fulfillment and service. The result was typical of successful
must consider the core competitive positions, roles, breakthroughs—rapid sales growth and rising margins.”
structures, and dynamics, beginning with the role played Struggles often arise between insurgent companies
by the market leader vis-à-vis a particular company’s (new entrants) and incumbents for market leadership.
position, as well as trend lines for
Few firms enjoy the luxury of being able to choose a mainte-
other competitors. In addition, it is
nance strategy. In most settings, market trends will erode the
also important to understand market
effectiveness of even the most successful strategy foundations
scope and boundaries. Is a business its sooner rather than later.
own universe, or is it part of a larger
market structure? Precise market definition depends To win these struggles, insurgent companies must have
upon three factors: supply side differentiation, demand a breakthrough strategy that delivers results in the
side differentiation, and competitive strategies. “Focused marketplace. Incumbents, on the other hand, can innovate
pursuit of a narrow market becomes hazardous,” Davidson as well. “Established market leaders can make the leap to
says, “if the market in question will be subsumed into a next-generation business models, reshaping themselves and
broader business model.” Understanding the dynamics their markets in the process,” says Davidson.
of globalization and shifts in market boundaries are also
MARKET LEADERS ARE NOT ALWAYS AGILE
essential to planning strategy.
INCUMBENTS
THE PROCESS UNDERTAKEN However, many incumbents find themselves unable to
Once an organization determines that an outrageous keep pace with the changes that will inevitably take place
goal or objective is appropriate for growth, for renewal, or in their market. For Davidson, the “source of paralysis” for
for continued existence, planning a breakthrough strategy market leaders is, generally, allowing existing processes
is the next step. Whatever the goal, says Davidson, profile and practices to become so deeply embedded that they limit
initiatives and operating performance provide the key the company’s ability to adapt to newer, more effective
engines for reaching it. Gains in competitive position models. This trend includes the inability to embrace
and financial results come from these two key drivers. new information systems technology. In addition, says
“Radical innovation in operating performance—process Davidson, dedication to existing channels of distribution
innovations—appears to be the single best driver of can also create resistance to innovation. “To successfully
breakthroughs,” according to Davidson. Toyota, for innovate, an industry incumbent . . . must abandon its
example, achieved great success with the introduction commitment to legacy channels, processes, practices,
of Lexus—a profile innovation—that allowed Toyota to products, technologies, business models, and mindsets.”
expand the company’s profile by entering the upscale, Incumbents often have a choice to make: continue with
luxury auto market. However, the success of that a market model and profit generator that will eventually
breakthrough was due to Toyota’s manufacturing system, become passé (while slowly allowing market share to go
including its Just-in-Time (JIT) inventory. Dell Computer to insurgent companies), or convert to the new order of
is another powerful example of how innovations in business in the industry. The challenge for incumbents is
operating performance carried what was once a marginal to abandon their comfort zones, and their obsession with
competitor to worldwide market leadership in PC sales. day-to-day operations and short-term financial results, and
Breakthrough for Dell came in 1995 when founder Michael move into the new order of business. There is an interesting
Dell focused his company’s sales on the Internet. But, psychological underpinning to executives’ reluctance in
Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 4
Breakthrough Bill Davidson

moving forward with innovation—a fear that the very provide implementation structure and resources, and
practices and success strategies that built a company’s manage execution in a focused and systematic manner.”
success will in turn render it obsolete or relegate it to the Davidson highlights one variation of this process.
role of a less powerful entity. It may, in fact, take a crisis Occasionally, he says, breakthrough strategies emerge
to shake leaders out of their complacency. after an innovation has occurred. At that time, leadership
Market leaders who are agile incumbents must remain can seize on a broader strategic potential that has resulted
on the offensive against insurgent competitors. Market from the innovation to renew the company’s business model
leaders must develop a mindset that is quick to embrace, and subsequently move toward more ambitious goals.
and to introduce, innovations, and go even further by setting This Davidson calls “leveraging a discrete innovation
the vision and direction for change and innovation in the into a broader breakthrough in profile, market position,
industry. They must always take the high road to “ensure and financial performance.” He offers as example, Vons,
industry peace and prosperity,” define the industry’s a Southern California grocery chain, that pioneered
borders and establish relationships with related industries. point of sale (POS) scanners at checkout counters in the
They must do all in their power to increase “generic” 1970s, introducing the technology years before other
demand for the product or service. They must also look to retailers. Investing in advanced technology not only led
the future, Davidson says, by continuously modernizing to multiple operating benefits (speed, efficiency, service
level, and accuracy of the checkout
Business engineering lies at the heart of breakthrough. process), it also created new business
Corporate and market transformation requires a critical mass growth opportunities. The card readers
of design and engineering effort. captured valuable customer information,
for example, that was used to support a
their offerings, and improving the customer value sophisticated mailing list business for the store’s private-
proposition. Market leaders—incumbents—in short, must label products. Charles Schwab, another of Davidson’s
revolutionize, or be revolutionized. Optimization strategies, breakthrough companies, was the first in the brokerage
such as those practiced by GE, says Davidson, are unlikely business to discover the power of the Internet and to
to support sustained leadership. Nor should incumbents rely combine online technology with the company’s hallmark
on acquisition to renew themselves. Acquisitions, if entered dedication to customer service.
into, says Davidson, should be “component” or “point” More typically, the breakthrough cycle begins of
acquisitions, “where specific elements of a future business necessity when the survival of the company is at stake, as
model or market profile are brought into the organization” in the examples of American Standard, Caterpillar, IBM,
and integrated into the core business of the organization. and Mervyns. In these cases, as with most breakthrough
Strategy should lead to acquisition, not the other way companies, the search for a core strategy that would not
around. Internally generated endogenic growth has more only renew, but in reality, save the company started the new
potential than “out-of-body” exogenic growth (growth by success cycle. Virtually all breakthroughs by incumbents
merger, spin-off, joint venture, etc.). Endogenic growth will are in this category. It is not absolutely necessary for the
create and nurture next-generation business. company to be facing disintegration, but leaders will need
AIM, READY, FIRE to find the weakest link—usually an emerging market
From his study of seventy plus companies, Davidson crisis—and “magnify it to create an atmosphere of crisis,”
identifies a generic pattern for successful breakthroughs: as ADP’s John Gaulding did with the company’s automated
enterprise leaders establish a clear, actionable agenda and claim service, transforming the company before the crisis
focus the company’s resources on an outrageous objective hit.
and a specific set of implementation priorities. “The modus The aim, ready, fire process needed to transform a
operandi practiced by successful breakthrough companies company—and its industry—must follow a highly structured
can be described as aim, ready, fire. They establish a framework in order to manage the transformation. The
clear target and specific initiatives, align the organization, aim phase allows the organization to collect, synthesize,

Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 5
Breakthrough Bill Davidson

and focus market knowledge and self-knowledge. The an effective death sentence for breakthrough. Failure can
outcome of Phase I, Aim, must be a single, integrated also result from poor strategy, but strategy is ultimately the
strategy with specific, actionable initiatives supported responsibility of the CEO. “Any grand goal,” says Davidson,
by the senior management team. In Phase II, Ready, the “especially those of a financial nature, are pipe dreams
senior team bonds together in support of the strategy, and without grounded performance and profile innovations
then engages the rest of the organization with a message that convert into growth, improved margins, and enhanced
that says, “We are changing, here is why, here is what we market position.”
are aiming to achieve, here is how we plan to do it, and ***
here is your role and our expectations.” Phase III, Fire, is Endnotes by chapter and a subject index
the execution of the strategy. To assist in the successful are provided.
execution, it is desirable for the organization to prioritize its
portfolio of projects and clearly establish the projects critical Remarks
to successful implementation of the breakthrough strategy.
Likewise, an organization should establish a program and Davidson’s greatest contribution in this readable, well-
project management (PPM) function to structure, staff, paced book based on his observation and study of more than
start, support, and secure the projects as prioritized by the 70 companies is to stimulate, even provoke, thought about
senior team. a company’s readiness—and commitment—to moving to
THE LEADERSHIP FACTOR the next level of corporate success. Davidson wants readers
No other single factor carries as much weight in to ask—and be able to answer—“Is my company ready for
determining the success of a breakthrough strategy as the breakthrough?”
senior leader’s role. Davidson goes so far as to say: “The Davidson defines and outlines what breakthrough
question is not so much the quality of the individuals in the is—and is not. He balances the theory, and the practice,
team: rather, it is a question of their ability to work together of breakthrough planning and strategy with specific case
as a team.” Working as a team requires a senior leader who studies, so that the reader is not bored with too much
has the personal capacity to oversee what often may seem theoretical text, nor overwhelmed with too much statistical
like a superhuman effort. A part of this personal capacity data in support of the theoretical text. The book can also
is in-depth operating experience in the company, and in be used as a primer or checklist for would-be breakthrough
the industry. The senior leader must be multi-talented; he companies and CEOs. It is important to note, however, that
or she “must play the combined role of general manager, Davidson’s focus throughout the book is on incumbents,
coach, and quarterback of a professional football team.” The rather than on start-up companies at the entry point to the
senior leader must have a combination of what Davidson market.
refers to as “humanism and directiveness,” a combination Some of Davidson’s most insightful comments involve
of boldness and humility, innovation and groundedness. the paradoxes inherent in breakthrough strategy. An
“The best breakthrough leaders are grounded visionaries,” obsession with core operations and markets—seemingly
says Davidson. to the exclusion of diversification activity—provides
And, if senior leadership deserves the credit for a powerful platforms for growth in new areas (chapter 1).
successful breakthrough, they must also answer for the “Dig down deep enough into the details of your operations,
failure. Davidson points to one single, deadly—but, as apply radical approaches, and perhaps you will break
he says, quite common—“failure factor”: an inability to through to the equivalent of China—a vast new market
align core members of the senior team around a common opportunity.” Likewise, in chapter 6, Davidson shatters
strategy. Other failure factors can include a lack of hands- the almost universally accepted mantra that “no revolution
on ownership and management of the strategy once the was ever led by the establishment.” To illustrate this, he
organization is into the implementation phase. Ironically, cites American Standard, “the oldest, stodgiest company
companies are often acquired during their breakthroughs, we could find,” as perhaps the single best example of
which often result in a loss, or transition of leadership, breakthrough, a company that, according to Davidson,

Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 6
Breakthrough Bill Davidson

“set world speed records in corporate transformation.” Davidson’s benchmark success stories (ADP’s ACS group
To achieve breakthrough—and this is a key concept—a and Progressive Insurance, for example), employed high
company does not necessarily have to be the initiator of directiveness without a corresponding high humanism. But
change, or innovation, within the industry, but it does have for a successful, sure, and swift execution of breakthrough,
to embrace innovation, and integrate it into its core business. there seems to be no substitute for a combination of
A breakthrough company is a leader, not a follower. directiveness and humanism. Successful breakthrough,
Davidson has organized Breakthrough with an and the resulting market or niche leadership it brings will,
inductive approach. His outline of the specific components eventually, bring a company once again to the need for yet
of breakthrough strategy planning and implementation, another breakthrough. If a company has built a success
along with the accompanying case studies, are concluded cycle based on directiveness and humanism, it should be
in chapter 8 by reflection on the nature of senior leadership well positioned for the next breakthrough effort.
in breakthrough companies, which he has identified as the
single most important factor in the success or failure of
breakthrough. He contrasts his choice for best breakthrough Reading Suggestions
leader, American Standard’s Mano Kampouris, with Ford
Motor Company’s Jac Nasser, whom he also describes as Reading Time: 6-7 hours, 238 pages in book
a superb breakthrough leader. The author develops his basic premises and
What was the difference between American Standard’s instructional guidance on creating a breakthrough strategy
spectacular success, and Ford’s potential transformation, in four chapters: chapters 1, 2, 3, and 7. If you are not
which, in Davidson’s words, “slowed to a crawl?” familiar with the concept of breakthrough, these are the
Nasser seemed to be doing everything right in terms of essential, must read chapters. If you are familiar with
breakthrough planning. He had an in-depth knowledge the concept of breakthrough and with market definition,
of the company’s operations, and he created an ambitious it is possible to read only chapters 1 and 7—chapter 1
vision for the company, which he converted into a series because it gives an overview, particularly of the success
of key initiatives to modernize and globalize Ford’s cycle and of breakthrough strategy principles, and the
operations. He communicated with, prepared, and trained power of breakthrough as evidenced by four companies,
the organization. High-priority projects were launched with Countrywide, Progressive, NBtel, and C.R. England,
the appropriate staffing, resources, and senior support. and chapter 7 because it details the process—the three
At the same time, according to Davidson, Nasser also important phases in the development of breakthrough.
launched a performance culture program that called for Chapter 4 provides moderately detailed examples
forced performance rankings and mandatory retirement for of successful breakthrough companies. Appendix I also
the bottom 10 percent of the company. Ford’s traditional contains bite-size summaries of the core strategies of
corporate culture began to view the transformation efforts 50 companies, including those highlighted in the book.
as too harsh in their handling of people, thereby allowing Davidson does not develop new concepts in chapter 4,
an “us and them” schism to form, which led, ultimately, to but uses this chapter to highlight well-known corporate
Nasser’s replacement. examples. Chapters 5 and 6 discuss market leaders/industry
Davidson’s careful research over 10 years, and with incumbents and their characteristics, and are recommended
more than 70 companies, has led him to believe that although if your company is in that category. Chapter 8 contains
directiveness (command and control) is essential, and that the characteristics of a successful senior manager or
both high executive and high employee turnover are to be CEO, as well as characteristics of those who will not be
expected in the implementation of breakthrough strategies, successful.
humanism (as evidenced by CEOs like Mano Kampouris
and Lou Gerstner with their respect for the individual, and CONTENTS
Chapter 1: Breakthrough Dynamics
their investment in the development of human capital) is
Chapter 2: The Enterprise Principle
a significant accelerator of breakthrough. A number of
Chapter 3: The Strategic Setting

Business Book Review™ Vol. 21, No. 5 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 7
Breakthrough Bill Davidson
Chapter 4: Champions of Breakthrough
Chapter 5: The Mindset of a Market Leader
Chapter 6: Advice to Incumbents
Chapter 7: Aim, Ready, Fire
Chapter 8: The Leadership Factor
Followed by two appendices

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Volume 18, Number 39 • Copyright ©2001 Business Book Review, LLC • All Rights Reserved

The Business
of Innovation
Managing the Corporate Imagination
for Maximum Results

Roger Bean and Russell Radford

©2001 Roger Bean and Russell Radford

Publisher: AMACOM
ISBN: 0-8144-0631-9

Reviewed by Lydia Morris Brown

Chapter One: The Strategic Impetus for Innovation

True innovation goes beyond invention. It creates sustainable competitive advantage and meets the needs of the
customer via the commercially successful use of that invention. Although business has always depended on innovation,
commercial relevance is realized most visibly in companies that have strategic goals in place to guide creativity, for
the appropriateness of an idea is determined by its alignment with an organization’s vision, financial capacity, and
current structure. Innovation strategy must be tailored to a company’s business design, target markets, and method
of market differentiation. And, the company must be specifically organized to take advantage of a continuous stream
of inventions. Moreover, all levels of management must play a cascading role in achieving alignment—supporting
those above while exerting specific emphasis in their own areas. Innovation thrives under the constant nurturing of
managers who know the specifics of their business.

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved
The Business of Innovation Roger Bean and Russell Radford

PART I: THE BUSINESS OF INNOVATION its four levels or subsystems), provides a proactive and
The Miracle of Systems. The universe is a world of systematic way for managing creativity throughout an
systems. Everything, from the subatomic to the macrocosm, organization.
behaves according to the basic principles of systems— While System I represents product development,
even the business organization and the management of process development, and manufacturing teams (the
innovation. “Innovation is a specialized, particular, and operational team level where the work gets done), System
fragile system that requires conscious nurture, careful II supports System I with shared resources, making it
management, and continuous encouragement if it is to possible for System I units to function.
thrive.” And, systems thinking, which requires a view of System III is the first strategic and managerial level.
the world that is different from the traditional Newtonian It provides operational direction, resolves conflicts, and
view, is the most powerful tool available for explaining allocates resources when System II needs assistance or
this behavior. clarification. It negotiates resource availability, priority,
The key characteristic of systems thinking and its and other issues. It ensures compliance as regards to prior
application is that it represents a fundamental shift, goals, quotas, completion times, roles, profitability, etc.
from analyzing the parts to understanding the whole. And, it audits to ensure that safety standards, quality
Analysis of parts is helpful
“Everything is connected to something else in an apparently endless web of
in situations where the
relationships, and understanding, predicting and managing such “systems”
parts are the source of the
requires both a different view … and a suitable theory to guide our action.”
problem and the problem
is isolated. But, for the system of innovation, and its control, security, copyrights, and the overall state of the
management, analysis cannot explain how the whole infrastructure are maintained.
operates, how it should operate, or how it might be System IV, the executive level, creates the environment
improved. for innovation by setting values, policies, organizational
A Model for Managing Innovation. To be achieved, character, and long-term goals and strategies.
innovation must first be understood; thus, a model is In addition to these systems, the Innovation
needed that goes beyond behavioral science and provides Management model also identifies four clusters of
the “how-to.” The Bean-Radford Innovation Management innovation activity: nurturing and building an environment
model, an adaptation of the Viable System Model (with for innovation via trust, openness, security, honesty,
and community; creating and developing the capacity
About the Authors for innovation, which is primarily accurate and useful
information about the customer; implementing and
Roger Bean is a principal of the Bean, Radford commercializing (i.e., managing an innovation all the
& Associates consultancy where he specializes in
way through the process so as to yield excellent gains);
corporate strategy, new product development, sys-
and exploiting and managing the innovation to mine the
tems thinking, and the management of innovation.
profits from it.
Russell Radford, PhD, is a principal of Bean, When the adapted Viable System Model is combined
Radford & Associates and specializes in the with activity clusters, it is possible to see how the
management of innovation and operations and involvement of the various participants in the system
service management. He teaches at Cardean varies by system, time horizon, and activity. These
University, and he is the coauthor (with Bean) of
observations allow the model to be applied to creating
Powerful Products. Radford is also the coauthor
the ideal environment for innovation, linking innovation
of Production and Operations Management and
to market opportunities, organizing for innovation,
Management of New Technology.
implementing innovations, exploiting innovations, and
For more information, please visit: supporting the innovative enterprise—all central aspects
www.BeanRadford.com of managing creativity. Nonetheless, all systems need

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 2
The Business of Innovation Roger Bean and Russell Radford

a clearly understood and widely accepted purpose and, The third key to nurturing innovation is clear strategy
in the case of innovation, that purpose is to serve the and employee understanding of that strategy. Without this
customer. Thus, strategy, innovation, and management element, innovation is mere guesswork. In addition, a clear,
must be market focused. well-conceived, effective strategy is extremely difficult
Nurturing Innovation. Management, strategy, and for competitors to defend against.
employee development are the key elements in creating an Innovation with a Purpose. Customer focus is
environment of innovation. If innovation is important to the fundamental to exploitable innovation; without clear
success of an organization, then management skills must be strategic targets, trial-and-error often replaces skills.
developed that will stimulate and nurture creativity. These Strategic focus is always market focus, requiring several
key elements: clear strategic
“We have been conditioned for centuries to think in linear patterns, understanding of customers; well-
but when our problem is a systems problem, understanding requires founded strategies to reach and
us to see things in a circular, balancing, or reinforcing way.”
serve the target customers; a
skills include the executive’s personal understanding of the determination of what is needed to successfully implement
process and activity of innovation, continuous learning, those strategies; and communication of corporate goals,
curiosity, openness, leadership (i.e., an interest or passion strategies, and customer knowledge to employees. When
for progress and useful ideas), and a focus on strategic these elements are lacking, companies tend to allow their
issues rather than operational tasks. customer base to “evolve,” and there are no conscious
Managers must also know how to balance the decisions based on any evidence of what should be done
contradictions between hierarchy and anarchy, control and who should be served.
and flexibility, external and internal, ambiguity and goal Once a strategy is developed, it must be communicated
clarity, and individuality and collectivity. The generally to everyone in the enterprise. In fact, all employees must
perceived level of control, the operational structure of the have access to goals, strategies, customer information, and
organization, access to and quality of corporate strategy, the essentials about why they should help. This information
and the overall level of organizational focus determine must be structured so that it is useful to people in diverse
how these contradictions are resolved. functions, and every available vehicle must be used to
Flexibility is key: Fixation and perfectionism hinder communicate clearly and frequently.
innovation by creating an environment of extreme risk The next major step in innovating with a purpose
avoidance. Striving obsessively and micromanaging for the is getting and organizing information. Usually, the best
“optimal point,” rather than pursuing the “golden mean,” information resides in a company’s sales force, wholesalers,
negatively affects the primary performance drivers of time, distributors, and retailers. However, because the sales force
cost, and quality. Strict functional structures or financial is in daily contact with the real customer, it should be
controls encourage unhealthy competitive attitudes and the primary source of information, along with service
discourage experimentation. representatives, who can supply vital information gleaned
However, management’s most important job in from their detailed understanding of the customers they
nurturing innovation is, perhaps, employee development. serve. Credit and collection people, with their knowledge of
Employees must be provided with books and professional the problems that cause customers to withhold payments,
journals; must have access to college courses, management are another key source.
and professional seminars, internal training classes, and Once gathered, information must then be organized.
Internet education materials; must be allowed study time; Key principles for doing so include:
and must be given cross-training in different jobs. When
people have a broader range of experience and skills, • selecting a structure that can grow with the
they are better able to “fertilize” their imaginations and strategy;
innovate more successfully. • using a market segmentation model as a frame-
work;

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 3
The Business of Innovation Roger Bean and Russell Radford

• avoiding the collection of information that is divisions that presume the linear and the sequential and
unnecessary or that will not be maintained; oversimplify complex systems. Structuring around process
• making a specific party responsible for gather- fulfillment, however, involves identifying all relevant
ing and maintaining customer information; processes that contribute value to the purchase and use of a
• managing only what needs to be managed; product/service in order to determine current participation
• collecting what is useful rather than what is in the value chain and to identify where improvements
convenient for the IT department; can be made. When carefully implemented, this kind
• avoiding “secret” information; and of structuring permits new and unique ways of solving
• keeping the system simple. problems and exploiting opportunities. Designed and
managed holistically, the process-based organization can
Developing the Capacity to Innovate. Management, achieve new levels of efficiency and customer satisfaction
strategy, employee, product and service, process, tool (simultaneously) because it configures products, services,
and technology, supplier, market, distribution, and brand and processes to work synergistically with technology.
development are the ten key areas of opportunity Strategic activity clusters (e.g., opportunity
where innovation can have a major impact—if capacity management, project management, asset management, and
is developed in each of these areas. The Innovation post-sale management) allow single managerial control
Management Model can be used to help organize and over all elements and subfunctions necessary for success
assign responsibility in this endeavor. in one entire process. This eliminates the coordination
For example, employee development, product/service problems inherent in function-based structures.
development, and distribution development
are primarily System I responsibilities. System
“Frequently, innovation must be achieved in multiple areas
simultaneously to achieve sustained competitive advantage.
II undertakes management development,
Innovation in a single area is not sustainable.”
supplier development, tool/technology
development, process development, and brand development. When management levels and professional skills are
System III is involved with management development and combined, redundancy is the result. Thus, it is more
market development. And, System IV concentrates on effective to separate the managerial component and the
management development. professional component of all positions. In this manner,
Although it is possible to innovate in any one area, the integrity of the managerial hierarchy, determined by
the impact will also be felt in other areas as well; thus, accountability horizons, remains intact. Thus, if a job is
it is more effective to anticipate and prepare for this exclusively professional, then a professional scale should
interrelatedness. Nonetheless, to be capable of innovating be employed. If a job involves both a managerial and a
in any or all of these areas, understanding, experience, professional component, then two separate scales should be
diversity, information/data, and skills must be present. devised. And, if a job is exclusively managerial, then Elliott
Crafting the Innovative Organization. Managing Jaques’s levels of accountability would apply.
innovation requires building an organization that is trusting, The accountability horizons (i.e., the time frames
open to new ideas and alternative approaches, adaptable in which managers should be focusing their efforts on
and flexible, and goal directed. At the same time, this producing results) for those on the shop or office floor
organization must function in an environment driven are measured in days or weeks. The time frame for first-
by emerging technologies. Given these criteria, the best line managers is six months; for unit managers, eighteen
approach organizes around the activity clusters that months; for general managers, three years, for business-
constitute process fulfillment and forms a modest hierarchy unit managers, seven years; for executive vice presidents,
that is consistent with the accountability horizon (i.e., time twelve years; and for CEOs/COOs, twenty-five years.
focus) of the decision maker. When these accountability horizons are viewed in light of
Traditionally, most organizational structures are based the Innovation Management Model, it becomes obvious
on function, product line, market segment, or geography— that System I managers, with short-term accountability,

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 4
The Business of Innovation Roger Bean and Russell Radford

should not be given System IV responsibilities. Conversely, to occur, they must be able to identify and avoid common
System IV managers should not waste their time on errors in thinking, which include: emotional, conventional-
System I issues. wisdom, after-the fact, either-or, and circular reasoning;
irrelevant conclusions; accepting bold statements as
“Anecdotal evidence seems to point toward the attempt fact and historical precedence as correct; allowing
to over-control organizational behavior through rules
theory and the observer to influence observations;
and policies as reducing innovator behavior.”
allowing equipment constraints to influence results;
equating anecdotes and scientific language with science
PART II: SUPPORTING INNOVATION and rumors with reality; employing improper inductive
Innovation and Organizational Policy. Policy can be reasoning; and relying too much on the “expert.”
defined as “a definite course or method of action selected Coping with Serendipity. As an organization’s strategic
from among alternatives … to guide and determine present focus increases, so should the amount of “planned”
and future decisions.” Given this definition, policy should innovation. The unexpected still occurs, however, and
be enlisted to help managers support corporate objectives, sometimes offers more benefit than anything the
help the organization focus on better serving customers, and organization has planned. Despite this serendipitous
support the ongoing development of desired capabilities. opportunity, systemic problems often prevent the
Thus, organizational policy can have a great effect on the organization from exploiting it. These problems can
frequency and success of innovation. Although it is not include: an excessively internal focus that gets in the
known precisely which policies facilitate innovation, ill- way of a broader customer perspective; processes that do
conceived polices can seriously and unexpectedly cripple not support change; lack of training to handle change;
it. fixation on the plan, to the exclusion of new information;
Thus, the intent of policy formation must be to an overcommitment of resources; management’s refusal to
actively support the innovative process and environment give serious consideration to new ideas; failure to empower
rather than control it. Thus, all managers should examine everyone at every level to innovate; and rewards, policies,
their policies in terms of values, education, reward and processes that reinforce the status quo.
systems, HR policies, work rules, and cooperation versus Of course, given an organization’s particular resources,
competition and ask themselves: “Are the values of trust, an idea can be good but not exploitable. When this happens,
openness, judgment, flexibility, and sincerity inherent in opportunities to profit from the innovation may still exist
my policies?” “Do I support and value education?” “Do via alliances, joint ventures, acquisitions, start-ups, or
my reward systems promote unproductive competition, selling the idea to those able to benefit from it.
or do they encourage cooperation and collaboration?” Measuring and Evaluating Innovations. Regularly
“Am I making the HR department aware of my policies evaluating innovations, at all stages of development, is an
in support of innovation?” “Do the work rules support essential part of the feedback loop—the process that allows
cooperation and innovation?” and “Is my golden rule: a system to function in a self-managed and self-sustaining
cooperation inside the organization—competition in the way. In the preselection stage, evaluation is strictly strategic
marketplace?” and is, thus, conducted by the executive team, which
Leveraging Logic. The new and unfamiliar typically assesses the market, the competition, and the organization’s
inspire a host of unusual responses; therefore, getting the capabilities. In the development stage, the focus is on
most from innovation efforts requires clear thinking and the innovation strategy and process; the development
efficient and accurate information processing—critical team, suppliers, and customers; parallel possibilities; and
thinking (logic), systems thinking, and the scientific capabilities. Launch-stage evaluation focuses on market
method of observing, hypothesizing, interpreting, and and competitor response. Here, adjustments can be made as
validating are essential. When organizations apply these a result of the first major market tests of the innovation.
tools vigorously and consistently, their decision-making In-service evaluation places emphasis on evaluating
efforts will yield better results. Nonetheless, in order for this the innovation as part of a cluster. This involves assessing

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 5
The Business of Innovation Roger Bean and Russell Radford

the performance of a “family” of innovations, with a the extent to which the value chain must be represented on
view to making changes based on market trends; and the senior design team, the depth of the design team, and the
it involves determining where the best opportunities lie number of teams needed for efficiency, must be considered.
for repositioned innovations. It also involves separating Although external resources will likely be necessary, the
innovations that have met expectations from those that have decision to outsource must be viewed in light of whether
exceeded expectations and from those that have not met the project is independent or systemic and whether needed
expectations, in order to identify underlying patterns and capabilities exist or must be developed. And, if experiments
develop effective plans, accordingly. Periodic assessments are needed to reconcile product uncertainty, they should
of the innovation system should also be undertaken in order be internally focused and based on cost, value, and/or
to evaluate the company’s performance against long-term timing. Experimentation and prototyping should be done
competitive measures as well as its performance in its early and often, even conducted in parallel. Thus, because
industry segment. development projects are major projects, they should be
Most management evaluation methods are based on a managed as such and their organizational implications
mechanical view of discrete parts rather than the whole. A considered.
much more effective approach is the
“Evaluation protocols must be developed as part of the innovation
Balanced Scorecard, which assumes
proposal. The protocols should answer the six basic questions:
that “focusing on one set of measures
When? What? Why? How? Who? Where?”
causes strategic and operational drift
and a loss of relevance and competitive advantage.” The The exploitation of a successful innovation requires
Scorecard is the component of a strategic management adequate financial resources, as well as a good distribution
system, which, when used with the innovation premium system, with good order-taking capability. However,
(a key indicator of the financial returns that accrue from exploitation is not limited to selling products—the
creating new value), can effectively evaluate individual innovation itself, or possibly some or all of the company,
innovations, clusters of innovations, or a complete product can also be sold.
portfolio. Innovation portfolios can be broadened by developing
derivative products or by producing follow-on products
at different stages of the product life cycle. Although
PART III: LEADING INNOVATION derivative products take less time in development, they
Developing, Implementing, and Exploiting Market- require hard work. Thus, rushing to market is fraught with
Focused Innovations. Market-focused innovations are risk—it is better to allow time for accurate positioning
innovations that give targeted customers greater value than than to confuse the marketplace. However, creating
they currently realize, at prices they are prepared to pay. meaningful derivatives only works if there is market/
If customers find no value and, if as a consequence, the competitor intelligence—an understanding of both the
company does not realize a fair return on its investment, user’s relationship with the innovation and the competitor’s
the idea is a failure. Thus, the marketplace can be used strengths and weaknesses. When resources are tight,
to help define product-based innovations by drawing on understanding customers should be the priority.
“lead users”— customers working at the leading edge of Beyond the essential element of a product or service,
technologies. But, in design, input from all vested interests competition also takes place around ancillary intangible
in the innovation is useful, particularly when the buy-in elements. These are usually service innovations that supply
has to come from internal groups who must implement a sustainable competitive advantage by making the product
change they did not initiate. easier to purchase, own, and operate. Moreover, these
Successful development projects require the assembly services are not easily copied by competitors, and if the
of a high quality proposal or design brief and managerial marketplace values them, adequate return on investment
coordination of timetables and resources for different will ensue.
projects in the portfolio. When organizing teams for
development, the appropriate mix of skills and experience,
Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 6
The Business of Innovation Roger Bean and Russell Radford

Bridging the Gap Between the Old and the New Despite the obvious importance of innovation, many
Economies. Innovation is concerned with preparing a companies seem unable to develop effective innovative
company to take advantage of future business opportunities capability. And, those companies that do manage to achieve
and challenges. In a dramatically changing world, these a high degree of innovation, often find it difficult to profit
challenges consist of finding the appropriate business from their initiatives. From their many years of experience
models for the new economy, determining how to organize in product development, operations management, corporate
in order to take advantage of new opportunities, and strategy, and managing innovation-intense projects, the
preparing for the new challenges that will confront the authors conclude that this failure is due to many diverse
successful innovator—challenges that consist of consist of factors involving operations, management, strategy, and
managing knowledge, managing material resources, and organization. Given this conclusion, piecemeal solutions
maintaining control of the innovation, the company, the are inadequate.
company’s innovation projects, and the brand. The Business of Innovation, therefore, offers the
Bean-Radford Innovation Management Model as a means
of helping managers and senior executives actively
CONCLUSION and systematically manage innovation throughout their
Toward the Future. Multiple inconsistencies in current organizations. The model is based on the premise that
economic theories suggest that we are on the cusp of a innovative organizations are complex, dynamic systems
new economic theory that revolves around the individual, that are maintained by managing the various organizational
with knowledge, capital, and individual choice as the basis elements as a whole, by keeping them from interfering with
of wealth creation. Thus, focusing on the individual in the each other, and by sustaining a future outlook and strong
marketplace and in the corporation will pay dividends to market focus, based on and understood by the whole. This
innovating companies and that requires an awareness of holistic approach demonstrates how and why innovation
latent demand in the market, instantaneous communication, plays a role in all areas of the organization, not just in
policies that support the company’s ability to adapt quickly, product development.
and processes that speedily exploit multiple approaches The Innovation Management Model also dispels
to customer need. the notion that random unfocused innovation, in which
employees and managers alike contribute ideas willy-nilly,
*** is the optimum approach. Bean and Radford’s treatment
Bibliographic notes by chapter, a bibliography, highlights the reality that innovation is serious business
and a subject index are provided. and that focused and directed creative initiatives produce
superior results. Essentially, this is an argument for
managed innovation, directed by corporate strategy and
intent, aimed at achieving a specific, planned market
Remarks outcome.
Although the book is filled with examples from
According to Bean and Radford, “The capacity to such industry leaders as McDonald’s, Toyota, 3M, Sony,
innovate is the source of a company’s enduring strength. Singapore Airlines, etc., these examples are offered only to
… [and] nothing less than a direct reflection of the provide brief glimpses into real-life how-tos of managing
organization’s ability to change, to adapt to new and innovation. The authors are adamant in their belief that
competent competitors, to skillfully fit its products and anecdotal recitations, with their “be-like-them-and-your-
services to the ever-evolving needs of customers. The problems-will-be-solved” implications provide little value.
innovative organization, by its wits, frequently survives, Instead, they approach innovation from the perspective that
continues, and succeeds. …The organization bereft of management (rather than imitation) matters, and strategy
innovation, creativity, and ingenuity is an organization is the key enabler. In using this approach, they combine
on the way down.” key elements from the fields of natural science, systems

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 7
The Business of Innovation Roger Bean and Russell Radford

thinking, psychology, and history in novel ways to form

a provocative backdrop for their Innovation Management
Model. This comprehensive treatment provides a different
way of seeing the innovation process—one that promises
to help organizations become successful in their creative
efforts, time after time.

Reading Suggestions
Reading Time: 10 to 12 hours, 304 Pages in Book
The table of contents provides an excellent outline of
the material and can be used effectively to guide your
reading, should you choose to skip and skim. Having said
that, we must point out that in the preface, the authors
state that the book is organized according to the general
process of innovation, and then they proceed to outline this
organization. (This section [pp. xiii-xiv] can also be used as
a reading guide.) Thus, we can infer from this information
that the book is intended to be read in its entirety and
in the order presented. If your company is having serious
difficulties with the innovation process, and/or if you are
unfamiliar with the Innovation Management Model, this
is definitely the best strategy. Because the model runs as
a connecting thread throughout, and because it advocates
an holistic approach to innovation, piecemeal reading is
unlikely to provide you with optimum value and is not
advised. Nonetheless, if you do decide to go piecemeal,
be sure to brief yourself on the strategic impetus for
innovation and systems theory first (chapters 1-3).

Business Book Review™ Vol. 18, No. 39 • Copyright © 2001 Business Book Review, LLC • All Rights Reserved Page 8
Creative Blogging
For Personal or Business Improvement -
“How You Do Dat?” About Paul William Johnson
Pa u l W i l l i a m
Johnson has
By Paul William Johnson, AuthorHouse, 2009 spent the last
If you feel trapped in the same old • How to select and function in a half century as a
issues in your personal life or your collaborative group b u s i n e s s
business and need to find a way out, executive, an
this book will show you “how you do It doesn’t make any difference if you entrepreneur, a
dat.” There is a common thread that are a business executive, an stock and commodity trader and
runs through all creative techniques entrepreneur, a stock and commodity an engineer..
that can be used to master any trader, or an individual; the creative
situation. This book will show you techniques will all work the same Mr. Johnson has managed cost
how to find and use that common way. These creative techniques have reduction, process
thread. The book also gives examples been used by Albert Einstein and i m p r o v e m e n t , a n d va l u e
that demonstrate how to use creative others throughout the ages to find engineering teams for the
techniques to master your business answers to their questions and to largest water agency in the
and personal life: create what they want. world. He currently provides
consulting services to large
• How to use the blog in a water agencies, to public
collaborative group to solve agencies and to private
problems and increase businesses. He also participates
productivity in value engineering teams.
• How to use your intuition and
imagination to get you where Experiences in all of his
you want to go endeavors will be shared with
• How to find the right job
you in this book as examples of
• How to use cycles to time
business expansions, how you can get your creative
contractions, the stock and intuitive mind to work for you.
commodity markets
• How to use simplicity to guide
you to the best path

Inside This Book Summary

Why You Need This Book
What Is The Collective Consciousness?
How To Use Your Imagination To Create What You Want
Combining The Blog With Collaborative Teams
Solving Business Problems With Collaborative Teams
Cycles Of Change
Simplify, Simplify, Simplify...
Selecting Your Collaborative Team
How To Function In A Collaborative Team
Conclusion

Published by BusinessSummaries, 7891 W Flagler St, # 346 Miami Florida, 33144 ©2009 BusinessSummaries All rights
reserved. No part of this summary may be reproduced or transmitted in any form or by any means, electronic,
photocopying, or otherwise, without prior notice of BusinessSummaries.com.
 Why You Need this Book happen when a certain number of people
change. This change eventually occurs in
everybody and can work both positively
This book makes available all the creative
and negatively.
techniques you need to experience and
incorporate into your real life to enable you
It is important for us to focus on positive
to start stepping into a world of unlimited
change and to stop the negative from its
possibilities.
tracks.

When we begin to enhance the creative

ability in a small group of people in our
W H AT I S T H E COLLECTIVE organizations, there will come a time when
CONSCIOUSNESS? all employees in these organizations will
become more creative as well.
Thoughts from the collective consciousness
can also be illustrated by inventions and new Groups of people that spend time together
discoveries that take place in different have a tendency to form a collective
countries at the same time, it also includes consciousness that swings to the same
thoughts and the same stories coming from beat. They may unconsciously move
various religions in different parts of the toward the same beliefs and perspectives
world. in life.

The important point to understand is that This is why we need a variety of

our conscious objective minds are not aware perspectives from people who don’t usually
that our subconscious minds are all work together or work in the same field to
somehow connected like wireless phones. form an effective creative collaborative
team.
There is a critical mass in change that can
The blog on the Internet is the ideal tool
that can be used to connect a group of
About the Book p e o p l e a n d u s e t h e i r c o l l e c t i ve
consciousness to create change.

Author: Paul William Johnson Information exchanged on the blog can be

Publisher: AuthorHouse, adapted to collaborative improvement
2009 processes, used to solve problems,
ISBN 978 1 4389 4994 9 improve processes, and implement
97 pages
change.

The blog helps us connect people and

speed up the creation of anything,
including change by simply giving it our

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 2 of 8

 undivided attention and more directed In this state, it is easy to be
thought. programmed and manipulated to serve
someone else because you have lost control
The Internet is a tool that can be used to of your mind.
complement any process. Many individuals
have the mistaken idea that finding out Tapping the creative portion of our
what others think on the Internet will tell brain by focusing on positive thoughts is the
them what to think and help them get the first step to eliminate depression and to
best answers. It will not! improve our state of mind.

The best answers come from within Most scientists will tell us that we
individuals or groups of individuals through only use 10-15 percent of our available
an intuitive thinking process. creative mind power. Just think of the
unimaginable power that could be released
if all the 6.5 billion people on this earth used
their minds collectively to create a better
world.
HOW TO USE YOUR IMAGINATION
TO CREATE WHAT YOU WANT Understanding that we are
interconnected gives us the incentive to use
If we could clock the time we spend the positive collective consciousness as a
focusing on what we do not want, we tool to improve our lives and businesses.
would be amazed at the large percentage
of our total waking hours that is spent on Exercising the faculties of thinking,
thinking about and creating what we do imagination, creativity, intuition, etc., in
not want. everyone in our organizations will make
them stronger and better able to utilize
It takes constant effort, a positive more of their latent power to the benefit of
collaboration team, or possibly a all.
distraction like music to get us out of the
habit of creating what we do not want in The subconscious mind cannot
our lives. distinguish between positive or negative
and good or bad. Its function is to only bring
When your mind is numbed out or to you what you imagine, think about, and
thinking negatively, it becomes very believe.
difficult to use your thoughts and
imagination to create what you want. The secret to making the
subconscious mind work for you is to
You then easily become depressed only energize your imagination with
and filled with fear and hopelessness the effects of what you want.
because you are drifting in a sea of
negativity of what you do not want.

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 3 of 8

 COMBINING THE BLOG WITH business or a public agency by
COLLABORATIVE TEAMS soliciting input from employees at
all levels on specific issues and
changes.
“Blog” is an abbreviation for a weblog.
Ÿ It can be used by entrepreneurs
Ÿ The blog format is a series of entries
and those starting a new business
posted to a single page in reverse
to find out “how you do dat” by
chronological order.
connecting them with others who
a re w i l l i n g t o s h a re t h e i r
Ÿ Blogs are generally represented by
experiences.
the personality of the author or
reflect the purpose of the web site
There are infinite ways to use blogs to
that hosts the blog.
improve any situation.
Ÿ Blogs can also provide links to other
The first step in a creative blogging
sites that support a point being
process is to select a blog facilitator,
made on the post.
determine the bloggers, identify the
problem or subject, and disseminate
Ÿ Blogs can be used to get people at
information on the subject to the bloggers.
any level actively involved in
business by participating in a
After that comes brainstorming. The
deliberate way.
blog facilitator will screen the
brainstorming blogs and give feedback to
Ÿ Blogs can be used to accentuate the
the bloggers.
sense of connection to a business. It
is a tool that gets people involved in
The next step is a separate blog used to
the business growth and their
judge these ideas and distill them down to
personal development.
solutions that have the best possibility of
working.
Ÿ The blog facilitates the need of
people to use their intelligence to
This gives the bloggers feedback from
express their innermost thoughts. It
other bloggers and they become co-
gives them a chance to take
creators. A separate blog is then used to
personal responsibility for their jobs
rank these ideas.
and the success of their companies.
The final blog is to find the best way to
implement the best solution.
Blogs have many applications for
Implementation should go smoothly since
businesses both large and small.
all stakeholders associated with the change
have been part of the process.
Ÿ They can be used to enhance a

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 4 of 8

 SOLVING BUSINESS PROBLEMS 7. Blog judgment and discussion of
WITH COLLABORATIVE TEAMS ideas from process number 6.
Reject some solutions; narrow
There are a wide variety of issues that can down and prioritize the remaining
be resolved quickly and economically with solutions.
a blog process. Below is an example of a
problem-solving blog process: 8. Blog implementation of the best
solutions in process number 7.
1. Management agrees to a These solutions must include
customized process, type of blogging the advantages and
blogging team, schedule, and cost. disadvantages of the best solutions.
Cost and schedule considerations
2. A blogging process and team is set also need to be included.
up.
9. The blog facilitator drafts a report of
3. A blog facilitator is selected to recommendations to review with
manage the process, cost, and management.
schedule from this point.
10. The blog facilitator produces a final
4. A blogging team is assembled. This report incorporating management
team could be internal, external, comments.
company-wide, a combination of
management and other small
groups, or whatever fits the In summary, there are many options to
situation. customize the use of blogs and
collaborative group processes to fit the
The blogging team needs to keep protocol and needs of specific
the blogs confidential and not organizations.
shared outside the blog group.

5. The bloggers are provided

information on the problem such CYCLES OF CHANGE
as, background data, constraints,
and ground rules. Italian mathematician Vilfredo Pareto
discovered an unequal distribution theory in
If the problem is not 1897.
thoroughly understood, it
should be blogged first. The unequal distribution theory states
that 20 percent of the parts have a greater
6. Blog the problem. Bloggers identify Impact on the whole than the other 80
the problem or potential solutions. percent.
There is no judgment or discussion
of ideas at this stage.

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 5 of 8

 Cycles are a naturally occurring event and When the Internet is used as an extension
give businesses an opportunity to replace, of the logical mind to find convincing proof
re-employ, or re-educate some of the 80 of a certain outcome before a decision is
percent of the people and products that do made, we get right back on the mouse
not add to profits or, are non-productive. wheel because the logical mind will always
need more proof.
The way to get these 80 percent of
unproductive people excited about their
jobs and producing profits is to get them The Internet’s greatest power comes when
involved in a collaborative blog process it is used to connect people so that their
where they have the freedom to express minds can work as a collective
themselves. consciousness.

Understanding how cycles work in your

personal or business life helps you to The blog systems mentioned in this book
reduce worry and fear of the future. Then are the path to the future. Other greater
you can use your intuitive faculties for systems will evolve in the future since the
guidance. possibilities of using the blog, along with
the collaborative collective consciousness,
Worry and fear of the future should be are infinite.
avoided at all cost because they are the
incorrect use of imagination and cause
your intuitive faculties to work against you.
SELECTING YOUR COLLABORATIVE
Will Rogers said, “Worry is like paying a TEAM
debt that may never come due”.
There is a better way to hire the right
Understanding the rhythm of cycles can people. The following are some questions
give you a roadmap that helps you get that could be used in the interview process
where you want to go. When used along to select the members of your collaborative
with your intuitive faculties, you then have team. These sample questions can be used
the key to create your won destiny. to determine what role a person might play
in a team and if they would be compatible
with a creative collaborative process:

SIMPLIFY, SIMPLIFY, SIMPLIFY… 1. How would you describe yourself

without referring to your job?
The Internet is an excellent resource for
getting information and connecting people 2. E x p l a i n a ny e x p e r i e n c e o r
but is not a good a tool for decision making. association you have had with
theater, music, or the arts.

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 6 of 8

 3. What are some things that upset HOW TO FUNCTION IN A
and disturb you? COLLABORATIVE TEAM
4. I shine and am most happy when
In order to function in a collaborative team,
______________ .
the team member needs to be able to focus
on why something could work rather than
5. I excel at ________________. This
why it won’t work. Here are some other
is, or is not, one of my passions.
important reminders:
6. What I do most effortlessly is
• Collaborative team members need
__________________ .
to be passionate about the tasks at
hand.
7. I like to play the ______________
role or roles on a team.
• Overcoming obstacles when your
game is not going smoothly, gives
8. I would like to have more
you the peace of mind, inspiration,
__________________ now.
and the power to win or reach your
goal.
9. What are your passions?
• If our teams, our businesses, our
10. What innovative ideas have you
jobs, or our lives are not going
had that excited you?
smoothly, all we need to do is
accept the challenge of taking
11. What achievements have you had
responsibility to play our game. This
that you are most proud of?
will give us new energy and
determination to influence the
12. Do you feel comfortable taking
outcome of the game.
risks? What kind of risks are they?
• We need people on our
13. Tell me about the time you took a
collaborative teams who are willing
risk and the outcome.
to look at problems from different
perspectives.
14. Would you prefer to work with
others or by yourself?
• Another attribute of a good
collaborative team member is that
15. Have you ever worked in a
he or she is a risk taker. Fear of
collaborative team or process? If
failure or ruin is what makes most
so, what role did you play?
people think that they should avoid
risk. Fear is always waiting on the
16. Tell me about the most fun you
wings to try to derail our creative
have ever had.
expressions.

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 7 of 8

 • It is imperative for members of a If we want our creations to be a reality more
collaborative team to be able to quickly, we can always add more desire,
think for themselves. The ability to passion and enthusiasm to it.
think for oneself and develop new
ideas is an important attribute of a
collaborative team member to have
because; most of the herd tends to
follow. ~///~

• The issue of control must be

addressed. Functioning on a
collaborative team does not include
control.

CONCLUSION

Many of us don’t realize that some of our

thoughts and beliefs are not our own but
are put into our heads by others to serve
their agendas.

We don’t have to be walking robots with no

idea about what or who is really controlling
us both in our business or personal lives.

We do not have to be slaves of the many

stealth mind control groups of the past or
present, that program our beliefs through
fear, repetition of slogans, different forms of
hypnosis and autosuggestion.

All we have to do is to use the techniques

described in this book and we will be free
from that kind of slavery and at the same
time, be able to create whatever we want in
our lives or businesses.

ABOUT BUSINESSSUMMARIES BusinessSummaries.com is a business book Summaries service. Every week, it sends out to
subscribers a 9- to 12-page summary of a best-selling business book chosen from among the hundreds of books printed out in
the United States. Summaries are available in PDF, PDA, HTML, Powerpoint and Audio formats. For more information, please
go to http://www.bizsum.com.

DO YOU LIKE THIS SUMMARY but not a member yet? Subscribe now and learn the latest business trends in minutes from book
summaries of today’s business bestsellers. Simply go to http://www.bizsum.com/offer01.htm.

Creative Blogging For Personal or Business Improvement - “How Do You Do Dat?” 8 of 8

Les Robinson | Phone 0414 674 676 | Email les@enablingchange.com.au
Web www.enablingchange.com.au | Blog http://enablingchange.posterous.com

A summary of Diffusion of Innovations

Les Robinson Fully revised and rewritten Jan 2009

Diffusion of Innovations seeks to explain how innovations are taken

up in a population. An innovation is an idea, behaviour, or object
that is perceived as new by its audience.

Diffusion of Innovations offers three valuable insights into the

process of social change:

- What qualities make an innovation spread successfully.

- The importance of peer-peer conversations and peer networks.

- Understanding the needs of different user segments.

These insights have been tested in more than 6000 research studies
and field tests, so they are amongst the most reliable in the social
sciences.

What qualities make innovations spread?

Diffusion of Innovations takes a radically different approach to most

other theories of change. Instead of focusing on persuading
individuals to change, it sees change as being primarily about the
evolution or “reinvention” of products and behaviours so they
become better fits for the needs of individuals and groups. In
Diffusion of Innovations it is not people who change, but the
innovations themselves.

Why do certain innovations spread more quickly than others? And

why do others fail? Diffusion scholars recognise five qualities that
determine the success of an innovation.

This work is licensed under the Creative Commons Attribution-Noncommercial-No Derivative Works
2.5 Australia License. To view a copy of this license visit
http://creativecommons.org/licenses/by-nc-nd/2.5/au/deed.en
Attribution should be made to “Les Robinson www.enablingchange.com.au”.
 Understanding Diffusion of Innovations

1) Relative advantage
This is the degree to which an innovation is perceived as better than
the idea it supersedes by a particular group of users, measured in
terms that matter to those users, like economic advantage, social
prestige, convenience, or satisfaction. The greater the perceived
relative advantage of an innovation, the more rapid its rate of
adoption is likely to be.

There are no absolute rules for what constitutes “relative

advantage”. It depends on the particular perceptions and needs of
the user group.*

2) Compatibility with existing values and practices

This is the degree to which an innovation is perceived as being
consistent with the values, past experiences, and needs of potential
adopters. An idea that is incompatible with their values, norms or
practices will not be adopted as rapidly as an innovation that is
compatible.

3) Simplicity and ease of use

This is the degree to which an innovation is perceived as difficult to
understand and use. New ideas that are simpler to understand are
adopted more rapidly than innovations that require the adopter to
develop new skills and understandings.

4) Trialability
This is the degree to which an innovation can be experimented with
on a limited basis. An innovation that is trialable represents less
uncertainty to the individual who is considering it.

5) Observable results
The easier it is for individuals to see the results of an innovation,
the more likely they are to adopt it. Visible results lower uncertainty
and also stimulate peer discussion of a new idea, as friends and
neighbours of an adopter often request information about it.

According to Everett Rogers, these five qualities determine between

49 and 87 percent of the variation in the adoption of new products. 1

These five qualities make a valuable checklist to frame focus group

discussions or project evaluations. They can help identify
weaknesses to be addressed when improving products or
behaviours.

*
I suspect, however, that three relative advantages are more influential than
others: personal control, time saving and self-esteem. See the paper at
http://www.enablingchange.com.au/Being_engaging.pdf.

2
 Understanding Diffusion of Innovations

Reinvention is a key principle in Diffusion of Innovations. The

success of an innovation depends on how well it evolves to meet
the needs of more and more demanding and risk-averse individuals
in a population (the history of the mobile phone is a perfect
example).

A good way to achieve this is to make users into partners in a

continuous process of redevelopment. Computer games companies,
pharmaceutical corporations and rural research institutes are
examples of organisations that seek to make users active partners
in improving innovations by supporting user communities or by
applying participative action research techniques.

Many computer games are now built with the intention that they
will be modified by enthusiastic users. Says consumer behaviour
expert, Francine Gardin. “They’re actually participating in the design
of the game. These consumers are really passionate about the
game – it’s almost like a cult. They have an incredible sense of
loyalty and ownership of that brand. Instead of complaining, they
fix the product.”2

The concept of reinvention is important because it tells us that no

product or process can rest on it’s laurels: continuous improvement
is the key to spreading an innovation.

The importance of peer-peer conversations and peer

networks

The second important insight is that impersonal marketing methods

like advertising and media stories may spread information about
new innovations, but it’s conversations that spread adoption.

Why? Because the adoption of new products or behaviours involves

the management of risk and uncertainty. It’s usually only people we
personally know and trust – and who we know have successfully
adopted the innovation themselves – who can give us credible
reassurances that our attempts to change won’t result in
embarrassment, humiliation, financial loss or wasted time.

Early adopters are the exception to this rule. They are on the
lookout for advantages and tend to see the risks as low because
they are financially more secure, more personally confident, and
better informed about the particular product or behaviour. Often
they will grasp at innovations on the basis of no more than a well
worded news article. The rest of the population, however, see
higher risks in change, and therefore require assurance from trusted
peers that an innovation is do-able and provides genuine benefits.

3
 Understanding Diffusion of Innovations

As an innovation spreads from early adopters to majority audiences,

face-to-face communication therefore becomes more essential to
the decision to adopt. This principle is embodied in the Bass
Forecasting Model (below), which illustrates how face-to-face
communication becomes more influential over time, and mass
media less influential.

Source: Mahajan, Muller and Bass (1990) as reproduced in Rogers, E.M.

(2003) p210.

The emphasis on peer-peer communication has led diffusion

scholars to be interested in peer networks. Many diffusion-style
campaigns now consciously attempt to utilise peer networks, for
instance by using Popular Opinion Leader techniques or various
“viral marketing” methods. These methods – which are becoming
increasingly popular – aim to recruit well-connected individuals to
spread new ideas through their own social networks.

Opinion leader tactics have been successful in raising the standards

of practice by medical doctors,3 promoting weatherisation of
homes,4 and encouraging safe sex in gay communities.5

Rogers notes that by 2003 there had been eight randomised

controlled trials – the gold standard in evaluation – all of which
demonstrated the success of opinion leader tactics in producing
behavioural changes.6

4
 Understanding Diffusion of Innovations

Understanding the needs of different user segments

Diffusion researchers believe that a population can be broken down

into five different segments, based on their propensity to adopt a
specific innovation: innovators, early adopters, early majorities, late
majorities and laggards.

Each group has its own “personality”, at least as far as its attitude
to a particular innovation goes.

When thinking about these groups, don’t imagine it’s your job to
shift people from one segment to another. It doesn’t work that way.
It’s best to think of the membership of each segment as static.
Innovations spread when they evolve to meet the needs of
successive segments.

Innovators: The adoption process begins with a tiny number of

visionary, imaginative innovators. They often lavish great time,
energy and creativity on developing new ideas and gadgets. And
they love to talk about them. Right now, they’re the ones busily
building stills to convert cooking oil into diesel fuel and making
websites to tell the world about it. Unfortunately their one-eyed
fixation on a new behaviour or gadget can make them seem
dangerously idealistic to the pragmatic majority. Yet no change
program can thrive without their energy and commitment.

How to work with innovators:

• Track them down and become their “first followers”†, providing

support and publicity for their ideas.

†
See Derek Sivers’ entertaining Youtube clip on the subject of first followers. It’s
a very succinct and accurate insight into diffusion theory:
http://www.youtube.com/watch?v=fW8amMCVAJQ

5
 Understanding Diffusion of Innovations

• Invite keen innovators to be partners in designing your project.

Early adopters: Once the benefits start to become apparent, early

adopters leap in. They are on the lookout for a strategic leap
forward in their lives or businesses and are quick to make
connections between clever innovations and their personal needs.

They love getting an advantage over their peers and they have time
and money to invest. They’re often fashion conscious and love to be
seen as leaders: social prestige is one of their biggest drivers. Their
natural desire to be trend setters causes the “take-off” of an
innovation. Early adopters tend to be more economically successful,
well connected and well informed and hence more socially
respected. Their seemingly risky plunge into a new activity sets
tongues wagging. Others watch to see whether they prosper of fail,
and people start talking about the results. And early adopters like
to talk about their successes. So the buzz intensifies. What early
adopters say about an innovation determines its success. The more
they crow and preen, the more likely the new behaviour or product
will be perceived positively by the majority of a population.

Early adopters are vital for another reason. They become an

independent test bed, ironing out the chinks and reinventing the
innovation to suit mainstream needs.

Fortunately early adopters are an easy audience. They don’t need

much persuading because they are on the lookout for anything that
could give them a social or economic edge. When you call a public
meeting to discuss energy-saving devices or new farming methods,
they’re the ones who come along. They’re the first people in your
block to install a water tank, mulch their garden, buy laptops for
their kids, or install solar panels.

Some authorities talk about a “chasm” between visionary early

adopters and pragmatic majorities.7 They think the chasm explains
why many products are initially popular with early adopters but
crash and burn before they reach mass markets. Everett Rogers
disagreed8 with the idea of a chasm. He thought early adopters and
majorities formed a continuum. However most early adopters still
have radically different interests and needs from most majorities, so
even if there’s no real chasm it’s a useful mental construct that
warns us against the easy assumption that one size fits all. Once
again, what makes products or practices spread is not persuasion.
It’s the whether the product or behaviour is being reinvented to
become easier, simpler, quicker, cheaper, and more advantageous.

6
 Understanding Diffusion of Innovations

How to work with early adopters:

• Offer strong face-to-face support for a limited number of early

adopters to trial the new idea.

• Study the trials carefully to discover how to make the idea more
convenient, low cost and marketable.

• Reward their egos e.g. with media coverage.

• Promote them as fashion leaders (beginning with the cultish end

of the media market).

• Recruit and train some as peer educators.

• Maintain relationships with regular feedback.

Early majority: Assuming the product or behaviour leaps the

chasm, it may eventually reach majority audiences. Early majorities
are pragmatists, comfortable with moderately progressive ideas,
but won’t act without solid proof of benefits. They are followers who
are influenced by mainstream fashions and wary of fads. They want
to hear “industry standard” and “endorsed by normal, respectable
folks”.

Majorities are cost sensitive and risk averse. They are looking for
simple, proven, better ways of doing what they already do. They
require guaranteed off-the-shelf performance, minimum disruption,
minimum commitment of time, minimum learning, and either cost
neutrality or rapid payback periods. And they hate complexity. They
haven’t got time to think about your product or project. They’re too
busy getting the kids to football and running their businesses. If
they do have spare time they’re not going to spend it fussing
around with complicated, expensive, inconvenient products or
behaviours. They want to hear “plug-and-play”, “no sweat” or
“user-friendly” and “value for money”.

How to work with the early majority:

• Offer give-aways or competitions to stimulate buzz.

• Use mainstream advertising and media stories featuring

endorsements from credible, respected, similar folks.

• Lower the entry cost and guarantee performance.

• Redesign to maximise ease and simplicity.

7
 Understanding Diffusion of Innovations

• Cut the red tape: simplify application forms and instructions.

• Provide strong customer service and support.

Late majority: They are conservative pragmatists who hate risk

and are uncomfortable your new idea. Practically their only driver is
the fear of not fitting in, hence they will follow mainstream fashions
and established standards. They are often influenced by the fears
and opinions of laggards.

How to work with the late majority:

• Focus on promoting social norms rather than just product

benefits: they’ll want to hear that plenty of other conservative folks
like themselves think it’s normal or indispensable.

• Keep refining the product to increase convenience and reduce

costs.

• Emphasise the risks of being left behind.

• Respond to criticisms from laggards.

Laggards: Meanwhile laggards hold out to the bitter end. They are
people who see a high risk in adopting a particular product or
behaviour. Some of them are so worried they stay awake all night,
tossing and turning, thinking up arguments against it. And don’t
forget they might be right! It’s possible they are not really not
laggards at all, but innovators of ideas that are so new they
challenge your paradigms! In the early stages, where you are
focusing on early adopters, you can probably ignore the views of
laggards, but when you come to work with late majorities you’ll
need to address their criticisms, because late majorities share many
of their fears.

How to work with laggards:

• Give them high levels of personal control over when, where, how
and whether they do the new behaviour.

• Maximise their familiarity with new products or behaviours. Let

them see exactly how other laggards have successfully adopted the
innovation.

Each of these adopter personalities is very different. It’s vital to

know which one you are addressing at a given time. And no, you
usually can’t address them all at once. Why? Because products and
behaviours only mature gradually. The exception is when you have

8
 Understanding Diffusion of Innovations

customized quite different products or behaviours for each group.

Weight Watchers is an example. It has a traditional calorie-counting
method that suits early adopters, a “points value” method that suits
early majorities, and a “no count” system for everyone else.

How big is each segment? Rogers went as far as assigning precise

notional percentages for each segment:

Innovators: 2.5%
Early Adopters: 13.5%
Early majority: 34%
Late majority 34%
9
Laggards 16%

However the “20:60:20 Rule” is a good all-purpose rule of thumb.

When designing a change project you need to know one vital fact:
the percentage who have already taken up the innovation. That
figure tells you which segment you are addressing next. It gives
you great insight into how to design your project and how to pitch
your communications.

Of course, no one is an innovator or a laggard about all new ideas.

That would be too exhausting. In reality, most people are majorities
about most things, and only innovators or laggards about certain
specific things. We wouldn’t say “John is a laggard”, we’d say “John
is an iPhone laggard” or “George Bush snr is a broccoli laggard”.

Reading

The standard text is Everett M. Rogers’ Diffusion of Innovations,

Fifth Edition 2003, Free Press, New York. It’s thorough, readable,
and strongly recommended for anyone who’s serious about initiating
change.

Endnotes
1
Everett M. Rogers, Diffusion of Innovations, Fifth Edition 2003, Free Press, New
York, p221
2
Quoted in Purcell, P. (2004) A quick mod takes gamers beyond their doom,
Sydney Morning Herald, 23 August
3
Soumerai, S.B. et al (1998) Effect of Local Medical Opinion Leaders on Quality of
Care for Acute Myocardial Infarction, A randomized controlled trial, Journal of the
American Medical Association Vol 279, pp1358-1363
4
Hirst, E. (1989) Reaching for 100 percent participation in a utility conservation
programme The Hood River project, Energy Policy Vol 17(2) pp155-164

9
 Understanding Diffusion of Innovations

5
Kelly, J.A. et al (1997) Randomised, controlled, community-level HIV-prevention
intervention for sexual-risk behaviour amongst homosexual men in US cities, The
Lancet Vol 350, 9090; Health Module p1500
6
Rogers op. cit. p322
7
Moore, Geoffrey, A. (1999) Marketing and Selling High-Tech Products to
Mainstream Customers (revised edition), HarperCollins, New York
8
Rogers, op. cit. p282
9
ibid. p281

10
 Book
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Volume 19, Number 31 • Copyright ©2002 Business Book Review, LLC • All Rights Reserved

Driving Growth
Through Innovation
How Leading Firms Are Transforming
Their Futures

Robert B. Tucker

©2002 Robert B. Tucker

Adapted by permission of Berrett-Koehler Publishers, Inc.
ISBN: 1-57675-187-2

Reviewed by Lydia Morris Brown

Introduction
According to Tucker, “in most cases today, the practice of innovation can be likened to the mating of pandas:
infrequent, clumsy, and often ineffective.” His research found that though many executives view innovation as holding
the most potential for achieving future growth, and though most consider it their primary strategic challenge, surpassing
even globalization and e-commerce, they claim not to have derived full business value from their innovation initiatives.
Thus, Tucker concludes that “there is a gap between what managers know they must do to achieve growth, and what
they are often able to do in practice.”
Driving Growth Through Innovation is offered to these executives, as well as to, general managers, project managers,
sales and marketing executives, and individual contributors to help them transform the practice of innovation so that it
becomes a systematic process, embedded in the organization’s culture, and the source of uncommon levels of growth.
The author goes behind the scenes of 23 companies that have redesigned every stage of how they implement new ideas
Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved
Driving Growth Through Innovation Robert B. Tucker

and synthesizes their best practices into an accessible, up with ideas and bringing them to life” for the purpose
practical innovation blueprint for winning new customers of creating new customer-perceived values, which is what
and growing new revenue. drives growth.
Tucker has found that in an increasing number of
PART I: THE GAP companies are winning the “growth game” by launching
Tucker notes that “a growing growth gap” exists in initiatives for “innovating how they innovate” and getting
corporate America today. Although the vast majority outstanding results. In these companies, which he calls the
of enterprises are indeed
growing, they are not growing “At the end of the day, what’s going to drive our business is top line
fast enough to keep abreast of growth, so innovation is vital to our future.”
shareholder values and future --Victor Menezes, Senior Vice Chairman, Citigroup, Inc.
expectations. According to the Innovation Vanguard, innovation is no longer addressed
author’s findings, though most companies acknowledge traditionally, but as an enterprise-wide process, and a
the importance of innovation, current performance is specific discipline, that supports customary R&D efforts
insufficient to allow them to succeed competitively. Thus, in fundamentally different ways. These firms use a
the issue is not that companies do not understand why comprehensive approach, which is driven by CEOs and
they need to innovate, it is that they do not know how to heads of business units who passionately support innovation
innovate effectively enough to grow revenue and sustain through goals, metrics, rewards, and resources. The search
their momentum. for big ideas that spur growth is organized, ongoing, and
Tucker says that a key aspect of knowing what to do is often embraces unconventional techniques as a means of
knowing what innovation is and what it is not. He emphasizes identifying unarticulated customer needs and “sussing out”
that it is not, despite what many believe, synonymous with future opportunities. Moreover, and most importantly,
creativity. Although creativity is an important component, it these companies have a broad-based cultural commitment
implies coming up with ideas; however, it is the “bringing to bottoms-up innovation as a means of implementing
ideas to life” that makes innovation such a distinct endeavor. strategic growth goals set by senior management. Ideas,
Thus, the author defines innovation as simply, “coming no matter what their source, are managed to ensure that
more ideas will lead to better ideas; and that better ideas will
About the Author lead to a greater number of successful launches, as well as
to changes in products, services, processes, and strategies
Robert B. Tucker, president of The Innovation
that have a positive impact on the top and bottom lines.
Resource, a research and innovation consulting
This 21st century approach to innovation encompasses
firm, has studied innovators and innovative compa-
nies since 1981, and is considered to be a leader
the critical elements of leading innovation, creating the
in the field. A much sought after keynote speaker, innovation culture, empowering the idea management
he advises Fortune 500 companies, as well as process, mining the future, fortifying the “idea factory,”
national and international trade associations, and producing powerful products, generating growth strategies,
has appeared on CNBC, CBS News, and was and selling new ideas.
a featured guest on the PBS series, “Taking the
Lead.” Tucker is also a frequent contributor to PART II: THE BLUEPRINT
such business periodicals as Journal of Business Referring to Warren Bennis’s observation that,
Strategy and Strategy & Leadership and the “Managers are people who do things right and leaders are
author of Winning the Innovation Game, Managing people who do the right thing,” Tucker notes that designing
the Future: 10 Driving Forces of Change, and and implementing an innovation strategy, spreading
Customer Service for the New Millennium. responsibility for making innovation happen, allocating
For more information, please visit: resources and deciding on levels of risk, establishing
www.innovationresource.com innovation metrics, and rewarding innovation are the five

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 2
Driving Growth Through Innovation Robert B. Tucker

essential “right things” leaders must do to build an all- address the issue of rewarding and encouraging innovation.
enterprise innovation capacity. The author believes that, “The rewards for risk-taking
From his perspective, an innovation strategy should: must always outweigh the fallout from failure. Rewarding
establish a common definition of what innovation means innovation specifically sits within a wider context of how
in a particular enterprise, spell out the behaviors to be other behaviors are rewarded.”
encouraged and the growth goals to be reached, provide Tucker’s study of Innovation Vanguard companies
a process in every area of operations for channeling ideas, shows that, with the right leadership, culture can be
outline a plan for overcoming the enterprise’s unique reshaped to catalyze the innovation process. He offers 11
barriers to innovation, imbed innovation in the culture, key strategies, designed for this purpose:
and identify a leader to be in charge of the process. And, (1) Assess where the enterprise is currently versus
though coming up with the strategy is not the leader’s where it needs to be to meet its growth challenge.
(2) Identify both the structural
“Innovation isn’t just a front-end activity; we need creative solu-
and cultural barriers to innovation.
tions all along the process.”
--Nancy Eicher, Director of Innovation, Pillsbury Unit of General Mills
(3) Assess the company’s current
innovation process. According to the
responsibility alone, but a team effort, he or she must author, the lack of a comprehensive idea management
encourage the process and make it a personal priority so system is the most frequent barrier to innovation. “People
as to ensure its success. don’t know what to do with their ideas and don’t know how
Because innovation is much too important to be left to to take action on them.”
the executive team, leaders must “deputize everyone in the (4) Address the “lack of time” barrier. Fresh approaches
organization in the idea-hunting posse, idea-implementing and/or the company’ next breakthrough can come from
process.” This diffusion of responsibility involves spelling periods of reflection
out expectations regarding innovative behavior, publicizing (5) Institute practices that create openness.
and promoting the kind of behavior sought, creating a (6) Balance the mix of people so there is a diversity
“curriculum” of innovation, providing basic training of thinking styles and perspectives, as well as the three
in creativity, and providing more advanced innovation different personality types (mavericks, individual
training to select groups. contributors, and champions) needed to ignite and sustain
While leaders must ultimately be the ones who allocate innovation.
time, money and talent to the innovation process, it is also (7) Do not segregate mavericks into skunkwork units;
necessary to develop a method for facilitating the task of their unique brand of diversity is needed in the main
deciding which ideas to fund, which people to involve, organization to create an optimal innovative climate.
and how much time to spend. In addition, risk must be (8) Achieve the right mix in creativity styles. With too
managed in a systematic fashion so as to lessen the number many adapters (those who prefer to improve the system),
of unproductive pursuits. bold ideas and stretch goals will not emerge. And, with too
Tucker notes that the way a company measures many innovators (those who prefer to change the system),
innovation, or its lack, determines the type and degree there will be too little effective execution.
of innovation that ensues. Thus, he advocates measuring (9) Avoid the tendency to underestimate the innovative
the percent of revenue from new products and services, potential of the ordinary people inside the organization and
designing metrics that motivate rather than create disunity, learn how to stimulate and harvest their ideas.
and measuring the number of new and promising ideas in (10) Identify and develop champions—those who
the new-product pipeline. are adept at steering, developing, and nurturing ideas to
Finally, because managers and individual contributors implementation.
must have a good reason for coming up with new ideas, (11) Identify and recruit innovators—people who are
volunteering to be part of special teams, and/or putting their creative, have broad interests, are problem-solvers, are self-
careers on the line, any innovation strategy must squarely motivated, have a strong work ethic, and are resourceful.

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 3
Driving Growth Through Innovation Robert B. Tucker

Tucker believes that how a firm “handles” ideas is manner to changing customer needs and wants, and/or to
full of cultural implications, especially in regards to the anticipate what customers want in the future, they have to
question: “If someone in your company has an idea, do do more than employ a “reactive linear approach” or leave
they know what to do with it?” He notes that though most the future up to the strategic planning committee. The
companies are unsure of how to answer that question, author is not talking about making predictions, but about
Innovation Vanguard firms make idea management the recognizing opportunities early enough to exploit or ignore
focus of their unending drive for growth. Idea management them effectively. He quotes a study published in Research
systems help firms make innovation a discipline in which Technology Management as saying that this “[‘fuzzy front
every department, and a broad segment of managers and end’] of innovation appears to represent the greatest area
employees, are involved. Nonetheless, they do not replace of weakness in the innovation process.”
the traditional processes engaged in new services, products, Nonetheless, the author found that organized,
and/or strategy development,
but serve as an energizing “Interesting and innovative ideas do not a business make. Getting
supplement.
people to pay for innovative and interesting ideas is what makes a
business.”
There are several distinct
--Michael Schrage, Co-director, MIT Media Lab’s e-Markets Initiative
models of idea management,
including: Suggestion System, Continuous Improvement, systematic, and continual mining-the-future processes
Open Door, New-Venture Team, Incubator, Top-Line-All- are characteristic of Innovation Vanguard companies.
Enterprise, Innovation Team, and Innovation Catalyst, and They scan and monitor global, economic, technological,
each has its distinct benefits and limitations. However, a social and regulatory change—the sources of innovation
model is best empowered if it: solicits ideas from everybody; opportunity. Their leaders create their own personal future-
is easy to use; has at least one full-time person to administer scan systems by making time to engage in broad-based
it; gives people permission to bypass the chain of command reading of high-quality material, connecting with people,
in order to air their ideas; responds promptly to those and listening to their own intuition. They do not wait until
who contribute ideas; has innovation experts in place to disaster strikes, put proactively integrate future scanning
review ideas; involves the contributor whenever possible; into their idea management systems. They recognize that a
gives recognition for an idea, regardless of whether it’s critical aspect of innovation is assaulting what “everybody
implemented; and integrates different models so as to fit a knows to be true.” And, with an eye toward broadening
firm’s unique culture. their companies’ vision, they reexamine how they define
Tucker advises that when deciding which system is their industries.
appropriate for their needs, companies must first assess Because the Innovation Vanguard also strategize their
how ideas are presently bring managed to determine what place in the “first mover, fast follower race,” Tucker offers
is already working well and what is not. Then, they must the advice that companies should consider the following
consider what they want the idea management system questions before they seek to pioneer a new idea: “Do
to do for them, how they expect a particular model will we have proprietary technology or designs that can be
enable them to meet those objectives, and how the system protected by patents, copyrights, or other means?” “Can
will cause innovation to become so entrenched in the we, by going first, keep assets or investment capital from
company that it is transformed into “the way we do things going to the competition?” “Can we achieve brand loyalty
around here.” Finally, the author warns that for any model by going first?” “Can we enhance our reputation by going
chosen, implementation takes time, and it is critical to have first?” “Do we have a vision of the mass market?” “Is our
strong, aggressive entrepreneurial leaders in place who are management team willing to be persistent over time?” and
supportive, active participants in the process. “Are we willing and able to relentlessly keep on innovating
“Mining the future” is an important component of after we’ve launched the idea?” The author warns that
any innovation strategy, and Tucker warns that if an without a strategic approach to the front end of innovation
enterprise is to have any hope of responding in a timely that carefully works through these questions (firms that can

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 4
Driving Growth Through Innovation Robert B. Tucker

honestly answer yes to them can garner lasting benefits), of operations, on making incremental improvements to
“fast followers” can benchmark and copy what works and existing products, and on adding endless line extensions
steal a first mover’s thunder. to keep up with the competition. Thus, many enterprises
The next step in designing a 21st century innovation struggle, without much success, to develop new products/
strategy involves enhancing the firm’s ability to generate services to drive top- and bottom-line growth. By contrast,
ideas. Innovation Vanguard companies understand that if Innovation Vanguard companies do not focus on the
good ideas are not thought up, they cannot be launched. competition, but on creating unique customer value. They
Thus, these innovation-adept firms are reinventing ideation concentrate on their customers’ current wants and needs
(“the systematic process of looking for ideas … which are and the unarticulated wants and needs that can be satisfied
the building blocks of new products, services, processes, in the future. This approach allows them ultimately to
reward their shareholders
“Sure, innovation is critical, but it doesn’t amount to anything unless the
with powerful revenue-
rest of the world does something with it.”
--Douglas Engelbart, Inventor of the computer mouse
growing products.
The author believes
and strategies”) and making concerted efforts to cultivate that any company can employ this approach to overhaul its
the conditions that will allow a greater number of ideas to new product development processes, no matter their present
emerge and be implemented via their idea management state and, thereby, drive growth. And, he offers six strategies
processes. for effectively accomplishing this task: (1) Study previous
Fortifying a firm’s idea factory in this manner requires breakthrough products. Breakthroughs provide a superior
that everyone be involved in the quest for inspiration. A solution to problems customers recognize as problems and
big part of this involves making sure the voice of the those they do not recognize until a product is created. In
customer pervades the entire organization, not just sales, addition, breakthroughs often resolve a contradiction; they
marketing, or service. Customers must be involved in provide customers with a benefit, often beyond the product
the innovation process at every opportunity and in new itself; and they go against conventional wisdom. (2) Focus
ways. Their unarticulated needs must be addressed. And, relentlessly on value creation and ensure that it permeates
ideas should be sought from new customer groups (e.g., the entire product innovation process. (3) Design and
companies and people who have never done business with implement a systematic new product development process
the firm, former customers, the competition’s customers, that begins with ongoing future-mining and move through
and customers’ customers) so as to enlarge the firm’s idea- each stage of development—ideation, concept refinement,
generation capacity. prototyping, business case analysis, development, market
Effectively fortifying a firm’s idea factory must testing, and launch. (4) Use a “probe and learn” strategy,
also involve suppliers. Rather than making demands on rather than a process-driven strategy, when dealing with
their suppliers, companies must cultivate the kinds of a radical product idea, a fundamentally new business
relationships that encourage teamwork and cooperation. model, or an unproven technology. (5) Use cross-functional
Tucker notes that when vendors are allowed to become teams for the advantages of concurrent decision making
actively involved in product ideation, procurement moves they bring. (6) Use prototyping early, often, and with
from the routine and begins to add value throughout the customers.
organization. Tucker warns that, “No matter how bulletproof your
Finally, ideation must be ongoing and actively firm’s current business model, it will be challenged by
organized. In order to improve the ideas-to-results new business models … imitated, and thereby diluted and
process, companies must examine how and where they commoditized and copied to death.” Thus, it is imperative
ideate, must examine the climate in which ideation takes that companies strengthen their business models, and to
place, and must ask who is in charge of making the do this, they must initiate strategy innovations that result
process better, more productive, and more “out of the box.” from discovering new ways to create value for customers, as
Tucker notes that most firms focus on taking costs out measured by bottom-line results. Here, the author advocates

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 5
Driving Growth Through Innovation Robert B. Tucker

looking for opportunities—in market positioning, in unforeseen problems. Thus, they expect the unexpected and
customer outsourcing, in understanding customer needs, expect to have to overcome objections, continually. They
to reinvent the firm’s business model, and to refine value- also understand that building a market can sometimes be
added—and rethinking how the product/service gets into a slow, tedious process fraught with many obstacles; thus,
the hands of the customer. they never rest on their laurels, but continue to innovate
“Innovation has always been about selling new ideas,” to ensure the likelihood of eventually owning the lion’s
says the author, but in the 21st century, new ideas face share of that market. And, because consumers give more
even greater scrutiny and resistance from customers. credibility to the personal testimonials of their friends and
Their basic needs have been met; they face too much colleagues than they do to advertising, savvy innovators
choice; they tire of constant,
“Innovation is ultimately not an act of intellect but of will.”
meaningless upgrades; and
--Joseph Schumpeter
they are beginning to resist
the costs of planned obsolescence. Given this situation, first convert the early adopters and the gatekeepers who
Tucker believes that firms must “master a sophisticated, control and influence acceptance of new ideas, and let them
multifaceted set of selling skills that are needed both sell the idea to the rest of the market.
internally and externally to build the buy-in and get the From Tucker’s point of view, successfully selling new
idea happening in the world.” These skills include making ideas is the “essential, capstone skill of innovation-adept
everyone an idea evangelist, focusing on the customer’s companies and idea champions. In his work, helping
“mean time to payback,” making it safe for customers to companies improve their innovation processes, he has
experiment, selling conceptually, building markets for the found that this back end of the process is where a lot of
firm’s products and services, converting the early adopters the real “fuzziness” resides. Thus, he counsels that it “needs
and gatekeepers first, and being persistent. major revamping such that selling ideas becomes a stepping
Innovation Vanguard companies understand that stone rather than a stumbling block to driving growth.”
evangelists are masters of the art of persuasion; they speak * * *
the language of the people they are selling to, they craft Source notes and resources, by chapter, and a subject
their messages so that people pay attention, and they help index are provided.
others visualize new ideas. They focus on benefits rather
than features. And, they use skeptics to help them identify
the flaws in their ideas. Remarks
Most companies, attempting to drive growth through Driving Growth Through Innovation is written
innovation, often focus on how long it may take to see for those who are dissatisfied with how their companies
a return on investment in their new product/service (i.e., obtain growth and with their companies’ present growth
mean time to payback). However, the Innovation Vanguard rates. Tucker reminds readers that if any company is to
focus on their customer’s mean time to payback, instead. have a future, it must grow enough revenues and profits
The concern, in this instance, is how long it takes for the to keep up with shareholder expectations. And, in this
customer to begin enjoying the benefits of the new product/ uncertain economy, increasing share of market, depending
service. Innovation-adept firms also put themselves in upon an industry’s natural growth rate, cutting costs and
their customers’ shoes and attempt to ease any customer enhancing efficiency, linear product/service development,
apprehensions about the risks of trying something new. nor acquisitions and mergers can do the job. Innovation
They promise safe experimentation (e.g., a “money back is the only solution. The author reports that, according to
guarantee”); use familiar terms, initially (e.g., horseless a landmark PricewaterhouseCoopers’ study, “Firms that
carriage rather than automobile); offer free trials; and make master innovation are firms that are faster than their peers
purchasing easier (e.g., offer credit). and produce higher profits.”
Experienced innovators know they will experience This observation is, of course, not new. A vast majority
resistance, both internally and externally, and encounter of enterprises worldwide are well aware that innovation’s

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 6
Driving Growth Through Innovation Robert B. Tucker

power to fuel growth is a critical business success factor. last principle in every phase of innovation.) The author
The problem (as further research shows) is that few also delineates three main types of innovation (product,
companies believe they are as adept at innovation as they process, and strategy), and three degrees of financial
need to be. They are finding that the traditional ways of impact (incremental, substantial, and breakthrough) that
discovering and developing opportunities are inadequate, also inform the innovation process. The work integrates all
given today’s demands. Tucker notes that even such 20th of these principles and factors into a “tutorial” that allows
century “innovation masters” as Procter & Gamble and readers to develop, step by step, their own “blueprints” for
McDonalds are having difficulty coming up with any creating a redesigned innovation process, unique to their
genuine breakthrough products. Thus, his central premise particular needs. And, even if one chooses not to implement
is that companies must innovate how they innovate, if they a redesign of innovation, understanding the five principles
wish to achieve high levels of growth and sustain them. and the types of innovation and their financial impact will
If readers are looking for a lot of theory about how this likely spark some creative ideas.
different approach to innovation should or might occur, this Tucker notes early on that most companies have no
is not the book. Tucker is all about taking action and, so, problem coming up with ideas—just the opposite. The
provides “options based on what leading companies are critical issue is that there are usually too many ideas
doing to rev up growth and earnings … using innovation and no effective processes for turning them into revenue.
as their vehicle.” These leading companies—the Innovation Driving Growth Through Innovation promises to stand
Vanguard—include Citigroup, EDS, Medtronic, Colgate- prominently in the literature as an essential primer on how to
Palmolive, Borg-Warner, and Royal Dutch/Shell. We note stop relying on “happy accidents” and piecemeal initiatives
that though the book’s jacket blurb stipulates that there are and start designing and implementing enterprise-wide
23 of these Vanguard companies, many more firms are used innovation strategies that ensure good ideas are continually
as examples, or in case studies, to illustrate how to retool captured and developed successfully.
an innovation process. However, because no complete list
of the 23 is provided, we wonder what the difference is
[if there is one] between the Innovation Vanguard and the
other enterprises Tucker highlights as being capable of Reading Suggestions
bringing ideas to life. We also note that a majority of the
firms profiled are large, mature companies. However, this Reading time: 10-12 hours 249 Pages in Book
fact, and the fact that there is no complete identification One of the primary goals of this book is to actively
of the Innovation Vanguard, in no way matter. Any firm guide you in the design of your own innovation strategy.
can use the examples presented as effective guidelines for Thus, not only is it an overview of best practices. It is also
making innovation a systematic process and for piloting (literally) a “workbook” for gathering insights, formulating
ideas from conception to implementation. plans to innovate your innovation process, and “writing a
Unlike many books on the subject, Driving Growth first draft of an innovation strategy that is uniquely right
Through Innovation does not focus on just one aspect for your firm,” beginning with issues raised as early as the
of the field, but integrates leadership, strategy, product introduction.
development, problem solving, idea management, future Each chapter ends with a section entitled, “Designing
planning, etc., into a single, inclusive strategy, characterized Your Own 21st Century …” (Innovation Strategy, Approach
by five essential principles: Innovation must be approached to Leadership, Approach to an Innovation-Adept Culture,
as a discipline. Innovation must be approached etc.). These sections contain questions for you to consider
comprehensively. Innovation must include an organized, and respond to in writing, and similar exercises appear
systematic, and continual search for new opportunities. throughout the book (chapter 10 is entirely devoted to
Innovation must involve everyone in the organization. helping you and your team map out an innovation initiative,
And, innovation must be customer-centered. (Throughout step by step). Obviously, Tucker does not intend for you to
the book, Tucker emphasizes the importance of this charge through this work, glean a few novel concepts to

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 7
Driving Growth Through Innovation Robert B. Tucker

throw at an ad hoc innovation initiative on the fly. Quite the

contrary. (With that said, however, we must note that he has
gathered all how-to advice, salient points, principles, and,
observations into a series of lists you can readily identify,
without much effort.) Still, you should plan on making the
effort. Tucker advises you to peruse each chapter carefully,
stop and reflect, take notes, and do what can only be
described as detailed “homework,” as you make your way
through the book.
We concur and recommend that you reserve the kind
of time you might set aside to take a short business course,
and bring a fresh notebook (electronic or traditional). We
also suggest that you make this “course” a team effort
from the beginning (rather than wait for chapter 10). We
believe that the majority of the questions and exercises you
will encounter can most effectively be worked through in
collaboration with others in your organization.
Of course, our estimated reading time only reflects the
time it might take for a quick run through the entire work
to identify the salient points.

Business Book Review™ Vol. 19, No. 31 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 8
Driving Growth Through Innovation Robert B. Tucker

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 March 11, 2011

Innovate the Pixar Way

Business Lessons from the World’s Most
Creative Corporate Playground
Bill Capodagli and Lynn Jackson

Adapted by permission of The McGraw-Hill Companies, Inc. from

Innovate the Pixar Way by Bill Capodagli and Lynn Jackson. ©2010 by
Capodagli Jackson Consulting
ISBN: 978-0-07-163893-7

Introduction
Today, many American companies are highly risk the company’s culture, leadership, teaming, and
averse and take a short-term view of business. This training. While each of these plays an important role
mindset impedes organizations’ ability to develop at Pixar, the real secret to the company’s success is
new and innovative products and services. A new employees’ ability to see the world from a child’s per-
focus on innovation is needed to make companies spective. It is common to observe teams surrounded
more competitive. In Innovate the Pixar Way, Bill by toys and having fun. This type of environment
Capodagli and Lynn Jackson discuss how leaders at stems from a company culture that values and
animation giant Pixar have cultivated a culture that is rewards imagination. The authors suggest that child-
highly innovative and also profitable. They describe hood is not defined by one’s age, but rather by one’s
how Pixar has created an energized work environ- state of mind.
ment and revitalized Walt Disney’s innovative spirit. Capodagli and Jackson question why the creative
The authors identify many specific and practical ways gene that thrived during childhood in everyone does
for organizations to create their own “innovation not endure in the corporate world. One reason is that
playgrounds.” management experts have continually focused on
Pixar and Innovation reducing costs and removing variation in business,
As Capodagli and Jackson began to research the yet innovation leads to increased cost and variation.
sources of Pixar’s innovative genius, they examined It is unusual for an organization to be both innova-
tive and profitable, like Pixar. It requires a delicate
Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

balance between two very different characteristics:

childlike dreaming and task-driven execution. Pixar
has been successful at achieving this balance. While Key Concepts
it may be tempting for organizations to try to copy
Pixar’s model, the authors warn that it is necessary In Innovate the Pixar Way, Bill Capodagli and
for companies to define cultures that are unique to Lynn Jackson discuss how leaders at animation
their specific conditions. Innovating, rather than imi- giant Pixar have cultivated a culture that is both
tating, is time consuming and challenging work. On highly innovative and profitable. Keys to Pixar’s
the upside, however, Capodagli and Jackson note that success include the following:
creativity exists in all organizations; it just has to be 1. Learning and collaboration. Innovation begins
unleashed. when a person is open to discovery and is
As Pixar approaches new projects, the teams are uni- stimulated by a catalyst. Training offered
fied by the belief that there is only one quality metric at Pixar University serves as a catalyst for
for their films: everything revolves around a great learning and collaborative creativity.
story. A sequel is only developed if it is based on an 2. “Art is a team sport.” Employees should be
excellent story. This same way of thinking can be encouraged to share ideas and gather feed-
transferred to other types of businesses. The authors back from others, without a fear of failure.
recommend that companies stop copying their old
3. Failing forward. Failing forward is the pro-
products and services and create new, creative offer-
cess of examining a failure and then moving
ings. The metaphor of being a film director can be
beyond it to success. To learn more rapidly,
applied to the exercise of developing new products
companies must make mistakes.
and services. Companies need to realize their vision,
story, and dream in an exciting way. The “story” must 4. Fun and play. The amount of fun and play
resonate with employees and also with customers. that occurs in a company is directly related
Another consideration is the “set.” In a business, the to employee morale. When employees have
“set” may include everything from the parking lot fun, it inspires them to be more innovative.
to the product display, web site, warehouse, product
5. Quality is the best business plan. Compa-
packaging, and documentation. All of these elements
nies have one chance to deliver a magical
have a creative aspect that should not be ignored.
experience for customers, regardless of the
Capodagli and Jackson reiterate that every business is
product or service. Once an organization
show business and ever business begins with a story.
compromises on quality, it is destined for
Dream Like a Child failure.
Children spend a lot of time dreaming about the g g g g
future, yet as people become adults, a short-term
Information about the author and subject:
mentality takes over in both their personal and busi-
www.capojac.com
ness lives. The reality is, however, that long-term
results require time, focus, and commitment. Pixar Information about this book and other business titles:
has remained committed to its goals over the long www.mhprofessional.com
term. Ed Catmull, president of Pixar and Disney Ani- Related summary in the BBS Library:
mation Studios, attributes Pixar’s success in part to
Unleashing Innovation
the fact that the founders took their time building the
How Whirlpool Transformed an Industry
organization. The initial Pixar team was motivated by
By Nancy Tennant Snyder and
academic fame in the world of computer animation.
Deborah L. Duarte
In the early 1980s, Catmull met a young animator
working at Disney named John Lasseter. At Disney,
Lasseter became proficient at creative teaming, shar-

Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

ing story ideas, and acting as a critical evaluator with ect, even it if it a small component.
other students. He believed that computers would be
Teamwork and cooperation are hallmarks of Pixar’s
the next revolutionary tool for animation, but he was
company culture. At the end of each work day, teams
unsuccessful at convincing the veteran animators.
share their unfinished work with any employee who
When Lasseter tried to develop a costly computer ani-
has an interest in attending the meeting. This prac-
mated short, Disney fired him. Disney management,
tice stimulates creativity both for the team and for the
driven by short-term results, ignored this upcoming
other employees. In this forum, the director also is
technology, and the business suffered. Catmull imme-
able to communicate key story concepts to the entire
diately hired Lasseter. The authors describe Catmull
company. These regular information-sharing sessions
and Lasseter’s partnership as one of the most produc-
also create transparency in the organization. At the
tive since Walt and Roy Disney. The two men together
end of each project, there are no surprises.
have achieved much more than either could have
accomplished independently.
Catmull and Lasseter’s goal is to There’s no “follow the leader” game of childish trickery at
create animated films that affect Pixar. The playbook simply calls for an open playground where
the world in a positive way for
leadership serves as a catalyst in the pursuit of big dreams.
many years. Their commitment is
to never compromise their long-
term dreams for the sake of short-term gains. In a creative organization, self-motivated employees
are a necessity. When people are self-motivated, fewer
In many businesses, corporate rules and processes
managers are needed. Organizations like Disney and
stifle creativity. This does not have to be the case.
Google have on average one manager for 20 or more
Effective leaders provide their teams with the tools
workers. In contrast, the majority of American com-
and information required for success and then allow
panies have a span of control where there are less
them to do their jobs. In addition, it is necessary to
than eight employees for each manager. At Pixar, the
develop an environment where employees can grow
decision-making hierarchy and the communication
and have fun in the process. Pixar focuses on invest-
structure are two different things. When problems
ing in people rather than in ideas. The company
need to be solved, Pixar employees can communi-
has created an in-house development program for
cate with anyone in the company, regardless of their
employees called Pixar University. Catmull has also
title. Catmull and Lasseter use a “share the spotlight”
recognized that creativity affects both teams and indi-
management style. This has cultivated a work envi-
vidual contributors. Every member of a Pixar team is
ronment where employees are accountable to one
given creative ownership of some aspect of the proj-
another and collaboration is highly valued.

Believe in Your Playmates

When children learn new concepts, it usually results
About the Authors from intense observation and then trial and error in a
collaborative environment. In adulthood, innovation
In 1992, Bill Capodagli and Lynn Jackson typically begins when a person is open to discov-
cofounded Capodagli Jackson Consulting. They ery and is stimulated by a catalyst. At Pixar, Pixar
have helped numerous organizations revamp University serves as one catalyst for learning and col-
their customer service experiences and develop laborative creativity. Pixar University is headed by
innovative products. They have also developed Randy Nelson, a former technical trainer at NeXT and
performance strategies to impact organizational a founding member of the Flying Karamazov Brothers
change using Walt Disney’s “Dream, Believe, juggling troupe. Pixar University offers more than 110
Do, Dare” success credo. courses, ranging from improvisation to self-defense.
Pixar encourages its people to spend up to four hours
per week on educational activities.
Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

Another example of an educational catalyst is the environment where safe inquiry, exploration, and dis-
Opening Minds through the Arts (OMA) program in covery are possible. The authors emphasize the fact
the Tucson school system. The program focuses on that innovation comes from habitual and continuous
children’s neurological development and brain-based collaboration.
learning theories. Teaching artists use music, dance,
Just as bullying can occur during childhood, it is pos-
and visual arts to teach skills that are needed for sub-
sible for bullying to occur in the corporate world with
jects like reading, writing, math, and science. The
stringent command and control management. Under
culture of OMA is that “art is a team sport.”
these conditions, employees often perform poorly.
Pixar dealt with bullies in the 1990s
Pixarians working in a team environment (standard operating when it signed a deal with Walt
procedure at Pixar) are open to alternative answers helping Disney Studios for three movies,
foster an outward focus. They understand that an outward starting with Toy Story. The head
of Walt Disney Studios at the time
focus is a requirement for seeking and accepting new inputs
was Jeffrey Katzenberg, a leader
and ideas in a playground where “art is a team sport.” who was well known for bullying.
The Pixar team experienced con-
The “art is a team sport” philosophy also exists at tinual scrutiny and critiques from Katzenberg about
Pixar. Employees are encouraged to share ideas and the story. In addition, he forced the group to stick to a
to gather feedback from others, without a fear of fail- tight schedule, regardless of the quality that resulted.
ure. People feel comfortable failing together and then
As John Lasseter, Pixar’s chief creative officer, saw
recovering from mistakes together. In order for this to
how Toy Story and the main character Woody had
occur, employees must have mutual respect and trust.
changed due to Katzenberg’s criticisms, he became
These qualities are necessary for innovation to occur
discouraged. Katzenberg heard about the team’s
in teams. Capodagli and Jackson describe four char-
dissatisfaction and demanded that production stop
acteristics that people must have to make art a team
immediately. He made the team cut the size of the
sport:
crew and move the story team to Disney headquar-
1. Depth. Team members must have mastered a sub- ters, where he could manage the process. Lasseter
ject or skill. This demonstrates that an individual requested two weeks to turn things around. The team
has the discipline needed to make a dream a real- worked around the clock to deliver a successful
ity. In addition, becoming proficient in a skill rework of the film where Woody emerged as a more
requires comfort with failure and recovery. sympathetic character. Lasseter’s group recognized
that they had been tested by a strong opponent and
2. Breadth. When employees have a wide range of
there was no limit to what they could accomplish
interests, they can explore ideas from many dif-
together. The company values of collaboration and
ferent points of view and generate new ideas with
mutual respect were solidified during this experience.
others.
Capodagli and Jackson write that creative individuals
3. Communication. Team members need to be able to
thrive when they come together on groundbreaking
give and receive feedback. When giving feedback,
work and when they do not compromise their values.
they must be able to confirm that the message was
One way to avoid interference from corporate bullies
clearly understood.
is to set specific milestones within projects and invite
4. Collaboration. The ability to collaborate is essential management to periodic briefings. Milestones fulfill
for generating ideas and solving problems. three goals: 1) they present the current status and
Failure recovery is essential for making art a team results achieved to date, 2) they enable the team to
sport. Instead of rewarding people for answering continue “selling the dream,” and 3) they allow the
questions correctly, organizations must cultivate an group to obtain input from management. Manage-
ment is similar to a customer; teams must persuade

Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 4
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

them to embrace their dreams and vision for the 8. Avoid long planning meetings and reports.
future.
9. Make bold decisions – it is easier to ask for for-
Dare to Jump in the Water giveness than permission.
and Make Waves 10. Find a soul mate in a daring customer or supplier
Children instinctively try new things, do not fear criti- who will help test ideas.
cism, and are willing to learn from mistakes and try
again. For adults to be successful,
they must learn how to fail and
While in school, we are often educated into believing that we
also how to respond to failure. must succeed – that mistakes should be avoided. But to be suc-
Successful individuals view fail- cessful, we need to learn how to fail and how to respond to
ure in a different way – they see failure.
it as a learning method that pro-
pels them toward success. Capodagli and Jackson use
the term “failing forward” to describe the process of The amount of fun and play that occurs in a company
examining a failure and then moving beyond it. To is directly related to employee morale. Unfortunately,
learn at a faster pace, companies need to make mis- corporate standard operating procedures do not usu-
takes and fail forward at a faster pace. ally include fun. One valuable side effect of fun in the
workplace is that it inspires employees to be more
At Pixar, risk taking is one of the company’s core innovative. Capodagli and Jackson have identified
values. Creativity requires acceptance of uncertainty seven ways that organizations can promote play:
and the ability to recover when a risk does not pay
off. Many organizations are unable to manage failures 1. Create a unique playground. Casual interactions
that crop up along the way to success. They become between employees often promote play and inno-
mired in bureaucracy, trying to prevent a problem vative thinking. This can be accomplished by
from turning into a crisis or searching for someone to designing offices in such a way that people meet
blame for the problem. Pixar’s Ed Catmull notes that in common areas. Décor can also add to a play-
when something goes wrong at the company, people ful atmosphere. Innovation often occurs when the
respond to it, but they do not shy away from risky office feels like a home away from home.
ventures. The authors suggest ten ways that an orga- 2. Think play. Each month a different team is assigned
nization can encourage risk taking: to organize a fun experience for employees.
1. Celebrate failure with the same intensity that suc- 3. Allow personalized work spaces. When employees
cess is celebrated. are allowed to decorate their cubes and work
2. Use prototypes to conduct real-world tests of areas, it promotes an environment of mutual
ideas. respect and trust.

3. Develop a “skunk works” that has independence 4. Celebrate. Make time to celebrate team and indi-
and is not burdened by bureaucracy. vidual milestones. Giving employees a reason to
connect with others can boost morale.
4. Dream big and ask each team member to think of
ten unorthodox ideas for the project. 5. Give employees permission to be recognized for their
work by “outsiders.” When employees participate
5. Don’t cry poor – not having a large budget is an in professional associations, they have the chance
excuse rather than an obstacle to innovation. to gain recognition for their accomplishments and
6. Planning is okay, but plans must be flexible have fun.
enough to allow multiple retries. 6. Be a role model for mutual respect and trust. There is
7. Use a “planning center” approach to make plans a direct relationship between the level of mutual
and tracking visible to all. respect and trust in the office and employees’ atti-

Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

tudes about play. When mutual respect and trust 9. Declare a “Do Nothing, No Tech” day and spend
do not exist, it is impossible for play and fun to the day reading, writing, or drawing by hand.
become internalized in a culture.
10. Take quiet time. Set one hour each day for no
7. Laugh at oneself. Leaders who are able to laugh at meetings, phone calls, or email. Use the time for
themselves set the tone for workplace fun. Effec- thinking and planning.
tive leaders have an emotional connection with
11. Product marketing teams should go into the mar-
employees. This link cannot occur in an atmo-
ketplace and participate as a customer.
sphere of fear and intimidation.
12. Establish a “junior brain trust”
Pixar director Brad Bird (The Incredibles, Ratatouille) has said, to advise teams, comprised of chil-
“The most significant impact on a movie’s budget – but never dren seven to 12.
in the budget – is morale. If you have low morale, for every 13. Establish a “senior brain
one dollar you spend, you get about twenty-five cents of value. trust” to advise teams, comprised
If you have high morale, for every one dollar you spend you of senior citizens.

get about three dollars of value.” 14. Celebrate the failure of the
month as a way to learn from mis-
takes.
The benefits of play are numerous. It reduces ten-
sion, allows people to work out emotional issues, 15. Bring in an outside guest speaker to expand
helps team members see things from another point of employees’ thinking.
view, and inspires courage to take risks. The authors 16. Stretch the limits of the comfort zone with an
state that the team that plays together stays together, event like karaoke.
and exciting things happen. Pixar’s John Lasseter
believes that creative ideas can come from anywhere. 17. Give projects or teams a cool name.
Capodagli and Jackson describe 41 ways to unleash 18. Give all team members a “Neat Things Happen-
employees’ imaginations: ing Recorder” to record neat experiences outside
1. Take a road trip with the team to get first-hand of work.
experience with the company’s product. 19. Do not let perpetual naysayers win.
2. Collect artifacts that inspire good work. 20. Ask “What if?” and “Why not?” Teams should
3. Go fact finding on field trips that may seem dis- constantly challenge conventional wisdom.
connected but will expand the team’s imagination. 21. Get everyone in the “sandbox.” Part-time team
4. Go to the park and play, then debrief on how to members can destroy team creativity and spirit.
capture that enthusiasm in the workplace. 22. Do something audacious every day.
5. Go to an art museum and consider how different 23. Embrace chaos and confusion – innovation
art styles could enhance a product. requires a degree of uncertainty.
6. Encourage individual creative work spaces. 24. Hire someone who is the opposite of an existing
7. Visit the local fire department and discuss how team member. Creativity requires a diversity of
standard procedures and creativity are both used ideas.
to fight a fire. 25. Share successes, failures, experiences, and ideas.
8. Open a dream room and post creative ideas. They may serve as catalysts for innovation.
Encourage employees to add new ideas at least 26. Engage in “smart” benchmarking by seeing what
once a week. can be learned from a completely different indus-
try.
Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 6
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

27. Engage with other departments, vendors, cus- business plans for startup consideration. Both
tomers, and frontline employees. big successes and excellent failures should be
rewarded.
28. Innovation begins in human resources. Exciting
people and stimulating training are requirements Unleash Childlike Potential
for an innovative company culture. For many years, the business world has focused on
29. Celebrate everything from successes to failures. measurements as the primary way to evaluate success.
However, many efficiency metrics discourage inno-
30. Kick it up a notch. If something seems “good vation and creativity. A focus on short-term results
enough,” raise the bar. causes management to impose unrealistic production
31. Partner with academia through small, large, standards. Employees then become demoralized and
formal, or informal partnerships. productivity suffers more.

32. Cross functional innovation teams are often To measure innovation in an organization, Capodagli
highly successful. and Jackson propose three metrics. The first is lead-
ers who love innovation and expect the same from
33. Create a subsidiary organization for innovation.
all employees. The second is frontline leaders who
Large, successful companies may get complacent.
encourage creative ideas throughout the organization
Creating a separate innovation organization with
and a workplace that empowers employees to try new
its own staffing and culture can help.
ways of doing their jobs and to learn from their expe-
34. Decentralized units can get closer to the customer; riences. The third is tangible measurements that are
the workforce is tighter knit and a commitment meaningful to the business process. Companies must
to innovation is easier to promote. Organizations remember that managing innovation only by financial
larger than 500 employees should consider decen- metrics leads to unimaginative customer experiences.
tralizing.
35. Support innovation in the Pixar, like Walt, is in perpetual motion, always exploring the
local school system. The
educational system should
world through a child’s eyes of wonder. Creativity at its best
promote innovation, since means beginning each new project with a clean slate – not
children are the future work- resting on one’s laurels of past accomplishments.
force.
Two guiding principles at Pixar can be applied to
36. Conduct quarterly “Gong Shows” where anyone
any organization. The first is that quality is the best
in the organization can pitch a new idea.
business plan. Companies have one chance to deliver
37. Make everyone an innovator. Encourage and a magical experience for the customer, whether the
reward employees for innovation in their work. product is an animated film or a completely differ-
ent product or service. The second is that the team is
38. Solve problems, do not just make better products.
everything. Pixar prefers average performers who are
39. Ask innovative questions. What value is being quality driven and committed to the team rather than
added by the problem being solved? Who is the prima donnas who are most concerned with their
customer? How will the product be made? Where individual reputations. Teams that are fully engaged
are the markets and distribution channels for new are much more likely to deliver blockbuster results.
products and services?
Based on their experience researching Pixar, Capo-
40. Mentor innovators. Ask innovative employees to dagli and Jackson have identified 16 ways that other
mentor new hires. organizations can create their own “corporate play-
41. Establish a department of “intrapreneurism.” ground” and promote a culture of innovation:
Allow employees to present new ideas and 1. The story is king. When developing new products
Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

and services, the story must be developed first, and milestones is important, but this should not
then the team can innovate around it. be permission for small dreams or mediocrity.
2. “Displayed thinking techniques” like storyboarding. 15. Postmortems. At the end of projects, conduct post-
When ideas are generated graphically, it expands mortems to learn from the experience. Identify
team members’ perspectives. Seeing concepts in a five things that should be done differently and
drawing suggests new possibilities. five things that should be repeated.
3. Improvisation. Environments where risks cannot 16. Quality is the best business plan.
be taken generate work that looks derivative
Companies that adopt these 16 principles will have
in the marketplace. Encourage improvisational
started the journey toward a culture of innovation.
thinking.
It requires dedicated leadership and a collaborative
4. Plus-ing. Walt Disney coined the term “plus-ing” team of employees, but it can be achieved. Imagi-
as a way of making a film, attraction, or idea native consumers want exciting new products.
better. Never accept “good enough.” Constantly Organizations that make a commitment to innovation
seek ways to plus products and services. will be able to satisfy those customers and also inspire
employees.
5. Collaboration (inside). The innovation team should
mirror the company’s market. Teams that reflect g g g g
the market are more likely to come up with win-
ning business ideas. Features of the Book
6. Collaboration (outside). Find daring customers and Reading Time: 6 hours, 208 pages
suppliers who are willing to help develop new
ideas. In Innovate the Pixar Way, Bill Capodagli and Lynn
Jackson use Pixar to illustrate how companies can
7. Prototype. This is a low risk way to try, learn, and awaken the innovative spirit that exists in everyone.
try again. The book contains an appendix that briefly describes
8. Working on cool projects. All projects have the other innovative companies including Google, Nike,
potential to be interesting. Teams must endeavor Target, and others. In the spirit of playfulness, the
to make every innovative project fun and inspir- authors have also incorporated an appendix with “fun
ing. facts” about Pixar and another appendix with quotes
from children in the Opening Minds through the Arts
9. Training. Create a learning environment that program. This book is relevant to both managers and
engages the creativity of all employees. individual contributors. The book is best read from
10. Fun and play. The degree of fun and play in the beginning to end and concludes with references and a
work place is directly related to employees’ atti- comprehensive index.
tudes. People should choose a mindset that values
play.
Contents
11. Transparency (show and tell). Remove the barri- Acknowledgments
ers to information and communication. Strive to
carry out almost all decision making in public. Introduction: Why Pixar?

12. Celebration. Celebrate everything and see innova- About the Authors
tive thinking increase. Remember the Magic of Childhood
13. Brain trust. Create a “brain trust” of team mem- Where Did the Creativity Go?
bers who are willing to dream big.
Hey Kids, Let’s Put on a Show!
14. Dreamers with deadlines. Adherence to timelines
Section 1: Dream Like a Child
Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
Innovate the Pixar Way Bill Capodagli and Lynn Jackson

Dream for Infinity and Beyond: The Beginnings of

Pixar
A New Way to Play “Follow the Leader”
Section 2: Believe in Your Playmates
Collaboration in the Sandbox
Stand Together Against the Bullies
Section 3: Dare to Jump in the Water and Make
Waves
The Skater Who Never Falls Will Never Win the Gold!
Recess: Go Out and Play!
Forty-One neat Things to Unleash Your Imagination
Section 4: Do Unleash Your Childlike Potential
How Do You Measure a Dream?
“Let’s Make a Dent in the Universe”
Ready, Set, Go!
Appendix A: Other Corporate Playgrounds
Appendix B: Bill and Lynn’s Favorite Fun Facts About
Pixar
Appendix C: Through a Child’s Eyes
References
Index

Business Book Summaries® March 11, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 9
 Book
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usiness

Re w
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We Select and Review Only the
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Best Business Books You Should Read.

Volume 15, Number 2 • Copyright ©2000 Corporate Support Systems, Inc. • All Rights Reserved

Innovation
Explosion
Using Intellect and Software to
Revolutionize Growth Strategies
James Brian Quinn, Jordan J. Baruch,
Karen Anne Zien

©1997 The Free Press

ISBN 0-684-83394-8

Reviewed by Lydia Morris Brown

Chapter One: Executive Overview—Intellect, Innovation, and Growth

For the most part, the economic and producing power of a modern corporation or nation lies more in its intellectual and
systems capabilities than in its hard assets. The implications of this new economic environment are profound.
Intellectually based services will account for almost all job growth in both the services industries and manufacturing.
Thus, managing intellect and services effectively in worldwide competition will pose some of the decade’s most
serious management challenges.
Overcapacity will exist worldwide for virtually all raw materials, foods, manufacturers, and physical goods, to the
extent that average returns will be close to cost of capital. The exceptions will include those companies and countries that
can add value through unique development of their intellectual, innovation, or services capabilities.
Software will emerge as the core element in innovating, managing effectively, and creating competitive edge
in the new economy. It will decrease innovation times, costs, and risks by factors of ten while increasing value
for the customer even more. Managing innovation and software will be the two most critical management skills
of the new decade.

Business Book Review™ Vol. 15, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
Innovation Explosion James Brian Quinn, Jordan J. Baruch, Karen Anne Zien

New highly disaggregated organizational forms, maximum technical advances internally as well as the
flexible innovation structures, and fast-response intellect- highest customer payoffs. It defines how people interact,
leveraging capabilities, enabled by software, will provide the information they use, what they communicate about,
benefits well beyond those that teams can offer. Much where they can be located, and what skills they need. It
advanced innovation will be done through “independent becomes an integral element of the organization, often
collaborative” approaches featuring virtual laboratories, determining its very culture and potential directions. In
virtual skunk works, and software modeling techniques many cases, the software itself is the major innovative
that will allow companies to leverage their human and “product.” And in others, it determines the level of
fiscal resources in ways never before imagined. “service” customers receive from an innovation and the
Global outsourcing and services trade will occur on capacity to create further innovations based on the hooks
an unprecedented scale. Intellectually based services will the software provides.
dominate the value chains of virtually all companies.
And new technologies will decrease traditional scale and Chapter Three: Managing Software-Based
location advantages for all players. Disaggregation, global Innovation
sourcing, and dealing with the lateral competition of best- To take proper advantage of the revolutionary
in-world specialist service suppliers will become strategic opportunities software-based innovation offers, many
imperatives of the new era. companies will have to improve their own internal software
management capabilities dramatically. Five issues are
critical:
PART I: SOFTWARE REVOLUTIONIZES
INNOVATION 1. Designing the software infrastructure as a
learning system that integrates the marketplace
Chapter Two: Software-Based Innovation with operations and upstream scientific and
Software (primarily information technology software) technological data sources and models;
is changing innovation processes. It is usually the key 2. Focusing the system on capturing, exploiting,
element determining scientific and managerial effectiveness and leveraging user information to maximize
at each stage of the innovation process from discovery to value-on-use for customers and to support flex-
implementation. It provides the critical mechanism through ible remodification of innovated products or
which managers can lower costs, compress time cycles, services with customers further downstream;
decrease risks, and increase the value of innovations. this is in addition to decreasing internal innova-
Software is the core of the interactive learning and tion costs;
knowledge processes that enable innovations to achieve 3. Recognizing the software system as an integral
component of the organization that largely
About the Authors determines the language, modes, and possibili-
Dr. James Brian Quinn is the William and ties of human interactions and, thus, much of
Josephine Buchanan Professor of Management at the institution’s culture;
the Amos Tuck School at Dartmouth College. 4. Utilizing the full capabilities of software as a
self-learning system to define new innovative
Dr. Jordan J. Baruch, a former assistant secretary
opportunities to interlink remote sources of
of Commerce in the Carter administration, is presi-
knowledge in new ways, and to create catalytic
dent of Jordan Baruch Associates, a consulting
growth effects by providing hooks onto which
firm.
others can attach multiple new innovative
Karen Anne Zien is an innovation systems anthro- capabilities; and
pologist; president of Apogee, an international con- 5. Establishing a systematic approach to software
sulting firm, and cofounder of the Creativity &
development appropriate to the company’s
Innovation Lab.
specific strategy and management style.
Business Book Review™ Vol. 15, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
Innovation Explosion James Brian Quinn, Jordan J. Baruch, Karen Anne Zien

PART II: NEW ORGANIZATION FORMS PART III: TOP MANAGEMENT’S ROLE

Chapter Four: Beyond Teams—Independent Chapter Six: Vision, Leadership, and Strategic
Collaboration Focus
Software becomes the foundation and central element The most critical single role in stimulating innovation
in managing the kind of disaggregated, individualistic, is the leadership of top management. Only top managers
collaborative, innovative activity that increasing scientific can establish the tangible visions, focused strategies, and
complexity and corporate hypercompetition are forcing. rewarding support environments that effectively encourage
Although individuals and groups have long collaborated innovation. Although the CEO does not need to be a
on innovations, software now substitutes for many of technologist, he or she must personally stimulate and
the infrastructure formerly imposed by teams. Thus, champion:
collaboration is no longer limited by the social rules,
dysfunctional political interactions, and space constraints • A truly exciting corporate vision built around
of direct personal contacts. Software establishes new challenging strategic goals;
sets of interaction protocols and enables new and much • A genuine technology strategy that defines
more powerful modes of simultaneous conceptualization, how and where the firm will take the competi-
analysis, and synthesis. It simplifies or eliminates tive advantage;
many formerly required interactions (e.g., calculations, • A balanced portfolio of programs clearly struc-
descriptions, tests, or verifications). And through software, tured to achieve these goals;
individuals, or very small teams, operating independently • A few selected core competencies that give the
can cooperate with more parties, more remotely, and in company best-in-world capabilities and provide
more asynchronous time frames. unique value for customers;
• A set of figure-of-merit (i.e., overall financial
Chapter Five: Motivating Creativity toward targets) performance targets that concisely
Markets define what winning competitively means in
Continual self-generated innovation requires more each critical arena;
than providing information, creating connections, and • Highly disaggregated, self-directed, nonbu-
developing a strong congruence between the goals reaucratic organizational structures that both
of individuals and those of the enterprise. Accepted leverage interactive innovation and maintain
methodologies are also needed as well as genuine passion strategic focus; and
for creating something new and valuable for users. • High-profile entrepreneurial incentives to
One of the most important aspects of innovation reward those who take on the challenges
management is actively motivating people to solver user of innovation.
problems with new answers. A starting point is the
conscious extension of possible answers by encouraging
wider personal and software networking with a more Chapter Seven: Creating “Best-in-World”
diverse range of users and other technical experts. However, Capabilities
more than mere contact is needed; there also must be deep Vision, clear strategy, and balanced deployment of
understanding of the unique performance parameters and resources are not sufficient in themselves to ensure
qualitative context of the problem itself. All of this suggests successful innovation. Top management must also see that
an innovation system where technologists actively live in their strategies embody figure-of-merit targets that will
the customer’s environment, engage with many outside result in competitive success. They must deploy a few
sources of ideas, and interact with both customers and other core competencies that give the company best-in-world
experts as closely as possible around simulations, models, capabilities in a few key areas critical to customers, and
or prototypes that help discipline their thinking. they must focus more intellectual resources on these key
areas than anyone else. They must leverage the enterprise’s

Business Book Review™ Vol. 15, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
Innovation Explosion James Brian Quinn, Jordan J. Baruch, Karen Anne Zien

resources, to the fullest possible extent, through alliances • Protect flexibility, time horizons, underground
with and strategic outsourcing to best-in-world outside activities, and direct access to information;
parties. And they must build an incentive structure that • Focus on champions, concepts, competencies,
clearly supports innovation and the strategic deployments uniqueness, and customer reactions, rather than
that ensure these best-in-world capabilities. misleading numbers; and
• Encourage multiple, self-guided, entrepreneur-
ial units to compete and prove their ideas in
PART IV: MIDDLE MANAGEMENT ISSUES objective performance terms.
Chapter Eight: Matching Strategies, Structure,
and Incentives PART V: NATIONAL STRATEGY
Middle managers perhaps have the most difficult role in CONSIDERATIONS
innovation, for they often find themselves in conflict with
both top managers and technological innovators. In addition Chapter Ten: The Politics of Science—The
to providing motivating visions, challenging strategic Nature of Scientific Knowledge
goals, and figure-of-merit targets for their operations, The creation of scientific-technical knowledge involves,
they must: at minimum, seven important conceptual levels—(1)
hypothesis generation, (2) testing, (3) exploration, (4)
• Implement a clear strategic, market-oriented systematic observation, (5) classification, (6) technology
focus across all technology and operating building, and (7) dissemination. Although progressing
units; in this general order, these levels typically occur
• Flatten internal organizations and encourage simultaneously and interactively in any healthy inquiry.
aggressive, decentralized, multiple-competing Unfortunately, however, most scientific method focuses
innovations to collaborate laterally across almost exclusively on hypothesis generation and testing,
the organization; despite the fact that the remaining levels probably create
• Empower and reward innovators, champions, more of a valid knowledge pool and are far more
risk takers, and change agents, while honoring important in creating competitive advantage, economic
those who squeeze out profits; value, and social benefit. A healthy scientific-technological
• Appropriately match incentives to each unit’s knowledge-generating system does not necessarily mean
unique strategies and time horizons; and more R&D. Instead it consciously and systematically
• Provide long-term leadership, enthusiasm, and taps into all stages of knowledge development. And it
sustained commitment while living in the chaos actively recognizes and exploits the highly independent,
of innovation. unpredictable, interactive processes that underlie all major
scientific and technological innovation.

Chapter Nine: Middle Management—The Basics Chapter Eleven: National Technology

Focused, disaggregated, laterally oriented, innovating Competitiveness—Government-Industry
groups will work only if managers convert the more Strategies That Work
transitory aspects of the innovation process into concrete In any national technology strategy, private market
reality. Thus, they must: mechanisms should be used as much as possible.
Nonetheless, government actions have historically helped
• Actively seek emerging opportunities, establish to create trillions of dollars in new industries and innovation
very demanding goals, and expect success; opportunities that would not have existed otherwise.
• Encourage uniqueness, constructive confronta- Experience shows that governments have been most
tion, high performance, and mutual trust; effective (although not always efficient) when they increase
private market efficiencies, help create new freestanding

Business Book Review™ Vol. 15, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 4
Innovation Explosion James Brian Quinn, Jordan J. Baruch, Karen Anne Zien

markets, break down institutional barriers to innovation, Remarks

extend corporate time horizons, and provide strong
differential incentives for savers, innovators, producers, Knowledge building, innovation, and scientific-
and learners. Moreover, as populations increase, natural technological advancement are the critical ingredients for
resources disappear, urbanization grows, health and economic growth and competitive advantage. But few
security problems expand, nature’s ecosystems break managers clearly understand how such processes actually
down, and complex technologies are required to solve occur—how they can develop and utilize knowledge
problems, the need for effective government intervention (intellect), science, and technology to maximize innovation
is likely to expand. and growth.
Innovation Explosion offers an exciting prospective
Chapter Twelve: National Technology on innovation that distinguishes five levels of useful
Strategies—Creating Public Markets knowledge—cognitive (knowing what), advanced skills
National strategies are needed because unfettered (knowing how), system integration (knowing why),
markets frequently allocate natural resources extremely creative (caring why), and synthesis and intuition.
poorly. Government actions often create entirely new Then it introduces and develops some novel concepts—
public markets that generate large growth opportunities “independent collaboration,” “auto-catalytic” or “negative
for the nation and for private companies. Government entropy,” “technological multiplier benefits,” and “core-
can support many classes of value-creating innovation competency-with-strategic-outsourcing” strategies—and
that private markets rationally cannot. And when properly synthesizes them into a practical framework to help
implemented, government actions make private markets managers not only enhance the expertise and creativity
much more efficient and effective. of their workforces, but to fill any existing strategy
Chapter Thirteen: National Technology vacuum.
Strategies in a Services and Software World This practical framework is built on the most novel
The key strategic factors in this age of knowledge, concept (which is also the major focus on the work)—the
software, and services include increasing general knowledge idea of the “software paradigm” of innovation. It is here
and access to technological information, lowering capital that the authors go beyond most approaches to innovation,
costs and facilitating venture investments, improving providing profound insight into the notion that software is
educational infrastructures, leveraging public and private more than just a technological means of guiding physical
investments to provide better information domestically machines and processes, interrelating multiple processes
and internationally, and developing public markets to or operations, and/or interconnecting multiple locations
deal with inefficiencies and unexploited opportunities and systems. Their premise that software is a form of
in private markets. As more people connect to the intellect and a key factor in developing, leveraging, and
education system and the information networks supporting diffusing all levels of intellect from the cognitive to
knowledge distribution, they will innovate new value- the intuitive provides an intriguing new perspective on
producing activities vastly in excess of those that can be strategic innovation, organization, and competition.
foreseen by the original investors. Thus, better education
is clearly the key to success.

Reading Suggestions
* * *
Bibliographic notes by chapter Reading Time: 10 to 12 hours, 448 Pages in Book
and a subjectindex are provided. Although the authors present exciting ideas, this
is by no means an easy read. Occasional lapses into
techno-jargon and somewhat turgid prose might slow you
down a little. So we suggest attacking the work in small

Business Book Review™ Vol. 15, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 5
 May 5, 2011

The Innovation
Secrets of Steve Jobs

y
op
Insanely Different Principles for

C
Breakthrough Success

's
er
Carmine Gallo

ad
Adapted by permission of McGraw-Hill from The Innovation
Le
Secrets of Steve Jobs by Carmine Gallo. ©2011 by Carmine
ng

Gallo
ISBN: 978-0-07-174875-9
ni
ar
Le

Introduction
nd

In The Innovation Secrets of Steve Jobs, business Pursuing Passions in Order

la

journalist Carmine Gallo describes the seven prin- to Change the World
go

ciples that form the philosophical core of master Steve Jobs has always pursued his passions, whether
ca

innovator, Steve Jobs. Although there is only one or not this seemed like the best choice at the time. He
Steve Jobs, studying and following these principles dropped out of Reed College in 1972 because he was
hi

can inspire creativity and the ability to ‘think differ- not passionate about school, and wanted to focus on
C

ent’ in any profession or workplace. Among these what he was passionate about: computers. He slept
principles are the importance of following one’s heart on the floors of his friends’ dormitories and dropped
and pursuing one’s passion, as well as the importance in on classes that interested him. After eventually
of seeking out new experiences. Innovations occur by moving back in with his parents in Silicon Valley, he
making connections between unexpected things, and and his childhood friend, Steve Wozniak, continued
this ability is rooted in a life filled with a wide range to pursue their common interest in computers. Woz-
of experiences. Simplicity is also crucial, because any- niak designed programs and computer technology
thing which is more complicated than it needs to be without pay, simply because that is what he loved to
will attract a narrower audience. Also important is the do. Jobs and Wozniak cofounded Apple Computers
ability to communicate the importance and utility of based in Job’s parents’ house, becoming millionaires a
one’s innovation, or tell its story, effectively. few years later, and then billionaires a few years after
that.
Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
The Innovation Secrets of Steve Jobs Carmine Gallo

Principle #1: Do What You Love

The story of Apple Computers illustrates the first prin-
ciple of innovation: people should do what they love.
Key Concepts
For successful innovation to occur, individuals must Seven principles forming the philosophical core
pursue what they are most passionate about. Pas- of the innovations of Steve Jobs include:
sion drives people to work harder, longer, and better
because they truly care about what they are doing and 1. Do What You Love. For effective innovation to
enjoy doing it in and of itself. Jobs and Wozniak did occur, individuals need to pursue what they
not start Apple Computers because they wanted to are most passionate about.
get rich; they started it because they loved computers 2. Put a Dent in the Universe. True innovation
and wanted to do something which involved comput- should seek to improve the world.
ers every day. This necessitated making a living via

y
3. Kick Start Your Brain. To be innovative, indi-
computers.

op
viduals need to try new experiences to open
In 1985, Steve Jobs was fired from his own company, their mind to unforeseen possibilities.

C
Apple Computers, during a power struggle with the
4. Sell Dreams, Not Products. Advertising

's
then CEO, John Sculley. Jobs was humiliated and
should show how the product can make life

er
crushed. But his passion for electronics was still there,
better, rather than overloading viewers with
and he pursued it actively. During the next decade, he

ad
excessive flashy visuals and text.
started several new electronics companies, including
Pixar. During that decade, Pixar produced Toy Story,
Le 5. Say No to 1,000 Things. Simplicity is attrac-
which was, and still is, one of the most successful and tive to individuals of all ages, genders and
ng

critically acclaimed animated films of all time. nationalities. Remove anything detracting
from a product or service’s purpose.
ni

Steve Jobs has been able to capture his intense passion

for electronics and turn it into innovative electronic 6. Create Insanely Great Experiences. Retail stores
ar

and digital entertainment, solutions, and products. and service locations should center around
Le

While it is possible for anyone to become innovative the needs and desires of the customer.
if they do what they love; few people will ever come
nd

7. Master the Message. Individuals should

up with an idea that is truly revolutionary and useful
explain their product or service in three con-
la

without passion for their work. The opportunity for

cise points to ensure that their audience will
innovation is always there for those who focus on
go

remember what was stated.

doing what they could not imagine living life without.
ca

For anyone who has not found a passion, he recom- g g g g

mends that they keep looking. He believes time spent Information about the author and subject:
hi

doing what one is not passionate about to be wasted http://gallocommunications.com

C

time which would have been better spent discovering

Information about this book and other business titles:
one’s true love. To find a passion, try something new
www.mhprofessional.com
and different, or ask a friend who has transitioned
into a career they love about their own story of dis-
covery. Related summary in the BBS Library:
Throughout his discussion on the importance of Innovate the Pixar Way
passion, Gallo cites several individuals who truly Business Lessons from the World’s Most
exemplify the first principle of innovation. James Creative Corporate Playground
Dyson is a British inventor who had a particular fixa- Bill Capodagli and Lynn Jackson
tion on creating the world’s first bagless vacuum.
Bagless vacuums retain suction better than those
which utilized bags. Dyson’s wife supported them
Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
The Innovation Secrets of Steve Jobs Carmine Gallo

financially through her work as a teacher while he and to improve the quality of everyday people’s lives.
tried to create the bagless vacuum. After five years
One of the most illuminating examples cited within
and 5,126 failed attempts, he successfully finished the
Gallo’s discussion of the second principle of innovation
vacuum. He took his invention to Britain’s top vacuum
is the story of Rob Campbell. Campbell’s particular
companies, but no one wanted to buy his invention
tale conveys the ways in which Jobs’ unique vision for
because they were making a large profit from selling
the future of computers was able to attract so many
vacuum bags. Dyson did not let this discourage him.
similarly talented and passionate individuals. In 1977
Instead, he started his own company, Dyson, and
Campbell was a small-time software programmer in
started selling his vacuum in Asia, where it became
Denver, Colorado and had just programmed the first
wildly popular. He then introduced the vacuum
general accounting program for the Apple II com-
into his home market of Great Britain, and Dyson
puter. He started looking for a permanent position
Vacuums became the bestselling vacuum cleaner in
at one of the companies he had been doing freelance

y
the United Kingdom. Because Dyson, like Jobs, was

op
truly passionate about what he
was doing, his thousands of fail- …Jobs is not a one-man show. He knows what he doesn’t know.

C
ures did not discourage him, nor Jobs ‘sees over the horizon’ and hires people – the best in the

's
was he discouraged by the rejec- business- who are inspired to make the dream a reality.

er
tions he received from the large

ad
vacuum corporations.
work for, and approached three companies, includ-
Principle #2: Put a Dent in the Universe ing Apple. Campbell asked each company what their
Le
vision for the personal computer was. The first com-
Steve Jobs has not only been passionate about comput-
pany stated that computers were the new fad and they
ng

ers; he has also foreseen how the personal computer

would be able to make a lot of money off of them. The
could change the world for the better. This leads to the
ni

second company stated that getting involved in the

second principle of Steve Jobs’ innovation success: put
ar

technology industry would help to raise their com-

a dent in the universe. At the time of Apple’s found-
pany’s stock. Steve Jobs of Apple, however, outlined
Le

ing, computers were used in a relatively small number

the many ways that he saw the personal computer
of businesses. The idea of using a computer in a home
improving the world of the future. Medical records
nd

for personal use was completely foreign. Jobs wanted

would be able to be pulled up faster, people would be
to create an effective and useful personal computer
la

able to communicate with each other more easily, the

amount of paper used in business would be signifi-
go

About the Author cantly reduced, thus helping the environment, people
ca

would be able to work from home. This was the vision

that Campbell wanted to be a part of, and it is a key
hi

Carmine Gallo is a former television anchor

and business correspondent. He is currently a part of why Steve Jobs has been able to come up with
C

columnist for Bloomberg BusinessWeek and Mon- such groundbreaking products, year after year.
ster.com, and he has written two books, The Jobs had a big, positive vision about what the per-
Innovation Secrets of Steve Jobs and The Presenta- sonal computer could bring into the world, and this
tion Secrets of Steve Jobs. He has also appeared vision helped him attract some of the most intelli-
on CBS, CNBC, NBC, BNET, MSNBC.com, and gent and talented people in the computer industry.
Forbes.com. Gallo has been featured in the Wall No single individual, no matter how smart, talented
Street Journal, the New York Times and Investor’s or charismatic, can create innovation on their own.
Business Daily. He currently resides in San Fran- Groundbreaking innovation is a team effort, and
cisco, California where he lives with his wife people are drawn to those who have inspirational
and two daughters. ideas. Passionate people want to make a difference
in the world, and if they are shown that a company

Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
 The Innovation Secrets of Steve Jobs Carmine Gallo

shares their belief, then they will want to work for tions and policies.
that company. This desire to create a better world is a
Try New Things, Then Sell People
significant reason why Apple has been able to recruit
Dreams, Not Products
such talented individuals and make such popular and
groundbreaking products. Steve Jobs has always actively sought out new experi-
ences, and in doing so, has opened his mind to new
This big vision also helped raise the capital needed to ways of thinking. After dropping out of Reed College,
make the vision become reality. When Apple sought he periodically returned to Oregon to spend time
private investments in 1977 to take their company at a Zen-influenced commune that made an income
to the next step, Jobs highlighted in his presentation by growing apples. At the commune he conversed
the various ways that the average person would be with a wide variety of individuals, learning about
able to use the personal computer. He suggested that many different topics. Jobs also visited India in the
it would improve learning efficiency, save time and 1970s in order to have a new, different and exciting

y
money, allow for increased leisure time, increase the

op
life experience. When Apple began to grow, he hired
variety of entertainment, allow for better security of artists, musicians and poets to work for the company

C
personal information, allow for better financial deci- in order to ensure that they had a diverse amount of
sions and create personal enjoyment. A key aspect

's
creative input within the organization. It is because
of his vision for the personal computer was that

er
of his desire to try the new and unknown that he has
anyone would be able to use it, no matter their techni- been, and continues to be, able to draw connections

ad
cal, mathematical, or engineering abilities—and this between things that others cannot.
meant that its future users had no desire to purchase Le
one at the present moment. This is another hallmark Principle #3: Kick Start Your Brain
of true innovation: creating something that people do The substance of the third principle of innovation is
ng

not even know they need. that individuals should try new things. The brain fol-
ni

lows established mental patterns

…One reason behind Jobs’ ability to generate idea after idea is in order to conserve energy, and
ar

that, as Harvard researchers observe, ‘he has spent a lifetime these mental patterns often result
Le

exploring new and unrelated things – the art of calligraphy, in repetitive, non-creative think-
meditation practices in an Indian ashram, and the fine details ing. However, according to Emory
nd

University neuroscientist Gregory

of a Mercedes-Benz.’
la

Berns, if individuals bombard

go

Apple has continued to be successful because Jobs’ their brain with new experiences,
original vision has never wavered. He has been very they force their brain to make new judgments. Neu-
ca

clear about his vision for each of the new products roscience researchers at Harvard University have
concluded the most important skill separating inno-
hi

that the company has developed. He does not use or

vators from other, less creative, individuals is the
C

support the use of mission statements, instead, prefer-

ring to hire talented people who are passionate about ability to connect seemingly unrelated issues or con-
what they do and who inspire each other to make the cepts. Innovators are able to connect their previous
best products possible. Subsequently, Apple does not experiences in order to create new things.
place huge “inspirational” posters on the walls. As a result, the more varied the life experiences of
Individuals should never underestimate the power an individual, the greater the number of connections
a clear and strong vision gives to an organization. If they are able to make between different subject mat-
an organization lacks a concise, consistent, and bold ters. Steve Jobs has been able to come up with very
vision, it should begin putting one together, and if unique innovations because his wide-ranging, seem-
this proves to be difficult, they should look to a com- ingly unrelated life experiences have provided him
pany or organization with an effective vision to see opportunities to draw strikingly different connections
how it incorporates their vision into everyday interac- between concepts and things. His brain processes and

Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 4
The Innovation Secrets of Steve Jobs Carmine Gallo

connects information in a way that is unique, in part some major changes.

because he has exposed himself to many different
Jobs believed that Apple had neglected its core con-
things.
sumer audience, and had begun to try to design their
When Jobs was attending Reed College, he took a products for everyone. He determined that Apple’s
calligraphy course and fell in love with the subject. customer base was composed primarily of teach-
Calligraphy seemed unrelated to his computing ers and creative-types: at that time, 65 percent of all
passion, and it offered no real career path, but he computers used by teachers in the U.S. were Apples,
pursued it just the same. Later on, when he and Woz- as were 80 percent of all computers used in graphic
niak were designing the first Apple computer, Apple design, advertising, printing and prepress. These
I, Jobs thought to incorporate different typefaces into teachers and artists want to make the world a better
the programming. Without that college calligraphy place. A new ad campaign to remind Apple’s custom-
course, he may well not have considered incorporat- ers and employees of what Apple was all about was

y
ing different fonts into the device, and the world’s initiated. One ad featured images of heroes and inspi-

op
computers probably would offer fewer font options. rational figures, including Einstein, Amelia Earhart,

C
Martin Luther King Jr. and Bob Dylan, while actor
Jobs also made a connection between the appearance
Richard Dreyfuss read an inspirational poem that

's
of comforting devices which people use every day,
emphasized the importance of creativity, ingenuity

er
and the exterior appearance of computers. Although it
and discovery. It reflected Steve Jobs’ philosophy pre-
featured comparatively advanced programming, the

ad
cisely: market the Apple brand as a whole in a way that
Apple I was sold primarily as a kit for computer hob-
Leinspires others to reach for their dreams and change
byists. Its exterior design did not differ significantly
the world for the better, instead of marketing a prod-
from that of other computers at the time: it was large
uct with gimmicks, bells, and whistles. In fact, Jobs
ng

and flat, and required the addition of parts to the cir-

truly does believe that his customers and employees
cuit boards—something which the average individual
ni

have the ability to make great and amazing changes

would never dream of doing. Realizing that a personal
ar

in the world through the use of Apple computers, and

computer which would be used by families could not
the sincerity of this belief has encouraged millions to
Le

appear overwhelming, Jobs spent many hours in the

buy more Apple products.
kitchen sections of department stores studying the
nd

exterior design of various appli-

ances. It was in food processors All the same, innovation is not limited to building something
la

that he found inspiration for the that nobody has ever seen. Instead, Apple does one thing very
go

Apple II’s exterior design, which

well: making complex things simple and elegant. That’s what
used a molded, textured plastic
ca

exterior. Most computers have

makes Apple the world’s most innovative company.
hi

used this design since, with the

C

exception of the new metallic-encased MacBook Pros. This approach of creating ‘dreams instead of prod-
ucts’ implies a different kind of relationship with a
Principle #4: Sell Dreams, Not Products
company’s customer base. If a company is creating
The fourth principle of Steve Jobs’ innovation is to sell revolutionary products, they are creating something
dreams, not products. This sentiment is evident in that people do not know that they want until they get
the return of Steve Jobs to Apple Computers in 1997. it. This means that traditional consumer focus groups
After he was fired from Apple in 1985, the company are not helpful. For example, the iPad was a huge suc-
began to expand, offering products that were not par- cess, but if Apple had asked consumers what product
ticularly useful or applicable to their main consumer they would like next, few would have suggested a
audience. As a result, Apple sales dropped from $11 device between a laptop and an iPhone without a key-
billion to $7 billion. When the company asked Jobs board which allows them to read books, magazines
to return to Apple, he knew there would have to be and newspapers digitally, play music and movies, and

Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
The Innovation Secrets of Steve Jobs Carmine Gallo

connect to the Internet. That would resemble asking the ease-of-use of Apple products, which in turn has
someone in 1915 to describe their ideal entertainment contributed to their commercial success.
product, and expecting them to suggest a television. It
The aluminum body enclosure of many Apple prod-
is simply beyond their realm of experience.
ucts also reduced the amount of the computer’s
Instead, Apple connects with its consumer base in structural parts by 60 percent, saving work for the
an extremely intimate way that supersedes the need manufacturer and helping to minimize production
for constant surveys or focus groups. Steve Jobs has waste. The reduction in the number of computer parts
said that he designs products that he would like him- has created computers which are stronger physically
self, because he knows that his likes and dislikes and and better able to withstand pressure.
product needs resemble the likes and dislikes of his
The simple, straightforward design of the iPod was
customers. When Apple releases a new product, it
revolutionary in the mp3 industry. Other mp3 players
puts forward of vision of what its customers will love,

y
included different buttons and knobs which suppos-
and its ads demonstrate how they will come to love

op
edly offered a wider variety of listening options to
and enjoy the new product.
the consumer, but in reality com-

C
plicated the listening. In contrast,
When Johnson and Jobs decided that the vision for Apple’s

's
the iPod, featuring a circular pad
stores would be ‘enriching lives’ instead of ‘moving metal,’ it

er
with another circle in the middle,
allowed them to throw out the conventional retail playbook was designed the make the listen-

ad
that dictated store design…Apple would build boutiques that Le ing experience as simple, quick,
and easy as possible. Anything
offered solutions, a novel approach to selling computers.
detracting from the music lis-
ng

Keep it Simple tening experience was removed from the final iPod
product.
ni

When Jobs returned to Apple in 1997, he reduced the

number of products Apple offered from 350 to 10. A Different Brand Experience
ar

He wanted to offer products that were excellent, and For many years, Apple depended on giant electronic
Le

believed that offering anything failing his expecta- retailers to sell their products. Unfortunately, many
tions would only sully Apple’s reputation. The actions of the employees at these giant retailers knew little
nd

he took rescued Apple from the brink of bankruptcy about the various electronic products being sold in
and turned it into the successful company it is today.
la

the store, and as a result were not able to describe the

go

Principle #5: Say No to 1,000 Things advantages that Apple products had over the other
products sold in the store. Jobs recognized this prob-
ca

Eliminating excess is in keeping with Jobs’ fifth prin- lem, and knew that the only solution was to open a
ciple of innovation: say no to 1,000 things. Anything chain of Apple retail locations.
hi

that compromises an uncluttered, elegant customer

C

experience will not be included in the final product. Principle #6: Create Insanely Great Experiences
This can be seen in many different aspects of Apple’s This leads to Jobs’ sixth principle of innovation: to
advertising and product lines, as well as on their web- create insanely great experiences. He strives to create
site, which sports a clean, minimalist layout. unique user experiences for Apple customers, and as
Jobs hired Jonathan Ives, an English designer a consequence, they return to Apple to satisfy their
renowned globally for simple, visually pleasing future electronic product needs.
designs and a tireless work ethic, to create modern, In 2000 he hired former Target executive Ron Johnson
simple designs for Apple’s products. The marriage and asked Gap CEO Mickey Drexler to join Apple’s
of Ives and Apple has been a resounding success. board to help guide Apple to retail success. They had
Ives’ minimalist designs offer a unique combination a vision for Apple’s retail stores, and that vision was
of simplicity and accessibility, adding significantly to to “enrich lives.” Their goal was to enable consumers

Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 6
The Innovation Secrets of Steve Jobs Carmine Gallo

to see what they could do with electronic products, old computer and the new one which now conve-
and this entailed putting a model of each product out niently contains all the information from the old one.
for the customers to play with and use. Apple’s attention to making the computer purchasing
experience one which is easy, pleasant, and quick has
After many meetings, Jobs and Johnson came up with
greatly expanded their customer base.
several criteria that would make Apple stores stand
out from other electronic retailers: The Power of Presentation
• The stores would be placed in locations with the Throughout Apple’s history, Steve Jobs has shared
easiest access. Instead of putting them in a unique his vision with others in order to gain either financial
and remote location, they placed Apple stores in backing or the trust and interest of consumers. With-
shopping malls where everyday people would be out the ability to communicate his vision to others
able to go inside and look around. effectively, Jobs would not be the successful business-
man we know and Apple would not have become the

y
• The stores would be simple and uncluttered

op
iconic brand which it is today.
inside. They would be well-lit

C
and open, using only stainless Steve Jobs understands that his audiences retain information
steel, glass, and Scandinavian
more effectively when ideas are presented in words and pic-

's
wood in their interior design.

er
tures instead of words alone... in the iPad presentation...[t]here
• The stores would offer a ser-

ad
were words and pictures – plenty of pictures – but no bullet
vice similar to that offered by
a concierge at a nice hotel. A points. Le
“genius bar” provides a place Principle #7: Master the Message
ng

for customers to walk up and ask questions about

any product or issue they may have with a prod- The power of presentation is reflected in the seventh
ni

uct. principle of Steve Jobs’ innovation, which is to master

ar

the message. It was Jobs’ remarkable ability to pres-

• The stores would provide one-on-one training ent his ideas in a way which inspires and motivates
Le

with an Apple employee for any individual who others that enabled Apple to gain financial backing in
has purchased an Apple computer on Apple’s the first place, and later to regain the trust of its cus-
nd

website or in their store. The training would focus tomers.

on whatever product or program the customer
la

chose. Jobs utilizes “the rule of three” in his presentations

go

and product launches, explaining his products or

• The products would be easy to buy. There would ideas in three concise points to make them easy to
ca

be no cash registers; employees would be able to remember and comprehend. In fact, studies by neu-
hi

ring up any customer with a portable wireless roscientists have demonstrated that the human brain
credit card reader that they carried around the
C

usually cannot remember more than three or four

store with them. pieces of information at a time. Jobs’ presentations
The Apple retail stores have been a huge success. describe an antagonist in a situation with a problem,
Not only have they boosted sales, their convenient and include Apple as the hero, or the solution to the
mall locations have exposed a wide range of people problem.
to Apple’s products. The “Meet Your Mac” program The presentations also feature a twitter-friendly head-
has made the computer purchasing experience easier. line that provides media outlets a catch phrase to use
Through this program, any customer who has pur- when writing about the new product or service. This
chased a new Apple computer is able to bring in the short and simple headline also enables Jobs to control
old computers so that Apple employees can transfer the public message which the media communicates
data from the old computer to their new one. The cus- about the new product or service. The twitter-friendly
tomer schedules an appointment to pick up both their headlines are shorter than Twitter’s 140-character post
Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
The Innovation Secrets of Steve Jobs Carmine Gallo

limit, and feature something positive about the new Chapter Five: Think Differently About How You
product or service. The presentations are visually Think
simple, including no bullet points, and feature slides
Chapter Six: Seek Out New Experiences
to explain key words, as well as slides with pictures to
illustrate points. They use “zippy,” uplifting words to Chapter Seven: Think Differently About How You
describe Apple’s new product or service. Think

Three key tactics contribute to Jobs’ ability to com- Chapter Eight: See Genius in their Craziness
municate value effectively. First, he tells classic stories Chapter Nine: Think Differently About Your Custom-
in order to get others to buy into the idea or product ers
he is presenting. Second, he keeps everyone on the
Apple team aligned by using a consistent and clear Chapter Ten: Simplicity is the Ultimate Sophistication
message about each of his ideas and products. Third, Chapter Eleven: Think Differently About Design

y
he encourages his employees to develop their own

op
presentation skills, and targets people with outstand- Chapter Twelve: We’re here to Help You Grow

C
ing presentation skills to work for Apple. Chapter Thirteen: Think Differently About Your
Brand Experience

's
er
g g g g
Chapter Fourteen: The World’s Greatest Corporate

ad
Features of the Book Storyteller

LeChapter Fifteen: Think Differently About Your Story

Reading Time: 4-5 Hours, 241 pages
One More Thing…Don’t Let the Bozos Get You Down
The Innovation Secrets of Steve Jobs would be ben-
ng

eficial to those working in executive positions or to Notes

ni

anyone who has started or is interested in starting Index

ar

their own business. The book cites many examples

of other successful companies which have operated
Le

under principles similar to those championed by

Steve Jobs. It is written in a straightforward, easy-to-
nd

read style. There are a few visuals in the book that

la

help to demonstrate some of the tools Steve Jobs uses

go

in his presentations and in his planning, but more

visuals would have been helpful. It is not necessary to
ca

read the book from cover to cover, since the principles

of innovation do not build upon each other chrono-
hi

logically.
C

Contents
Acknowledgements
Introduction: What the World Needs Now is More
Jobs – Steve Jobs
Chapter One: What Would Steve Do?
Chapter Two: Follow Your Heart
Chapter Three: Think Differently About Your Career
Chapter Four: Inspire Evangelists
Business Book Summaries® May 5, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
Book Review #1 The Innovator’s Dilemma Jennifer Yang

A Book Review:

The Innovator’s Dilemma

By Clayton M. Christensen

Keunyoung (Jennifer) Yang

Student ID #: 1618-128032

Date: 10/15/2010
Book Review #1 The Innovator’s Dilemma Jennifer Yang

“The Innovator’s Dilemma” explores how the creation of new technologies can cause
companies to lose market share or their markets entirely, even companies that do everything right
such as listening to their customers, watching the marketplace, and investing in research and
development. It outlines clearly why successful companies find it easy to develop "sustaining"
technologies and why they find it so extraordinarily difficult to develop the "disruptive"
technologies that our economy and country need to continue moving forward and being
successful. This book grabbed my attention because I have been interested in the business
strategy and leadership, especially since I have read about the paradox of leadership from
“Broaden the vision and narrow the focus” by James R. Lucas. In many cases, leaders who have
influenced the society and the economy of countries are also innovators who made their creative
ideas or findings successfully applied in practice. Moreover, most companies these days are
seeking for innovations in their organizations, technologies, ways of management, and so on. In
this sense, the title, The Innovator’s Dilemma met my interest about the paradox or dilemma of
leadership and business strategy in today’s business world. Usually I tend to judge business books
by whether, as a CEO of a company, I learn something that I can apply to my company to make
it better; and in this case, there are a lot of useful and insightful thoughts and theories, although
there are some weaknesses, too.

Summary
To briefly summarize the book, The Innovator’s Dilemma, it offers a compelling
explanation for why large and well-respected companies lose their dominant position within a
market, following what Christensen styles as “disruptive innovation.” The arguments are based
on the author’s study of the computer disk drive industry. Disk drive manufacturing was chosen
for its frequent turnover of technology and competitors in a relatively short time span; however,
the author also looks at the retailing industry, pharmaceutical industry, and automobile industry
including the development of the electric car, among others.
In Part One, Chapters 1-4, Christensen builds a framework that explains why sound
decisions by great managers can lead to failure. In Part Two, Chapters 5-10, he attempts to
resolve the dilemma by examining why and under what circumstances new technologies have
caused great firms to fail. He makes an important distinction between sustaining technologies
and those which are disruptive, and offers four "laws or principles" of disruptive technology: (1)
companies depend on customers and investors for resources; (2) small markets don't solve the
growth needs of large companies; (3) markets that don't exist can't be analyzed; and (4)
technology supply may not equal market demand. Actually, these four principles could also be
Book Review #1 The Innovator’s Dilemma Jennifer Yang

viewed as guidelines as well as check-points by which to detect early-warning danger signs.

Unless and until, however, it becomes obvious that a given technology will create sustaining
rather than only temporary disruption.
In Part Two, Christensen describes in detail how managers can address and harness four
principles by which to prevail against disruptive technologies. Once again, he asserts that a
company's customers effectively control what it can and cannot do. Managers who deny or
ignore this do so at great peril. To support his assertion, Christensen examines several quite
different companies: Quantum, Plus Development, Control Data, Micropolis, DEC, IBM,
Kresge, Woolworth, and Hewlett-Packard. In some of these companies, the innovating managers
who were faced with disruptive technologies created organizations whose cost structures enabled
them to make money in the value network where the disruptive technology was taking root, and
where customers “power and the managers” intentions were aligned. In Chapter Six, Christensen
insists that managers must be leaders, not followers, in commercializing disruptive change. It is
often prudent for "incumbents" to be followers, resisting pressure from customers, until
opportunities to commercialize disruptive technologies are sufficient and appropriate. As
Christensen suggests, "In sustaining technologies, in fact, evidence strongly suggests that
companies which focus on extending the performance of conventional technologies, and choose
to be followers in adopting new ones, can remain strong and competitive." Lastly, in Chapter 11,
he summarizes with seven useful key points for readers who may be wrestling with the
innovator’s dilemma.

Inspiration and Learning

The Innovator's Dilemma provides a new way of looking at success and failure due to
disruptive technology. It questions many established ideas and shows that often these ideas fail to
apply to disruptive technology, asserting that disruptive technologies can prove highly successful
and profitable, if addressed properly. I particularly found his exploration of the differences
between a sustaining and a disruptive technology to be very useful. Furthermore, it also gives the
further insight to the readers through the four principles. First, the first principle that says assets
are really managed by customers, not our own managers emphasizes the importance of the
customers and challenges the thought that only the knowledge and abilities of people in
organizations or companies are their core assets. Second, the principle of “small markets cannot
fulfill the growth need of large companies” makes readers think of market size or company size
as another important determinant that decides supply or demand of the industry and also think
about how they relate with each other. The fourth principle, “technology supply does not always
Book Review #1 The Innovator’s Dilemma Jennifer Yang

equal the market demand” also shows that the technological improvement would not always
increase the profit and that technology is one of the significant determinants of supply and
demand of the market, giving the lesson that applying technologies, sustaining or disruptive,
requires very cautious and analytical judgment.
As one of the Peter Drucker fans, I believe Christensen has independently found and
expanded upon two Drucker concepts in a fresh and original way. The embedded Drucker’s
concepts are that key changes always start with a company’s non-customers and the “new”
should be developed separately from the old, should be sheltered, and should not bear the same
burdens as the company’s established products. Moreover, this book also makes some points that
managers must be leaders, not followers, which is very important in a strategic decision. This
assertion made me compare and contrast the definitions and the roles of an innovator, an
entrepreneur, a manager, and a leader, reading throughout the book. Although the title of the
book is “The INNOVATOR’s Dilemma,” there is not a clear definition or explanation about
who innovators are, what their roles are, or how they are different from general managers of
companies, thus the content of the book looked closer to “manager’s dilemma in innovative
industry” rather than “innovator’s dilemma.” Additionally, it seems that Christensen’s theories
and models can be applied not only to business area, but health, education, and general
government administration can also gain enormously from studying them.

Strengths and Weaknesses

Overall, “The Innovator’s Dilemma” is an excellent explanation of a recurrent strategic

problem, based on solid research. The ideas are empirically founded, logically structured, and
together they form a coherent theoretical framework. Above all, the book is organized very well
with plenty of case studies and graphics to illustrate key concepts, and it gives the reader the
option of a quick read or a detailed read. For example, there is an excellent introduction that
summarizes the main points of the book. Also, each chapter has detailed footnotes allowing the
reader to go deeper into the material if desired. Especially, the major topic around disruptive
technologies and their impact is truly a fascinating study and some of the conclusions are very
much unexpected. However, given the details contained in the book, it is not something that can
be read lightly and briefly, thereby readers really need to dedicate some serious study time to
receive all the benefits it has to offer.

Moreover, Christensen’s Innovator’s Dilemma is an incredible book about the dangers

Book Review #1 The Innovator’s Dilemma Jennifer Yang

of focusing on current high margin activities at the cost of future opportunities, providing an
interesting perspective on a seemingly recurrent problem. It does so in a fashion that is both
insightful and easy to read. The main themes in the book are qualified with numerous examples
and some rudimentary analysis. Furthermore, this book is a very powerful framework, by which
readers can understand how emerging new business opportunities compete with their current
product lines and not to kill them before they become profitable, or how the current starts will
be surely killed if they don't do anything about it in time and to acknowledge a high risk situation.
Additionally, I think the premise of this book itself is very intriguing. All the questions such as
“Why do great companies fail?”, “How do disruptive technologies redefine the competitive
landscape?”, and “ How can established players compete against new entrants?” are timely and
attracting.

However, this book has some flaws, too. First of all, although it is well written and
structured, the book has a bit of an academic feel and is not written in a casual way as found in
many popular business books. Moreover, Christensen repeats himself on many occasions. Rather
than being clear once, he attempts to make his points by being unclear many times, and
sometimes gets too detailed about the disk drive industry. Therefore, although the author makes
insightful, persuasive arguments throughout the book, thereby it is very worthwhile reading, I
wonder whether I could, without hesitating, recommend this book for the managers or
employees who are very busy and tied up with their works. Maybe I would rather recommend
them to read just the introduction part that summarizes the whole book very well and contains
all the key points. Second, the concluding part of this book is a little weaker than others.
Although it provides the answers for the questions it asked, the suggestions are just on the level
of the simple conclusion extracted from the answers. In other words, readers would benefit
more from the book if it provided more useful and powerful business strategies. Lastly, as I
mentioned before, although the title of this book is “The INNOVATOR’s Dilemma”, it seems
that the author wrote mostly keeping “the managers in innovative firms or industry” in mind.
Thus it is suggested that the author clearly define or explain about what he means about
“innovator” and the roles of innovators or managers in his mind.

Overall, despite its weaknesses, this book is very insightful, and it seems that embracing
the principles of this book may be the difference between developing a successful business or
not. Furthermore, it may be a very useful book for any business team leaders, particularly those
who are interested in high-tech manufacturing business strategy. I believe reading this book will
Book Review #1 The Innovator’s Dilemma Jennifer Yang

change the way they think about business and manage their companies.
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Volume 15, Number 1 • Copyright ©2000 Corporate Support Systems, Inc. • All Rights Reserved

The Lean Enterprise

Designing and Managing Strategic
Processes for Customer-Winning
Performance
Dan Dimancescu, Peter Hines,
Nick Rich, Foreword by Dan Jones

©1997 Amacom
ISBN: 0-81440-365-4

Reviewed by Lydia Morris Brown

PART I: THE VITAL FEW

For many companies, aligning organizational competencies around a vital few core processes has become a
competitive strat-egy. They have recognized that processes, rather than functions or departments, are the real conveyors of
customer value and satisfaction. These processes “qualify” a company in the eyes of a buyer, and demonstrate capabilities
that will “win an order.” If a company does either of these things poorly, it is out of business.
Quality, cost, delivery, and new product development are the four primary processes. A secondary category
of processes, including information management, personnel training, and R&D, is of internal importance to the
competitiveness of a business. Regardless of the operating environment, none of them can be unbundled from a competitive
strategy. Their interdependency is the basis on which the success of the lean global corporation is founded.
Additionally, supplier partnerships, which create mutual benefit through shared responsibility and risk, are embedded
in many of these cross-organizational processes. A growing awareness that the traditional practice of holding multiple

Business Book Review™ Vol. 15, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
The Lean Enterprise Dan Dimancescu, Peter Hines,Nick Rich, Foreword by Dan Jones

vendor bases causes serious supply-chain inefficiency, has organizational coordination through process teams and
accelerated the expansion of strategic partnering. Without a diminished influence of functions as key components
such relationships, no customer can ever know enough of the structure.
about a supplier, and vice versa, to take full advantage of A three-tier system of management that builds on a
both parties’ combined resources and expertise. lean, three-level hierarchy of senior executive, process,
Influencing the change to a process-driven view is the and action teams pulls all the pieces together around a
realization that the “whole” must be managed and not just single overriding design principle: The organization must
the separate parts. This has led to a systemic approach be constructed in such a way that the whole can be seen
consisting of four key organizational ingredients—strategy, through any of the parts, and any one part contributes to
processes, roles and responsibilities, and structure. the whole. Proper implementation leads to a workforce
Strategy is the response to external information with an end-to-end understanding of the processes they are
about competitors, market opportunities, government involved in and the relevance of the actions they must carry
programs/regulations, and new technologies, as well as out to meet the organization’s business objectives.
an understanding of a firm’s internal capabilities and Essentially, the three-tier system permits strategy and
resources. From a well-crafted strategy flows a set of business objectives to be translated into key processes, and
precise objectives revised periodically in reaction to new the latter into specific actions. Top-level (static) objectives
sources of information. are translated into competitively critical (motivational)
Processes are patterns of continually changing, performance gaps, and finally into (dynamic) targeted
interconnected value-adding relationships designed to meet actions that are executed in short time frames in order
business goals and objectives, and to adapt to both expected to close the gaps. Because any individual in this system
and unexpected events. The way in which information should be able to see the whole field, individuals or
and knowledge are communicated and managed affects teams can better calibrate their actions. Senior managers
the quality of decision making and innovation within a set goals and support and coach the teams below. And
process. the system transforms traditional functional roles, such
Roles and responsibilities are determined in such a way as engineering, manufacturing, and/or marketing into
as to carry out key processes. Most valued are individuals competencies.
who bring specialized competencies and who are able to The three-tier system emphasizes the quality of
work with others to solve complex problems. Rewards, working relationships between people as a competitive
career paths, and recognition reinforce the required roles resource. Groups of people are trusted to, and held
and responsibilities. accountable for, managing their own interrelationships and
Finally, structure reflects the intended strategy and controlling the whole process from beginning to end. This
process orientation of an organization. Structure is three-tier, lean-layered hierarchy of teams helps minimize
shaped, too, by geography and by divisional or business the role of any reporting bureaucracy and, in this manner,
unit criteria. However, the dominant feature of the opens the door to great interaction between people. It
new organizational structure is its emphasis on cross- also allows more complex problems to be tackled by
teams rather than be delegated as tasks to individuals
About the Authors working less effectively at arm’s length. Nonetheless,
teams must be given clear objectives and precisely defined
Dan Dimancescu is a professor at Boston
constraints within which they can then be empowered to
University and the founder of the Technology &
work unfettered by management interference.
Strategy Group consulting firm.
In a process-focused company, business objectives (i.e.,
Peter Hines is deputy director of Cardiff Business the “scorecard”) contain simple financial goals; customer
School’s Lean Enterprise Research Center in objectives generally expressed in quality, cost, or delivery
Wales. metrics; and goals for establishing employee morale,
Nick Rich is a senior research fellow at Cardiff. training, and safety. In this way, the company acknowledges

Business Book Review™ Vol. 15, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
The Lean Enterprise Dan Dimancescu, Peter Hines,Nick Rich, Foreword by Dan Jones

the equal importance of its key constituents—shareholders, not survive if it did not change its hierarchical management
customers, and employees. style dominated by functions that owned resources but
Nonetheless, the translation of top-level business in which no one owned critical processes that served
objectives into actions remains a problem in many customers. This revelation was the first step in a ten-year
companies. Better ways of bridging the gap between goals journey that culminated with the formal institution of a
and actions are needed to achieve the flexibility and speed process-driven strategy in which titles and ownership of
of adaptation associated with a lean enterprise. Using a resources are things of the past.
matrix that shows the relationships between objectives and At present, Mitel actively embraces five key processes:
processes is one effective means of resolving the problem, product and market direction, product development,
for it sets the stage for brainstorming performance gaps that demand creation, change management and support, and
must be narrowed by each of the process-owning teams order fulfillment. Employees engaged in the last three
in order to meet the business’s objectives. The operational processes interface directly with the distributors of the
responsibility of closing these gaps is delegated, in turn, company’s products and services. For each process there
to action teams. This cascading three-tier procedure is is a “champion,” who has the responsibility to ensure that
carried out and reviewed annually or biannually by the the process is understood, supported, and implemented
senior executive team as a Plan Do Check Act (PDCA) successfully by action teams. An operations team oversees
cycle. the interaction of the key processes and allocates resources.
A set of seven measures (operating income, gross margins,
PART II: DOERS channel satisfaction, employee satisfaction, new product
In 1986, Nature’s Best, a manufacturer of yogurt sales, return on investment, and value added per employee)
and ice cream, faced a major crisis. The introduction of is championed by a member of the senior team and drives
foreign brands had caused a sharp decline in market share, performance. The basic components of every process are
and the company’s reputation with industrial buyers was mapped out on walls for everyone to see, as are company
suffering. As the company struggled to stay afloat, it performance measures.
became clear that many of the difficulties resulted from Tesco Stores Limited is the trendsetter of the British
problems rooted in the organization itself, for Nature’s food retailing industry. It is the focal point for some 2,000
Best had no mechanism to control and direct change on vendors that support almost 525 company-owned stores.
a companywide scale. The driving force within this system is an aggressive
Having come to terms with the company’s systemic quality, cost, and delivery program intended to create an
weaknesses, management took steps to address the experience that “delights” customers. But in the late 1970s,
fundamental failings of the business in its entirety. A stable things were very different. Tesco was managed as a paper-
environment of cooperation and collaboration was created intensive, predominantly manual, bureaucratic ordering
to increase visibility and interaction among departments. system that guessed at customer demand and relayed
Infrastructures were built at many levels in the organization delivery information to vendors by mail. Eventually,
to more fully coordinate and integrate activities of each changing consumer expectations and mounting competitive
area. Thus, the management team would have full control pressures caused a series of stresses and strains in the
over the direction of the business, and lower-level cross- whole food-retailing system. To tackle the problem, Tesco
functional teams would take responsibility for enacting decided to centralize all decision making at a single
change within the company. In addition, the creation of a corporate office—at the very same time as other major
shared information network freed key business processes players were decentralizing control to the store level.
from the domination of any single department. Equally important was Tesco’s commitment (novel at
In 1988, a revelation showed that the ordering process the time) to create an effective partnership process with
at Mitel Telecom (a business communications systems suppliers and a team to manage it.
subsidiary located in Wales) was broken into disconnected Tesco now handles 96 percent of all purchases centrally,
bits, some of which were dead ends, and that no one maintains half the corporate levels of stock that it once
“owned” the whole process. It was evident that Mitel would
Business Book Review™ Vol. 15, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
The Lean Enterprise Dan Dimancescu, Peter Hines,Nick Rich, Foreword by Dan Jones

did, and delivers three times more produce variety to its Meanwhile, the Delivery Control Team is responsible
customers. The company uses point-of-sale data capture for order fulfillment. It must sustain continual improvement
and has fully integrated warehouses by introducing mobile in the performance of order fulfillment and assign action
computers. And, one-time entry and open access to data by teams to carry out specific tasks, and to monitor and
all on-line suppliers allows the suppliers to better manage check those actions so that the process itself can be
their own stock levels. improved. These action teams give several order-fulfilling
activities special attention: improving sales-forecasting
PART III: CORE PROCESSES methods and the order entry system, coordinating sales
New product/service development processes are the and manufacturing more closely, leveling manufacturing
lifeblood of a business attempting to grow. In many flow, reducing planning and manufacturing lead times,
companies, however, traditional product development is reorganizing the parts management system, synchronizing
rarely a “process” (it usually falls under the aegis of a purchasing and manufacturing, optimizing inventory
single department) and it is typically undervalued. But, holding levels, and adopting a kanban system.
in world-class firms such as Cincinnati Milacron and
others, key differentiating best practices exist that together PART IV: EXTERNAL PARTNERS
serve to mobilize the intelligence of the workforce in In general, purchasing people think of their function
creating streams of new products. These organizational as “strategic,” but their strategic plans are all too often
features and process enablers include: a three-tier process- unrelated to general company strategy or marketplace
based structure, cross-company training, performance-gap requirements. They also attempt to integrate with suppliers
metrics, rewards and recognition, suppliers as partners, without functional support from within their companies.
three-track technology management, four-fields relationship They talk about partnerships and close relationships but do
mapping, capturing the voice of the customer, rigorous not really have a process to plan by, a road map to follow,
design reviews, and shared-knowledge systems. Within or a set of strategic standards to gauge their progress. What
the three-tier system of management, the use of cross- they need is a cross-organizational supplier integration
functional teaming is also critical to successful new process driven by corporate strategy and controlled by a
product development, along with the early involvement of few key metrics, or benchmarks (i.e., a process that takes
suppliers and a thorough understanding of what customers the needs of the whole business into account and that
actually want from a product. manages the supply chain for competitive advantage and
How well a company delivers a customer order, on time, not just to reduce costs).
undamaged, and in the right quantity, can make or break Although on-site suppliers, cross-exchanges of staff,
that company. One of the first enterprises to use the three- one-on-one working groups, and supplier schools all
tier strategic process approach to attend effectively to the have enormous merit and proven benefits, suppliers
delivery needs of customers was JUKI’s Industrial Sewing associations are the best at integrating suppliers and
Machine Division. JUKI’s key to success, other than a keen buyers into a seamless whole. The supplier association
understanding of its technology and its customers’ needs, is a mutually benefiting group of a company’s most
is a simple process-driven strategy aimed at excelling in its important vendors brought together on a regular basis to
coordination of cross-company activities. coordinate, cooperate, and share best practices. In Europe,
JUKI’s Executive Management Committee is charged for example, such groups are now providing competitive
with the responsibility of making improvements in each of advantage for more than 400 companies. They are raising
its key companywide processes, of which delivery is one. the awareness of customers and key suppliers of the need
Best practices are, thus, shared between process areas to to change, educating different companies on how to make
address problems, and resource needs are better balanced those changes, and serving as vehicles for successful
between four process-owning teams. Each of these teams implementation.
is given performance gap targets by the Committee, and
their progress is monitored quarterly.

Business Book Review™ Vol. 15, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 4
The Lean Enterprise Dan Dimancescu, Peter Hines,Nick Rich, Foreword by Dan Jones

PART V: LIFTING THE BAR direction a business needs to take, focusing resources
The evolution towards a process-focused strategy by only on activities that will generate the biggest gains,
Western organizations has been fueled by the emergence and translating objectives into “shop-floor” activities with
of process engineering as a means of achieving leaner clear performance improvement targets. Explaining that
and more adaptive business performance. The corporate quality, cost, delivery, and new product development are
world learned the hard lesson that cost reduction efforts the four essentials of any and every business, the authors
such as downsizing, often incurred hidden, longer-term report on how specific companies in the United States,
systemic costs. Misapplied business process engineering Europe, and Japan have shed their departmental structure,
programs tended to strip companies of their nonlinear vigorously organized the three-tier system around the four
vitality, which also destroyed the creativity upon which processes, and profited in all areas as a result.
new growth is founded. The work is, at once, both pragmatic and cutting
The new awareness of process management as a edge. The authors admit the need for authority (not
defining quality of competitive strategy is a perceptual a very popular sentiment these days), yet demonstrate
breakthrough that recognizes that it is not so much what the effectiveness of spreading power evenly across the
is produced that distinguishes winners from losers, but three tiers of senior management, process owners, and
how it is produced. As a result, more effective decision action teams. Realizing that no organization exists in
management has emerged. And, learning to better support a vacuum, the authors also show in detail how many
teams with real-time information that enhances both their companies are innovatively extending the three-tier process
judgment and decision-making ability is at the forefront. to include suppliers. Finally, because Wales has, almost
Thus, the future is shaping itself around those companies overnight, become an exceptional case of rapid economic
that not only see the power of knowledge as a competitive development in Europe, a number of case studies are of
resource but who are able to tap it through composite Welsh companies—organizations in the process of moving
behavior, and as a result, exhibit process excellence. from dying 19th and 20th century industrial infrastructures
to ones adapted to global competitive standards. The result
Appendix: A Checklist for Supplier Association is not a book of management theory but rather an in-depth
Success exploration of an emerging style of management in which
process-driven excellence is the strategy.
* * *
A subject index is provided.

Reading Suggestions
Remarks Reading Time: 8 to 10 hours, 240 Pages in Book
The subject of how to turn the growing complexity of On page xvii of the Introduction, the authors present
day-to-day business to the advantage of profitably delivered detailed reading recommendations. We suggest that you
goods and services valued by customers is not new. What use this information, plus the excellent outline in the table
is new is the “strategic process” framework that entered the of contents to guide your selections.
mainstream of Western corporate practices in the 1990s.
This new view of management treats organizations as
whole entities first and considers the parts second. Thus,
managers learn to think and act systemically—process
management is one of the important manifestations of
that learning.
The Lean Enterprise presents process management
as a three-tiered teaming system for deciding on the
Business Book Review™ Vol. 15, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 5
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Volume 10, Number 2 • Copyright ©2000 Corporate Support Systems, Inc. • All Rights Reserved

Lightning
Strategies for
Innaovation
How the World’s Best Firms
Create New Products
Willard I. Zangwill

© 1992 Lexington Books

ISBN 0-02-935675-X

Reviewed by Lydia Morris Brown

LSFI STEP I: MAKE INNOVATION THE STRATEGY (12 pages)

Although product innovation has always been a part of business strategy, LSFI makes innovation so efficient
that it changes business strategy itself. The strategic implications are impressive—LSFI cuts product life cycles and
rejuvenates “mature” or “dead” markets. Since most of manufacturing cost is determined by product design, LSFI cuts
manufacturing costs. LSFI also provides a clear competitive advantage by creating speed to market; however, delayed
market entry is allowed if the technology is rapidly changing and/or the product under development has a clear and
demonstrable advantage. Finally, LSFI requires top management to be involved in the overall guidance of innovation;
to reward, recognize, and publicize innovation; to set financial and market share goals; and to have a goal for the
percent of sales from newly introduced products.

Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
Lightning Strategies for Innovation Willard I. Zangwill

LSFI STEP II: ESTABLISH FOUNDATIONS The corporate culture is the foundation that reveals the
(78 pages) commitment of top management to successful innovation;
The first major task of senior management is the foundation capability is also the most difficult to establish.
building of solid foundations that underpin successful If a firm is to be driven by innovation, the culture must
innovation, the most important being the quality and actively support innovation, and innovation must drive
expertise of the staff, which is intimately related to a strong the culture.
technological and research foundation. These foundations All too often, however, the corporate culture does not
permit a wider range of products to be developed and speed support innovation but in fact acts as a huge obstacle.
the development of a particular product. CEOs are focused on other issues such as financing or
Although building these foundations is important, marketing. Little trust or mutual respect exists among
their mere existence does not guarantee successful new colleagues. Managers are involved in politics. There is a
products. What is needed is a general plan that can help lack of open communication. Executives and managers
the firm more fully develop and utilize its foundation advance themselves at the expense of others. Conversely,
competencies. Implementation should include: blame and finger pointing are allowed.
On the other hand, a culture that supports innovation
• identification of the firm’s major strategic ensures that ideas are given a fair hearing. Clear
objectives; incentives for product innovation are established. Different
• identification of key foundation capabilities groups involved in product development cooperate and
that foster the firm’s objectives; communicate. Senior management ensures that decisions
• decisions about which foundations the firm are made using the best possible consideration and always
will maintain and which it will obtain through makes the customer part of the process. Finally, and
outside partnerships; most importantly, senior management constantly and
• installation and maintenance of foundation consciously keeps on top of what is really going on at the
competencies; operating levels by surveying what the innovation staff
• detailed identification of what expertise will be really thinks about the culture.
needed to support the foundations and training The corporate culture must support the best
of staff in those areas; management practices as well as innovation. A powerful
• formulation of personnel policies to retain staff competence for achieving this is benchmarking. It is an
in the key competencies; organized approach to help a firm excel and be number
• excellent technology transfer between research- one by assuring that every person, group, and department
ers and product developers; follows the best possible practices of the industry.
• the establishment of incentives for researchers Effective benchmarking involves all areas of the firm.
whose ideas are used; It is an approach that must not only be employed against
• monitoring and making changes as needed; competitors, but against the best in the world in that
and area. Further, benchmarking must be implemented on
• continuous integrated planning of the founda- two levels: strategic to establish performance targets,
tions and the products. and operational to uncover ways to achieve those
targets. Critical to the process is not accepting Not
About the Author Invented Here (NIH), establishing partnerships—even
with competitors—and handling psychological issues that
Willard I. Zangwill is a professor of management
might block benchmarking.
science at the Graduate School of Business at the
Another foundation competency is planning. A
University of Chicago. For more than 20 years he
has researched the characteristics that distinguish
company must plan how it will conduct innovation efforts,
the world’s leading firms and consulted for many of and because the future is difficult to predict, planning
them. This is his fourth book. should incorporate risk management. The best approach

Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
Lightning Strategies for Innovation Willard I. Zangwill

is anticipation, which forces thinking very carefully about the cost and time to complete the project can be cut
what products have a reasonable chance of success, thus, by more than half. This requires no large allocation of
improving a firm’s ability to innovate. Keeping data and funds or people, only an identification and elimination
a systematic analysis of data leads to further improved of fumbles.
planning and risk management. The next step is the Several techniques can be used to eliminate errors
establishment of the processes, systems, and procedures including tiger teams, workout, work sampling, schedule
that promote innovation in the face of uncertainty; thus, monitoring, process mapping, bottleneck breaking, and
benchmarking should also be a part of planning. setting theoretical limits.
With the corporate culture and benchmarking
foundations in place, planning must next consider what LSFI STEP IV: PLACE CUSTOMERS FIRST
products to develop. This requires prioritizing funding. (51 pages)
Using the portfolio approach, firms can select development Placing the customer first is the most important LSFI
projects that balance the overall portfolio, or there can step. The worst fumble of all is the creation of a product
be an evaluation of both process risk and technology that the customer does not want. Although customer
risk. Functional maps, by graphically displaying strategic unpredictability is a major obstacle in implementing this
variables, can facilitate planning and risk management, competency, certain actions can be undertaken to reduce
helping a firm determine what products it wants to the risk of unwanted products. The overriding consideration
generate. This development will often take the form of a is understanding the goal of LSFI Step Four—successfully
product family in which several generations of products answering the customer-first question (CFQ):
are planned.
Good plans are ones that budget wisely, integrate • What major problems that the customer faces
activities, evaluate uncertainty using computerized planning does this product solve that no competitor
models, utilize competitor analysis, provide market solves?
windows of opportunity, have vision, and avoid overloading • What major benefits does this product provide
the resources. for the customer that no competitor provides?
Before this kind of planning can be effective, firms • What is the customer’s motivation to purchase
must have established a culture that facilitates rapid this product?
changes, revision, and flexibility, as well as one in which
there is trust, honor, and respect. Customer research is one approach that can be
employed in obtaining good answers to the CFQ. The
LSFI STEP III: ERADICATE FUMBLES second approach is flexibility, which assumes that customer
(27 pages) research is unreliable (cost will determine which method
With the general foundations in place, the product is most effective). Thus, engineers design the product to
innovation process itself must be probed. The first be modular and flexible, and as reliable information about
challenge is to get rid of unnecessary delays and costs customer desires comes in, the product is revised.
by eliminating “fumbles”—bottlenecks, changes, rework, Essentially, the concept involves creating a core
and unnecessary work. To begin improving an innovation platform that contains the base technology. Design this
system, it is helpful to have a notion of what an ideal process platform so that a wide range of different models or
of product development is—“one cycle design” where features can easily be built on it. Depending upon what the
everything is done right the first time. Although no real customer wants, the models or features can be changed, but
process comes close, the ideal helps guide thinking. the platform remains the same. Periodically, technological
One approach to obtaining improvement is to advancements will allow an update of the basic platform.
understand that in most projects the proportion of nonvalue-
added work is so large that a small reduction in it can
double or triple the proportion of value-added work. When
effective useful work on a project doubles or triples daily,
Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
Lightning Strategies for Innovation Willard I. Zangwill

LSFI STEP V: DEVELOP A BUSINESS Because concurrent engineering (also called

STRATEGY (44 pages) simultaneous engineering) attempts to do the right job
Developing a business strategy requires evaluating right the first time, it is a powerful technique for
the product’s marketing, distribution, and other relevant orchestrating all those tasks. It is a synthesis of two
business aspects. During this step, one is not concerned fundamental observations:
with specifics but with overall concept and features.
An experienced cross-functional team should examine a • Changes become more costly the later in a
product concept to determine if it makes good business project they are done.
sense and if detailed development should be undertaken. • Doing the different steps of a project in parallel
The team should consider: gets the project done more quickly than doing
the steps sequentially.
• the customer-first questions;
• marketing issues, including segmentation and Conceptually, concurrent engineering can be
positioning; accomplished via overlap generations of products, overlap
• competitor strategy and issues; phases of a project, and overlap steps of a phase. The key
• technical and market risks; to implementation is that the entire development process
• costs, resources required, and financial is managed by a cross-functional team of experts from
projections; all relevant departments, including marketing, design, and
• major targets and conceptual issues; manufacturing. Creativity can be enhanced, and time and
• strategic goals and level of support from top cost reduced through co-location, dedication, isolation,
management and other groups; and and concentration of the team.
• governmental issues, such as intellectual prop- The team’s initial objective is to plan the project
erty and regulations. properly, ensuring that potential difficulties in the venture
are virtually eliminated. Once that is accomplished, the
One of the most powerful product strategies to be team will delineate its plan to execute the project in a
developed in recent years is the strategy of platforms, reuse, special document called the contract book. This book
and modularity (PRM). PRM creates some important represents the team’s methodology to attack such issues
strategic advantages, including greater tailoring of the as the market; project control criteria; the product/system;
product to the individual customer; easier upgrading; lower and the development, manufacturing, sales and service,
cost of both product development and manufacture; faster and announcement plans. The contract book does more
introduction of new models; and faster introduction of new than analyze and plan the issues; it is an agreed-upon
technologies. As with any approach, an overreliance on contract that all team members sign. Once the book is
PRM concepts can lead to trouble. The issue here is one signed, all specifications are frozen. This forces people to
of balance. When there is uncertainty—an unpredictable think very carefully in advance about the efficacy of the
market and/or rapidly evolving technology—PRM comes project. But, what about the unexpected . . . ? The contract
into its own. book handles the unexpected by enumerating risks and
providing contingency plans.
LSFI STEP VI: DESIGN THE PRODUCT The contract book should also clearly specify the
(72 pages) process, manufacturing, quality, material, and information
In designing the product, the development team flow goals for the product’s performance. Precise goals
first determines the product’s overall technical concept— help focus the team on what is really important to make
then the detailed engineering-design work begins on the a product a success.
product’s systems, subsystems, and piece parts. Prototypes The serious question then remains of how to
are built, and pilot models are tested. Finally, manufacturing anticipate how much time and staff will be needed to
starts debugging its operations and gearing up for achieve the goals. Through analysis of historical data,
full production.
Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 4
Lightning Strategies for Innovation Willard I. Zangwill

companies can generate staffing level metrics of how every plan. To include continuous improvement, many
much effort is required to carry out almost any step in the companies start by first determining improvement goals
design process. and objectives and then establishing metrics (performance
Development projects are usually driven by the measures) to monitor progress toward improvement goals.
schedule—management’s prime tool for organizing and At every phase of the development process, the team
directing the activities of the design and development staff. should formally anticipate what problems might arise in
Macrolevel scheduling (called phase review) divides the later phases.
project into phases with specific tasks to be accomplished To obtain the improvement, establishing metrics does
in each phase. Once the phases and reviews are set, not by itself do much good. The key is the elimination of
management must schedule the day-to-day work within the original root cause of a problem—perhaps the most
each phase (the microlevel). Scheduling procedures like important step in continuous improvement. This prevents
these can be of great benefit in avoiding delays. the problem from recurring in the future and obtains
In the future, product development will become true advancement.
considerably better, faster, and cheaper, and as with One of the most widespread techniques in continuous
manufacturing in the past, the increases in efficiency improvement is the post-mortem—a careful and formal
are likely to be several thousand percent. A number of review of how well a project has proceeded. Effective
techniques are already getting big improvements: procedures identify what went right and wrong, as well
as how to make improvements. Findings are implemented
• Concept selection pools the best features of with a special action team. A database is then created
several designs. as a repository of what was learned. At the start of new
• Value analysis provides the product’s functions projects, past findings are reviewed.
at lowest cost.
• Target costing uses value analysis repeatedly * * *
to ensure the final design can be manufactured Appendixes can be found at the conclusion of
at the target cost. Chapters Seventeen, Nineteen, and Twenty. Bibliographic
• Capability indexing improves product quality notes and a subject index are also provided
and promotes coordination of design and
engineering.
• Designing for manufacturing and assembly
simplifies manufacturing of the product. Remarks
• Time to market versus time in design evalu-
ates benefits of shorter time to market versus Presentation
better design. This well-written, well-structured work is accessible,
• Design of experiments tests several parameters in both style and tone, to a wide audience. Zangwill
of the product at once. benchmarks the best practices in innovation and does an
• Taguchi methods account for uncontrollable excellent job of seamlessly incorporating detailed examples
factors and provide robustness. in the narrative. (Important representative case histories
• Prototyping tests interface between compo- are, however, highlighted as special sub-topics and listed
nents and between product and customer. in the Table of Contents.) Particularly helpful is the way
• Computer support facilitates rapid design. the author encapsulates every discussion in outline form
LSFI STEP VII: IMPROVE CONTINUOUSLY in the concluding table of each chapter.
(29 pages) The only problem with presentation is an occasional
Planning the present project should also improve misnumbering of tables. Since Zangwill continuously
future projects. Clear criteria and measures to help the refers to the tables and they (for the most part) provide
firm do better tomorrow should be incorporated into
Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 5
Lightning Strategies for Innovation Willard I. Zangwill

crucial illustrative material, this editing oversight may Reading Suggestions

cause the reader some difficulty.

Content Reading Time: 6 to 8 hours, 379 Pages in Book

Zangwill has done an excellent job of synthesizing We recommend that you read the Preface, Chapter
and integrating world-class practices of such companies as One: Lightning Overview, and Chapter Twenty: Action
General Electric, 3M, Canon, Xerox, Motorola, Reebok, Plan as an introductory package. With that background
Kodak, Microsoft, and others into a seven-step strategy. you can use the detailed Table of Contents and the chapter
It not only provides a comprehensive understanding of summaries to guide your remaining selections.
innovation, it will help the reader effectively apply general
concepts to his or her own situation. Zangwill’s most
valuable contribution to the study of innovation is that he
demonstrates clearly and unequivocally that innovation is
not something that just happens but is a conscious process
governed by planning.

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Business Book Review™ Vol. 10, No. 2 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 6
 BUSINESS BOOK SUMMARIES
®

Stay on Top of Best in Business Knowledge

SM

Volume 25, Number 25

Making Innovation Work

How to Manage It, Measure It,
and Profit from It
Tony Davila, Marc J. Epstein,
and Robert Shelton

©2007 Pearson Education, Inc.

Adapted by permission of Wharton School Publishing
ISBN: 0-13-149786-3

Reviewed by Lydia Morris Brown

Introduction
Although many myths surround innovation, making innovation into the fabric of the business, neutralizing
it appear more complex than it is, the authors believe organizational “antibodies,” building innovation net-
that the execution of innovation is not any more dif- works, and measuring and rewarding.
ficult than the implementation of other management Part I: The Rules of Innovation
activities. Nonetheless, it seems as if the correct set
For any organization, innovation represents the oppor-
of innovation rules has been misplaced, distorted, or
tunity to survive, grow, and significantly influence
simply misinterpreted.
the direction of an industry. Blockbuster development
Making Innovation Work challenges prevailing does not, however, guarantee success, but must be
misconceptions and lays out the tools and processes followed up with successive streams of innovation,
necessary for an organization to harness, manage, and from the incremental to the radical. Knowing that the
execute innovation successfully and profitably. It pro- only reliable security is the ability to innovate better
vides a start-to-finish process for defining innovation and longer than the competition, leading companies
strategy, integrating innovation and business strat- develop innovation portfolios that they can use to
egy, balancing creativity and value capture, weaving help sustain growth over the long term.

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

A fundamental tenet of innovation says, “How you

innovate determines what you innovate.” The ele-
ments of innovation—leadership, strategy, processes, Key Concepts
resources, performance metrics, measurement, and
incentive rewards—and how they are arranged (i.e., The elements of innovation--leadership, strat-
organizational structure and culture) have a huge egy, processes, resources, performance metrics,
effect on the quantity and quality of innovation that measurement, and incentive rewards--have a
an organization achieves. huge effect on the quality and quantity of inno-
vation that an organization achieves.
Given this reality, the authors believe that the key
to successful innovation is what they call the Seven The key to innovation is what Davila, Epstein,
Innovation Rules: and Shelton call the Seven Innovation Rules:

1. Exert strong leadership with regards to innova- 1. Exert strong leadership with regards to in-
tion strategy and portfolio decisions. novation strategy and portfolio decisions.

2. Integrate innovation into the company’s basic 2. Integrate innovation into the company’s
business mentality. basic business mentality.

3. Align innovation with company strategy. 3. Align innovation with company strategy.

4. Manage the natural tension between creativity 4. Manage the natural tension between creativ-
and value capture. ity and value capture.

5. Neutralize organizational “antibodies.” 5. Neutralize organizational “antibodies.”

6. Recognize that the fundamental building blocks of 6. Recognize that the fundamental build-
innovation are networks that include people and ing blocks of innovation are networks that
knowledge both inside and outside the organiza- include people and knowledge both inside
tion. and outside the organization.

7. Create the right metrics and rewards for innova- 7. Create the right metrics and rewards for in-
tion. novation, as well as a structured process to
guide the development of ideas.
Leadership is first because it is where an organization
g g g g
needs to start. Metrics and rewards are last because
they close the circle, creating the motivational and Information about the author and subject:
behavioral links to all of the other rules. www.makinginnovationwork.com

According to Davila, Epstein, and Shelton, strong Information about this book and other business titles:
leadership from senior management is essential to www.whartonsp.com
achieving innovation success. An important aspect Related summaries in the BBS Library:
of this kind of day-to-day leadership, which happens
Driving Growth Through Innovation
through commitment, example, and solid decisions,
How Leading Firms Are Transforming
is the creation of a portfolio of technology and busi- Their Futures
ness model innovation. Robert B. Tucker
Business model innovation is just as important, and The Ten Faces of Innovation
just as powerful, in driving business success and rev- IDEO’s Strategies for Beating the Devil’s Advocate
olutionizing industries as technological innovation. A & Driving Creativity Through Your Organization
classic example of this is Dell Computer, an enterprise Thomas Kelley, with Jonathan Littman
that radically changed the business model of the cus-
tomer interface in retail personal computer sales.

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 2
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

Knowing how to change business models and tech- second, defining the business model, is strategic. Suc-
nology together and individually is also a mark of cess depends on the integration of business model
success. The authors’ Innovation Matrix illustrates and technology change into a seamless process.
this interplay by highlighting the fact that not all inno- However, this does not imply that innovation should
vations are created equal. Three types of innovation be contained within one organizational unit.
exist: (1) incremental, (2) semi-
radical, and (3) radical. Senior We define “innovation” as our ability to create new value at
management bears the respon- the intersection of business and technology. We have to have
sibility for creating a balanced
new insights. We have to do things differently. We cannot rely
portfolio, consisting of all three
and for creating the appropri-
just on invention or technology for success.
ate options, both business-model
and technological.
Innovation requires resources, competencies, and
Innovation encompasses two established activities. experience that reside in different parts of the orga-
The first, R&D, is thought of as technological. The nization and in enterprises outside the organization.
It also requires coordination and synchronized efforts
across these departments in order to transform an

About the Authors abstract idea into a tangible product.

The importance of innovation rises and falls with
Tony Davila is a faculty member of Stanford’s time, depending on the confluence of several factors,
Graduate School of Business. He works with including the timing of the last innovation, the nature
both large industrial companies and Silicon of the competition, and the overall business strategy.
Valley startups to design management control Thus, the amount and type of innovation must align
and performance measurement systems that with the company’s strategy. The selected strategy
drive innovation. And, he has been published has to fit the business situation and it has to be clear
in Harvard Business Review, Research Policy, and (i.e., must be measured and recognized with proper
other leading journals. rewards linked to performance) throughout the orga-
Marc J. Epstein has been a visiting professor nization.
and Hansjoerg Wyss visiting scholar at Harvard Companies also need to keep in mind that more inno-
Business School, a research professor at Rice vation is not necessarily better. Not all businesses
University’s Jones Graduate School of Man- need significant, continual doses of innovation, espe-
agement, and a professor at Sanford Business cially the radical, game-changing kind. This level of
School and INSEAD. change may cause problems for the competition, but
Robert Shelton is managing director of Navi- it could also break the back of the innovating organi-
gant Consulting’s Innovation practice, with a zation. Constant, radical change not only represents a
client list that includes Fortune 500 leaders in huge cost, it also creates huge organizational tensions
the electronics, energy, health care, automo- and destablizations.
tive, consumer goods, software, and aerospace Thus, innovation, like most things, is best in the right
industries. He has served as vice president and proportions. Moreover, each enterprise needs to
managing director of the Technology Manage- determine how much innovation it can handle in the
ment practice at SRI International. And, his present, how much more it needs in the future, and
work has been referenced in The Wall Street the dynamics of how to get from here to there.
Journal, CNN’s “Financial News Network¸” and
other leading media. Wrongly assuming that structure and process are the
natural foes of creativity, many people cannot imag-
ine how to manage the natural tension between

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 3
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

creativity and value capture (i.e., commercialization). Successful organizations understand that the primary
However, structure can, in fact, enhance creativity if unit of innovation is not the individual. Rather, it is a
built and used in the right way. network that includes people and knowledge both
inside and outside the organization. Innovation
Too much emphasis on delivering value through
requires cultivating and maintaining this network as
execution can stifle the creative processes. And,
an open and collaborative force, which is no easy task,
unstructured creative processes can displace the
considering the complexities of relationships, as well
effective value management, yielding many great
as differing motivations and objectives.
ideas but insufficient commercial successes. Innova-
tion does not mean ignoring business imperatives Rewards that focus on meeting budgets and avoiding
but, rather, being aware of the processes within the risk cause managers to invest in safe products where
organization that kill creativity. Commercialization there is little chance of a big loss but also little chance
processes also need to be managed so as to turn the of a big profit. These companies reward the speed at
best creative concepts into marketable products and which low risk products are created and marketed,
services quickly. even while they hope for radical new ideas. The out-
come is an overdose of incremental
Organizations … need to create an environment where taking ideas.
risks on breakthrough innovations is recognized as valuable To innovate successfully organi-
to the company. This recognition will help modify a unilat- zations must create environments
eral short-term focus on results to a more balanced view that where taking risks on breakthrough
encompasses a long-term perspective. innovations is recognized as valu-
able. Thus, they need systems in
Senior management must create a culture that has place that create the proper measurement, motiva-
the ability and courage to change and explore and, at tion, incentives and rewards, as well as a structured
the same time, remain stable enough to deliver on its process to guide the development of ideas.
innovations. In other words, companies must neutral-
Part II: Strategic Innovation - A Model
ize organizational antibodies—the explicit routines
and Process
and cultural norms that act to block or negate change.
In general, the more radical the innovation, and the According to the authors, successful organizations
more it challenges the status quo, the more antibodies combine technology change and business model
there are. Also, the greater the company’s past suc- change to create innovation. Rarely does a technology
cesses, the greater the organizational antibodies. change occur without also causing a change in busi-
ness processes and vice versa. Both go together and,
Core capabilities can become core liabilities if they do thus, must be conceptualized and implemented as a
not adapt and change, and this requires cultures that whole.
are open to questioning assumptions and to debating
alternative business approaches. Managers must also There are six levers that influence strategic innova-
understand that only by taking risks, closely observ- tion. Three of these levers are the basis for creating
ing results, learning from them, and trying again, can business model innovation:
innovation occur. 1. value proposition—what is sold and delivered to
Cultures that foster innovation embrace communica- the market
tion, not only with the members of the organization, 2. supply chain—how it is created and delivered to
but also with such external constituencies as custom- the market
ers, suppliers, universities, competitors, or companies
3. target customer—to whom it is delivered.
in other industries. The not-invented-here syndrome
is a sign of an arrogant culture, and where there is Sometimes new technologies are a major part of an
arrogance, strong organizational antibodies exist. innovation, and they stand out and garner significant

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 4
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

attention. At other times, the new technologies are semi-radical innovation is technology driven, there
hidden and can only be seen by the technical people will be small change in one or more of the business-
servicing them. Either way, technology change can model levers and significant change in one ore more
fuel innovations through three additional levers: technology levers.
4. product and service offerings, Some companies are adept at managing the change
in either the technology arena or the business model
5. process technologies
arena, but seldom both. This puts then at a significant
6. enabling technologies. disadvantage to the company that is able to manage
Although enabling technologies (technologies that change in both.
help a company execute strategy much faster and In order to collaborate effectively in semi-radical inno-
leverage time as a source of competitive advantage) vation, and avoid missteps, missed opportunities,
are the least visible to customers, change in this arena and the inability to quickly and effectively capture
can be very important because it helps to ensure better the two-step process, groups within the organization
decision making and financial management. need to have a map of both the business model and
Another key aspect of this model involves the generic technology space in which they compete. A collabora-
types of innovation—incremental, semi-radical, and tive innovation map provides a common framework
radical. for different groups to discuss threats, opportunities,
strengths, and weaknesses that are crucial to success-
Incremental innovation is the most prevalent form of ful innovation.
innovation, receiving more than
80 percent of total innovation Southwest Airline’s move away from the traditional hub and
investment in most companies.
spoke business model is an excellent example of a semi-radical
It is a way to wring out as much
value as possible from existing
innovation. … It has set the new direction from the industry
products or services without and established the competitive benchmark that others use to
making significant changes or measure themselves.
major investments.
Radical innovation is a significant change to one or
Nonetheless, incremental innovation is not a minor more of the business-model levers and to one or
factor in the equation but its cornerstone. It is extremely more of the technology levers. Moreover, it usually
valuable in providing protection from the competitive brings fundamental transformations to the competi-
erosion that eats away at market share, profitability, or tive environment in an industry. The introduction of
both. By providing small improvements, via changes disposable diapers in the 1970s is a historical example
in one or more of the six business-model-technology of the combined changes in the technological and
levers, a company can sustain its product market share business elements leading to a fundamental change
and profitability for a longer time. This results in better in home baby care. Because of the success of this
cash flow and a better return on development and radical innovation, companies like Procter & Gamble.
commercialization investments. Nonetheless, compa- Kimberly-Clark, and Johnson & Johnson (to name
nies cannot succeed, or even survive throughout the a few) have invested massive amounts of money
long term, without complementing their innovation and intellectual resources in the development and
portfolios with other types of innovation. commercialization of advanced absorbent and con-
Semi-radical innovation can provide crucial changes tainment technologies for disposable diapers.
to the competitive environment that an incremental Nonetheless, while radical innovation can create tec-
innovation cannot. If it is business-model driven, the tonic industry shifts, and put a company in the lead,
innovation is characterized by significant change in investments in this arena need to be approached cau-
one or more of the business-model levers and small tiously. Because radical innovations are by nature,
change in one or more of the technology levers. If the
Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 5
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

low-probability investments, investing too much, If the goal is to produce significant competitive
based on unrealistic expectations, can waste valuable
advantages a PTW strategy is required. PTW, a mar-
resources that could be better employed on semi-radi-
ket-leading strategy that relies heavily on semi-radical
cal or incremental innovations. The key is to maintain
innovation, is typical of high-technology startups.
a balanced portfolio so that the investment matchesThese companies are highly focused on bringing one
business needs. new technology or business model to market. In fact,
one new thing is almost all they
It is not enough to choose the right strategy once. You have to have, and their future is almost
keep choosing the strategies to remain successful. … Starbucks entirely dependent on it.
provides a good example. … Starbucks has continually adapt- The high failure rate for small
ed, experimented, and regenerated its image and its focus to companies following this strategy
maintain its edge in the industry. reflects the high risk involved with
this approach—whether it comes
Sometimes companies combine two semi-radical from the technology delivering the value promised,
innovations to create a blockbuster innovation that from the market developing fast enough to value the
changes an industry fundamentally. Davila, Epstein, technology, or from the management executing on the
and Shelton call this phenomenon “ersatz radical strategy.
innovation.” Apple Computers took the industry by
The other key contributing factor in the high failure
surprise when it launched iTunes and iPod. It was not
rate is a lack of depth in their innovation portfolios.
as though no one in the PC arena had ever thought of
The broader resources of larger, more established
these innovations before but, no one had the radical
firms allow them to cover a larger portfolio of invest-
idea of combining technology change and business-
ments, providing a hedge that significantly lowers the
model change into this one-two innovation punch.
risks. Many large firms (e.g., GE, Apple, and Sony)
Selecting and integrating the priorities for business- have clear PTW strategies aligned with their overall
model change and technology change, and defining strategies. These companies have committed to an
the balance between the three types of innovation in investment portfolio, designed to provide a formi-
the portfolio, constitute the basis for forming the inno- dable flow of innovations that promise to help them
vation strategy and developing a portfolio aligned dominate their business sectors.
with the company’s overall business strategy. These
For some companies, an intense or uncertain com-
are the fundamental responsibilities of senior man-
petitive environment, and/or significant internal
agement—ones that provide the context for decisions
constrains, makes it more advantageous for them to
related to organizational design, the development of
adopt a PNTL strategy. This strategy typically includes
innovation networks, and the development and use of
more incremental innovation in the portfolio than a
metrics and incentives to drive innovation.
PTW strategy and aims to ensure that a company can
Because there is no menu of generic strategies from stay in the game by moving quickly, taking calculated
which to choose, one of the first responsibilities of risks, sometimes moving first, or by matching or sur-
senior management is to craft an innovation strategy passing any moves by competitors.
that supports the business strategy, adapts to chang-
Following a PNTL approach, an organization can
ing conditions, and chooses the right time to make key
watch for improvements in the external environ-
moves. An organization may choose to devote most
ment, make improvements in its internal capabilities,
of its resources to a particular part of the innovation
attempt to wear down the competition, and look for
model or spread them out over the entire framework.
opportunities to shift to a PTW strategy at the appro-
Depending on the approach, one of two classes of
priate time.
innovation strategies can be considered—Playing-to-
Win (PTW) or Playing-Not-to-Lose (PNTL). Sometimes PNTL strategies exist because manage-
ment cannot commit to a clear PTW strategy; thus,

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 6
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

PNTL is a compromise among parts of the organiza- • innovation metrics use only capital-return tools
tion that do not have the same view of what should such as Return On Investment and Discounted
be done to succeed. This sort of compromise is, Cash Flow;
however, a very dangerous strategic choice because • innovation funding is available only annually
people cannot execute at maximum efficiency, speed, rather than at regular intervals or whenever great
or effectiveness if they are getting confused signals. It ideas emerge;
is management’s responsibility to clearly specify and
• innovation is measured in terms of efficiency
communicate the innovation strategy throughout the
rather than in terms of the value of the portfolio;
company.
• managers are complacent about good ideas;
Although PNTL is sometimes, called the “fast-fol-
lower” strategy, PNTL is not limited to following • managers criticize and undermine innovators
another’s move. To be successful, PNTL requires a rather than serve as sounding boards, role models,
mix of preemptive and reactive moves, all aimed at and sponsors.
not relinquishing advantage and, whenever possible, A key antidote would be the development of an
causing competitors to expend more than their fair internal marketplace where the ideas and functions
share of resources. Organizations focused on just fol- of innovation can flourish. In this atmosphere, truly
lowing eventually become limited in their competitive valuable innovations are funded and advanced from
mindsets and innovation capability. concept to commercial reality, no matter how threat-
ening they may be to the existing business. Critical to
Still, skilled fast-followers are often more success-
creating such a marketplace is having a process for
ful than early innovators. They come behind PTW
balancing creativity and value capture so that both
strategies, quickly deploying their own capabilities
thrive.
to copy and improve on successful innovations, and
consequently beating the original
innovator in the marketplace. For an organization to innovate successfully, it needs to foster
a balance of creativity and value capture. Maintaining that
The best innovation strategy,
whether PTW or PNTL shapes balance requires support from metrics and rewards, and also
the portfolio, is ultimately deter- has cultural components. However, the organization is at the
mined by a number of internal and core of the internal marketplace that provides for balanced cre-
external factors, including: tech-
ativity and value capture.
nical capabilities, organizational
capabilities, success of the current business model,
The first step in this process involves developing plat-
funding, top management vision, capabilities in the
forms for the different types of innovation desired.
external network, industry structure, competition,
These platforms are organizational units of networks
and rate of technological change. These are the fac-
nestled within a company that direct resources toward
tors management must address when improving and
specific areas of innovation. They cut across business
updating the company’s innovation strategy.
unit silos, provide an honest perspective on the value
In addition to crafting an innovation strategy, enter- of all proposed innovations, and they include:
prises must choose, build, and prepare the right
• broad areas of innovation that direct the plat-
organization and the right people. However, many
form’s activities;
firms find that the organizational components of
innovation are often rejected or marginalized by the • both business-model and technological change;
antibodies of their mainstream organizations and, as • a portfolio of incremental, semi-radical, and radi-
a result: cal innovations;
• current project portfolios consist almost entirely of • networks of people inside and outside the organi-
incremental innovations; zation, who can effectively contribute to different

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 7
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

aspects of innovation (idea creation, selection, within the organization. The venture capital struc-
development, and implementation) and who can ture receives radical ideas, selects those with the most
also preserve the company’s intellectual capital potential, funds them, and then sells them.
and knowledge during downsizing;
Another alternative is the “ambidextrous organiza-
• metrics and rewards that focus resources on the tion.” It is a model in which the organization promotes
potentially valuable areas of innovation, capture innovation and operations within its architecture,
the organization’s innovation performance, high- through multiple groups, handling different types of
light gaps and areas of improvement, encourage innovation and operation projects. With this approach,
the desired behavior and results, and mitigate different innovation cultures and processes are pro-
organizational antibodies; and moted, and radical innovators are kept separate from
• management systems that promote and use learn- the traditionalists who run the core businesses.
ing and change to improve strategy, processes, Strategic decisions will guide where innovation
organization, and resources. efforts are focused, and structure will act as a foun-
dation for the innovation process.
Two organizations with the same structure will get very differ- However, innovation can still
ent … results based in part on the systems they have in place fail if management systems are
and the consistency with which they are followed. [However] inadequate. Innovation manage-
ment systems are established
for innovation to happen successfully, there needs to be an
policies, procedures, and infor-
explicit process in place to manage all the steps … from design, mation mechanisms that facilitate
to measurement, to reward. the innovation process within
and across organizations. They
Balancing internal creative and commercial markets determine the shape of daily staff interactions and
also involves creating portfolios of projects in each decisions, the order in which work happens, how it
platform, and reviewing each project to ensure that the is prioritized and evaluated daily, and how different
creative and commercialization markets are aligned parts of the organization use the organizational struc-
and balanced. A portfolio overly rich in incremental ture to communicate.
projects signals an anemic market for creative ideas.
Many managers assume that structure and process
A portfolio that has an over abundance of radical and
are the natural foes of creativity; however, if they are
breakthrough innovations signals a hyperactive cre-
built and used correctly, they can actually enhance
ative process and an internal market that discounts
creativity by fulfilling five important roles:
commercialization.
1. moving great ideas from concept to commer-
In addition to developing innovation platforms and
cialization, quickly and with a minimum use of
creating portfolios, management must also form inter-
resources;
nal and external partnerships and networks, ensure
that internal markets for creativity and commer- 2. creating the appropriate lines of communication
cialization are open and transparent, and reallocate within the company, and with outside constituen-
resources so as to guard against the reemergence of cies, so as to facilitate timely access to specialized
antibodies that may limit or destroy the company’s knowledge;
rejuvenated creative markets and processes. 3. facilitating optimum coordination between proj-
Innovation can also be organized according to the cor- ects and teams;
porate venture capital (CVC) model, which is useful 4. learning (i.e., managing the knowledge that is
for promoting radical innovation without hindering constantly created in innovation); and
incremental innovation. It works as a hybrid between
an independent venture capital firm and an incubator 5. aligning the objectives of various constituencies
and reinforcing the most favorable individual and
Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 8
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

group behavior so as to foster optimal innovation specific innovation characteristics. The measures that
performance through well-designed incentive are appropriate at the beginning of a project may not
and reward systems. be adequate in the later stages.
Management systems are, therefore, the key to balanc- It is also necessary to dissect measurement systems to
ing and managing the dualities of technology models ensure that they are confirming the right mix of plan-
and business models, radical and incremental innova- ning, monitoring, and learning. Knowing the specific
tion, creativity and value capture, and networks and purpose of each type of measurement system is essen-
platforms. tial for keeping the innovation from trying to achieve
too many objectives.
Innovation can be envisioned as a flow that starts with
a multitude of great ideas, which are winnowed and A corollary to knowing the specific purpose of each
refined until only the few best are brought to com- type of measurement is to keep it simple. Because too
mercialization. Systems manage this flow. many can be more of a distraction than a help, it is
better to have just five simple measures linked to the
The first stage, where management systems play a
strategy and the innovation business model. Even if
role is the ideation stage where ideas are generated
the additional measures provide a more complete pic-
and moved across the organization to where funding
ture, they will overwhelm the decision-makers. It is a
decisions are made—the second stage. Here, selected
case of quantity being the enemy of quality.
innovations receive initial funding to move ahead or
are discarded. The last stage is the execution phase Finally, organizations must be aware of the limitations
where the innovation project is commercialized. of measurement systems and understand that they do
not replace good management—only enhance it.
No matter which innovation systems an organiza-
tion chooses, the systems must be effective in moving Incentives and rewards are some of the most powerful
through all three stages from ideation to selection to management tools available. Incentives are designed
execution and then on to commercialization. before an innovation effort starts and link perfor-
mance measures and rewards. Recognition rewards,
Measurement is one of the most critical elements of
which are based on subjective assessments of the
success in innovation. When measurement systems
value generated, occur after the outcomes of the proj-
are not aligned with the strategy, and not tailored to
ect are available, even if there was no prior contract in
the portfolio’s mix of incremental, semi-radical, and
place linking performance to rewards.
radical innovation, managers lose
a key source of information. And, A fundamental rule of innovation is that linking strategy to
this loss translates into lower per-
innovation measurement with a few sharp metrics provides
formance and decreased payoffs
from investments in innovation. a clear picture of performance. … What gets measured gets
done—so be careful what you measure.
However, measurement sys-
tems are not solutions but are
Formal reward systems are well-suited for incremental
managerial facilitators that fill three roles: (1) plan-
innovation, such as increasing the efficiency of a man-
ning—defining and communicating strategy, (2)
ufacturing plant or improving quality through quality
monitoring progress, and (3) learning—identifying
circles. Incremental innovation projects have a clear
new opportunities.
problem to solve, and the solution to the problem can
Enough variability must be built in to allow valu- be translated into objectives and linked to rewards.
able measurement. Different innovation processes
Radical innovations also rely more on recognition.
and different organizational levels need different
Using recognition gives an organization the flexibil-
measurement systems, and these can vary over time.
ity to adjust the reward to each individual project,
Projects need measures that are consistent with the
team, and person. In particular, managers need to feel
business unit but different enough to capture project-

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 9
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

rewarded for taking risks, even if the project is not critical insights into problems and opportunities and
successful. And, if it is, they must feel as though they more complex learning systems that operate con-
received a fair share for the value generated from the tinually to provide feedback and guidance. It also
project. includes:
Cash-based incentive systems, using performance • specific processes for learning and change that
measures with a large component of formula-based link to strategy and embody explicit and continual
evaluation, are best when innovation initiatives have efforts to improve;
short-term results, smaller impact on overall organi- • a systems approach to complex organizational dy-
zation, easily measured performance, and expected namics in which actions and reactions are under-
performance is relatively easy to describe. As innova- stood in terms of causal loops (actions, reactions,
tion initiatives incorporate a larger amount of radical and effects) rather than in terms of linear cause
innovation, incentive systems should be based on and effect;
long-term incentives (stock-based incentive systems)
• shared vision, which is critical for minimizing
and subjective evaluations.
organizational antibodies;
In fast-changing environments, the ability to learn
• flexibility and agility that enhance changes and
faster, better, and more cheaply than the competition
create an environment that is conducive to ongo-
can mean the difference between retaining market
ing innovation;
leadership and barely surviving. Because innovation
is all about change—incremental, semi-radical, and • proactively anticipating challenges and threats;
radical change—driving innovation into the business • a collaborative but challenging environment that
mentality requires learning and change. maximizes creative tension and minimizes de-
structive tension.
Learning systems are required to manage the balance
between creativity and value capture; otherwise, one The tools of innovation are also affected by culture—
always dominates over the other. Information and the unwritten rules, shared beliefs, and mental models
learning are required to remodel and update innova- of the people. A powerful innovative culture can be a
tion networks, which tend to become bureaucratic, vital source of competitive energy for the organiza-
cumbersome, and ineffective if not refurbished. tion as well as an energizing force for the people in
Finally, learning systems and activities that allow the organization.
the organization to differentiate good change from It is, therefore, ironic that the biggest threat to inno-
bad are needed to control organizational antibodies.
vation is success. The very organizations that are
Without this differentiation, the antibodies becomeriding high on the success of their innovation efforts
unselective and attack and disrupt all change. are often the organizations most
You can’t improve any part of innovation—not the framework, in danger of falling prey to com-
placency. Successful innovators
strategy, processes, organization metrics, or incentives—and also risk succumbing to dogma.
expect to see good results unless you make sure that your The same values that initially pro-
organization knows how to learn and change. moted innovation and success in
an organization can be the demise
Properly conceived and executed, organizational of that organization if they are not evaluated and
learning can unleash powerful forces of creativity adjusted on an ongoing basis.
and the development of processes to focus them into According to the authors, managing innovation while
successful commercial realities. In healthy innovative delivering performance is a paradoxical process. The
companies, leadership supports learning and puts organization must be stable in its identity and strat-
in place the systems for it to happen. This includes egy and yet open to constant change. Success requires
“quick-and-dirty” diagnostics that are run to provide managing this paradox by recognizing and managing

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 10
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

the levers of culture that positions the organization on the book provides new insights into how to execute
a spectrum between conflicting goals. An innovative innovation and parses this how into manageable pieces
culture embraces: that can be applied by any company.
• balance and disequilibria The lessons learned by this approach include:
• periods of stability and periods of change • innovation does not require a revolution inside
• focus and diversity companies;
• discipline and surprise • innovation is not primarily about creativity and
having a “creative culture,” nor is it just about
• confidence and paranoia
processes and “stage-gate” tools;
• conservatism and risk-taking
• innovation does not focus exclusively on cool new
• guidance and freedom technology;
• control and trust • innovation is not something every company needs
Nonetheless, it is the people in an organization who in large quantities.
adopt, adhere to, change, or reject a culture. People Because the how of innovation is so critical in deter-
are the vehicles through which a culture has impact mining results, Making Innovation Work does what,
and through which innovation happens. Thus, the according to the authors, books focused on innova-
organization’s human resources strategies (recruiting tion strategy cannot—offer the context, framework,
the right people, managing them to ensure satisfaction tools, and operating guidelines for successfully imple-
and ongoing motivation, and ensuring that leaders menting innovation throughout one’s organization.
fulfill a role that promotes innovation) are critically Moreover, it provides the means for tailoring innova-
important. tion to any company’s particular situation, business
strategy, culture, technological acumen, and appetite
g g g g for risk. Thus, as Jean-François Manzoni (Professor of
Leadership and Organizational Development, IMD)
Features of the Book stated in his praise of the book, “If you’re interested
in improving your organization’s innovation perfor-
Reading Time: 30-32 hours, 350 pp.
mance and potential, this book will tell you how. If
Because there seem to be so many half-truths and you’re not, it will tell you why you should be!”
myths surrounding innovation that have made it
With that said, we must issue a caveat—this time in
appear more complex than it actually is, Davila,
the words of Lew Platt (chairman of Boeing, former
Epstein, and Shelton present Making Innovation
chairman and CEO of HP, and former CEO of Kendall-
Work, offered to challenge prevalent misconceptions
Jackson Wine Estates), “It’s crammed [our emphasis]
and to lay out the tools and processes necessary for an
with examples and practical ideas that can trigger
organization to harness and execute innovation.
improvements in innovation, starting tomorrow!”
The authors’ analyses of these tools and processes Making Innovation Work is so densely packed with
show that the execution of innovation is no more or so much information, that our reading estimate prob-
less difficult than the execution of any other manage- ably far underestimates the time it will take for you
ment activity. Thus, we see innovation is not about to fully assimilate the ideas and examples, within the
secret formulas; it is about good management, driven context of the framework, so that your innovation
by the Seven Innovation Rules. improvements can “start tomorrow.”
Essentially, we are shown that there is not much that Using chapter 2 as a representative example, we find
is truly new about innovation—the basics have not that each chapter contains a plethora of significant
changed, only the way innovation is managed. By insights:
analyzing what has worked well and what has not,
• Figure 2.1—“The Six Levers of Innovation”
Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 11
Making Innovation Work Tony Davila, Marc J. Epstein, and Robert Shelton

• Research Bite—“Innovation in Product Offerings” Contents

• CEO Considerations Chapter 1: How You Innovate Determines What You
• Figure 2.2—“The Innovation Framework” Innovate

• Figure 2.3—“The Levers for the Three Types of Chapter 2: Mapping Innovation
Innovation” Chapter 3: How to Design a Winning Innovation
• Research Bite—“Incremental, Semi-Radical, and Strategy
Radical Innovation Investments”
Chapter 4: Organizing for Innovation
• Case Study—“Approaches to Incremental Innova-
Chapter 5: Designing the Process of Innovation
tion: Magna International”
• Case Studies—“Semi-Radical Innovation: South- Chapter 6: How to Measure Innovation
west Airlines and Apple Computer” Chapter 7: Rewarding Innovation
• Research Bites—“Enablers and Blockers of Radical Chapter 8: Learning Innovation
Innovation”
Chapter 9: Cultivating Innovation
• Case Study—“Radical Innovation: Microsoft and
its .NET Initiative” Chapter 10: Applying the Innovation Rules
• CEO Diagnostic—“Using the Innovation Frame- Endnotes
work to Understand How Your Company Plays
Biography
the Innovation Game”
The best strategy is to read the entire book in the order Subject Index
presented (unless otherwise indicated). The frame-
work, tools, and operating guidelines are so tightly
integrated that skipping, skimming, or the least bit of
inattention will get you hopelessly lost in the thickets.
As you come across the various boxed and high-
lighted sections (Research Bites, Case Studies, CEO
Considerations/Diagnostics, etc.), stop and read them
carefully before continuing on with the primary text.
Occasionally, these sections will refer you to other
chapters or topics elsewhere in the book. When this
happens, follow where the trail leads. As for the
wealth of figures and tables, these are also not to be
taken lightly. Stop, study them carefully and, when
called for, follow where they lead you.

Business Book Summaries® Vol. 25, No. 25 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 12
 Book
Business Book Review™
usiness

Re w
vie
We Select and Review Only the
B ™
Best Business Books You Should Read.

Volume 19, Number 18 • Copyright ©2002 Business Book Review, LLC • All Rights Reserved

Managing
Innovation And
Change
Second Edition
Jane Henry and David Mayle, Editors

©2002 The Open University

Adapted by permission of Sage Publications, Ltd.
ISBN: 0-76196609-9

Reviewed by Lydia Morris Brown

Introduction
As organizations struggle to keep pace with the globalization of the economy, the explosive growth of the Internet,
deregulation, the drive to increase the bottom line, faster product development times, rampant technological innovation,
a shortage of the best talent, and changing customer and employee demographics, they are being forced to consider new
organizational forms and processes in order to manage innovation effectively. This second edition of Managing Innovation
and Change presents a collection of critical writings, contributed by international business consultants, academics, and
practitioners, that provides an overview of the theory and practice of managing innovation. Executives, managers at
all levels, and entrepreneurs will find timely and varied insights into an array of important topics: the current business
environment and its implications for the innovative management style now required, the importance of innovation in
today’s business environment, different strategies that can be adapted to manage innovation within and across organizations
and business networks, the different ways in which organizations have attempted to restructure, and the effects of new
information and communications technology.

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved
Managing Innovation and Change Jane Henry and David Mayle, Editors

PART I: MANAGEMENT of the best service suppliers worldwide have become the
Henry and Mayle note that because innovation and new strategic imperatives. Given this new reality, success
change are now so central to today’s business environment, in global competition means understanding, integrating,
new management practices have arisen as a response. Here, and managing intellectual, technological and innovation
Quinn, Baruch, and Zein; Hamel and Prahalad; and Lester, resources in a dramatically different way.
Piore, and Malek outline and illustrate the nature of some Hamel and Prahalad’s “Competing for the Future”
of these changes. argues that leaders must make a point of involving
In “Intellect, Innovation, and Growth,” Quinn et al. managers from different parts of the organization in
explain that according to estimates, 85 percent of all U.S. order to develop corporate foresight on a continuous
jobs, and 80 percent of all jobs in Europe, are knowledge, basis. Although restructuring and reengineering are both
software, or technology based. The authors believe that legitimate, they are more concerned with fixing a current
these economic changes will have
“Intellect, science, technology, innovation, and knowledge diffusion
a profound effect on both corporate
are the crucial growth forces in any modern economy or corporation.”
and national policy for the next two
--Quinn, Baruch, and Zein
decades. For example: Managing
intellect and services effectively in an environment business rather than building an industry’s future; thus, any
characterized by global competition will be one of the company that focuses on the present will see its structure,
most critical management challenges of the decade. The values, and skills become more and more incapable of
only enterprises that will not fall prey to the ravages of keeping pace with a changing industry. Getting ahead of
over-capacity, other than a small number of cartels and an industry’s change curve, requires that senior managers
cyclical businesses, will be those companies and countries have a clear and shared vision of how the industry may
that can add value through the unique development of be different in ten years, and this vision must be unique
their intellectual, innovation, or services capabilities. among competitors. Moreover, to make this vision a reality,
Managing innovation and software will be the two most companies must regenerate their core strategies, become
critical management skills of the decade, and much architects of innovation and growth, be the industry rule
of advanced innovation will be accomplished through makers, and allow foresight, rather than competitors, to set
“independent collaborative” approaches (e.g., virtual their transformation agendas.
laboratories and skunk works, etc.). Finally, because In “Interpretive Management: What General Managers
new technologies have decreased traditional advantages Can Learn from Design,” Lester et al. explain that because
of scale and location across the board, disaggregation, the pace of marketplace change has accelerated to such
global sourcing, and managing the lateral competition unprecedented proportions, companies have abandoned
traditional hierarchy for flatter, less bureaucratic models.
Their goal is the kind of flexibility that allows the
About the Editors organization to adapt quickly to changes, and allows all
the aspects of the organization to work together effectively,
Jane Henry and David Mayle are academics at
without a long chain of command. However, if managers
the Open University, located in Milton Keynes,
maintain the strictly mechanical approach of the industrial
U.K., and they co-chair Creativity, Innovation,
age, with its stress on clearly defined objectives, roles, and
and Change, a MBA course offered by the Open
structures, the necessary flexibility cannot be achieved.
University Business School. Henry is also author
Instead, they must behave like managers of new-product
of Creative Management and Creativity and
development, where there is a high degree of uncertainty,
Perception in Management.
and where their role is to interpret the new situation rather
For more information, please visit: than to analyze it or to problem solve. This involves
www.sagepub.com interacting with customers and technical experts in order
to identify the new possibilities that these interactions

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 2
Managing Innovation and Change Jane Henry and David Mayle, Editors

present. Moreover, to harness and encourage creativity, but a shift in perspective. Instead of thinking in terms of
managers must act more like leaders of a jazz combo than being a brilliant or charismatic visionary, it is more effective
like engineers. As combo leader, their goal is not to seek to think in terms of being an organizational visionary
endings by striving for a fixed and final destination, but and building the characteristics of a visionary company.
to embrace ambiguity and improvisation (the essentials Moreover, most of what is required can be learned.
of innovation) and channel the work in a way that seeks According to Quinn et al, as human capital becomes
openings that influence and fulfill the listener’s (i.e., increasingly critical to the functioning of the organization, it
customer’s) expectations. has become increasingly necessary to focus on the business
Pfeffer; Collins and Porras; and Quinn, Anderson, of managing the professional. In “Managing Professional
and Finkelstein are next presented to illustrate some of Intellect: Making the Most of the Best,” the authors
the reasons why management of people is so central to define the professional as one who commands a body
the success of today’s organizations. In “Competitive of knowledge and who operates on the levels of “know-
Advantage of People,” Pfeffer explains that people, and how what,” “know-how,” “know-why,” and self-motivated
they are managed, are becoming more important because creativity (“care-why”). They say that recruiting the best,
product and process technology, protected and regulated forcing intensive early development, constantly increasing
professional challenges, and
“It is by making the right choices about managing people that firms
evaluating and weeding out
such as Nordstrom, New United Motor, Wal-Mart, Lincoln Electric,
are the best practices engaged
and Southwest Airlines achieved their well-known success.”
--Pfeffer in by the most professional
organizations. They also observe
markets, access to financial resources, and economies of that though there are few opportunities for leverage in
scale are no longer the powerful sources of competitive professional activities, some organizations have managed
success they once were. Thus, success is now achieved to do so by linking new software tools, incentive systems,
by “working with people, not replacing them or limiting and organizational designs. Many successful enterprises
the scope of their activities. [And], it entails seeing the have abandoned hierarchical structures and organized
workforce as a source of strategic advantage, not just as a themselves in patterns specifically tailored to conform
cost to be minimized or avoided.” This requires a focus on to the specific way their professional intellect creates
training and skill development and being careful about the value. And, to tackle extremely complex problems and to
“externalization” of employment (companies must ensure leverage their intellectual assets to the fullest degree, many
that key activities are performed by those employees who companies are using a form of self-organizing networks
are connected enough to the organization to be committed that the authors call a spider’s web.
to its success). Pfeffer sees these two issuesÑtraining and
PART II: INNOVATION
contracting outÑas solid illustrations of how thinking about
the extent to which sustainable competitive advantage In this section, contributors focus on innovation policy
is dependent on the workforce helps companies make and innovation management, with their discussions of the
more sound decisions about the policies and practices of different routes to innovation, the dangers of innovating, the
managing that workforce. lean enterprise, and a more effective way of communicating
Collins and Porras (“Building a Visionary Company”) new ideas.
found in their research that creating and building a visionary According to Rothwell, in “Towards the Fifth-
company does not require a great idea or a charismatic Generation Innovation Process,” with the growing
leader. Thus, they believe that the “continuity of superb complexity and pace of technological change, leading-edge
individuals atop visionary companies stems from the innovators are beginning to employ elements of the fifth-
companies being outstanding organizations, not the other generation (5G) innovation process, defined as “a process
way around.” Their message for CEOs, managers, and of systems integration and networking (SIN). É in which
entrepreneurs is that the most important step is not action the technology of technological change is itself changing.”
The result is faster development speed and greater
Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 3
Managing Innovation and Change Jane Henry and David Mayle, Editors

efficiency. The author speculates that if the 5G process of the individual, of functions, and of companies, and offer
is properly deployed in assembly-type industries, these greater value to the customer than either the German,
industries might overcome the product development and American, or Japanese traditions alone.
manufacturing speed and efficiency advantages enjoyed “Strategic Stories: How 3M Is Rewriting Business
by Japanese manufacturers. Planning” (Shaw, Brown, and Bromiley) explains why
“Why the Last Shall be First and the First Shall Fade stories are more effective in strategic planning than outlines.
Away” is Kay’s explanation of why innovative companies The article notes that when planning, almost every company
are rarely the most successful. He believes that being first uses the standard bulleted outline because it fits the way
is not often very important because innovation is rarely the people are accustomed to presenting information. It is
lone source of competitive advantage. While individuals economical, reducing complexity to a few concise points.
and small companies can make a great deal of money It allows for dialogue around the issues and gives presenters
out of good, new ideas, the success of large established the freedom to clarify and revise on the fly. And, it reflects
enterprises is generally based on their distribution the character of meetings and the high-pressure pace of
capability, their depth of
technical expertise, and their “The critical challenge … is to synchronize the needs of the individual, the
function, the company, and the value stream in a way that will yield the
marketing skills. History
full benefits of the lean enterprise.”
has shown repeatedly that
--Womack and Jones
these factors have allowed
large companies to develop an innovative concept far more management and planning. Nonetheless, bulleted outlines
effectively than the innovators themselves. also encourage intellectual laziness in three ways: (1) they
Because the German industrial tradition tries to satisfy are too generic, (2) they do not specify critical relationships,
the needs of the function; the American tradition, the needs and (3) they do not state critical assumptions about how
of the individual; and the Japanese tradition, the needs of the business works. In contrast, planning by narrative is
the company, conventional wisdom views them as mutually much like good storytelling: The strategic planner sets the
exclusive. Womack and Jones disagree. In “From Lean stage (i.e., defines the current situation, insightfully and
Production to Lean Enterprise,” they note that research has coherently)Ñby analyzing industry economics, key success
led them to consider a fourth approachÑthe lean enterprise. factors, and key drivers of change, and by defining basic
In their model, the needs of the individual are satisfied tensions and relationships. The planner introduces dramatic
by career paths that alternate between concentrating conflict (i.e., challenges and obstacles to success). And, the
on a specific family of products and dedicated, intense story reaches a satisfying and convincing resolution (i.e.,
knowledge building within functions. However, these the plan relates how the company can overcome obstacles
functions must include a process management function (to and win, which requires a logical, concise argument).
replace industrial engineering and quality assurance) that Another facet of innovation is the question of
instills a process perspective throughout the organization. partnerships across organizational boundariesÑa topic
This approach will allow people’s skills and capabilities that Henry and Mayle address with relevant articles from
to continue to grow while they give their undivided Tidd, Bessant, and Pavitt; DeFillippi and Arthur; and Lewis
attention to product development over extended periods. and Lytton.
In addition, functions serve as schools that systematically In “Learning Through Alliances,” Tidd et al. discuss
summarize current knowledge, search for new knowledge, the alliance as a means of accessing market or technological
and teach both to members of value-creating process teams. know-how or acquiring assets. However, they also view it as
Functions also develop best practices and, additionally, with an opportunity to internalize a partner’s know-how in order
their counterparts up and down the value stream, formulate to learn new market and technological competencies. With
rules for governing how they will work together and for learning as the goal, partners must have complementary
establishing behavioral codes. Womak and Jones believe skills and capabilities, but have an even balance of financial
that this model of the lean enterprise will satisfy the needs strength as well as equal strength in the technological,

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 4
Managing Innovation and Change Jane Henry and David Mayle, Editors

product, or market capabilities they contribute. In that is sensitive to shifting combinations of human and
addition, learning through alliances is affected by intent, social capital.
transparency, and receptivity. The partners must view In “The Way Forward: Partnership Sourcing,” Lewis
collaboration as an opportunity to learn new skills rather and Lytton define partnership sourcing as “a commitment
than to gain access to a partner’s assets. Each partner must by both customers and suppliers, regardless of size, to a
be open or “knowable” so that the potential for learning long-term relationship based on clear, mutually agreed
objectives to strive for world-class
“Management thought and practice frequently have been capability and competitiveness.” This
seduced by the search for the ‘one best way to manage’.
approach is advocated because it is seen
Unfortunately, business does not lend itself to universal truths,
as providing significant benefits for both
only to ‘contingency theories’ of management.”
--Bowen and Lawler purchasers and suppliers. Purchasers can
realize the benefits of security of supply,
exists. And, each must have the capacity to learn. reduced paperwork, simpler delivery systems, improved
“Paradox in Project-Based Enterprise: The Case of quality and cost savings, faster product development, lower
Film Making” is DeFillippi and Arthur’s discussion of the stocks and smaller overdrafts, and reduced total costs. For
rise of project-based careers and the creation of temporary suppliers, the advantages include the ability to plan more
organizations for project-based work, which they view as effectively, more financial security, and reduced total
two interdependent manifestations of the new economy. In costs.
such industries as film, construction, and semiconductors,
work is frequently organized around specific projects, PART III: CHANGE
and “employees” are subcontractors who move from one Henry and Mayle divide the issue of change into
project to another. These kinds of project-based enterprises two primary components: organizational restructuring
and careers are usually found where complex, nonroutine and the impact of technology. As regards organizational
tasks require the temporary collaboration of specialists with restructuring, they view continuous improvement (an
diverse skills. incremental approach), empowerment (a bottom-up
The authors believe that the independent film approach), and reengineering as the three key management
industry provides an opportunity to observe the project- fads of the past 30 years. Here, Bowen and Lawler consider
based enterprise in relatively pure form. It also allows the the benefits and costs of empowerment and Hammer
opportunity to see how the idea of temporary enterprises, describes the benefits of reengineering.
sustaining a permanent industry, challenge several tenets In “The Empowerment of Service Workers: What,
of traditional strategic management theory. For example, Why, How, and When,” Bowen and Lawler explain that
in the independent film industry, strategy precedes the in the mid-1970s, the production-line approach was
formation of the enterprise; structure, staffing, and capital preeminent in the service arena. It advocated dealing
investments are temporary; the enterprise is dissolved with the customer via standardized procedurally driven
before the outcomes are measured; idleness is necessary; operations, and it reaped the benefits of efficient, low-cost,
inconsequential jobs are sought after because of the career high-volume service operations and satisfied customers. In
benefits they offer; and career mobility drives industry recent years, however, companies have rushed to embrace
stability. Moreover, the goals of the enterprise are empowermentÑservice delivery in which employees
subordinate to the goals of the individuals involved. In fact, interact with customers “free of rulebooks”Ñencouraged
the industry’s continuing success is synonymous with the to do whatever is necessary to satisfy them. Empowered
success of industry individuals rather then with the success employees are informed about the organization’s
of the enterprise. DeFillippi and Arthur conclude that this performance, are rewarded based on that performance,
evidence indicates that strategic management theory needs have access to knowledge that enables them to understand
to turn away from enterprise-centric strategic formulations and contribute to organizational performance, and have the
and incorporate a dynamic, multicommunity perspective power to make influential decisions. When these factors

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 5
Managing Innovation and Change Jane Henry and David Mayle, Editors

are in place, companies are able to respond more quickly to one of the major changes in business today, Henry and
customer needs during service delivery and respond more Mayle offer articles that address the impact of these
quickly to dissatisfied customers during service recovery, technologies on organizations. Here, Apgar describes the
resulting in invaluable word-of-mouth advertising and shift out of the office, and Hof, with McWilliams and Saveri,
customer retention. Moreover, employees feel better about speculates on the prospects for e-commerce.
their jobs and themselves, tend to interact with customers In “The Alternative Workplace: Changing Where and
with more warmth and enthusiasm, and are often a great How People Work,” Apgar explains that depending on their
source of service ideas. needs, companies use different variations of the alternative
Despite these considerable benefits, the authors work (AW) theme, with most organizations using a mix
warn that there are some costs that
must be considered, including a higher
“At the heart of reengineering is the notion of discontinuous
thinking—of recognizing and breaking away from the outdated
investment in selection and training,
rules and fundamental assumptions that underlie operations.”
higher labor costs, slower or inconsistent
--Hammer
service, violations of “fair play,” and bad
decisions. In addition, before rushing into empowerment of options rather than a one-size-fits-all approach. Some
programs, companies must determine whether and how merely have employees share desks and office space, or
empowerment fits their situations. For example, the place them on different shifts or travel schedules. Others
production line approach is most effective if the core replace traditional private offices with open plans, while
mission is to offer high-volume service at the lowest cost. others use “hotels” (another form of shared-office options),
When service involves managing a relationship as opposed create satellite offices, institute telecommuting, or allow
to performing a simple transaction, empowerment is best. individuals to work from home offices. Apgar notes,
In some situations, technology has been designed in such however, that the first step in choosing a particular mix
a way that empowerment must be limited to suggestions of options is to answer a few basic questions as a means
that do not alter the basic production-line approach. In of ascertaining whether any or all of the AW options are
other instances (e.g., ATMs), technology has removed the feasible: Is the organization committed to new ways of
individual from the service delivery process altogether. operating? Is it information-based rather than industrial?
And, empowerment is most beneficial in businesses that Is the culture open; are managers proactive? Can clear links
operate in unpredictable environments. be established among staff, functions, and time? Is the
Hammer observes (in “Reengineering: Don’t organization prepared to deal with the inevitable resistance
Automate, Obliterate”) that because business processes and from middle management? Can the inherent physical and
structures have not kept pace with changes in technology, logistical barriers be overcome? And, is the organization
demographics, and business objectives, they have become willing to invest in the tools, training, and techniques that
obsolete. Thus, he advocates new rules that fit the current make AW initiatives successful? Managers must also look at
environment and require a new conceptualization of the the economics of AW from the perspective of the company,
business process. These rules include: organize around the employees, and the customers, and weigh the tangible
outcomes rather than tasks, allow those who use the and intangible costs against the respective benefits.
output to perform the process, include information-process According to Mulgan and Briscoe (“The Society of
work in the real work that produces the information, treat Networks”), despite the remarkable level of innovation in
geographically dispersed resources as though they were organizational forms, it is surprising that most observers
centralized, link parallel activities instead of integrating assume that the era of cyberspace will be based on the
their results, put the decision point where the work is classic organizational models of the 20th century, which
performed and build control into the process, and capture were designed for material-based industries and economics
information once and at the source. and for workers with relatively little education. They note,
Because the “increasingly ubiquitous presence of however, that the Internet and Visa stand out as two highly
information and communications technology” represents successful entities that have designed their organizational

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 6
Managing Innovation and Change Jane Henry and David Mayle, Editors

structure to be at odds with the single-chain-of-command Nonetheless, the book’s 23 articles, excerpted from
hierarchical form, with its emphasis on control, and to reflect books, academic journals, and business periodicals, were
the unique nature of information. The Internet is owned not selected to form one school of thought on the subject
by no one, operates on leased lines, and is a bottom-up of managing innovation and change, but to provide a
organization that gets its innovations from users. Visa is an kaleidoscope of the vital strategic management theories and
open organization, which thrives on diversity and multiple initiatives of the past decade that promise solid, long-term
lines of power, that anyone meeting certain criteria can join value in a changing environment. The creative approaches it
(there are approximately 20,000 member organizations that presents form an accessible overview of the many effective
jointly own Visa). Although its headquarters has a skeleton ways to develop and sustain the innovative organization.
staff, the enterprise does business of more than $650 billion Business writer, Stuart Crainer, has said, “There are
annually. And, regulation is built in instead of imposed; if no final answers in management É just lasting questions.”
members want to increase their market share, they must Seemingly, editors Henry and Mayle agree, for the works
offer better service at lower prices. The authors suggest they have carefully selected do not appear to be offered as
that some version of the network approach can even be the final, definitive word on excellence in management,
effectively applied to the telecommunications industry. innovation, and change, but to gather many strands of
strategic management thought into a concise compendium
of insights from both thinkers and doers. These insights
*** identify some of the fundamental, but significant, areas that
References by chapter, contributor credentials,, and a today’s managers must consider in the process of creating
subject index are provided. new visions of the future, developing the strategic plan for
reaching that future, and creating value in the process.
In this second edition of Managing for Innovation
and Change (the first was first published in 1991),
Remarks more emphasis is given to people, intellectual capital,
partnerships, networks, and structural development as
Managers are pervasive throughout society, whether it a means of reflecting the significant transformations
is a small local business, a multibillion-dollar multinational, occurring in today’s business world. And, as before,
a farm, Little League, or a local community action group. open cultures are viewed as having a significant role to
Thus a diverse range of management thinkers is needed play, and innovation and change are treated as long-term
to help management understand the considerations that initiatives.
drive organizations and enterprises, no matter what their With its excellent range of subjects, and its extensive lists
role. What these thinkers have to say, whether it is a of references, the book is invaluable as a supplementary text
revolutionary new idea or a new perspective on an old idea, for corporate training in managing innovation, knowledge
matters greatly to those undertaking the task of guiding management, and organizational development. And, it is a
their organizations through the challenges they must face perfect, accessible source for managers interested in self-
in today’s world. Managing Innovation and Change is directed professional development.
a reader for the Open University Business School’s MBA
course in creativity, innovation, and change. It presents the
perspectives of academics, consultants, and executives,
some of whom (like Hammer, Hamel, and Prahalad) are
instantly familiar to the wide business audience, and others Reading Suggestions
(e.g., Roger Levett, London consultant, and James Dyson,
Reading time: N/A, 307 Pages in Book
a CEO in the U.K.) that might not be so widely known
(especially in the U.S.)Ñall offering information aimed at Managing Innovation and Change is not necessarily
helping managers to maximize management opportunities offered to be read, but to be used as a complementary
and processes. source of information on various topics, or as a primary

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 7
Managing Innovation and Change Jane Henry and David Mayle, Editors

reference for further reading and study. Its 23 chapters,

each representing a different article, are divided into the
three parts indicated in this review: (1) management, (2)
innovation, and (3) change. Each part is further divided into
sections: management context and managing people (part
1), policy and management, and partnerships and networks
(part 2), and organizational restructuring and the impact
of technology (part 3). We suggest reading the preface, the
introductions to each section, and the table of contents in
order to ascertain the focus of each chapter and to make
more informed reading selections.
We highly recommend this “planned” approach rather
than just picking a title, at random, from the table of
contents. In some instances, you may get more value from
reading several articles as a set and, thus, obtain different,
but complementary, perspectives on a general topic. For
example, we believe that “Interpretive Management: What
General Managers Can Learn from Design” (in part 1),
“Paradox in Project-Based Enterprise” (in part 2) and
“The Society of Networks” (part 3) make a provocative
learning package. You can probably find several other
such packages, depending upon your interests and needs.
In addition, because we could not review all 23 articles that
appear in the book, but just a representative sampling, you
would do well to follow our recommended approach so as
to make yourself familiar with all the material before you
make your reading selections.

Business Book Review™ Vol. 19, No. 18 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 8
 BusinessSummaries ®

May 15, 2007

The Myths of
Innovation
Scott Berkun

©O’Reilly Media, Inc., 2007

ISBN: 978-0-596-52705-1

The Big Idea

In this book, author Scott Berkun takes a close look at
innovation history, including the software and Inter- innovation all at once, to enable you to gain a better
net ages, to reveal how ideas truly become successful understanding of the world around you and to be
innovations – truths that can be applied to the chal- able to avoid mistakes should you attempt to inno-
lenges of today. vate as well.

The book uses innovation myths to understand how THE MYTH OF EPIPHANY
innovations take place. Each chapter identifies and Where do ideas come from? This question is on the mind
discusses one innovation myth, explains why it is of anyone who visits a research lab or an inventor’s
popular, and, lastly, uses the history of innovations, studio or an artist’s workshop. It’s the secret we hope
both recent and ancient, to teach the truth behind the to see – the magic that takes place where new things
myths. are born, where world-changing ideas come from –
they have always proven elusive.
WHY YOU NEED THIS BOOK
Using dozens of examples from the history of technol- For centuries before hotbeds of innovation such as
ogy, business and the arts, this book will teach you to Google, IDEO and MIT came into existence, human-
learn how to convert your knowledge into ideas that ity struggled to explain any kind of creation. For the
can change the world. most part, popular answers have been unconvincing
– enabling fantasy-laden myths to grow strong.
The book intends to clarify how innovation happens
by taking on business, scientific and technological
BusinessSummaries® May 15, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved
The Myths of Innovation Scott Berkun
Two of the grandest idea-creation myths: • Their influence and impact owes as much to
1. The story of Isaac Newton and the discovery circumstance, world politics and chance as to
of gravity, in which Newton was sitting under their inherent value or skill. In their time they
a tree when an apple fell on his head and the were perceived in a radically different way
idea of gravity was supposedly born. than we see them now.
2. The tale of Archimedes’ Eureka – he was • There is a lesson here for us: when the legends
asked by his king to detect whether a gift was we know so well today were becoming legendary,
made of false gold, and supposedly did so by they were rarely if ever seen as legends.
accident upon observing the displacement of Some points:
water as he stepped into his bath. • The stories told in many schools present
These myths are stories of an epiphany or a “sudden innovators like Gutenberg as obvious, logical
manifestation of the essence or meaning of some- and necessary contributors, which beg the
thing”. The word has religious origins – its first use assumption that if we were alive when they
meant that all insight came from divine power – and were, we would have seen them the same way
although today its religious connotations have been as we do now. This obviously is far from the
mostly forgotten, what remains is that we don’t know truth.
where the idea came from and aren’t willing to take • In addition, any legend of innovation will find
the credit for it. natural omissions by history. History can’t give
attention to what’s been lost, hidden or deliberately
To disprove these and other such myths, we have
buried! It’s mostly a telling of success – and not
to remember that ideas never stand alone. Any and
the partial failures that enable success. Many of
every seemingly grand idea can be subdivided into
the heroes we idolize were far from perfect;
an infinite series of smaller, previously known ideas.
popular history neglects to mention their
Similar patterns exist in the work of innovation itself;
failings.
for most there is no singular magic moment. Instead,
• The innovations in the past were far from
there are many smaller insights accumulated over
inevitable. There are no guarantees that grant
time.
that these innovations really would have come
The best way to think of epiphany is to imagine work- into existence no matter what – or, moreover,
ing on a jigsaw puzzle. Epiphany is the moment when that the situations that persist today are the
the last piece of work fits into place. However, that last inevitable consequences of history!
piece really is no more magical than any of the others – and, • We also tend to forget that when an innovation
moreover, has no magic without its connection to the other was in progress, there are always competitors.
pieces. The process by which an innovation gains
superiority over the competition is an open,
One final point – to look at this from another angle,
competitive, experiment-rich playing field.
no grand innovation in history has ever escaped the long
• The winners of this process are the ones that
hours required to take an insight and shape it into a form
become feted, while the losers are usually forgotten.
that the world can use. The big idea has to be broken
At best, timelines only show one path of the
down into its constituent parts that can be built or
full tree of innovation history.
even attempted before said idea can be realized.
THERE IS A METHOD FOR INNOVA-
WE UNDERSTAND THE HISTORY OF TION
INNOVATION A methodology is defined as a systematic way of accom-
Ordinary things, people and events are transformed into plishing something. There is a belief that a playbook
legends by the forces of time. The Rosetta Stone, the exists for innovation – a distinct and definite process
key to sorting out the ancient Egyptian hieroglyphic similar to that followed in, say, chemistry experiments
language, and Johannes Gutenberg, the celebrated – and, if followed faithfully, will remove risk from the
inventor of the printing press, were not appreciated process of finding new ideas.
for what they mean to us in their times.
BusinessSummaries® May 15, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 2
The Myths of Innovation Scott Berkun

However, there is no way to avoid all risks when doing new revolutionary for your time (many past
things! It takes resources to start a company, develop innovators had this problem).
an idea or even change someone’s mind – and those 8. Keep the lights on. The bills will keep coming
investments never have any guaranteed returns. while you’re struggling with all these things.
There can be no perfect beginning to innovation; plus Lastly – but far from the least – here are paths of inno-
once you start you have to evaluate and decide to shift vation, or ways of thinking about them that can shift
directions or start over with the insight, perspective the odds in your favor:
and experience you’ve gained.
1. Self-knowledge. Being aware of the
In addition, luck is a big part of business life and perhaps environments or challenges that inspire the
the biggest part of entrepreneurial life as well. best results for your personality can help you
make smart path choices.
That said, though, some patterns to the source of innova-
2. Be intense, but step back. Be ready to hear
tion do exist:
hard truths; maintain the courage to question,
1. Hard work in a specific direction. The rethink and commit again.
majority of innovations come from dedicated 3. Grow to size. Start small and attack a specific
people working hard to solve a problem. problem in a known field. Grow your ambition
2. Hard work with direction change. Many an with your success.
innovation starts as mentioned previously, 4. Honor luck and the past – the sacrifices of
but an unexpected opportunity arises and is your predecessors. Acknowledge that you are
pursued midway through. standing on the shoulders of giants!
3. Curiosity. Many innovations begin with PEOPLE LOVE NEW IDEAS
bright minds pursuing interests. Every great idea in history has the fat red stamp of rejection
4. Wealth and money. Some innovations are on its face. Every innovator who cooked up these ideas
driven by the pursuit of cash. has had to deal with a lot of skepticism before meet-
5. Necessity. Individuals have innovated to seek ing success.
something they couldn’t find.
6. Combination. Most innovations involve more The love of new ideas is really a myth; we prefer
than one of these factors. ideas only after others have already tested them. We
The challenges to innovation: reuse ideas and opinions all the time and don’t really
1. Find an idea. Ideas can come from just trust in the truly new – we’re being smart by doing so,
anywhere! hedging our bets.
2. Develop a solution. An idea is one thing; a It’s only human to fear suffering due to forced change
working solution is another. and to avoid this when able. Innovation asks for faith in
3. Sponsorship and funding. You may not have something unknown and thus far from risk-free over some-
the capital to develop the idea or solution by thing known to be safe or even pleasant. Even great minds
yourself. have been guilty of this.
4. Reproduction. It can be difficult to scale
This situation – where an innovator has to challenge
something, especially if you need 100,000
the status quo, which may include previous innova-
pieces of whatever it is you are making.
tions that some people have struggled to build all
5. Reach your potential customer. An idea is
their lives – is known as the Innovator’s Dilemma. As
NOT an innovation until it reaches people.
people and companies age, they have more to lose,
You have to reach the people the innovation’s
and attitudes focused on security, risk aversion and
designed for!
optimization of the status quo eventually become
6. Beat your competitors. You won’t be alone at
dominant.
trying to get your ideas up and running.
7. Timing. As great as your idea is, will people Innovators and would-be innovators alike must take
accept it when it’s finished? It may be too note of this: innovative ideas are rarely rejected on their
BusinessSummaries® May 15, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 3
The Myths of Innovation Scott Berkun

merits; they’re rejected because of how they make people adults are too rigid, arrogant or afraid to entertain.
feel. So these innovators can’t and shouldn’t forget The difference between creative people and others is more
people’s concerns and feelings when they design and because of attitude and experience than nature itself.
present innovations.
Idea reuse, however, is so easy and convenient that
Here are five factors that define how quickly innova- people can go for years before feeling the need to find
tions spread: ideas of their own. Even our educative and profes-
sional systems push the idea-finding secrets of fun
1. Relative advantage. The value the new thing
and play to the corners of our minds and train us out
has compared to the old. (Perceived advantage,
of our creativity. It doesn’t help that a prevailing myth
determined by the potential customer.)
exists that good ideas will look the part when found – the
2. Compatibility. How much effort to transition
future never, ever enters the present as a finished
to the new thing is needed? If the cost is greater
product.
than the advantage, most people won’t try it.
3. Complexity. How much learning is required The truth is that we all have innate skills for finding
to try the new thing? The smaller the ideas and solving problems; most of us have just lost
perceived conceptual gap, the higher the rate our way.
of acceptance.
Unlike the mythical epiphany (as discussed earlier),
4. Trialability. How easy is it to try the
real creation is sloppy. Discovery is messy and explora-
innovation? The easier it is, the higher the
tion can be dangerous; most of what’s found will not
acceptance rate.
be satisfactory. Creative work will not fit neatly into
5. Observability. How visible are the results
plans, budgets and schedules.
of the innovation? The more visible the
advantage, the faster the rate of adoption. Some points contributory to finding ideas, then:
THE LONE INVENTOR • Our minds work as filters. If you want new
Popular credit for major innovations isn’t always given to ideas, you have to slide toward openness
the right people; it’s often driven by markets, circumstance, by turning some filters off – and exploring
and popularity – forces not bound by accuracy. Other thoughts you’d ordinarily reject offhand. Do
factors, such as people coming up with the same inno- this until some interesting thoughts come up,
vation at the same time, or the sub-innovations that and then turn some of the filters on until a
had to take place in order for an innovation to become handful that is both interesting and practical
reality, also serve to muddle the truth. come up. (It’s not only about having an open
Innovation history is complicated; it’s always made up mind; you also have to know when to judge
of threads and relationships that don’t separate easily and when not to judge.)
or yield simple answers, such as who really invented • Remember that the core message of
a certain gadget (or whether only one inventor can brainstorming is that you have facts (data
really take credit for said invention in the first place). and information), ideas (possibilities) and
The departure from the truth takes place because it’s solutions (answers to problems) and you
simply easier to remember. have to spend time with all of them.
• Regarding idea genesis, produce as many
We want innovation explained in neat packages, but ideas as possible; produce ideas as wild as
we also want to acclaim the right people for them. possible; build upon each other’s ideas; and
Rarely do both happen simultaneously. avoid passing judgment.
GOOD IDEAS ARE HARD TO FIND YOUR BOSS KNOWS MORE ABOUT
Humans, young and old, are built for creative think- INNOVATION THAN YOU
ing. So-called creative thinkers are not bothered by Those in power can make decisions others can’t, but that
inconsistencies, departures from convention, non-lit- doesn’t mean they have the wisdom or the experience to do
eralness, and often run with unusual ideas that most it well. There are exceptional managers out there, but
BusinessSummaries® May 15, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 4
The Myths of Innovation Scott Berkun

they’re very hard to find. It’s easy to overlook people’s 1. Culture. Innovations do change societies, but
lack of talent by misplacing faith in their power. they must first gain acceptance by aligning
with existing values.
It’s easy to assume that the manager has a better per-
2. Dominant design. Many dominant designs
spective on the viability of an idea because of his or
achieve popularity on the back of another
her superior experience of the industry. But these are
innovation.
exactly the factors that work against innovation. High
3. Inheritance and tradition. Some people are
experience and confidence make some managers the
comfortable with a particular idea based on
greatest resistors to new ideas, as they have the most
tradition, and it’s easy to confuse comfort for
to lose.
a belief with it actually being good.
Here are five challenges to managing innovation: 4. Politics. You can predict how people in power
Life of ideas. The best idea-finding sessions in will respond to a new idea if you first calculate
the world are useless if that creative energy goes its impact on them.
nowhere. It’s what’s done with ideas that matters! 5. Economics. Innovation is expensive; will the
The environment. Encourage a free discourse costs of changing to the new thing be worth
of ideas, including open criticism and debate. it?
Put innovation at the center. Make sure people 6. Goodness is always subjective. Get any
are comfortable with and unafraid of new ideas. number of people in a room and you’ll get
The protection. Managers can offer cover fire for their different definitions of goodness.
staff’s ideas, which is something that their staff cannot 7. Short-term vs. long-term thinking. Many
do for themselves. Life is a zero-sum game and the superior ideas are rejected by people interested
resources for innovation must come at the expense of in either short-term or long-term goals.
something else. All innovations run on political capi- PROBLEMS AND SOLUTIONS
tal, which the manager has more of than his or her staff. Would-be innovators must spend enough time exploring
The execution. This is to shepherd an idea down and understanding problems before trying to solve them.
the path from conception to realization – and it’s
the hardest task faced by managers of innova- Successful innovation often involves more attention to
tion. They have to deal with all the details that problems than solutions. Discovering problems actually
were waved away or overlooked earlier. The requires just as much creativity as discovering solutions. A
challenge is to make the right sacrifices at the properly defined problem is partially solved.
right time: too much idealism vs. too little of it. One way to help define a problem is to compare it to
Persuasion. Innovators don’t always have all the another kind of challenge that’s been solved in order
cards, so they have to ask others for help to make to creatively frame the problem in such a way as to
things happen. It fuels innovation at all levels. Every stimulate new ideas. You could try to see where the
successful innovation depends on getting people to believe competition has failed, for instance, and try a differ-
in things that have not been done before. ent approach. Or you could try to explore the problem
THE BEST IDEAS WIN by envisioning it or making prototypes.
The best ideas DON’T always win, but that doesn’t stop Legend has it that the microwave, Band-Aids, Nylon,
people from believing that they should. Fairy tales and X-rays, rubber soles and Viagra, among other break-
hero stories follow similar patterns: good guys win through products, were discovered by accident.
and bad guys lose, and people who do the right thing Innovation is supposedly random and those lucky
get nice prizes. People want to believe that this is enough to show up at the right place and the right
always the case, even if it isn’t. time reap rewards. However, it’s what people do with
the chance encounter that matters, and not the chance dis-
The goodness or newness of an idea is only part of the
covery itself.
system that determines which ideas win or lose; there
are environmental or secondary factors which determine In our everyday lives we encounter odd moments
the fate of an idea: when we see things beyond the ordinary. Most of us
BusinessSummaries® May 15, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 5
The Myths of Innovation Scott Berkun

simply ignore these moments or trivialize or discard

them. However, for the innovator, these moments are
the future knocking at the door.

INNOVATION IS ALWAYS GOOD

Not all innovation is good. What we casually term as good
is never beneficial to everyone; it depends on who you are
and where you stand. Sorting out the meaning and
impact of innovations is more complex than the task
of making the innovations themselves.
All innovations combine good and bad effects regardless of
the intention of the innovator or how well designed they
are.
Innovations can be good for you, for others, for an
industry or economy, for a society, and/or for the
world – or combinations thereof. However, no one
knows, not even the inventors, how their creations
will impact the world until they are used.
In addition, most inventors believe that true break-
through ideas are so different from our current
thinking that we have no idea how to use them. This
means that not only is the use of an innovation unpredict-
able, but the time and motivation for its acceptance is also
unpredictable.
Lastly, it must be said that it’s both ridiculous and
dangerous to think that an idea is good because it’s
new and reject an idea because it’s old. It must be said
that the best philosophy of innovation is to accept
both change and tradition and to avoid the traps of
absolutes.

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Volume 25, Number 34

The New Age

of Innovation
Driving Co-Created Value
Through Global Networks
C.K. Prahalad and M.S. Krishnan

©2008 C.K. Prahalad and M.S. Krishnan

Adapted by permission of McGraw-Hill
ISBN: 0-07-159828-6

Reviewed by Leslie Johnston

Introduction
In The New Age of Innovation, authors C.K. Pra- Transforming Business
halad and M.S. Krishnan reveal the missing link in The authors focus on the nature of innovation and
connecting strategy to execution, the building of the often hidden links—business processes and
organizational capabilities that allow companies to analytics—between business models and day-to-
achieve and sustain continuous innovation. Prahalad day operations. They do not focus on a “charismatic
and Krishnan show that the key to creating value and leader” approach or on big breakthroughs. They
future growth depends on accessing a global network believe that the changing dynamic of markets, driven
of resources to co-create unique experiences with cus- by connectivity, technology, industry convergence,
tomers, one at a time. In order to achieve this, CEOs, and consumer activism and involvement, has cre-
executives, and managers must transform their busi- ated a need for continuous change. They emphasize
ness processes, technical systems, and supply chain the technology and social infrastructure required to
management by implementing key social and techno- deliver an ongoing innovation advantage.
logical architecture requirements to create an ongoing
The relationship between consumers and companies
innovation advantage.
has changed radically. Over a hundred years ago,

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

companies assumed undifferentiated consumers.

Since that time, businesses have developed vari-
ous levels of marketplace segmentation of consumer Key Concepts
groups. They have now reached the point at which
connectivity, digitization, and the convergence of The fundamental transformation to N=1 and
industry and technology boundaries have created a R=G has two basic pillars:
new dynamic between consumers and a company. 1. Value is based on unique, personalized ex-
Traditionally, it was assumed that the company creates periences of consumers (N = 1).
value and exchanges it with its customers. This firm-
2. No firm is big enough in scope and size to
and product-centric view of value is being replaced
satisfy the experiences of one consumer at a
by a personalized experience and a co-creation view
time, which places the emphasis on access
of value. iGoogle, for example, depends upon co-
to, not ownership of, resources (R = G).
creation of value and personalization of experience.
Google provides the platform; individual consum- The authors focus on five key elements of the
ers decide how to use it (personalize it) to suit their transformation to an N=1 and R=G business
needs, for fun or for learning. environment.

This focus on personal experience permeates indus- 1. Value has evolved from products and ser-
tries as diverse as toys, financial services, travel and vices to solutions and experience.
hospitality, retailing, and entertainment. The message
2. All companies are seeking access to the tal-
is clear that even if a company is dealing with a hun-
ent and resources they need from the best
dred million consumers, each manager must focus on
sources—wherever they are.
one consumer experience at a time. The firm provides
the platform around which customers can co-create 3. Thus, flexible organizational systems are a
their own experiences. We have moved into a world prerequisite and must be developed.
in which value is determined by one consumer co-cre- 4. Resources in a company’s ecosystem,
ated experience at a time. Prahalad and Krishnan call whether local or global, must be continually
this phenomenon N=1. configured to meet consumers’ needs.
Similarly, for decades, large firms tended to be ver- 5. Business processes must be developed that
tically integrated, and it is only since the 1980s that enable a company to focus on one consumer
companies have begun to source critical components at a time, even among the millions.
from suppliers. Now, most have moved to global
supply chains, accessing specialist and low-cost pro- g g g g

ducers. As a result, access to resources is increasingly Information about the author and subject:
becoming multi-vendor and global. This trend toward www.newageofinnovation.com
access to resources from multiple sources (either local Information about this book and other business titles:
or global)—not just from a firm or its subsidiaries— www.mhprofessional.com
the authors designate R=G. The key is that the supply
of products, services, and competencies is multi-insti- Related summaries in the BBS Library:
tutional. Companies should build capacities to access Designing the Customer-Centric Organization
the global network of resources in order to co-create A Guide to Structure, Strategy and Process
unique experiences with customers. It is not neces- Jay R. Galbraith
sary for firms to own all the resource bases they need; Driving Growth Through Innovation
the capacity to access these networks of resources is How Leading Firms Are Transforming Their Futures
sufficient. Robert B. Tucker
This fundamental transformation of business is alter-
ing the nature of companies and how they create

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 2
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

value, and no industry is immune to this trend. The resulting in radical changes to the technical archi-
transformation is built on two pillars: tecture of the firm and how it is designed. It also
challenges the managerial processes, skills, and the
• Value is based on unique, personalized experienc-
attitudes of managers. The authors assert that coming
es for consumers, and firms must learn to focus
to terms with the implications of this transformation
on customers individually, even if they serve 100
is both urgent and inevitable for the survival of busi-
million customers. The focus is on the centrality of
ness.
the individual. This is the N=1 pillar.
• No firm is large enough in If traditional industries such as tires, shoes, movies and enter-
scope and size to satisfy the
experiences of one customer
tainment, advertising, life insurance and home insurance, and
at a time. All firms will access health insurance for those with long-term disabilities are mov-
resources from a wide variety ing in this direction, then as a manager you need to pause and
of other big and small firms— ask: Why is my business any different?
the global ecosystem. The focus
is on access to resources, not ownership of resources.
This is the R=G pillar. The key elements of this transformation are:

This trend holds tremendous implications for the 1. Value is shifting from products to solutions to
creation of value and profit in any business. It also experiences. In this new world, B2B and B2C will
challenges established managerial practices in talent converge (N=1).
management, product development, manufacturing, 2. No company has all the resources it needs to cre-
pricing, logistics, marketing, and brand management ate unique personalized experiences. All compa-
nies will, therefore, have to access talent, compo-

About the Authors nents, products, and services from the best source
(R=G).
C.K. Prahalad is the international bestselling 3. Internal management systems can become an im-
coauthor of The Future of Competition and Com- pediment. Flexible systems are a prerequisite and
peting for the Future and author of The Fortune at must be developed.
the Bottom of the Pyramid. He is the Paul and Ruth
McCracken Distinguished University Professor 4. Resources in the ecosystem must be continually
of Strategy, Ross School of Business, University configured.
of Michigan. Prahalad was named “The World’s 5. Specific models must be developed to enable or-
Most Influential Management Thinker” in 2007 ganizations to focus on one consumer at a time.
by The Times of London and “the most influ-
The competitive arena is shifting from a product-
ential thinker on business strategy today” by
centric view of value creation to a personalized
BusinessWeek.
experience-centric view of value creation. Resources
M.S. Krishnan is a Hallman Fellow & Professor are derived from a wide variety of suppliers who
of Business Information and Technology, Ross collectively provide the service, and continuous
School of Business, University of Michigan. reconfiguration of resources becomes a critical ele-
Krishnan was named as one of the 21 voices of ment in serving in an N=1 and R=G world.
quality for the 21st century by the American
Society of Quality and as a Power Thinker on
The N=1 and R=G World
Business Technology by Informationweek and If the locus of value is shifting from products and ser-
Optimize in 2004. vices to experience, then, almost by definition, value
creation must focus on the individual customer. This
is in contrast, however, to the manufacturing-oriented

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 3
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

model businesses have inherited. The N=1 world is iPod and iPhone are other examples that underscore
not, it should be noted, about the mass customiza- the importance of interface in enabling consumers to
tion offered by a number of large companies. Mass co-create their experiences.
customization has failed because, first, it is based on
As organizations expand across the globe, the diver-
a company-centric view of value creation in which
sity of languages, customs, and norms must be
product managers and designers pre-select the possi-
matched with the sheer scale of operations. Every
ble options and say to the customer: “We do not need
Wal-Mart store, for example, has different products
to hear what you want; choose from the options we
on demand. The different formats and sizes of stores
give you.” Second, companies have underestimated,
require different configurations of resources, and the
in the authors’ view, the complexity of the back end
company offers a dramatic example of scale, stan-
(the business processes and logistics) that is required
dards, global integration, and local responsiveness at
to fulfill that promise. However, digitization of busi-
the same time.
ness processes, a knowledgeable customer base, and
ubiquitous access to information not only have made Cycle time and speed are critical elements of the N=1
it possible to push beyond mass customization but world. Working on product development, for exam-
have made it a competitive requirement. ple, in three time zones in comparison to keeping all
development in one location allows companies to
The way in which the principle N=1 goes beyond
accomplish it in, if not one-third of the time, at least
mass customization is by understanding the behav-
half of the time, creating a huge competitive advan-
iors, needs, and skills of individual customers and
tage.
co-creating with them a value proposition that is
unique to them. Customers play an active role in The need for continuous scaling and downsizing of
co-creating value, and companies must leverage a operations is a strategic imperative in the N=1 world.
broader resource base to deliver value. Selective outsourcing of work to others is a necessity
for building scale in a short time period. While Pra-
No single company can provide the range of skills to
halad and Krishnan focus on large firms, those large
create the N=1 world. There will need to be a nodal
firms often focus on small firms as sources of inno-
firm at the center, influencing the entire ecosystem
vation. Knowing what is available and leveraging the
through a shared framework as well as establishing
innovations coming out of the laboratories of world-
the standards and customer interfaces, but all of them
class institutions and small start-up firms are critical
have to work together. The nodal firm does not own
to staying ahead of the competition. These small firms
the others; rather, it collaborates and co-opts them to
become a source of innovation arbitrage. Through
provide a complex solution. Nodal networks are now
selective licensing, collaboration, or acquisition, the
becoming the norm. OnStar, the telematics network of
quality and speed of innovation can be dramatically
General Motors, is a good example of a nodal enter-
altered.
prise.
Today, the authors point out, busi-
Pomarfin, the Finnish shoe firm, in focusing on N=1, depends nesses are somewhere between
on Italian designers, Estonian factories, and Finnish scanner where they started the journey and
where they need to be. They have
and software vendors. global supply chains and a host
of suppliers, and have segmented
While managers must cope with a complex system,
consumers in many ways. But their thinking about
whether the number of alliances and collaborations,
consumers does not reach the N=1 standard, nor are
the technological back end, or the analytical models
they able to leverage the global resource capabilities
used, the consumer’s experience must be simple and
available. Outsourcing provides a model that informs
intuitive. With the OnStar interface, for example, cus-
our efforts in manufacturing, design, software, and
tomers simply touch a button and they are connected
call centers, but it is only a start. In most cases, com-
to a human being. The intuitive interface of Apple’s

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 4
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

panies approach outsourcing as a means to control (R=G) to serve the interests of N=1 will define the new
internal costs, not to find innovative approaches to age of innovation.
reach N=1.
Enabling Innovation
The source of value is shifting from physical products With firms transitioning to an N=1 and R=G world,
(tires, for example) to solutions (specific applications the nature and sources of competitive advantage are
for managers of large fleets) to personalized experi- changing. Managers must ask themselves: What are
ences (for Joe, a tractor-trailer driver, for a specific the enablers of innovation in my firm?
application within his company). This shift in value
The global corporation can be visualized, according
to N=1 cannot be accomplished without increasing
to Prahalad and Krishnan, as a logical thread of rela-
knowledge intensity. However, not all of the ele-
tionships between a multitude of moving parts: ideas,
ments of the knowledge intensity needed can be fully
information, knowledge, capital, and physical prod-
developed within a single company. A multi-vendor
ucts. These relationships define an organization. The
strategy is required, which forces the firm to accept
capacity of an organization to articulate the relation-
R=G. If we move toward R=G, the authors note, we
ships selectively between these moving parts is at the
find that we can gravitate to N=1. If we want to move
core of an organization’s ability to respond, in real
to N=1, we will also have to move toward R=G.
time and with cost efficiency, to the demands of N=1
This process of creating value with one consumer and R=G. The more explicit the relationships are, the
experience at a time also permeates the way firms are greater the ability of managers to use them.
managed internally. Within the company, engaging
employees emotionally and intel-
lectually in the mission of the The transformation of a firm from its current business model
company will require that each to N=1 and R=G will not be a smooth and well-balanced exer-
employee is treated as unique cise. There will be lags. Some will move rapidly to R=G, as
(N=1). Mobilizing global teams
many have, to reduce costs. Some will move ahead to N=1.
based on the unique skills of indi-
viduals to address unique tasks is no different from
ING, Bridgestone, Starbucks, and Google are in very
R=G. The social movement toward N=1 will, there-
different businesses, but all subscribe to the core prin-
fore, affect not only how we deal with consumers but
ciples of N=1 and R=G. It is necessary, therefore, to
also how we deal with employees.
distinguish between the core principles themselves
Recognizing individuals as unique in all their roles and their manifestations in a specific industry or spe-
(consumers, employees, investors, suppliers, and cific firm and to minimize the temptation to imitate
citizens) will become a prerequisite for success in any one company’s approach to implementing the
value creation. Recognizing that resources are highly core principles. Well-developed and flexible business
distributed—within the global firm, among suppli- processes are the enablers of all innovation cultures.
ers, in consumer communities, and among people If they are not consciously adapted to the changing
at large—is critical. Managers must build systems business environment, business processes can instead
that selectively pull together teams that are uniquely become impediments to innovation and change.
capable of providing high-quality, low-cost solutions
The connection between strategy, business models,
rapidly. This transformation is well under way, and
and business processes must be carefully understood.
digitization and emerging technologies (such as Web
The broad understanding of the basic business model
2.0) are aiding as catalysts in the movement.
must be translated into business processes. Business
Privileged access to capital, technology, and people processes affect and are affected by the technical archi-
is becoming less critical. The ability to develop flex- tecture (information and communication technology
ible, transparent, and granular business processes systems, or ICT) and the social architecture (organi-
that allow for continuous reconfiguration of resources zational structure, decision rights, and performance

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 5
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

management systems of the firm). Visibility in the global supply chain is a prerequi-
site for managing the complex web of product and
Analytics: Insights for Innovation
information flows. UPS and FedEx offer examples of
Competitiveness favors those who spot new trends
visibility in a global supply chain. UPS moves over
and act on them expeditiously. Spotting new trends
15 million packages, and FedEx 6 million packages,
requires comprehension of consumer expectations
around the world each day, and both companies pro-
and behaviors and technological changes, as well as
vide complete visibility to the end consumer on each
the nature of the supply chain and opportunities for its
and every package. To perform analytics for insight,
improvement. Today’s competitive landscape requires
companies must focus on visibility, granularity, accu-
continuous analysis of data for insight. Analysis that is
racy, and timeliness of data. The premium paid by
only episodic, ad hoc or periodic cannot suffice. Tradi-
large businesses for the logistics services offered by
tional analytical approaches are often asynchronous
UPS or FedEx is not for mere visibility. These busi-
with business changes. Therefore, delays in recogniz-
nesses are also paying for accuracy, timeliness, and
ing, interpreting, and acting on trends are emerging
the ability to reroute their packages based on their
as impediments to competitiveness.
current needs—that is to reconfig-
ure resources.
The focus of the young on Web sites like MySpace, YouTube,
Orkut, Facebook, and others suggests that a whole generation The capacity to reconfigure
resources globally can start with
of consumers will grow up expecting to be treated as unique a simple trend analysis of the
individuals, and they will have the skills and the propensity to key metrics across different mar-
engage in a marketplace defined by N=1. kets and product categories. This
beginning, however, should be
Real-time analytics seize the opportunities and miti-
expanded to a capacity for rapid response to changes
gate the risks in seeking to have global resources
in either the external market demand or internal pro-
serving single customers. The algorithms and quanti-
cess capabilities available at a given point in time.
tative methods used in analytics are evolving to help
managers derive insights, often combining structured The visibility of processes and data within global
transaction data (numbers) and unstructured data, supply chains (R=G) is crucial for building the mul-
as in documents, images, and video. Digitization of tiple layers of capabilities that are critical for dynamic
business processes, the Internet, and evolving ICT reconfiguration of resources. Visibility also helps
architecture enable real-time predictive modeling. managers anticipate consumer behaviors so that
These capabilities, the authors note, are at the heart of they can add or subtract appropriate resources to or
effective management in an N=1 and R=G world. from the whole supply network. In this process, com-
panies gain new insights, whether for operational
There is value in identifying new patterns of rela-
improvements or for strategic redirection and course
tionships, predicting the behavior and evolution of
correction.
systems, and mitigating risk. In an N=1 world, the
behavior of individual consumers as well as broad The shift toward a more customer-centric view of
patterns of change must be understood. In R=G, the delivering services is also evident in the business of
capabilities of each vendor in the ecosystem in terms information goods. Online news portals, social net-
of costs, time, and quality levels must be understood working sites, and search engines such as Google,
and matched with the specific demands of a single Facebook, and Yahoo! allow customers to design their
consumer at a point in time. Furthermore, given the own choices of news topics and sources. Such analyti-
complexity of the entire ecosystem, the impact of cal capabilities are now widely used by leading online
change in any single variable, such as order entry, will retailers and auction sites (such as Amazon.com and
have a ripple effect on other related subsystems such eBay) to build personalized products and services for
as inventory, spare parts, and manufacturing lead their customers based on deep insights derived from
times. their past choices and behaviors.

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 6
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

According to the authors, there is an underlying trend devices, products, customers, and supplier systems.
for large companies to search out and engage with This enables an N=1 customer experience in an R=G
small firms and even individuals. These relationships environment. This extended ecosystem of firms and
are focused on access to specialized talents and skills individuals requires flexibility in internal business
required for moving to N=1 and R=G. The ability to processes and must connect to devices, and content
collaborate between large and small firms as well as sources through new platforms that can include blogs,
to tap into the unique skills of individuals is a critical wikis, contextual data, and video.
requirement. The analytics required to migrate to N=1
As companies develop specifications for their new
and R=G can be mutually reinforcing. The greater the
ICT architecture, they need to deal with several reali-
ability to dynamically reconfigure resources (R=G),
ties. All large firms start with significant legacy assets
the greater ability to support N=1.
in their ICT architecture. The first step in confronting
IT Matters: Technical Architecture reality is to perform an audit of the existing ICT sys-
for Innovation tems. As firms build their insights about individual
Good analytics requires richness and quality of data, customers and partners in their ecosystem, propri-
both traditional transactional data and unstructured etary systems and analytics capability will become a
data (text and video). Using powerful mathematical source of competitive advantage.
models requires computing capa-
bilities. For a global firm, getting
We need to discard traditional categories in our thinking, such
real-time data from multiple as hardware and software (both as in GM’s OnStar or cell
sources requires an investment in phones), manufacturing and services (both as in McDonald’s),
telecommunications and network and product and process improvement (both as in iPod). These
capabilities. For most firms, this
is problematic. They often lack a
distinctions are not very useful.
strategy to link data architecture This implies, however, that systems must be simul-
with the logic of their business models and business taneously proprietary and transparent so that others
processes. can participate effectively. Meeting this requirement
Having the capacity to act on consumer insights and can create tension: How much of the system must be
to reconfigure resources dynamically means that the transparent? And to whom? The tension between pro-
entire network—consumers, the firm, and its col- prietary intellectual property and openness is not an
laborating suppliers—must be seen not as a static easy situation to address, and there is not one formula
system but as a system in continuous flux. For example, that fits all. Even within an ecosystem, there may be
Amazon.com, Apple, and eBay make several changes multiple levels of “openness.” Managers should rec-
to their consumer interface pages every quarter to ini- ognize, the authos suggest, that in an N=1 and R=G
tiate new features for dialogue and interaction with world, collaboration to create value is commingled
customers. The ability of individual consumers to with competition to extract value. This tension is a
shape their experiences via access to a flexible and reflection of the inherent nature of the emerging value
responsive global system is at the heart of value cre- creation process.
ation, in the authors’ view. The capacity for change in business processes needs
Information and communications technology to be built as part of the new design of ICT architec-
architecture must accommodate the apparently “con- ture. The demand for change can stem from a variety
tradictory” demands of consistent quality and low of sources—the regulatory environment, changes in
cost, capacity for change and efficiency (R=G), and the competitive landscape, technological disruptions,
capacity to cope with complexity and ease of use and the need for a unique approach to personalized
(N=1). The new ICT architecture extends beyond the value creation. Mangers, therefore, must focus on the
enterprise itself. The new architecture should embed system’s capability to adapt rapidly at low cost and
the business in the Internet, connecting to external without sacrificing quality.

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 7
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

In building capabilities for innovation, managers The ICT architecture of a company is equally fraught
need to leverage their knowledge. The system must with legacy problems. Legacy systems, just as with
know whom to tap to solve critical problems that are social architecture, represent an investment, and
encountered. This means that the system must not CIOs and top leaders are often unwilling or unable
only focus on archived knowledge but also be able to to accept the costs and risks of moving away from
access experts in the entire ecosystem. The new ICT the legacy. With organizational and administrative
architecture should enable a platform for managers to hierarchies often being aligned by business unit,
get visibility to data and information across functions geography, or function, business processes tend to be
in order to build an integrated perspective. Blogs, “organizational orphans.” Changes to business pro-
wikis, real simple syndication (RSS), and podcasts cesses, therefore, are not well managed, which leads
allow for new kinds of transparency and capacity to to further multiple, and often incompatible, systems.
leverage tacit knowledge contextually. As such, business processes are simultaneously the
enabler of rapid change and an
In most organizations, the evolution of business processes is impediment to progress.
undermanaged. This often creates major missing and broken A systematic approach to change
logical links. Often, employees provide the missing links by allows managers to take small
making manual adjustments to the missing logical connections. steps, which reduces the risk of
change and increases the capacity
Almost all existing business systems were created as to learn. It starts with the transformation of the under-
a way of archiving and managing the large volume of lying business processes into a transparent, flexible,
transactions that capture the activities of a firm. This and predictable system that can provide the capacity
transaction orientation is not sufficient in an N=1, to change (support innovation) and to maintain cost
R=G world. The need to create unique, personalized competitiveness (efficiency and consistent quality).
experiences requires that systems capture the essence The social architecture, for example, needs to build
of interactions, not just transactions. While firms must capabilities to spot deviations and rapidly build con-
focus on global standards of quality, transparency, sensus to achieve coherent action in geographically
interoperability, compliance, speed, and cost, they fragmented organizations—and at low costs.
must also provide space for the local operations to be
A recent article in the Wall Street Journal reported
flexible. What can be local is a critical consideration
that leading U.S. firms have voiced their concerns on
in building flexible business processes and agile sys-
diminishing returns from a process focus, whether it
tems, the authors note.
is TQM or Six Sigma. The authors believe that such
Organizational Legacies: Impediments disappointments in managing processes are not sur-
to Innovation prising. What is missing, they indicate, in adopting
Many companies find themselves not ready to accept most of these initiatives is a perspective that includes
the challenges posed by the new N=1 and R=G real- both innovation and value creation, not just cost reduc-
ity. Managers face organizational legacies, both social tion. Some of these process-focused initiatives miss
and technological. The social legacies include mana- the critical need for balancing the demands of innova-
gerial mindsets, skills, incentives, behaviors, and the tion and efficiency. It is often forgotten that making
decision-making structures in a firm. Reinforced over business processes strategic to results requires mana-
time and embedded in the organization in standard gerial, cultural, and technological change.
operating procedures and rules, a firm’s social archi- There may not be, however, one right path to migrating
tecture leads to predictable ways of thinking about the business processes for N=1 and R=G. Depending
opportunities, competitiveness, consumers, and per- on the current state of social and ICT architecture and
formance. Managerial responses to new opportunities the nature of the business and the markets covered,
presented by N=1 and R=G are conditioned, therefore, firms need to find the right approach for them and
by the existing social architecture. the balance between efficiency and innovation in their

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 8
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

business processes. The authors suggest small cal- 2. How deeply do business unit managers get
culated steps, learning from those small steps, and involved in making ICT architecture and process
consolidating by scaling. The process of change must design decisions?
focus on “de-risking big changes.”
Further, the incentives for ICT vendors and the needs
Efficiency and Flexibility: Managing of large firms vary. Multiple vendors supply most
the Tension CIOs. In this sense, it is an R=G environment. How-
The need for flexibility, adaptation, resilience, and ever, the CIO, in order to serve his firm well, must
continuous innovation are embedded in the concepts build a unique ICT architecture focused on the needs
of N=1 and R=G. This does not mean, however, that of the firm. This is about specificity of needs and
efficiency is unimportant. There is a need for quality uniqueness of applications. The ICT vendors must see
and reliability, cost effectiveness, speed, and efficiency. the CIOs as N=1 as well. Vendors cannot be delivering
Innovation and flexibility must coexist with efficiency the same products and solutions they provide to other
and reliability. There will be, however, inevitable ten- big—and small—manufacturers. Vendors, according
sions caused by the simultaneous demands for high to the authors, are reluctant to recognize this emerg-
levels of efficiency and flexibility to create value in ing reality.
an N=1 and R=G world. It is important to note that While the business processes need to be flexible and
the authors see this as a tension, a need to focus on efficient, we need to also be sensitive to the elasticity of
“apparent opposites,” rather than as a trade-off. business processes. The authors define elasticity as the
In most firms, managers see the either-or view of extent to which business processes can be stretched to
the world—efficiency versus innovation. We need to accommodate strategically dissimilar businesses, an
move, Prahalad and Krishnan suggest, to a “both and” important consideration in diversified business firms.
view. The challenge rests primarily on the capability Can a single ICT architecture and social architecture
of internal business systems to support both efficiency accommodate a wide variety of strategic imperatives?
and innovation, fighting variability in some aspects of The implication, according to Prahalad and Krishnan,
the business, while simultaneously supporting some is that one system cannot fit all businesses.
variations in individual consum-
ers’ experiences. The new levels of transparency demanded here pose unique
challenges for managing security and privacy in the ICT
As firms learn about customer
preferences, their respective architecture. Systems should be flexible, anticipatory, and
business processes will evolve. responsive.
Therefore, the ICT architecture
needs to be transformed, and the managers need to Dynamic Reconfiguration of Talent
be socialized for a new approach to decision making No firm can develop all the products and services it
to reflect this need for flexibility. In the new business needs to provide personalized experiences for each
model, efficiency in business processes is necessary, customer. Nor can any firm develop all the manage-
but it is not a sufficient condition for success. rial capabilities it needs to transform the organization.
The tension in managing efficiency and flexibility Firms must change the way they manage, how they
exposes disconnects between the new demands on continually match opportunities with resources. The
social and technical architectures (for N=1 and R=G) focus must be on the skills of individuals and their
and organizational legacies. There are two critical attitudes to learning, as well as on the competence
questions that are basic to understanding the nature of teams and the ability to continually reconfigure
and causes of the disconnect between business needs task-based teams with the best talent from around the
and ICT capabilities: world. A firm must treat its employees and vendors
as unique individuals (or a collection of individuals)
1. How do senior managers approach ICT invest- just as it treats its customers as individuals. The key
ments?
Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 9
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

message is that for the transformation to be effective, nature of tasks evolves over time from new and
managers must focus on mobilizing talent rapidly complex activities to routine activities.
from both within and outside the firm, an approach
4. There are no fixed patterns in the migration of
that flies in the face of formal hierarchies and silo-
jobs. The configurations of teams differ based on
based behavior and thinking.
the tasks and the availability of appropriate for
According to Prahalad and Krishanan, while the ini- specific projects.
tial impetus for outsourcing jobs to countries such as
5. The common theme is about talent arbitrage, not
India and China was primarily cost arbitrage, West-
just cost arbitrage.
ern firms have become more sophisticated in their
understanding of emerging markets and are rapidly Lowering cost is still a concern, but it is now coupled
expanding their R&D operations in both India and with the need for better quality, innovation, and speed.
China. Many of these firms recognize that the Indian Talent used to be trapped in boxes on organizational
market, for example, provides unique opportunities charts. In contrast, business is moving, the authors
for developing products and services for “India-like assert, to a system of project management in which
markets.” projects are temporary organizational systems, and this
transition is critical to recognize. The majority of
While global firms are focusing on emerging mar-
employees may not have this somewhat ambiguous
kets for growth and talent, some local firms are also
and shifting organizational affiliation. However, for
outgrowing their national markets and are building
the highly skilled and the most coveted employees,
global operations. Globalization is creating a new
this will, increasingly, be the reality.
dynamic. It is about all firms searching for the talent
they need anywhere in the world. It is no longer about This transformation of how work is done cuts across
“outsourcing” jobs but rather about “importing com- business functions and industries. The core platform
petitiveness.” for value has shifted from product and service to
solution and experience for the
Success in innovating new business models for the N=1 and customer. Managerial work, as a
R=G environment, whether the business is in tires, shoes, or result, is continuously changing,
insurance, is all about finding the right mix of capacities for and unlike the mass production of
the past, each request from a cus-
flexibility and efficiency.
tomer is different. Each co-creation
opportunity (and customer inter-
The patterns of resource configuration depend on the
action) can be viewed as a specific project involving a
nature of the projects and where the firms can find
unique configuration of resources.
the appropriate skills, and these patterns continually
change. Relationships across geographies, business Managing a series of micro- and macroprojects within
units, and vendors are not predetermined or static. a firm cannot take place unless managers pay specific
The phenomenon is best described, therefore, as a attention to the following:
dynamic configuration of talent based on the specific- 1. Managers need to know where the talent is within
ity of needs. What is new is that configurations are the organization and where it can be accessed eas-
constantly changing, even within a firm and within a ily from the outside.
project as it evolves:
2. Managers need to help project team members
1. Many tasks and projects are implemented in mul- cope with the stresses caused by time pressures,
tiple locations around the world. ambiguous power and authority relationships,
2. Expertise is geographically distributed and can be and cross-cultural and interpersonal interactions.
distributed between firms. The reconfigured systems need to be fluid. It is
like building a Velcro organization in which teams
3. The composition of teams is task specific, and the
can come together and disengage without effort.

Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 10
The New Age of Innovation C.K. Prahalad and M.S. Krishnan

3. Managers need the capacity to reduce “frictional of competitive advantage will rest on how systemati-
losses” in the dynamic configuration of resourc- cally firms shape these capabilities to the demands of
es—the difficulties in getting teams to work N=1 and R=G, how business processes can seamlessly
together effectively without delays and loss of connect consumers and resources and manage simul-
creativity. This is about continuous improvement and taneously the needs for efficiency and flexibility.
innovation.
g g g g
The first step in developing an understanding of
how to mobilize task-specific teams is building a pro-
cess for transparent and objective assessment of the Features of the Book
skills, attitudes, and experiences of all people. Man- Reading Time: 7-8 hours, 304 pages
agers must be able to, in real time, access the human
resource database and assemble the names, locations, The first four chapters of The New Age of Innova-
and availability of people with specific skills. For this tion focus primarily on the “what” and “why” of the
level of transparency to be built into the system, every transformation of the competitive landscape and the
employee must be clearly screened for skills, attitudes, nature of value creation. Chapters 5 through 8 focus
and experiences in projects. This approach to creat- on an approach to taking stock of where a company
ing a transparent talent management system suggests is in its transformation. The authors’ objective is to
that the basic unit of analysis of an organization or its basic help companies prosper in an N = 1 and R = G world;
building block is an individual. It is each individual’s therefore, they outline a methodology for a system-
skills and capabilities that are configured to make the atic migration from where a firm is currently to where
system deliver in an N=1 and R=G world. This is the it needs to be. To help accomplish this, they share les-
opportunity and the challenge for managers. sons learned from a number of companies from North
America, Europe, and Asia.
Focusing on the Essence of Innovation
The transformation of the business environment
toward the N=1 and R=G model of value creation Contents
provides an unprecedented opportunity for innova- Chapter 1: The Transformation of Business
tion and does not leave any industry untouched. The Chapter 2: Business Processes: The Enablers of Inno-
change envelops companies from developed markets vation
such as North America, Europe, and Japan as well as
from emerging markets as India and China. There Chapter 3: Analytics: Insights for Innovation
will be, the authors point out, increasing collabora- Chapter 4: IT Matters: Technical Architecture for Inno-
tion to develop analytics and other resources between vation
well-established firms in the West and emerging, spe-
Chapter 5: Organizational Legacies: Impediments to
cialist micro-multinationals in India, China, and other
Value Creation
countries. Privileged access to talent, not ownership
of talent, will be the defining characteristic of this Chapter 6: Efficiency and Flexibility: Managing the
transformation. However, for most firms, escaping Tension
their legacy systems and transforming their organi-
Chapter 7: Dynamic Reconfiguration of Talent
zations toward an N=1 and R=G world of innovation
and value creation will not be easy. Chapter 8: An Agenda for Managers: Focus on the
Essence of Innovation
The move toward N=1 and R=G is not an event; it is
an evolution. Therefore, this transformation must be ***
seen as a journey. The first step, the point of depar-
Endnotes by chapter and a subject index are provided.
ture for the journey, is for firms to build a common
perspective on their current business model and capa-
bilities. For Prahalad and Krishnan, the future sources
Business Book Summaries® Vol. 25, No. 34 • Copyright © 2008 EBSCO Publishing Inc. • All Rights Reserved Page 11
 Book
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Volume 15, Number 4 • Copyright ©2000 Corporate Support Systems, Inc. • All Rights Reserved

Powered by Honda
Developing Excellence in the
Global Enterprise

Dave Nelson, Rick Mayo,

and Patricia E. Moody

©1998 John Wiley & Sons, Inc.

ISBN: 0-471-18182-X

Reviewed by Lydia Morris Brown

Chapter One: Rocio’s Story

The BP Program is a simple 13-week hands-on process that Honda has perfected and applied in over 120 successful
projects to help achieve tremendous productivity improvements. Many of the companies have, in turn, applied the BP
process to their own suppliers. Thus, BP represents a many-tiered web of production success stories.
BP stands for Best Position (improve global competitiveness), Productivity (improve the process), Product (improve
quality and delivery), Price (decrease cost), and Partners (improve Honda/supplier relationship). It builds stronger
continuous improvement processes by eliminating waste and accessing the creativity and intelligence of associates
(suppliers). The process is based on the principle that the production experts – those who perform the work – are the
greatest source of improvement ideas and creativity.
BP works in any industry and with all types of employees. It addresses a broad range of areas, from housekeeping,
ergonomics, work flow, and other noncapital equipment-driven improvements, to higher investments relating to
tooling and major equipment changes. It unlocks productivity potential by producing significant, permanent culture

Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
Powered by Honda Dave Nelson, Rick Mayo, and Patricia E. Moody

change through workforce training and development and percent to 85 percent. After one year, Rocio and the other
the invaluable participation of employees. manufacturing associates had generated 432 suggestions,
BP is not consultant driven. One of the outstanding of which 340 were adopted.
features of the process is that the suppliers themselves make Empowerment, communication, first things first,
the changes. The Honda BP team only teaches the process, gaining management commitment, the 3As (go to the actual
but after the 13 weeks are up, the suppliers run the show. spot, examine the actual part, and see the actual situation)
Thus, the program creates supplier self-reliance. were the hard lessons learned during the Reynoso project.
A BP example: Rocio assembles and tests automotive Like most BP projects, success hinged on communication
component assemblies for the Honda Accord at a small TRW from the employees on the line to executives whose
plant in Reynoso, Mexico. She and her coworkers diligently real-time support was a basic requirement. A synergy
perform repetitive movements
BP’s Mission: Contribute to the establishment of a competitive and
hundreds of times per day, but the stable supply base by supporting all aspects of supplier improvement
plant has been showing irregular from a foundation of trust, respect, professionalism, and ethics.
delivery and quality performance.
Because Honda needed the plant’s parts, and because it developed between production associates (the process
felt that reworking parts would not solve the real problem, experts) and the BP engineers. From the marriage of the
it decided to send in its BP team. The goal was to give the idea to the implementation plan, continuous improvements
Reynoso workers a way to take control of the production that dramatically raised productivity were born.
process, to raise their own quality and productivity levels, Chapter Two: Terry Maruo, the Father of BP –
to make their jobs easier and physically less taxing, and to Lessons from the Great Sensei
help them prepare for the incredible growth opportunities Maruo, the father of BP, learned many valuable lessons
coming their way as a key Honda supplier. from Soichiro Honda. But the word gemba most defines
Although the BP team knew how to speed and balance the continuous improvement philosophy that Mr. Honda
the line themselves, they understood that improvement lived and taught his associates and suppliers. Gemba – the
had to come from the line workers. They approached actual place, gembitsu – the actual part, and gengitsu – the
Rocio for suggestions. Her idea was simple. “I want the actual situation guided all his work life.
test fixture angled so I can see the lights better.” Within Maruo created the Honda BP approach over 20 years
30 minutes, the new test fixture was in place, and Rocio ago, using the teachings of Mr. Honda and his own 15
was able to work more quickly and smoothly. The next years of quality experience. He believed that teamwork
day suggestions from other workers began pouring in. and hands-on learning have the power to make important
After 13 weeks, the number of good pieces produced per changes in the way people work. His goal was to fortify the
man-hour rose from 4.93 units to 7.6, an increase of 54 ranks of the suppliers to achieve cost-down activities.
percent. Line balance improved from 55.5 percent to 72.5 When Maruo first arrived in the U.S., he saw that
percent; throughput time dropped from 10 minutes, 43 most supplier improvement techniques followed the Lopez
second to 9 minutes. Production efficiency rose from 66 approach – a hit-them-over-the-head process that makes
suppliers go broke and forces the customer to change
About the Authors suppliers. But, he realized the importance of fortifying
Dave Nelson is former senior vice president
the team, strengthening its capability, and transforming
of Purchasing and Corporate Affairs for Honda it into a strong organization. Thus, his first real goal
of America. He is also former president of the was helping suppliers to become strong, knowing that
National Association of Purchasing Management. if they became strong they would continue to improve
Rick Mayo, a Honda of America associate, helped on their own.
design and implement the BP program. Patricia E. Sometimes the layout of a process, the operator, or the
Moody is a manufacturing management consultant equipment causes productivity losses. Maruo looks at all
and editor of Target Magazine. these factors, but he remembers learning from Mr. Honda

Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
Powered by Honda Dave Nelson, Rick Mayo, and Patricia E. Moody

that environmental conditions make a big difference. So, Americas. These principles link day-to-day operating
he taught his BP pioneers to focus immediately on how decisions on the production floor, in the purchasing and
a plant sounds, smells, looks, feels, and tastes, because supplier offices, and even in engineering and R&D.
they have everything to do with the safety and quality
of work life. Chapter Four: The Competitive Challenge – the
Because planning is 90 percent of the of the continuous Race to Give the Customer What He Wants
improvement process, Maruo taught that even before a Customer loyalty, quality, and price demands are
team is formed or the numbers collected, BP requires the visible signals of a successful strategy. How each
planning. Thus, he forced planners to answer questions major producer and supplier meets these demands over
about the planned approach, the number of people needed, the next three to five years will determine who wins the
the kinds of people and skills required, and the types of race. Moreover, customers, suppliers, and competitors are
skills already possessed. He asked BP pioneers to describe learning that it is a team sport, and the best tram wins. So the
what they were going to do on arrival at the supplier’s plant,question for the entire industry is how should automotive
what they planned to do on the first day, the second day, manufacturers and their suppliers work together to meet the
the third day, and so on. And, although Maruo’s students demands of the changing environment. First, the industry
developed BP plans in great detail, they still were allowed, must develop leading-edge technology that generates
even expected, to make judgment errors. products faster, more efficiently, and with greater value
for the customer. Technology holds
Do not confuse Honda BP with cost-down approaches. … The the key to six-month or sooner new-
first objective is perfecting the process. Good quality and delivery model introductions. Technology will
performance will naturally flow from a smooth process.
make customer-designed vehicles a
One of Maruo’s most effective teaching images was reality. And, technology will change the dealer franchise
“Raising the Bar.” His goal was to not set the target so high marketing and distribution system into a customer-driven
people would be overwhelmed, but to always set it just a entity.
little bit higher. This process of raising the bar, making Nonetheless, technology has varying impacts at
changes, and repeating the process calls for self-evaluation different tiers in the industry. Large companies at the
so as to improve on weaknesses. first tier have been working for years to develop lean
manufacturing methods, to dedicate training hours to
Chapter Three: The Gospel According to Honda their workforces, and to constantly seek the advantageous
Honda is one of the leading global organizations today technological edge. But suppliers at the second, third,
with 130 production facilities in 52 countries, supplying and fourth tiers need help. Most small- and medium-
Honda products to most countries of the world. The sized companies cannot support wide-ranging technology
company approaches its global mission through integrating initiatives or big workforce training programs on their
the company’s philosophy, organization structure, its own. Further, they are hard-pressed to strategically decide
strategy of self-reliance, and its new ‘Strategy for the which particular new technique or method is the one to
Americas.” These form the foundation for the company’s which they should dedicate their limited resources.
dramatic growth worldwide. Obviously, a one-size-fits-all approach to supplier
Staying close to customers, understanding their needs, excellence won’t work. Other approaches, many of which
and exceeding their expectations are the primary aspects cost hundreds of thousands of dollars per implementation,
of the strategy Honda uses to ensure its continued continue to miss the mark. Thus, the best and most lasting
success into the 21st century. As a philosophy-driven programs are those that teach suppliers how to improve on
organization, Honda relies on only a few integrating their own. Honda BP is a solution that obtains impressive
principles to keep its strategy focused and to keep results fast because it builds supplier self-reliance.
its plants, suppliers, and associates worldwide aligned:
one global philosophy, employee dedication and focus,
complementary supply, self-reliance, and strategy for the

Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
Powered by Honda Dave Nelson, Rick Mayo, and Patricia E. Moody

Chapter Five: Many Roads Lead to Excellence When Honda evaluates suppliers, it uses the QCDDM
and the New Partnership template (quality, cost, delivery, development speed, and
Honda’s long tradition of auto racing, epitomized management attitudes), which covers most operating
by the Racing Spirit, teaches associates hard lessons in issues. Nonetheless, attitude is the deal breaker. Although
being the best, preparing for the competition, teamwork, management’s attitude must not exactly mirror Honda’s,
and learning from mistakes. This tradition always begins both parties must feel that they share similar goals in
with an “impossible challenge” and has the objectives of quality and continuous improvement, and that they need
learning about Honda products in a harsh environment, to demonstrate respect for the individual. Honda also
using racing to develop the associates, promoting Honda looks for specific equipment and technological capabilities.
activities in the U.S., and teaching Honda of America Potential partners must demonstrate a keen awareness and
Manufacturing (HAM) associates the Racing Spirit. leadership in new technologies.
The philosophy that expresses the company’s principles After being chosen, suppliers must meet Honda’s goal
is called The Honda Way – a philosophy grounded of perfect quality every time and must participate in
in respect for the individual. It defines for employees aggressive new-product introduction goals by shortening
inside the company, and for suppliers and customers on prototype lead times and improving prototype quality
the outside, how Honda does business, what approaches levels.
to business relationships
Manufacturing’s most important, repeatable task is learning how to produce
are the preferred mode
well and learning exactly what make a quality part. One of the quickest ways
of operation, and how
to improve productivity is to eliminate rejected parts because every reject
to make day-to-day
includes not only the loss of that product but also the loss of the opportunity
operating decisions that to make a good part.
reflect the company’s
best objectives. Associates come to understand that The Honda also helps its suppliers reach world-class
Honda Way helps clarify the Three Joys – the joys of performance levels by becoming a world-class customer
making a high-quality product, selling a high-quality and who speaks clearly, reasonably, and frequently about its
efficient product, and buying a good product. Suppliers current and future requirements. It is a matter of perfecting
participate in the execution of these joys because they the flow of communications and working at establishing
are building Accords and Civic, rather than just parts routines and contact points in the system that facilitate
and components. partnering communications.
In 1995, Honda Purchasing was awarded the Medal
of Excellence by Purchasing magazine “for its true Chapter Seven: BP, the Tool for Building the New
understanding of the value of the supply chain, and/or its Partnership
long-term approach to developing world-class suppliers.” The integration of a few tools that focus on the
Although Honda works with suppliers in many different power of people to understand problems and fix them,
ways, cost reduction, quality improvement, product R&D, all under The Honda Way umbrella, make up the core
and teaching self-reliance are the areas noted for their of BP. BP exemplifies Honda’s partnering spirit with
value and effectiveness. suppliers by offering them a hands-on, user-friendly focus
for manufacturing improvement.
Chapter Six: The Supplier’s Role in the New For example, BP uses Deming’s approach to quality
Partnership – Becoming the Supplier of Choice improvement – Plan Do Check Act (PDCA) — in all its
Partnerships work best with two committed, strong improvement activities for project management, problem
participants. In an alliance with Honda, the supplier’s solving, new projects and initiatives, and just about every
responsibility is to first become the supplier of choice and other serious effort any one associate or group of associates
second, to maintain a superior level of quality and delivery tackles.
performance. The challenge for the customer is to select BP also utilizes the COPDS technique and COP
suppliers well and manage a productive relationship. Strategies in tandem to effectively reduce costs, improve
Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 4
Powered by Honda Dave Nelson, Rick Mayo, and Patricia E. Moody

quality, increase morale, and improve efficiency. COPDS, conducts a training class, a situation analysis (SAI),
involves cleaning up, organizing, picking up, discipline, and a supplier orientation meeting. Next a model line is
and safety; while COP provides common examples that selected to match the scope and timing of the project;
baseline data are collected; a detailed
Small challenges, small successes, raise the bar; small challenges,
analysis of the model line processes
bigger successes, raise the bar.
is performed; Smart, Measurable,
— Terry Maruo
Achievable, Realistic, and Timely
ease COPDS into action. COP’s Wall Side Strategy is goals are set; improvement ideas developed; and the plan
a plant-wide approach to creating clear access around implemented. Finally in the Check phase, “after” data are
equipment for cleaning and maintenance. It addresses the collected, long-term organizational plans developed, and
clean-up aspect of COPDS. The Closet Strategy removes results celebrated.
seldom used items from the workplace, keeping them out
of the way but close for quick retrieval. This strategy Chapter Nine: Enterprise Leadership – Take the
addresses the organize and pick up aspects of COPDS. High Road
The Kitchen Strategy keeps frequently used tools close Leadership for the lean enterprise requires a focus on
at hand. Searching for tools interrupts production flow, excellence in people, systems, and the extended enterprise
causes more wait time, and occasionally results in bad that is only found among industry leaders who practice
products when the wrong tool is used. The final strategy what they teach. Honda supplier development philosophies
is Visibility – the total visual management system that are built on the idea that teaching suppliers how to perfect
organizes a facility so that day-to-day information and their processes and how to become self-reliant, rather than
data are readily available to all at a glance. focusing on cost savings, will yield long-term, permanent
BP’s use of the 3 As is very consistent with the idea results. The BP goal reflects this extended vision – select
of management by walking around (MBWA). MBWA a single model line, for example, and work on it for three
means designating time to be in a specific months. When that one model works well, the supplier is
area without being called in by a crisis. It also Winning is everything [and BP is a valuable advantage].
means making the most of every opportunity Second place is never honored or remembered. We are all
to see the actual situation on the shop floor. given the same opportunity to start and finish the race, but
BP practitioners believe that when they focus the finish line shows the actual result.
— Soichiro Honda
on the Seven Wastes – overproduction, idle
time, delivery waste, waste in the work itself, inventory asked to promulgate the approach throughout the rest of
waste, wasted operator motion, and rejected parts – the company, and then on to the supplier’s own supply
they continuously improve their ability to see the actual base. The leadership challenge in this approach is that it
situation. raises the bar for the entire industry, which means that
everyone must become more innovative and run a faster
Chapter Eight: BP, 13 Weeks to Success and leaner race. BP is also used to raise the level of
The 13-week BP process works well either internally competitiveness in nonautomotive industries. Honda calls
at the manufacturer’s facility or externally with the this taking the high road.
manufacturer’s supply base. The only difference between
the two applications is the selection process used at the Chapter Ten: The Gift of PB – You Cannot Be
beginning at the project – either a Model Line Selection Excellent All By Yourself
process or a Supplier Selection process. In business, everyone is a customer or a supplier
Like all Honda improvement initiatives, BP follows to someone else. Each has the unique opportunity
the PDCA model. The planning stage involves model line to make good products every time, to meet delivery
selection or supplier selection, the supplier management commitments every time and, of course, to slip back into
meeting, finding a project manager, choosing a “war low-margin operations. Honda BP is a gift to organizations,
room,” and project scheduling. In the Do phase, Honda allowing their press operators, engineers, assemblers,
Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 5
Powered by Honda Dave Nelson, Rick Mayo, and Patricia E. Moody

material handlers, schedulers, and maintenance personnel interpretations, data, etc. Thus, one should not be fooled
to understand and proceed without hesitation to redesign by the statement: “Anyone who can’t follow their simple
their workplaces and to strengthen their powerful voices instructions … has little chance of staying in the race.”
in the business of making things. This work is best viewed as an introduction to the BP
concept – one that allows readers to experience the power
Appendix: The BP Toolbox of Honda’s vision and deep understanding of what it takes
to achieve world-class performance. Thus, the book stands
* * * as an excellent tool for envisioning the possibilities – for
A short list of bibliographic notes thinking about making the commitment to allow BP into
and a subject index are provided. one’s organization so that it can work its magic. Those who
actually want to apply what they read here should call,
fax, or email Honda and ask for help.

Remarks
Honda of America has become the benchmark for
manufacturers worldwide, particularly in the areas of Reading Suggestions
organizational development and product innovation. The
key to Honda’s remarkable performance, exemplified by Reading Time: 5 to 7 hours, 261 Pages in Book
the innovative product development that went into the 1998 As we mentioned previously, this work presents a free
Accord, is a unique program for supply-based excellence flow of ideas that can be accessed in any order that strikes
called BP. This process combines classic quality analysis your fancy. We suggest that you begin by leafing through
and problem-solving techniques to develop rather than the book to get a sense of its style, tone, and organization.
leverage excellent suppliers. It is an approach that has Then go back and read the chapters or chapter sections
enabled the company to build a strong supply base whose that interest you (be prepared to be sidetracked by all
partners consistently deliver zero ppm defects, on time – the provocative quotes and figures that litter the way).
every time, and at very competitive costs. Our estimated reading time is based on reading the book
Powered by Honda presents a colorful, lively and from cover to cover in the order presented. That figure
detailed explanation of the techniques and tools of the BP will be more or less, depending on how you approach
process and the philosophy on which they are founded. the work.
The case examples, sample BP documents, and the If after reading the book, you think you might need or
invaluable insights from Mr. Honda himself, Maruo (BP’s want more formal interpretations, check out the references
creator), suppliers, customers, and Honda’s own workforce listed in the Notes and the Appendix. We must warn you
provide an excellent view into a uniquely successful that as is typical of the way the book is structured, “Part
corporate culture. The guidelines on developing a best- Three” of the Appendix appears first.
in-class purchasing department are especially visionary.
Traditional practices position most purchasing departments
in the cost arena; however, The Honda Way seeks to
develop departments that inspire trust. Four hundred
Honda suppliers speak to the success of this innovative
approach.
Despite the book-jacket claims, Powered by Honda
does not work well as a hands-on how-to manual. The
material is not organized nor synthesized in a way
that allows easy application, but rather, it reads like a
personal journal of free-flowing concepts, ideas, stories,
Business Book Review™ Vol. 15, No. 4 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 6
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Volume 6, Number 1 • Copyright ©2000 Corporate Support Systems • All Rights Reserved

The Pursuit of
Book
Innovation

usiness

Re w
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B ™
George Freedman

©1988 AMACOM Book Cover

ISBN 0-8144-5923-4 Not Available

Reviewed by Lydia Morris Brown

Part I: Organizing for Innovation

Chapter 1: The Pursuit of Innovation: Goals and Options (22 pages)

Successful innovation involves establishing goals and the actual implementation of ideas. The goals, which cover
either improving existing product lines or establishing new lines or businesses, help shape growth based on innovation.
Innovation is a process that must occur in a step-by-step progression and that requires the formation of distinct
organizational entities whose sole purpose is to perform innovation. These entities should be as autonomous as possible
and, depending on the size and nature of the business, steps should be taken to make such entities permanent. In addition,
someone who has “a not inconsiderable importance in the firm” must assume the role of sponsor or facilitator. This
person can protect, nurture, and enhance the role of innovation as well as make sure that the innovation unit is in tune
with the needs and demands of top management.

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
The Pursuit of Innovation George Freedman

Chapter 2: Staffing (26 pages) Part II: Implementing the Creative Process
The titles of employees in an innovation organization
are similar to those of employees in other parts of the Chapter 4: The Seven Steps to Innovation
company. The nature of their duties is different, however, (31 pages)
so these duties require special abilities and traits. The best way to produce innovation is to follow a
Managers or administrators must possess imagination relatively universal step-by-step sequence. This sequence
and a sense of humor. They are the people responsible for need not be strictly linear; the nature of the innovation
creating the right rules for an occasionally “unpragmatic process is inherently iterative. One starts with the Idea, and
people.” They are also responsible for dealing with the then develops the Innovation Concept Report (lCR), an
rest of the organization--seeking to find a “middle ground example of which is provided in Appendix One.
that will simultaneously conform to established practices The ICR examines possible constraints, manufacturing
and accelerate their normal uninspired and ponderous procedures, and market prospects. Next comes the
pace.” They should be leaders first and managers second, Feasibility Model, followed by the Engineering Model
even if this means hiring someone to assume managerial (EM). The EM represents the “pragmatic embodiment
responsibilities. of die concept,” and usually involves a number of steps
The workers, or implementers, of innovation consist or models. The final steps are the Visual Model, the
of generalists and specialists. Generalists provide a more Prototype, and, finally, the Pilot Production Unit.
wide-ranging perspective that often generates the best new Teamwork is essential during each step, especially as
ideas and concepts. the potential product moves from one step to another and
These ideas are then fine-tuned by the specialists, with from one department to another. Without such cooperative
assistance from “non-professional” technicians (craftsmen) effort, as well as copious and accurate note taking, the
and experts from other departments. Finally, there are the process could take longer than necessary, if not collapse
product/process transfer specialists, who smooth the path of completely.
a product front R&D to actual production. The key element Chapter 5: Program Planning, Budgeting, and
throughout the innovation process is teamwork. Monitoring (22 pages)
Chapter 3: Providing Facilities and Funds Thoughtful and elaborate planning must occur prior
(24 pages) to launching a project. A good manager will not allow
Credibility is essential for creating and maintaining his or her, innovation organization to proceed without
successful innovation organizations. Other organizations such planning. Use of a bar chart and a PERT diagram is
and individuals within the company will be less threatened recommended, although all planners should use whatever
and therefore more likely to provide the necessary support tools they prefer. The key is to have a comprehensive
and resources. Credibility is linked to image--ranging view of how the seven steps of innovation work together.
from the physical environment to the image projected by The goal is to develop the most time-efficient process
the employees. A good image can best be achieved by possible. Budgeting, working on more than one project at
possession of an autonomous facility (a description of what once, and monitoring each project are facilitated through
such a facility could include is provided). such planning.
Credibility can also help to eliminate the greatest Chapter 6: Generating Patents and Know-How
stumbling block facing innovation: funding. Most (9 pages)
innovators spend too much time and effort fundraising, An innovation, prior to its being made public in the
usually on a project-by-project basis. Establishing a yearly market place, is referred to as equity intellectual property.
allocation can eliminate this waste. Additional funding The issue addressed in this segment is how to maximize
could be obtained from outside sources, but this should only the potential value of such property. First, it must be
be done if absolutely necessary, and only occasionally. ascertained whether the potential product is patentable or
simply know-how, which means that it could have been

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
The Pursuit of Innovation George Freedman

done by anyone “skilled in the art” of patentable, then a human relations department can serve the needs of the
decision of whether to patent the product must be made. company and, in particular, of innovation: cutting through
The remainder of the chapter presents the pros and cons red tape and bending the rules, counseling, and formal and
of both choices, emphasizing the need to be able to predict ad hoc training programs. It also plays a crucial role in
the product’s life cycle. There is also a discussion on the both the recruitment and rewarding of innovators, aspects
best way, and the importance of, keeping records of the of which the author covers in some detail. Recruitment
work and planning. can and does occur from outside the company, but there
are distinct advantages to recruiting from within. Rewards
Chapter 7: The Impact Statement (6 pages) include monetary incentives as well as a variety of non-
Once the innovation has entered the marketplace, the monetary incentives.
leader of the innovation project should prepare an impact
statement, which examines the impact of the product Chapter 10: Company Culture and the Executive
of the company, the competition, and society. It should Office (12 pages)
be sure to give credit to those who participated in the Businesses are dictatorial, which means that in most
project and should be submitted at least a month before the cases the degree of innovation depends upon the top
yearly budget allocations are made. The author includes a executives, particularly the CEO. A corporate way of
discussion of the various aspects of such a statement. life, or company culture, that innovators will find hostile,
indifferent, or hospitable emanates from the top down.
Culture is so powerful that an innovator will be extremely
Part III: Company Policies-Company Support hard-pressed to overcome a hostile environment.
Chapter 8: How Can Management Facilitate A company committed to growth chooses from a
Innovation? (27 pages) number of “empowering policies” that determine the
This chapter examines the various management-level direction given to innovation activities. Policies chosen
individuals and groups that can make successful innovation reflect the degree of change the company is willing to
possible. The most important is the sponsor, someone who explore, ranging from a continuation of the way a company
supports the idea of innovation who has the power to see to has always done business to the introduction of new
it that innovation is established and financed. The sponsor and radical directions. Pursuit of a new growth strategy
must be in a position to convince others of the worthiness of that is, changing the company culture, is not easy, but
a project or of the need for an innovation organization, and can and has occurred at Allen-Bradley, for example. It
be capable of cutting through red tape. Although rare, there requires (1) involving the managers of innovation, (2) a
is always at least one person among upper management clear “assemblage of strategies” formed into a single and
“who is infected with the innovation bug.” concise statement of mission which is distributed to every
The champion is someone who fights for a particular employee, and (3) an executive champion, preferably the
project, an employee or employees “who inject emotion and CEO, who will lead the struggle for the creation of a new
obsession into a program or organization.” The encouragers atmosphere and style.
facilitators (EIF) can be individuals, although the best E/F
is either the company culture, such as exists at 3M, or Part IV: The Eight Innovation Modes
some kind of idea team, such as the “V-Teams” created
by Signode. Chapter 11: The Nature of Innovation in U.S.
Industry (19 pages)
Chapter 9: Personnel Policies and Initiatives This chapter examines issues common to all eight
(18 pages) innovation modes, placing them within a national context.
Innovators, by virtue of being “out-of-the-ordinary” It also deals with various aspects of innovation such as
people, require special support and encouragement; hence inner, and outer-directed, as well as tangible and intangible,
the importance of the human relations department. The innovation. The remainder of the chapter focuses on what
author surveys the various ways in which an effective
Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
The Pursuit of Innovation George Freedman

constitutes R&D. The author looks at such issues as how thus, proving the point that an innovation mode should
industry decides what is worthy of innovation, how much stick to its mode.
money is spent on R&D, how many people are engaged There are very few separately constituted NPCs in
in R&D (and cost per employee), and how much floor this country; this function is often subsumed within a
space is used. A list of the 100 biggest spenders on R&D research or technical center. However, where the need
is also included. exists, an NPC is established; at Raytheon, for instance,
the central innovation organization did not address the
Chapter 12: Technical Center (10 pages) needs of certain entities (those without their own “captive”
Although new products or ventures may result from R&D organization). A comprehensive discussion of how
the work of a technical center, its main function is the NPC at Raytheon is organized, staffed, and made
the upgrading and replacement of existing materials or functional is provided.
practices. Two examples are provided: General Electric,
which is a large-scale center, and the Emhart Corporation, Chapter 15: Captive R&D (12 pages)
representing a small-scale center. Both GE and Emhart These innovation groups serve the needs of only a
have developed a number of new structures and processes single business entity within a company. Within a large
to facilitate innovation. Emhart has created a Center for company there are often centers for technology, research,
Technological Innovation, which operates similarly to or new product development as well as individual captive
GE’s Application Centers. The major difference is that, R&D units. Such a structure results in duplication of time
unlike GE, Emhart’s center performs the early creative and effort, but can generate positive results as well. Captive
work but then turns the results over to the operating R&Ds serve the needs of a particular division, providing
entities to complete. the divisional manager with more control over his or her
turf. The result is quicker response to the changing needs
Chapter 13: Research Center (11 pages) of the division, leading to greater efficiency.
Whether or not a particular company chooses to Skunk works are a particular form of captive R&D,
conduct research depends on the judgment of the CEO, established to innovate a single product or line and to
based on the needs of the company, although a strong case carry that innovation all the way to the marketplace.
can be made for possessing an in-house research facility. Most skunk works are disbanded upon completion of
Such a facility, while similar to other R&D organizations, their task although they are occasionally maintained as
differs from them in direction and style. Basic research captive R&Ds.
is an essential part, as demonstrated by Bell Labs in the
1940s. The applied research dimension, while similar to Chapter 16: External Teams (22 pages)
work performed in technical centers, is less superficial, A business will sometimes seek assistance from
and although the process takes longer, the end product is outside sources, such as consulting firms or universities,
often more “art-leading, more elegant.” when it desires to tap a particular expertise or does not
The Hoechst Celanese Research Company, discussed wish to invest in in-house experimentation. Scientists in
in some detail, provides a classic example of the importance universities have recently become more businesslike and
of a highly operational and supported research center. thus a more integral part of industrial innovation. This
marriage between business and academia can lead to new
Chapter 14: New Products Center (12 pages) business creations, as happened in 1985, when Contex
New products centers (NPC) develop products designed Graphics was formed by Continental Can Company, Scitex,
to “utilize existing technologies, to conform to existing and two faculty members at Carnegie-Mellon University.
product functions, and to be exploitable through existing Sometimes the university becomes an integral partner
channels to the marketplace.” They do not engage in in the enterprise although, like Contex Graphics, the
research or new ventures, only development. Some NPCs involvement is limited to a few individuals.
have attempted to generate new ventures but have failed, Universities, as well as consulting firms, are also
loosely associated with the multi-client consortium, which

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 4
The Pursuit of Innovation George Freedman

serves as a center of expertise. Such centers, made into a minority position in another company. This represents
up of academic scientists, serve a diverse clientele. a “strategic maneuver of the hedging variety,” the goal being
An excellent example is the MIT Ceramics Processing to tap into a particular resource/innovation possessed by
Research Laboratory, which currently serves about 30 the other company. The advantages of such are approaches
clients, each paying $40,000 per year (compare this to the are numerous and discussed by the author. Raytheon, for
average salary of an R&D scientist or engineer, which is example, has consummated nine minority positions during
$175,000, and the popularity of such a service becomes the past three years, with very positive results.
readily apparent). Joint ventures are another popular method for acquiring
innovation. Contex Graphics (Chapter 16) provides one
Chapter 17: Internal Ventures Center (13 pages) example. Corning Glass Works currently has 21 joint
A company, particularly a large one that is committed “involvements” worldwide, with an ownership portion
to innovation often faces the development of skunk works ranging from 33 to 50 percent. Such joint ventures generate
that refuses to disappear, thus creating inefficiency and new companies, such as Dow Corning, and can lead to
waste. One solution is to organize such groups into new revolutionary innovations.
one location, creating an internal ventures center. An
excellent example of the development, and role, of such a Chapter 19: Licensing Arrangements (11 pages)
center is provided by Eastman Kodak’s New Opportunity Licensing can achieve the same results as other external
Development operations. sources-filling gaps in capability as well as telescoping the
time scale for exploiting innovation. It can also minimize
Chapter 18: External Ventures Center (14 pages) lawsuits, especially within a reciprocal environment. The
A strategy for acquiring innovations is to buy another author provides a survey of the various aspects of licensing;
company engaged in innovation. Successful integration of supporting his contention that it is a valuable adjunct to
the new company is crucial, and this requires forethought, innovation and growth.
flexibility, and sensitivity. Some companies prefer buying

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Volume 21, Number 10 • Copyright ©2004 Business Book Review, LLC • All Rights Reserved

Reinventing
Strategy
Using Strategic Learning to Create &
Sustain Breakthrough Performance

Willie Pietersen

©2002 William G. Pietersen

Adapted by permission of John Wiley & Sons, Inc.
ISBN: 0-471-06190-5

Reviewed by Lydia Morris Brown

Introduction
According to Pietersen, today’s new leadership challenge is a journey of discovery in which management, particularly
in large, established firms, must learn to “think out of the box” and “move out of their comfort zones,” in order to create
and lead adaptive organizations that change and innovate continuously. The objective is not learning for learning’s sake,
but learning strategically so as “to build an organization that continuously learns new things and [repeatedly] translates
them into breakthrough strategies.”
Reinventing Strategy distills the author’s extensive experience, both as a CEO and as a teacher, consultant, and
researcher at Columbia Business School, to offer a set of operating principles and a leadership process—Strategic
Learning—that has proven effective in enabling business leaders to develop superior insights, transform them into
winning strategies, and foster adaptive enterprises. This practical, powerful tool, which has been taught in numerous
Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved
Reinventing Strategy Willie Pietersen

workshops, Columbia Business School executive programs, including businesses, adhere to the natural law of birth,
and top-performing corporations, is also offered as a growth, maturity, decline, and death. This tendency can be
valuable framework for personal growth and leadership illustrated by the sigmoid curve (S-curve), which teaches
development. two powerful rules: Nothing lasts forever under its original
momentum. And, success contains the seeds of its own
PART I: THE NEW LEADERSHIP CHALLENGE destruction. When an organization reaches the top of the
Distinct universal forces—the Internet, globalization, curve, it becomes complacent, inward looking, political,
deregulation and privatization, convergence, and risk-averse, forgetful of the drivers of initial success, and
disintermediation—are interacting with one another obsessed with entrenched standards and routines.
to radically alter the way business is
conducted today. Thus, the rules for “Knowing what to do is important, but … to win, you must
competition have changed, not only for know how to do it. You must be able to move beyond the
dot-coms and high-tech enterprises, rhetoric and actually implement your strategy.”
but companies of every kind are under According to Pietersen’s findings, the best time for
extraordinary pressure to transform themselves and develop companies to change is while they are still successful,
effective responses. In fact, as Pietersen notes, long-term and highly resistant to fixing what “ain’t broke,” rather
success now depends on the ability to do two seemingly than when they are beginning to fail. Moreover, this
contradictory things simultaneously: (1) improve existing process must be ongoing—there must be a constant push
processes and products through continuous incremental to adapt and innovate so that “anxiety is never assuaged by
change and, (2) invent totally new and better processes/ success.” Given this approach, the S-curve also teaches the
products via discontinuous breakthrough change. importance of riding a series of curves, for products and
Thus, creating the right balance between incremental services no longer represent sustainable advantage. Instead,
improvements and radical innovation is key. And, though it is a firm’s organizational capability to constantly renew
a shortage of resources is not necessarily fatal, a shortage itself that will allow it to win and go on winning. Thus, the
of imagination can be. author believes that today’s primary leadership challenge
Most breakthrough innovation seems relatively easy is the creation and maintenance of an adaptive enterprise
to accomplish by individual entrepreneurs such as Ted and that Strategic Learning is at the heart of this kind of
Turner, Fred Smith or Anita Roddick, but this is generally successful adaptation.
not the case for large, established firms, weighed down
by tradition and bureaucracy. All social institutions, PART II: IMPLEMENTING STRATEGIC LEARNING
AS A LEADERSHIP PROCESS
Although the specifics of what an enterprise must do
About the Author to win and go on winning vary from company to company
Willie Pietersen, who is chairman of the Institute and industry to industry, there are five fundamental
for the Future, advises and serves as a consul- competencies that all successful adaptive businesses
tant to many global companies, including Sony, absolutely must master. First and foremost, every company
Ericsson, Deloitte & Touche, SAP, and the Chubb needs insight—the superior ability to make sense of the
Corporation. In 1998, he was named Professor changing environment. Second, insights must be translated
of the Practice of Management at the Columbia into an intense focus on the right things. An enterprise must
University Business School. And, between 1974
make the most intelligent strategic choices about where and
and 1994, he ran multibillion-dollar divisions of
how to deploy its scarce resources in support of its plan for
such several major corporations as Unilever, The
winning. The third and fourth requirements are the ability
Seagram Company, and Sterling Winthrop.
to align every element of the entire organization behind
For more information, please visit: the company’s strategic focus and to implement strategy
www.wiley.com quickly. Speed expands the gap between a company and
its closest competitors and, at the same time, improves the
Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 2
Reinventing Strategy Willie Pietersen

ability to take advantage of the next environmental shift. crystallized into concise diagnostic statements, readily
However, speed of execution is impossible unless insight, understood by everyone in the organization.
focus, and alignment are in place. The fifth competency— Pietersen also notes that there are three “golden rules”
the ability to repeat insight, focus, alignment, and execution for doing an effective situation analysis: (1) Rather than
ad infinitum—is not aimed at producing specific outputs, produce a useless survey that burdens the organization
but at creating an ongoing cycle of renewal. with a glut of information, produce a diagnosis that allows
These “killer” competencies are the crucial skills one to go beyond the superficial symptoms of a problem
needed for mobilizing the collective intelligence and and discover root causes and ultimate consequences. (2)
creativity of an organization’s individuals and for forging an Produce a trend rather than a snapshot. “We’re losing
integrated system of strategy and leadership. Nonetheless, millions of dollars” is a snapshot statement that provides
just as companies need to employ systematic research and only a superficial understanding of the business. However,
development to generate technical innovation, they also when trends are mapped, the underlying drivers of the
need a systematic process to drive strategic innovation. million-dollar loss are revealed. (3) Keep it simple. In
“Thinking hard about the five killer competencies and hon- a complex world, simplicity is crucial;
estly measuring your company’s current capabilities against however, do not confuse simplicity with
them can be a valuable starting point for assessing your superficiality. Simplicity is by no means a
organization’s strengths and weaknesses.” shortcut—reducing an insight into a clear,
concise, and meaningful statement is an
Pietersen believes that his Strategic Learning cycle extremely difficult task.
represents this kind of practical process. It links learning The situation analysis is designed to ensure that
(i.e., the development of a set of superior insights), focus, the most intelligent choices are made (strategy is about
alignment, and execution so that they build on one another making choices), based on superior insights rather than on
and repeat themselves in a continuous cycle of learning guesswork, assumptions, or a vision that does not relate to
and renewal. The first two steps form the basis of a firm’s reality. Thus, the second step in the Strategic Learning cycle
strategy creation, and the last two form the foundations (defining focus) involves translating these insights into the
of strategy implementation. Thus, strategy creation and key strategic choices of the enterprise and into the vision that
implementation are integrated into a mutually reinforcing emerges from these insights. This is a process of convergent
process. learning (as opposed to the divergent learning inherent in
Because an organization needs a systematic way to the learning phase of the Strategic Learning cycle).
develop a set of superior insights to use as a foundation for Note that Pietersen recommends making strategic
its strategic choices (experience shows that every business choices before creating a vision. Vision is not something
breakthrough starts with a unique insight), the Strategic separate, but is best viewed as an extension of a firm’s
Learning process always begins with a situation analysis that winning proposition—the aspirational statement of where
asks and answers penetrating questions about customers, the winning strategy can take the company in the future.
competitors, the firm’s own realities, industry dynamics, However, winning does not mean being the biggest and
and the broader environment. Unlike typical strategic the most profitable (there can only be one number one in
planning, which involves ritualized analyses that tend to any industry). Winning means creating greater value for
reinforce existing mental models, the situation analysis the customer, and superior profits for the company, in the
is deliberately designed to employ divergent learning. It specific area chosen as the target market.
begins with the assumption that discontinuous change is the Effectively making choices and defining a winning
norm, and that a conscious effort to recognize, understand, strategy is a “bridging” process that starts with insights,
and respond to this kind of change is a vital precursor to the analyzes the issues they raise, and involves the following
creation of strategy. Thus, the situation analysis combines elements: (1) consolidating the main points culled from the
market research, analysis, critical thinking, and creative situation analysis into a single list of the most important
brainstorming in order to provide insights that can be findings, (2) listing the major threats and opportunities that

Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 3
Reinventing Strategy Willie Pietersen

these insights uncover, (3) identifying strategic alternatives, creating an action plan to overcome resistance to change and
and (4) considering the pros and cons of each alternative as inspire individuals to achieve exceptional performance.
the basis for making final choices. The author warns that one of the major sources of
The strategic choices the company finally makes failure in strategy implementation is the natural bias of
should address three fundamental elements—the customer executives toward taking action before having a crystal clear
focus, the winning proposition, and five key priorities. focus that is fully understood by the entire organization.
Customer focus defines which customers a firm will and Once this is accomplished, the next big challenge involves
will not serve. It identifies the hierarchy of needs of these operationalizing the strategic priorities so that they can be
customers. And, it defines what products/services the rapidly translated into results, which is accomplished by
firm will offer. The winning proposition is the core of a looking at each priority and asking, “What performance
company’s strategy and defines what it will do differently gaps must be closed in order to achieve this priority?”
or better than the competition to achieve greater value for The answer should be a series of gap statements that
customers and shareholders. Finally, by defining the most define the difference between the current reality and the
important things the firm will do to achieve its winning desired future state for each priority. Thus, the task is to
proposition, the five key priorities ensure “Positioning is sacrifice. … Trying to be all things to all people
that the company’s key resources are is recipe for failure. Instead, pick a place to play where you
focused on supporting the strategy (any have a shot at being the best, where it’s possible to know your
more than five dilutes the message and customers and the market superlatively well.”
compromises its effectiveness). Note
that focus is the emphasis in all three elements, simply employ effective project management—to apply the right
because, every time a company fails to choose, it is indeed disciplines, measurements, and accountabilities—in order
choosing to spend a portion of its scarce resources on the to close the identified gaps.
wrong things. Thus, the one crucial test of a good strategy Nonetheless, without comprehensive alignment, no
is that it indicates what a company will not do, as well as amount of project management can carry the organization
what it will do, to succeed. to success. Measures and rewards, structure and process,
The second element of the focus phase involves the culture, and people—the key supporting elements of a
formulation of a compelling vision statement—simple, company’s business system—must directly support the
motivating, realistic, and transformative (compelling or new strategy and directly support each other. Selective
motivating incrementalism is not the objective). Like interventions, what Pietersen calls the trap of Managing
Martin Luther King Jr.’s “I Have a Dream” speech, and Things in Isolation (MTI), hardly ever work; instead, the
President Kennedy’s mandate to land a man on the moon key to success lies in orchestrating the right interrelated
and return him safely to earth, an effective vision describes actions. It is an orchestration that can be effectively carried
an aspiration and provides a clear direction to follow. out using a four-step process that entails: (1) describing each
Defining the winning proposition and the key priorities element of the present business system so that its current
leads to the third step in the Strategic Learning process— status is clearly and realistically understood, (2) recapping
creating alignment behind the new strategy. Essentially, this the new winning proposition and strategic priorities to
is about getting the organization to do what it must do, which ensure that each system’s alignment is single-mindedly
can be a major challenge for large, complex enterprises dedicated to making the strategy work, (3) employing
with ongoing businesses and complex processes, especially reverse visioning to define each business system needed to
if the strategy requires a major shift in mind-set, skills support the new strategy, and (4) defining the early actions
and practices. Thus, Pietersen offers a highly effective and next steps to be taken to reach this step successfully.
process that involves: (1) developing a clear overarching Of the four levers that must be aligned, culture
focus, (2) identifying systemwide gaps and accountabilities and people tend to be the most challenging. According
proceeding from this focus, (3) aligning the key levers of the to Pietersen, “Culture is a means to an end, a way of
business system so that they drive the new strategy, and (4) solving the problems your organization faces. To serve
this purpose effectively, your culture must be in sync with
Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 4
Reinventing Strategy Willie Pietersen

your strategy. … when your strategy changes, your culture last a week. Thus, it is necessary to align the culture with
needs to change as well.” Nonetheless, attempts to change all the other key levers of the business system and measure
corporate culture end in failure approximately 80 percent and reward the desired behaviors. In addition, the leader
of the time, generally because of six basic assumptions: (1) must unfailingly set the example by his or her actions.
Culture is vague and mysterious. (2) Culture and strategy The creation of an adaptive organization requires that
are separate and distinct things. (3) Defining values should strategy and leadership interact seamlessly. And, great
be the first step in transforming culture. (4) Culture cannot leadership is not only about offering an inspiring vision of
be measured and rewarded. (5) Leaders must communicate the future, and a practical method for getting there, but also
what the culture is. (6) Culture is the one constant that the ability to help people overcome their natural opposition
never changes. to change. Thus, managing large-scale change calls for
These assumptions are, however, false. Culture highly effective people skills. One of the greatest challenges
expresses itself through specific, observable everyday leaders must face is finding ways of motivating people to
behaviors that are as tangible as a company’s cash flow embrace change at times when the need for change is not
and, thus, must be measured and rewarded. “The golden apparent—when circumstances naturally seem to call for
rule is: What gets measured gets done; what gets rewarded pride, self-satisfaction, and complacency. In fact, Pietersen
gets done repeatedly.” In addition, the performance of a has found that, while most companies do well at managing
business organization and the specifics of its culture are the organizational aspects of change, they usually fail to
interdependent. However, to align culture with performance manage the people aspects of transformation properly.
successfully, a new culture cannot be created in advance of This failure is due to their miscalculation of the amount of
a new strategy. Companies must be clear about how they resistance they will encounter; the time they will need to
shape, sell, and execute change; the resources,
“When the culture is counterproductive because it conflicts
support, and sponsorship required; their need
with the company’s strategy … the company then faces
to model the change personally; and the fear,
… the need to change an ingrained corporate culture in
response to a changed strategy.” uncertainty, and doubt (the FUD factor) that
change naturally elicits.
will win before they can effectively define the values and Thus, the author advocates that leaders
behaviors that will make winning possible. And, though view change as a simple equation, whose components
leaders must consciously and deliberately transmit these are: dissatisfaction with the current state (D), a clear
values and behaviors to their employees, it is not so much vision for change (V), a process for getting it done (P),
about communicating them as it is about living them. If and the psychological costs (C). In other words, D x V
x P > C, which means that dissatisfaction, multiplied by
leaders do not behave in accordance with the culture they
profess, it does not matter what they say. vision, multiplied by process, must be greater than cost.
Pietersen believes that demolishing these myths, so that If any one of the multiplicands is zero, the change effort
the drivers of success can be harnessed, requires the right will be unsuccessful, because the product of all three will
starting point. Values must be simple, specific, and directly equal zero. To prevent this, Pietersen offers six “golden
support strategic priorities, they should be described as rules” for successful change leadership: (1) Create a
behaviors, and should be arrived at through a process simple, compelling statement of the case for change. (2)
of enrollment (i.e., a process of commitment rather than Communicate constantly and honestly throughout the
compliance). These behaviors (which the author identifies process. (3) Maximize participation. (4) If all else fails,
as characterizing the adaptive organization) include remove those who resist. (5) Generate short-term wins. (6)
teamwork, risk taking and experimentation, continuous Set a shining example.
learning, knowledge sharing, and candor and trust. Implementation and experimentation form the final
However, without a sustaining process that ensures that the stage of the Strategic Learning cycle and the first step into
new culture takes root throughout the entire organization, the next iteration of the process. (As a company repeatedly
and is continuously enforced, the initiative is not likely to works its way around the learning cycle, it continues to

Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 5
Reinventing Strategy Willie Pietersen

update its insights, to learn, and to adapt to new conditions.) (1) What was the intent of the engagement? (2) What
Implementation of strategy will only be as effective as the actually happened? (3) Why did it happen? (4) How can we
effectiveness of the firm’s insight, focus, and alignment. do better? This highly structured process, designed to ferret
Thus, implementation is part of the continuum of the out crucial insights from battlefield experiences, can also be
Strategic Learning cycle, representing both its successful a powerful tool in the context of business. Any significant
culmination and its source of learning for the next situation event (e.g., a major new-product launch or market test; the
analysis. opening of a new manufacturing facility, retail outlet, or
Agreeing with Paul Saffo (Institute of the Future), website; a corporate reorganization, merger, or spin-off;
who believes today’s discontinuous environment requires and/or any crisis [external/internal] or turning point) can
a “Ready, fire, steer” approach, Pietersen suggests that potentially produce valuable learning and is, thus, suitable
experimentation is the most crucial activity involved in for an AAR exercise.
implementation. The organization’s strategic direction Lastly, Pietersen notes that Strategic Learning is a
is developed, implemented, and then repeatedly and 365-days-a-year process, and he warns that in order for
continuously modified in response to changes in the organizations to enjoy its full benefits, they cannot let the
environment and in the firm’s own circumstances, process lie dormant between “planning seasons.” Instead,
and experimentation allows companies to make these they must take deliberate actions to make the method a
adjustments successfully. “The situation analysis is an permanent and active part of the business culture so that
intellectual voyage of discovery. Experimentation adds to the cycle of learning, focus, alignment, and execution,
this the dimension of action learning.” Thus, the adaptive constantly operates to help the business adapt to its ever-
organization is ready to experiment, to learn from results, changing environment. Thus, if companies wish to make
and to adjust its strategy accordingly. It is
“By continually experimenting, producing ‘mutant strains’ of
an approach that liberates thinking so that
new products, processes, methods, and strategies, the [adap-
it does not attach to a fixed set of mental
tive] organization maximizes its chances of developing new
models. It also aids in stamping out the
businesses that are capable of responding to the next change
complacent “if-it-ain’t-broke-don’t-fix- in the environment.”
it” attitudes that tend to exist in most
organizations. the most of the innovative potential of Strategic Learning,
Because the entire objective of experimentation is for they must: Commit to the lifelong learning of employees
the organization to learn its way to success through failure, and develop their international experiences. Refresh
a mistake-friendly, knowledge-sharing culture is required. work teams through job rotation. Build heterogeneity
However, successful organizations are, by definition, into the organization. Institutionalize time for reflection.
organizations that do things right and, in the process, avoid Benchmark the company against noncompetitors. Turn
uncertainty and error in favor of what has worked in the past. company conferences into opportunities for learning. And,
Many companies undertake new-business venturing and create a climate of open communication.
innovation through acquisition as a means of circumventing
PART III: STRATEGIC LEARNING FOR PERSONAL
this natural tendency and fostering cultures in which
GROWTH
constant experimentation is generated. But, Pietersen
believes that one of the most powerful techniques for Not only can Strategic Learning generate ongoing
harnessing the power of experiential learning comes from renewal in organizations, but it can also be used as a personal
the U.S. Army’s after-action review (AAR). tool to develop more effective leadership. Generating great
The AAR is a learning review, conducted immediately insights, making difficult choices, creating a clear focus,
after a military engagement (simulated or real), in order to aligning the organization, inspiring people, leading change,
articulate the lessons learned and to identify the Army’s and then repeating this cycle continuously require strong
strengths and weaknesses. Thus, as the basis for continuous leadership. The Strategic Learning process is designed to
improvement, the AAR typically focuses on four questions: help leaders accomplish these tasks but, says Pietersen, how
well it works is a function of leadership effectiveness.
Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 6
Reinventing Strategy Willie Pietersen

Although a good IQ and strong technical skills are apply the Credo to everyday life and work, and at the same
important, the author believes they are “entry-level” time, continuously repeat the process of self-discovery and
requirements that are eclipsed in importance at the senior learning from observation and experience. The objective
executive level by emotional intelligence (EQ). Referring to is to remain open to new ideas and innovations, while
the research popularized by such writers as Daniel Goleman having a process in place to help digest this information in
(Emotional Intelligence), Pietersen notes that there are four a deliberate, meaningful way.
fundamental components of EQ: (1) self-awareness (self-
confidence, realistic self-assessment, and a self-deprecating * * *
sense of humor), (2) self-management (the ability to control Source notes by chapter and a subject index
and channel one’s emotions in productive positive ways are provided.
and being trustworthy, conscientious, adaptable, ready
to seize opportunities, and driven to achieve), (3) social
awareness (empathetic, organizationally aware, and service Remarks
oriented), and (4) social skill (adept at finding common
ground among diverse groups, orchestrating teams, and Pietersen begins Reinventing Strategy heralding
maintaining rapport). Seemingly, it is the possession of new leadership challenges, new rules of competition,
these characteristics, rather than IQ, that sets brilliant new playing fields, new games, and the new economy;
leaders apart from those who are merely good executives. nonetheless, the ideas he explores do not venture into any
Fortunately, in contrast to IQ, which is thought to be virgin territory. Strategy, culture, leadership, innovation,
determined largely by genetics, EQ can be significantly learning, and change are all familiar topics, endlessly
improved if the right tools are applied. Pietersen believes explored in the business (and other) literature to yield
that because learning is at the heart of both strategy an ocean of ideas, both serendipitous and mundane. The
creation and leadership development, the Strategic author spreads a wide net, gathering in such forward
Learning process is that right tool. In the learning phase, thinkers as Lester Thurow, Arie de Geus, Robert Reich,
the task involves conducting an honest self-appraisal, and Clayton Christensen, Charles Handy, Andy Grove, Henry
obtaining feedback from others, as a means of generating Mintzber, Peter Senge, Charles Darwin, Carly Fiorina,
insights about one’s personal strengths/weaknesses, one’s Jay Galbraith, Michael Porter, Edgar Schein, B.F. Skinner,
values, and the specific leadership challenges to be met in Richard Pascale, Collins and Porras, Peter Drucker, David
the business, industry, and role one occupies. This process Nadler, and others of renown. There’s not much, in terms
of self-discovery amounts to a personal situation analysis, of basic business theory that you won’t recognize.
which forms the foundation of the next step, focus. Here, the However, as Pietersen is quick to point out, “our issue
newfound insights about strengths, weaknesses, personal here is not what’s new; it’s what’s important.” Thus, he
values, and leadership challenges are translated into a set critically examines timeless lessons in light of current
of priorities and action plans for self-improvement. challenges, offering his unique perspective on what’s
In order to align personal values and leadership important. The result is, as Bob Johansen (president of the
philosophy with the strategic priorities and cultural Institute for the Future) notes in his foreword, “a wonderful
values of one’s organization, it will be necessary to write mix of theory and practice, plus commonsense reasoning
a Leadership Credo. The purpose of this document is to that works—for all the right reasons. … [filling] a genuine
articulate “This is what I believe in, and here’s how we void between organizational learning and strategy, without
are going to win.” Thus, because it defines one’s core the cumbersome jargon of either field.”
principles and theory of success for the business, the Credo This lack of cumbersome jargon is an extremely
is the vehicle for integrating organizational strategy with valuable characteristic of the work. Readers get an
leadership effectiveness. “insights-to-action” guide, which delineates a practical,
Finally, to complete the cycle, the individual must proven methodology that can be used by anyone to create
implement his or her action plans for self-improvement, and sustain an adaptive organization. And, it is offered as a

Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 7
Reinventing Strategy Willie Pietersen

distillation and simplification of the essential consequences We would also suggest that you read all of the case studies
and implications of a comprehensive range of business throughout the work (they’re clearly marked). They do an
theories into a clear and concise hands-on “playbook” that excellent job of illustrating the effectiveness of Pietersen’s
can be used as a constant reference for strengthening the methodology in real-life situations, they demonstrate the
interrelated processes of strategy and leadership. practical procedures of implementation, and they will alert
you to some of the important material you might overlook
by skipping and skimming.
With that said, we must emphasize that we don’t
Reading Suggestions recommend this approach. Pietersen is rare find—an
articulate writer with the uncommon ability to write with
Reading Time: 14-16 Hours, 288 Pages in Book a simplicity that is never simplistic and to distill volumes of
Due to the fact that Reinventing Strategy was conceptual analysis into pithy and compelling one-sentence
published in 2002, there’s a good chance you’re already (and/or paragraph) essentials that bring much needed
familiar with it. If so, then you’re probably also aware of clarity to critical business issues. Thus, his book deserves
the three critical leadership questions the book addresses: (to borrow a concept from noted theologian Marcus J.
(1) What is the environment in which our organization Borg) to be read again for the first time so as to give your
must compete and win? (2) What are those few things our organization and yourself the opportunity to stay ahead of
organization must do outstandingly well to win and go on the curve and achieve superior breakthrough performance
winning in this environment? (3) How will we mobilize again and again.
our organization to implement these things faster and better
CONTENTS
than our competitors? In an economic environment that has
Chapter 1: The New Playing Field
become increasingly merciless over the past two years, these
Chapter 2: The Challenge of Change
issues are even more pressing now than they were then.
Chapter 3: The Search for an Answer
Thus, we suggest that if even if you’ve already read
Chapter 4: The Strategic Learning Process
Reinventing Strategy, these turbulent times represent the
Chapter 5: Winning the Battle for Insight
perfect time to revisit it as a means of kick-starting the
Chapter 6: Defining Your Focus
Strategic Learning process you may have put on the back
Chapter 7: Aligning the Organization
burner two years ago. If this is the case, or if this is your
Chapter 8: Transforming the Culture
maiden voyage, you will want to read the book from start to
Chapter 9: Overcoming Resistance to Change
finish in the order presented. As Pietersen notes, Strategic
Chapter 10: Implementing and Experimenting
Learning is a self-reinforcing cycle that combines learning,
Chapter 11: Strategic Learning as a Path to Personal Growth
strategy, and leadership into one organic process that, in
Chapter 12: Creating an Environment for Success
its entirety, offers an effectively innovative way of leading
companies. “The key to success [and to realizing its full
benefits] is to think of it as a holistic, emergent process.”
And, this requires a complete, methodical reading of the
work.
If you need to revitalize your Strategic Learning process
because it has become stalled (due to lack of attention),
or if you merely want to fine-tune particular phases that
need a bit of tweaking for better results, you can perhaps
get by, reading specific chapters. If this is the approach
you take, please take time to read the acknowledgements,
foreword, prologue, introduction, and the last chapter,
“Creating an Environment for Success” in their entirety.

Business Book Review™ Vol. 21, No. 10 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 8
 Book
Business Book Review™
usiness

Re w
vie
We Select and Review Only the
B ™
Best Business Books You Should Read.

Volume 19, Number 25 • Copyright ©2002 Business Book Review, LLC • All Rights Reserved

The Seeds of
Innovation
Cultivating the Synergy That Fosters New
Ideas
Elaine Dundon

©2002 Elaine Dundon

Adapted by permission of AMACOM
ISBN: 0-8144-7146-3

Reviewed by Lydia Morris Brown

Introduction
Dundon notes that this age of economic uncertainty, strained resources, and increased global competition not only
calls for innovation, but also for Innovation Management as a source of new inspiration and uniquely effective solutions.
However, the author has found that most organizations have no clear idea of what innovation is all about. It is stated as
an objective, but there is a failure to initiate any concrete actions or to provide support. And, at every level, individuals
and teams limit their view of innovation to creative thinking.
The Seeds of Innovation is based on Dundon’s successful Innovation Management course at the University of Toronto
and presents a disciplined and practical Nine-Step Innovation Process that organizations of any size, in any industry, can
use to guide their innovation activities for maximum impact. It combines learning from the areas of creative, strategic, and
transformational thinking to demonstrate how these “seeds” create the synergy for fostering new ideas at the individual,
team, or organizational level.

Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved
The Seeds of Innovation Elaine Dundon

PART I: THE SEEDS individual is curious, adventurous, observant, reflective,

According to Dundon, innovative thinking involves playful, intuitive, motivated, collaborative, analytical,
the integration of three competencies: creative thinking, persistent and/or willing to challenge the status quo, he or
strategic thinking, and transformational thinking. Creative she is a creative thinker. And, if any of these traits have
thinking is about “burning new neural connections in been displayed in one area of life, they can be transferred
the brain so that creative ideas have the opportunity to to innovative efforts at work. Artistic ability is not the
surface.” Although many people want to stay in a comfort only form of creative expression; the HR manager who
zone that reinforces order, control, and the “Gone are the days when one person or one department
“right way,” creative thinking involves could be focused on the future while everyone else kept
leaving the familiar and plunging into their heads down and focused on the present. … every
uncharted territory. Once the creative idea employee in every area of the organization [must] be on the
has been identified, it must bring value to lookout for innovative ideas”
the organization and the marketplace. Thus,
strategic thinking, based on understanding the current discovers a new recruitment idea, and the person who
and emerging needs of the customer, the organization’s discovers a faster route to work, are just as creative as the
current and future competences, and the industry’s future, “brilliant” copywriter. Moreover, every person is creative
is needed to connect creativity with value. And, because in a different way, approaching innovation and change with
attitudes and behaviors, rather than a lack of creativity a unique blend of Visioning, Exploring, Experimenting,
or strategy, are often the primary barriers to innovative and Modifying—the four Innovation Styles identified by
efforts, transformational thinking must also be addressed. William Miller (in Flash of Brilliance). When organizations
Intrapersonal and interpersonal competencies are needed combine each person’s unique Innovation Styles and unique
to build the collaborative networks required for supporting talents (linguistic and mathematical intelligences are not
new ideas, igniting passion, and taking action. the only valid intelligences) in a collaborative effort, the
Dundon believes that the most important factor in quality of interaction, and the group’s results, are greatly
creative thinking is a person’s own belief in his or her enhanced.
creative ability. Everyone has the ability to be creative—to Nonetheless, people cannot expect to “think outside
connect one idea with another to solve a problem. If an the box” if they constantly put themselves back in the
box—constantly throw up barriers to the expression of
their creativity. Preventing the atrophy of creative muscles
About the Author
requires making an effort to try new things; to explore
Elaine Dundon, MBA, former adjunct professor of alternative answers, after the first “right” answer has been
innovation management at the University of Toronto found; to stop controlling the viewpoints and opinions of
(where she designed and taught a “first of its kind” others; to unlearn and forget some of the old “rules” and
course on Innovation Management), is founder and
ways of doing things; and to accept the inevitability of an
chief strategist of The Innovation Group Consulting,
occasional failure.
Inc., an international firm dedicated to elevating
A curious mind—one that is open, seeks a broader
the innovative thinking potential of individuals,
teams, and organizations. She has also held senior
perspective, and asks probing questions—is the primary
line management positions at Procter & Gamble, basis for creativity. All innovations start out as simple
Nestlé, Kraft, and the Royal Bank of Canada and ideas, but in order to see them, one must acknowledge
is a highly regarded keynote speaker, trainer, and that alternative ideas can exist; be willing to change
consultant. one’s “mental model” when new information surfaces;
challenge the opinions, assumptions, or rules (i.e., the sacred
For more information, please visit:
traditions) that may no longer be relevant; and hold back
www.seedsofinnovation.com criticism until an idea’s potential is revealed. In addition,
www.innovationguru.com because ideas and solutions are to be found everywhere,
an organization’s idea-gathering process must be broad
Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 2
The Seeds of Innovation Elaine Dundon

enough to seek ideas in the far corners of the organization, a step, rearranging steps, etc.) to find new ideas; and (1)
to ask the “experts,” to look at other companies at home and becoming a visual thinker—doodling or drawing to get
abroad, and to access perspectives that are unrelated to the away from the linear process of listing.
problem. Moreover, the process must be able to sort through
the range of facts, memories, emotions, observations,
PART II: A NINE-STEP PROCESS
perceptions, and impressions that emerge. Dundon warns,
however, that there is a difference between looking at Although some organizations have designed and
different perspectives and actually seeing their many implemented specific innovation processes for developing
facets. To override the mind’s automatic filtering process, new products or guiding project management, Dundon
she advocates using everyday situations to practice “seeing believes that they are not necessarily applicable to
more” so one can develop sharper observation skills. innovation efforts, nor are they applicable to all employees
Creative thinking begins with great questions rather across the organization. Therefore, she advocates her Nine-
than with great answers. The curious mind realizes that Step Innovation Process, a systematic model that can guide
innovative efforts in any department,
“One of the fundamental principles of Innovation Management organization, or industry sector, from
is ‘Believe in Creativity.’ …If you think you can, you can …’ ” start to finish.
The Process consists of the three
there is no such thing as a wasted inquiry and takes the time stages of Understanding, Imagination, and Action.
to question the “facts” in any situation. Its creative-thinking Understanding involves gathering background information,
mantra is “Why? What if? What Else?” However, “Why?” formulating potential problem statements from multiple
is the most effective query because it explores the rationale perspectives, and determining the range of potential
behind a given approach and opens up the possibility of solutions. Imagination involves gathering as many stimuli
an alternative. Nonetheless, great creative thinkers are not as possible in order to maximize the probability of making
satisfied with surface answers. Instead of jumping on an new connections, finding new insights and, from these
immediate solution too quickly, and ending up with ideas insights, identifying new ideas. In the Action stage, ideas are
that do not fit the needs of the real problem, they ask “Why?” built into full business concepts and then into plans, which
repeatedly until new insights are uncovered. are presented in accordance with the strategic Innovation
Discovering new connections is another critical aspect Goalposts (to ensure acceptance) set in the Understanding
of creativity. Creative thinkers pursue a large quantity of phase. Finally, the ideas are implemented and reviewed for
ideas and use their imaginations and diverse related and shared learning.
unrelated stimuli to combine and recombine these ideas to Dundon views strategic thinking, the second seed
make new associations. For a structured approach to this of innovation, as an important component of Innovation
process, Dundon suggests using the Top Ten Creative- Management because it can be used to strengthen the
Connections Powertools. They are: (10) rummaging in the fundamentals of the business or organization (creative
“attic” of the mind and/or organization to discover elements ideas on top of a weak foundation are useless), to
of previous ideas for jumpstarting inspiration; (9) becoming deepen understanding of the true underlying cause of the
obsessed with the challenge of finding new concepts for a problem at hand (understanding is a critical first step),
certain product, service, or process; (8) sparking innovation and to strengthen communications with teams, suppliers,
by analyzing customer frustrations; (7) identifying the Gold partners, and customers (if strategic goals are clearly
Standard—the other people and/or organizations that articulated, it is easier to identify useful ideas that fit these
have solved a similar challenge in an outstanding way; (6) goals). Thus, strategic thinking comes into play during the
adopting and adapting existing ideas; (5) combining diverse Understanding and Imagination stages of the Innovation
objects and ideas; (4) finding other challenges that might Process, where the objectives are to see the “BIG Picture,”
be similar; (3) breaking down the underlying “DNA” of look to the future, and do the extraordinary.
a complex problem or situation to focus on its “bits”; (2) If all employees, suppliers, and partners can understand
listing and twisting the bits (i.e., adding a step, eliminating the overall goals of the organization and be on the lookout
Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 3
The Seeds of Innovation Elaine Dundon

for new creative and strategic ideas to further those how to look.” When seeking stimuli, it is helpful to use
goals, the competitive advantage of the organization is direct interviews with customers, observation, lead-
enhanced. Gathering information about the challenge, user research, and benchmarking to analyze the current
from as many different perspectives as possible, is the state of the business, current and future customer needs,
first step in the Process, and can be facilitated by using existing solutions within and outside the organization’s
such creative thinking tools and techniques as building business and industry, best practices in the industry, and
observation skills, seeking diverse stimuli, and asking emerging technology. Furthermore, organizations can
probing questions. It is also helpful to gather information avoid the trap of “inside-out thinking” by watching trends
by looking beyond the specific task and seeing the bigger in the marketplace, industry, and workforce. Analyzing
picture. This systems-thinking “If all employees, suppliers, and partners can understand the overall
approach allows individuals to goals of the organization and be on the lookout for new creative
look at how their tasks are related and strategic ideas, the power of the organization can be magni-
to the larger process, organization, fied.”
and marketplace.
Seeing the BIG Picture also involves analyzing the trends to determine their causes, how they will affect the
many different angles of a problem in order to clarify the team and organization, the problems that will ensue, the
real challenge (the second step). The author warns that if opportunities that will emerge, and how to turn them into
this step is omitted (which often happens in the rush to “get practical application will help organizations determine the
a solution out the door”), little is added to the innovative need to respond in future planning efforts.
capacity of the organization. Insight mining, or translating new information into
In addition, seeing the BIG Picture involves setting insights is the next step. Dundun reports that in Who
Innovation Goalposts (step three) so that innovation Moved My Cheese?, Spencer Johnson states that “Noticing
efforts are focused on discovering the most strategic ideas small changes early helps you adapt to the bigger changes
for solving the problem. The goalposts effectively guide that are to come.” Organizations must be more aware of
the development of new concepts by setting limits on their the opportunities in the marketplace and use imagination
range. “The goal is focused and structured creativity.” to mold this information into further insights. This, plus
Finally, seeing the BIG Picture is concerned with the ability to see new opportunities in emerging customer
predetermining the criteria that will be used to select the needs, new products, services, segments, and markets, as
best idea among many options. In addition to solving the well as the ability to see (before the competition) where
real problem and fitting between the Innovation Goalposts, superior value can be offered, is critical to building an
the idea must be simple, must support the overall business organization’s innovation advantage.
strategy, must be distinctly new and better, must be proven, The goal is to pull ideas from these insights; however,
must be profitable, and must be capable of being quickly and the most strategic ideas can only be identified after the
easily implemented. If these criteria are absent, the creative organization has chosen a vision (i.e., future destination)
idea does not become a strategic idea, and value is lost. upon which to focus innovation efforts. Essentially, this is
The second stage of the process is also an aspect of an image that goes beyond preconceived notions of what
strategic thinking and involves “gathering as many stimuli is and is not possible about what the organization wants to
as possible in order to maximize the opportunity to make as do, to become, and to be famous for in the future. With the
many connections as possible” (step 4). Using these stimuli destination having been determined, the best path must be
and an active imagination, participants can uncover new chosen for reaching it, and the most effective approach is to
insights (step 5) and, then, identify new ideas (step 6). consider multiple scenarios so as to not leave the future to
Together, these steps allow innovators to look beyond what chance. Paths to consider include cost leadership, product/
they are doing in the present and to anticipate the future. service differentiation, customer segmentation, superior
Dundon quotes Drucker as saying, “Innovation can process, and/or superior distribution, and should be based
be systematically managed if one knows where and on the team’s own standards or on the BIG Picture criteria.
Once the destination and the path are chosen, ideas can
Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 4
The Seeds of Innovation Elaine Dundon

be sought that support this future direction—ideas for understanding of what is happening around them and
expanding the current portfolio of products/services, for why. This is the difference between being empowered
offering new products and services, for targeting new and achieving true self-mastery. “In the moment of self-
customers, or for expanding beyond the current business. awareness, great wisdom appears.”
Dundon advises that with today’s demanding If the very best innovative thinking is to emerge,
customers, citizens, and employees, “ordinary” ideas people must inspire others as well as themselves. To
are no longer good enough; instead, organizations must become this kind of “innovation champion,” innovators
look for the “exceptional, surprising, and unusually must become aware of the effect of their attitude on others,
great” (i.e., the extraordinary). She offers nine strategies, of the increasing need for more developed social skills,
used by many successfully innovative organizations for of the need for widespread participation in the innovation
accomplishing this task: (1) Target the most profitable initiative, and of the team’s resistance to change. Dundon
customer. (2) Offer something distinctly new and better. (3) adds that it is also important to support diverse thinking
Set innovation priorities by determining which products/ styles—“creative tension is the catalyst for developing
services to grow, hold, or eliminate; which customer groups better solutions.” The team’s structure is another important
to support, hold, or ignore; which regions to grow, hold, consideration, which should be approached from a systems-
or eliminate; and which projects to support, maintain, or thinking perspective that encourages, rather than hinders,
discontinue. (4) Make sure the product/service is easy to widespread innovation.
understand, to buy, and to use. (5) Speed is a competitive Innovation also benefits when people become more
aware of the organization. Dundon
“Innovation is a transformational challenge as well as a cre- believes that the traditional, hierarchical
ative and strategic one. … innovation is not about statistical pyramid structure might not represent
process control—it is about flexibility and human interaction.”
the best design for a future that demands
“open, networked, and overlapping
advantage, so pick up the pace—eliminate unnecessary systems where the right people can be connected with the
steps and bottlenecks, simplify decision making, identify right ideas in the fastest possible time.”
and discard the sacred traditions that no longer add value, Based on applied research in the field of Innovation,
take advantage of technology, and operate on customer and on her work with leading organizations, Dundon has
hours. (6) Systemize with modules for greater efficiency. identified ten characteristics that innovative organizations
(7) Profit from the power of branding. (8) Add credibility. have in common: (1) They encourage all stakeholders to
(9) Create Magnetworks—networks of competing and take an active role in innovation. (2) They welcome new
collaborating individuals or teams who innovate together ideas and approaches. (3) They anticipate the customer’s
for mutual benefit. future needs. (4) They challenge complacent competitors
Dundon believes that, contrary to Dr. Deming and by redefining the rule of the game. (5) They empower
the quality movement, innovation is not about statistical their customers with information and more control over
process control, but about flexibility and human interaction; the purchasing process. (6) They embrace new technology
thus, innovation is a transformational challenge as well as in order to strengthen their competitive advantage. (7) They
a creative and strategic one. Transformational thinking, employ internal processes that support innovation. (8) They
which is about how individuals and teams approach allocate resources to find, develop, and implement new
their work, begins with increasing self-awareness and ideas. (9) They reward innovative efforts. (10) They move
understanding of one’s own attitudes and those of one’s quickly. Innovation cannot thrive in organizations that are
teammates. in, what the author calls, an Innovation Rut—organizations
People fear the unknown; fear losing hard-won in which products/services have lost their competitive edge,
status, power, and/or money, fear what others think; and there is a lack of consensus about the future, more time is
even fear the judgment of their own egos. Because these spent on internal issues rather than on pleasing the customer,
fears form the greatest barrier to innovative thought and weaknesses are rarely acknowledge and discussed,
action, individuals must overcome them and deepen their
Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 5
The Seeds of Innovation Elaine Dundon

innovation efforts are not recognized or rewarded, people reviewing the current state of the business, of customers,
do not really enjoy their work, etc. of the competition, and of other elements of the marketplace.
An organization can move out of its Innovation Rut Page two—Future—would describe future predictions for
and achieve the Top Ten Characteristics of Innovative customers, the marketplace, the competition, technology,
Organizations by taking a systems-thinking view of and other challenges. Page three—Vision—would present
innovation that helps it align and guide itself to a higher the organization’s future destination, its chosen path,
level of innovation performance. In support of this view, and its BIG idea. Page four—Requirements—would
Dundon and colleague, Alex Pattakos, have developed the identify the core competencies and resources needed to
Innovation Systems Architecture® model that considers achieve the vision, take the path, and develop the BIG
all the diverse elements required to create and sustain idea. Page five—Action Plans—would summarize key
the environment for innovation and also focuses and actions, including timing and responsibility. And, page
incorporates the various building blocks for constructing six—Financials—would analyze financial resources and
a strong foundation for organizational innovation. present forecasts.
The second key aspect of transformational thinking The next step entails gaining a commitment to the idea
is passion, which is about linking creativity with a deeper or plan. Dundon advises preparing the audience for the idea
purpose. Work should not just be about tasks that need as well as preparing the idea for the audience. The presenter
to be completed, but should be a manifestation of one’s must understand the needs of the audience and be willing
individuality and should provide a deeper sense of meaning to repackage the message accordingly in order to maximize
in life. In order to sustain passion, people must block out the chances of acceptance.
the cynics and focus on their purpose and what they can Finally, the author warns that because implementation
contribute to themselves, to their teams, and to their is never a smooth process, persistence and patience are
organizations. They should concentrate on what is right required to find support and to overcome natural human
about a situation instead of what is wrong. And, they should resistance to change. “Just as the seasons change, you
set aside time during the day to think about the BIG Picture must be willing to accommodate the ambiguities that flow
and how they can find new ideas. naturally from any harvesting process.”
The work environment, both physical and psychological,
PART III: ORGANIZATIONAL INNOVATION
is also an important element in stimulating passion and
innovative thinking. Thus, it must be inviting, must change In addition to addressing creative, strategic, and
or evolve as the work evolves, and must communicate that transformational thinking, as a means of enhancing the
the organization is innovative. organization’s capacity for innovation, innovators must
The last component of transformational thinking is also design the optimal organizational environment—one
taking action. “Great ideas are not ‘innovative’ unless that enables everyone to take an active role in building an
they are successfully implemented. The critical factor is not “innovation-centric” enterprise. The Innovation Systems
the number of ideas … but the successful implementation Architecture model provides a framework for identifying
of those ideas.” Action, the third stage of the Nine-Step where innovation can be encouraged throughout the
Innovation Process, involves building strategic ideas into organization. Eight key dimensions (“pillars”) define the
fully developed business concepts and plans, and includes architecture for constructing and sustaining innovation:
developing the Innovation Roadmap (step seven), gaining (1) Shared Innovation Vision and Strategy, (2) Innovation
commitment (step eight), and implementation (step nine). Environment Supports, (3) Innovation Resource Allocation,
Developing strategic ideas and the Roadmap involves (4) Innovation Process Networks, (5) Innovation Programs,
categorizing the ideas according to their potential, (6) Innovation Skills Development, (7) Innovation Rewards
checking them against the BIG Picture criteria and and Recognition, (8) External Stakeholder Innovation
the Innovation Goalposts, and then writing a simple, (customers and partners).
focused six-page plan (i.e., Roadmap). For example: Page According to Dundon, attending to each pillar will
one—Learning—would detail key lessons learned from ensure that innovation is viewed as a priority throughout
the organization. Nonetheless, she warns that before an
Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 6
The Seeds of Innovation Elaine Dundon

organization can determine how it is going to improve its useful idea into action, and profitability—maximizing
capacity for innovation, it must first determine how well the added value from the implementation of the new and
it is doing currently. Based on an integrated view of the useful idea. Thus, Dundon’s definition of innovation is
Innovation Systems Architecture model, she and Pattakos “the profitable implementation of strategic creativity.”
have developed The Innovation Organization Assessment: This definition, which places innovation beyond the act
A Holistic Approach© (IOA). It is designed to provide: of creativity or the identification of new ideas, forms the
a common framework for describing and understanding basis of her Nine-Step Innovation Process and integrates a
innovation, a way to define and measure the organizational wide range of the existing theory and practice of innovation
design or infrastructure needed to cultivate and sustain into a comprehensive resource that is a true learning
innovation, a series of metrics that can be used to benchmark experience.
innovation capacity within a team or across the entire Moreover, the author does not intend for her audience
organization, and practical, results-oriented actions to to be passive observers of this experience but to be
build an organization’s innovation capacity. participants who learn by doing. Thus, The Seeds of
Innovation is essentially a planned “workshop,” full of
exercises for jumpstarting an organization’s innovation
APPENDIX A: THE NINE-STEP INNOVATION engine. Readers are required to list their creative talents,
PROCESS complete observation exercises, set Innovation Goalposts,
APPENDIX B: LIST OF PROBING QUESTIONS identify their industry’s sacred traditions, question their
teams about setting priorities, etc. By the end of the book,
APPENDIX C: NINETY-NINE INNOVATIONS not only will readers have learned quite a bit about how to
unleash creativity and implement an effective innovation
APPENDIX D: NINETY-NINE TRENDS process, they will have also (if they’ve done the work)
APPENDIX E: LIST OF ADDITIONAL CRITERIA actually begun the process.

* * *
Bibliographic notes by chapter, a recommended reading
list, and a subject index are provided. Reading Suggestions
Reading time: As Long as It Takes, 249 Pages in Book

Remarks We cannot emphasize strongly enough that The Seeds

As Dundon notes, innovation is the “new corporate of Innovation is not for reading, but for accomplishing
mantra.” Most managers understand the critical specific tasks. Even the appendixes require that you
importance of innovation as a competitive advantage. actually do something. Before you get to work, however,
And, they know that their organizations must do a better we recommend that you read the preface, the “Introduction
job with Innovation Management, including building their to Innovation Management” and the “Conclusion” to
capacity in innovative processes and aligning innovation determine whether you’re prepared to take on this rather
initiatives with strategic intent. However, most managers daunting project (it is not for the faint of heart). We also
are dissatisfied with the results they’ve seen to date. suggest that you consider the undertaking as a team effort
Because the author believes that a primary reason for this and pull together a group for an in-house workshop focused
failure is the pervasive confusion about what innovation on doing the work Dundon recommends. She makes it
is, she constructs that practical guide around a definition patently clear that effective innovation is, above all else, a
of innovation that combines the four key ingredients of collaborative effort.
any major change initiative: creativity—the discovery of Nonetheless, the goal is not actually to launch a full-
a new idea, strategy—a determination of whether the idea scale Nine-Step Innovation Process, but to explore the
is new and useful, implementation—putting the new and possibilities, benefits, and the work entailed in doing so.

Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 7
The Seeds of Innovation Elaine Dundon

A further objective would be to get the group into the most hands-on advice you will most likely need to help guide
effective mindset for leading the kind of change initiative the actual process.
this process requires. Dundon’s description of how the One more suggestion: While you’re engaged in your
seeds, stages, and steps interrelate is rather intricate. mini-workshop, we suggest that you take Dundon’s
And, there is just too much overlapping information (and recommended reading list seriously. The Seeds of
rightly so, given her insistence on systems-thinking) for any Innovation pulls together, in one resource, much of the
organization to launch this type of change initiative based existing viable theories and guidelines on the subject of
solely on the material provided in this book. Rather, the innovation. We believe that it would add immensely to the
book’s real value is that it exposes you to the possibilities success of your own process to explore as many of these
and prepares you to be more effective in using the expert original insights as possible.

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Business Book Review™ Vol. 19, No. 25 • Copyright © 2002 Business Book Review, LLC • All Rights Reserved Page 8
 BusinessSummaries ®

April 1, 2007

Six Disciplines For

Exellence
Gary Harpst

©Six Disciplines Corporation, 2004

ISBN: 0974858706

The Big Idea

If you are a small business owner, you should aspire
for more than momentary success. Your goal is to 4. Utilize a strategic use of technology.
push your organization towards achieving and sus- 5. Be able to build strong relationships and use
taining excellence. Author Gary Harpst uses his years it effectively.
of experience with thousands of small businesses to You must also be able to hurdle barriers that can pre-
bring you the six fundamental business disciplines vent you from achieving lasting excellence. These
that can help you achieve enduring excellence. barriers include having a poorly understood strategy,
weak strategy execution, unchecked organizational
Chapter 1 : Excellence entropy, and impractical implementation methods.
An excellent small business should:
Chapter 2 : Tha Small Business Advan-
1. Be a learning organization. tage
2. Strive to be a leader in a chosen area. A small business owner may experience challenges
3. Have the ability to sustain success. that may seem daunting but are nevertheless manage-
To be better than the rest, you must: able. The top six issues are:
1. Be able to rely on a strong leadership team. 1. Financial issues.
2. Attract and retain good employees. 2. Customer issues.
3. Have a disciplined approach towards 3. Production issues.
business. 4. People/employee issues.

BusinessSummaries® April 1, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved
Six Disciplines For Exellence Gary Harpst

5. Limited resources. that the goals you set must be specific and measur-
6. Growth management. able. Setting goals allow your staff to understand how
The Small Business Advantage to pursue your company’s VFOs. Furthermore, goals
There are several advantages to small businesses. As allow everyone in your organization to focus on the
a small business owner, you must learn how to use tasks that are important to your company’s success.
them effectively and aggressively. Here are steps you can follow when setting goals that
They are: lead:

1. Connecting people to purpose. 1. Define measures.

2. Effective communication. 2. Define targets.
3. Timely decision-making. 3. Define initiatives.
4. Customer intimacy. 4. Engage the team.
5. Attracting team members. Chapter 6: Discipline 3 - Align Systems
Chapter 3: The Six Disciplines Method- Your work doesn’t end after setting your company’s
ology goals. Now that you have the goals ready, you must
The six disciplines methodology is a synchronized and be able to take action. You might be surprised to find
systematic approach for building your business to the point out that a lot of companies fail at execution due to
that you can sustain excellence. It is a step-by-step pro- their own internal systems and processes.
cess that brings together key business principles such Although it might be difficult at first, you must be
as strategic planning, quality management, business able to master your organization’s systems. Make sure
process automation, etc. that they are lined up with the company’s priorities. If
The Six Disciplines of Excellence are: they are misaligned, set them straight.

1. Decide What’s Important. Here are the steps you can follow to align your orga-
2. Set Goals That Lead. nization’s systems:
3. Align Systems. 1. Identify misalignments.
4. Work the Plan. 2. Align processes.
5. Innovate Purposefully. 3. Align policies.
6. Step Back. 4. Align measures.
Chapter 4: Discipline 1 - Decide What’s 5. Align technologies.
Important 6. Align people.
Your leadership team must meet and decide annually Chapter 7: Discipline 4 - Work the Plan
what the organization’s long-term priorities are. You Every member of your organization should work
must then ensure that these VFOs (vital few objec- towards meeting your organization’s long-term goal.
tives) are met. Here are steps you can follow: You must, therefore, be able to determine areas of
1. Renew mission. responsibility for each employee. Your people should
2. Renew values. be able to develop plans and take responsibility for
3. Renew strategic position. executing them. They should also be able to work
4. Renew vision. with others and manage themselves.
5. Define VFOs (financial, customer, production Make sure that each member of your organization
and people). prepares an IP (Individual Plan) quarterly. This way,
6. Agree what to stop. they are able to monitor their progress. The IP will
Chapter 5: Discipline 2 - Set Goals also serve as a basis for a status report that should be
That Lead submitted every week to a specific team leader.
After you have decided what is important, it is now
time for you to set goals and initiatives. Remember

BusinessSummaries® April 1, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 2
Six Disciplines For Exellence Gary Harpst
The key steps are:
• There is passion for excellence in the
1. Define IPs quarterly. organization (particularly among its leaders).
2. Review IP status report weekly. • Leaders know the difference between working
3. Rate IPs quarterly. in the business and working on the business.
4. Prioritize daily tasks. They should be committed to “work on it.”
5. Monitor measures regularly. • Business size is sufficient enough for people
Chapter 8: Discipline 5 - Innovate Pur- to see the difficulties and challenges that arise
posefully through growth.
Achieving excellence that lasts requires organizations • The leaders are trusted and respected.
to continuously come up with new services, new Employees also believe and respect each other.
products and new delivery methods. Each day, com- • The business is stable.
petition grows stronger and you must come up with • The organization makes effective use of
better products and better service. If you do not do so, available technology.
your company will be left behind. • The company makes use of outside experts
such as accountants, lawyers, bankers,
You must be able to channel the creativity of the people consultants, etc.
in your organization to contribute to your company’s
mission and vision. In other words, you must make
sure that innovation is focused only on things that are
important to the organization.
Here are the steps you can follow:
1. Brainstorm.
2. Conduct 100-Point exercises to help prioritize
choices.
3. Quick ROI analysis.
4. 5-step problem solving.
5. Champion your ideas.
6. Recognize contribution.
Chapter 9: Discipline 6 - Step Back
Make it a habit to step back every year to give yourself
a broader view of the things that are going on inside
and outside your business. Taking a closer look at the
internal and external factors should make it easier for
you to update and improve your strategies.
The key steps are:
1. Review externals (competition, industry,
technology).
2. Review internals (goals, measures,
stakeholders, etc.)
3. Recap SWOT (strengths, weaknesses,
opportunities, threats)
4. Review individuals.
Chapter 10: Putting It All Together
Is your organization ready to try the Six Disciplines of
Excellence methodology? Here is a checklist you can
use to find out:
BusinessSummaries® April 1, 2007 • Copyright © 2010 EBSCO Publishing Inc. • All Rights Reserved Page 3
 Book
Business Book Review™
usiness

Re w
vie
We Select and Review Only the
B ™
Best Business Books You Should Read.

Volume 6, Number 1 • Copyright ©2000 Corporate Support Systems • All Rights Reserved

The Sources of
Book
Innovation

usiness

Re w
vie
B ™
Eric Von Hippel

©1988 Oxford University Press Book Cover

ISBN 0-19-504085-6 Not Available

Reviewed by Lydia Morris Brown

Chapter 1: Overview (8 pages)

The old assumption that manufacturers always develop innovations with their ears tuned to customer needs is
often wrong. Innovation comes from various places and usually depends on the field in question. It may come from
the innovation user, from a supplier, from a manufacturer, or elsewhere by studying the trends in such functionally
distributed innovation, one can predict and manage the innovation process much better.
By analyzing the temporary profits that potential innovators expect to achieve, one can predict the functional
sources of innovation “usefully often.” This can lead eventually to learning how to manage a distributed innovation
process. Further research on the functionally distributed innovation process can lead to advances in innovation
research, practice, and policy making.

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved
The Sources of Innovation Eric Von Hippel

Chapter 2: Users as Innovators (17 pages) switching from one functional category (say, suppliers) to
Innovations are developed mostly by users in at least another (say, users). This makes establishing the functional
three important areas: scientific instruments and assembly category too difficult. Second, firms must have difficulty
processes for both semiconductors and printed circuit collecting rent on the innovation through licensing. If an
boards. The author’s research team has discovered that innovator could license the innovation freely, the functional
users developed 77 percent of the innovations in selected role that the inventor happened to play would not influence
scientific instruments; users developed all of the process the expectations of rent.
machinery innovations involved in the initial commercial The available data show that both preconditions
practice of a process step; and over 60 percent of the major do exist. Patents are generally ineffective at excluding
and minor improvements to the machinery. imitators and capturing royalty income.
With respect to the scientific instrument innovations, Trade secrets legislation and licensing are effective
the user did all of the following steps: perceived that an only with innovations that have certain technological
innovation was needed, invented the instrument, built the barriers to analysis (so that reverse engineering cannot
prototype, applied the prototype, and diffused information be done) or with process innovations that can be hidden
about it. Manufacturing input came in only after that from public view.
was done, and was chiefly responsible for commercial
diffusion. Chapter 5: Testing the Relationship between the
Why does the belief persist that manufacturers are Functional Source of Innovation and Expected
responsible for all, innovations? Innovation Rents (9 pages)
One reason is that manufacturers do account for many Chapter 4 arrived at the tentative conclusion that it
innovations. Another reason is that the manufacturer’s role is possible to predict functional sources of innovation
tends to be more public than the user’s. by looking at the differences in potential rent of those
innovations. To test this hypothesis, it was necessary to
Chapter 3: Variations in the Functional Source of examine in detail five of the fields that previous studies
Innovation (15 pages) had explored: pultrusion process machinery, the tractor
Users are not the only source of innovations. In shovel, engineering plastics, and process equipment uti-
particular, innovations in tractor shovels, engineering lizing industrial gases and thermoplastics. In each case,
thermoplastics, and plastic additives have been attributed the functional type of firm expected to be the source of
to the manufacturers of those products. A third functional innovation, based on expected rent from those innovations,
source of innovation, suppliers, was discovered in the areas was indeed the source of the innovation.
of wire termination equipment and process equipment That, of course, does not prove the hypothesis beyond
utilizing industrial gases and thermoplastics. Finally, dispute, but the results suggest that further research should
research by others has verified the presence of non- be done and that certain practical applications can be
manufacturer innovation. made. The model appears to be applicable to industrial
products, processes, and services, and less applicable in
Chapter 4: The Functional Source of Innovation such areas as scientific instruments, where motivations
as an Economic Phenomenon (14 pages) other than expected rent guide the research.
One very important cause of variation in innovation
is the economic return that various functional groups Chapter 6: Cooperation between Rivals: The
expect from the innovation. A straightforward economic Informal Trading of Technical Know-How
model allows one to predict the sources of innovations (7 pages)
“usefully often.” In other words, innovating firms will be If variations in the functional sources of innovation
found among those whose analyses lead them to expect a can be explained in terms of expected economic rents, it
relatively decent economic rent on the innovation. is possible to develop a more general understanding of
For this hypothesis to be true, two other preconditions patterns in innovation sources. One area that bears scrutiny
must be true. First, firms must not be in the habit of is a mode of cooperative research and development called

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 2
The Sources of Innovation Eric Von Hippel

information know-how trading. This refers to the trading Making the appropriate organizational changes is
network that often develops between engineers who share more difficult, however, and a firm needs to be on the
professional interests, even those engineers who work for lookout for biases related to the sources of innovation.
competing firms. Still, it is possible to modify the innovation process and
Within the United States steel mini-mill industry, the sources of innovation by shifting the rent expectations
for example, trading of proprietary process know-how of would-be innovators.
appears to be routine, sometimes with rivals. Research
by others, though scanty, suggests that this occurs ire
many industries. Such informal trading of technology
can even be seen as an inexpensive, flexible form of
cross-licensing.

Chapter 7: Shifting the Functional Source of

Innovation (9 pages)
Given what we know about the functional source
of innovation, it should be possible to “shift” the
source of innovation by changing the distribution of the
expected rents. Current data on innovation in automated
clinical chemistry analyzers suggest such a shift can be
accomplished. Here, variations in product design were
found to affect the level of user innovation. However, the
reasoning works just as well with all functional groups:
users, manufacturers, suppliers, and even government
policy makers.

Chapter 8: Predicting the Source of Innovation:

Lead Users (15 pages)
Once one understands how the expected rent from
innovation is distributed, one can begin to predict the
likely sources of innovation. A problem with most market
research is that the users who are selected to give data on
new products and services are constrained by the products
and services that already exist. That is, they don’t tend
to think about the products and services in novel ways.
But by using “lead users”, those users who encounter
specific needs before the rest of the market and who are
positioned to benefit from a solution to those needs, one
can provide accurate data. By being able to predict lead
users as innovators, one can use them to provide new
product concepts and designs.

Chapter 9: Epilogue: Applications for Innovation

Management (6 pages)
It should be relatively easy for analysts to determine
a firm’s appropriate role in the distribution innovation
process.

Business Book Review™ Vol. 6, No. 1 • Copyright © 2000 Corporate Support Systems, Inc. • All Rights Reserved Page 3
 December 19, 2011

Sustainable Excellence
The Future of Business in a Fast-Changing
World
Aron Cramer and Zachary Karabell

©2010 Rodale, Inc.

Adapted by permission of Macmillan Publishing
ISBN: 978-1-60529-534-3

Introduction
Earth is warming, resources are dwindling, and thinking to address global challenges. They have set
people are worried. But some have sighted oppor- incentives that allow sustainability to drive inno-
tunities amid the gloom. In Sustainable Excellence, vation. They have rejected secrecy and embraced
Aron Cramer and Zachary Karabell explain how transparency, and entered into partnership with con-
savvy entrepreneurs have begun implementing the sumers to shape the future.
principles of sustainable excellence, and are doing so To begin, a sustainable business:
profitably. Sustainability means acknowledging that
what people do now affects the world their children • Delivers value for investors, customers, and em-
inherit. Excellence in business means identifying ployees.
and meeting human needs while turning a profit • Raises the standard of living of the community in
for shareholders. Industries from many sectors have which it operates.
managed to attain or retain excellence without violat- • Uses resources wisely.
ing the environment, human rights, or labor relations.
• Treats its employees fairly.
That is sustainable excellence.
Sustainability entails societal as well as environ-
About Sustainability
mental considerations, because today’s global issues
Such leaders have accepted an inconvenient truth: include not only global warming, but also growing
business as usual is dead. They have expanded their attention to human rights, a struggling world econ-

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
Sustainable Excellence Aron Cramer & Zachary Karabell

omy, and emerging global markets like China and

India. Businesses were once accountable only to their
stockholders and to government regulators. Now, Key Concepts
information technology and social media have joined
traditional media to add radical transparency to the In Sustainable Excellence, Cramer & Karabell
list of behaviors demanded by the public. claim that business as usual is dead. Ecologi-
cal pressures, new attention to human rights,
Moreover, experts have long pointed out that there economic scandal and emerging markets have
is simply not enough fossil fuel, clean water, raw all combined to make twentieth-century busi-
materials, anything—to allow every inhabitant of the ness practices obsolete; the business leader who
planet to enjoy the current Western lifestyle. Western ignores this is poised for failure.
consumers must embrace the concept of sustainable
consumption, or, face an increasingly hostile world. To survive in a fundamentally changed world, a
Also, the demand for immediate gratification makes business must:
it very hard to sell alterations that will benefit genera- 1. Create business strategies that meet global
tions yet unborn, but may cause a short-term drop in challenges.
earnings.
2. Use sustainability to drive innovation.
To survive, a business must:
3. Set internal and external incentives to en-
• Think bigger. Global challenges require global courage innovation and sustainable con-
solutions. sumption.
• Aim for sustainability. 4. Accept and comply with the new demands
• Set incentives to encourage sustainable innova- for transparency in governance and business
tion. practices; expect to collaborate with outside
• Acknowledge the new expectation of transpar- organizations.
ency and embrace it. 5. Make consumers partners in the quest for
• Turn consumers into partners by stimulating mar- sustainable excellence.
ket demand for sustainability.
The competition may already be doing these things.
g g g g
Big corporations are aiming at sustainability, and
corporate leaders are daring to take the long view. Information about this book and other business titles:
Sustainable excellence may not be a formula for suc- www.macmillan.com
cess, but those who trivialize it are certain to lose.
Related summaries in the BBS Library:
Business as usual is dead.
The Sustainability Champion’s Guidebook
A Little History How to Transform Your Company
Historically speaking, the movement away from con- By Bob Willard
spicuous consumption and toward sustainability has Making Sustainability Work
been a rapid one. It began in the 1960s and 70s with Best Practices in Managing and Measuring
a growing passion for the environment and the birth Corporate, Social, Environmental,
of activist investing. By the 1990s, sustainability was and Economic Impacts
entering the mainstream. In 1992, the Earth Summit By Marc J. Epstein
in Brazil featured companies like 3M, DuPont, Procter
and Gamble, and Mitsubishi, all calling for increased
environmental preservation efforts. The early 1990s
saw a 450% increase in the number of non-govern-
mental organizations (NGOs). Many were shoestring
Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
Sustainable Excellence Aron Cramer & Zachary Karabell

operations that nevertheless called major companies costs by raising prices no longer works: the emerging
like the Gap and Royal Dutch Shell to account on sus- markets of the Third World cannot yet afford to buy.
tainability issues. Such NGOs were enabled in part While the U.S. lost economic ground, India, Brazil,
by the rise of the Internet, which offered a cost-free and China gained, and experts concur that the future
medium for anti-business messages. will be shaped by the emerging world. The only hope
for profitability lies in increased efficiency and sus-
The opening decade of the new century saw the
tainability, but realistically the world will continue to
premiere of Al Gore’s An Inconvenient Truth, and a
be carbon-intensive until alternatives are developed
spate of economic and natural disasters. Public con-
and consumption reduced. Unfortunately, the 2009
cern about the environment triggered fretting over
Copenhagen Conference on Climate Change showed
sustainability, causing some corporate leaders to
that the West will not accept carbon limits, and the
see that environmental green could also be fiscal
Third World will not offset them.
green. The market’s stellar per-
formance proved to have been
[P]artnership and transparency are at the core of sustainable
driven mainly by easy credit.
An increase in wages for Third excellence and … open source principles may be as useful for
World workers made cheap labor sustainable product design as they’ve been for software design.
a dwindling resource. Higher In an industry where intellectual property rights have tradition-
labor costs were not balanced by
ally been guarded like state secrets, this is a big change.
rising consumption. Managing
External pressure for sustainability and an internal
drive for excellence are crucial for the future of busi-
ness and indeed, for the world.

About the Authors Sustainability as a Business Strategy

While holdouts wonder if sustainability is just another
Aron Kramer has been president and CEO of fad, many companies have recognized that business
Business for Social Responsibility since 2004. success demands a strategy for sustainability. The
Under his leadership, the organization has buzzword is resilience: a resilient organization antici-
more than doubled in size, with seven offices pates big economic changes and acts to mitigate risk.
in the US, Europe, and Asia. He has pioneered Two practices characterize resilience: forecasting/sce-
efforts to integrate human rights principles into nario planning, and increased openness to input from
global business practices, has led human rights diverse sources. By consulting experts outside their
training workshops in China, and has helped own field, companies can better understand customer
to make sustainable business a reality on three priorities and be poised for future market changes,
continents. even at the cost of scuttling legacy products and rede-
Zachary Karabell, Ph.D. is the author of ten fining the business.
critically acclaimed books, and a contributor A key element of any business strategy for the future
to CNBC. He began focusing on sustainability is a realistic climate strategy. All businesses will be
issues as chief economist, head of marketing, affected by climate change, but the energy and trans-
and president of Fred Alger and Company. portation sectors are similar to the low-lying islands
He helped create one of the early green funds in the Pacific: climate change will affect them sooner
at Alger, and left the company to start his own and worse. The companies in the best position for
fund that focuses on sustainability as a driver of longevity are those which have accepted that existing
profitability. models will not serve over the long term. The compa-
nies best able to generate innovation are those more
adaptable to changing conditions. They are the com-
panies with vision, clarity, and urgency at the highest
Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
Sustainable Excellence Aron Cramer & Zachary Karabell

levels—companies whose leaders can manage change. roots push toward sustainability.
Realistically, though, all a CEO can do is to nudge
China, the tipping point in many trends, is realizing
the behemoth in the right direction. CEO credibility
the need for transparency and other facets of sus-
hinges on delivering the goods in the marketplace,tainability. The State-Owned Assets Supervision and
generating earnings growth, and maximizing share- Administration Commission, the board of directors
holder profits. An additional challenge is the brevity
for big government-owned corporations in China, has
of the typical CEO’s tenure: around six years. There
ordered moves toward corporate social responsibility,
is thus no personal payoff in pushing for long-term
including sustainability. Many private entrepreneurs
changes. Short-term sacrifice is unacceptable also to
are following suit. While Westerners continue to
investors, as their focus on quarterly earnings dem-
watch China’s human-rights practices, from coal-
onstrates. miner safety to Internet privacy, they acknowledge
that China has heavily invested in alternative energy
and high-speed rail. Indeed, at
It turns out that a twenty-first-century term like “sustainabil- present, China has more cash and
ity” can be achieved with an old-fashioned concept like frugality. better credit than U.S. enterprises.
Emerging markets need not
But the CEO’s primary task is setting corporate undermine human-rights standards. Companies
agenda. Doing business in the global market is a jug- in such markets face the same problems as Western
gling act. Managers must balance financial, customer, ones: environmental challenges and a growing need
employee, environmental, and societal demands. In for jobs to support a growing population. To compete
this complex task, reinforcing a broader corporate in Western markets, they must meet Western stan-
principle can be the deciding factor. dards—which are backed up by global systems like
the World Trade Organization. In the end, the West
In essence, leadership is redefining itself. CEOs are
might even learn from the emerging world. The main
now listening to leaders in other fields, and speaking
challenge for the West will be keeping up with the rest
out on a variety of outside issues. Such outside contact
of the world.
gives them an early warning of impending changes.
Leaders, to be effective, must stay ahead of change, The Chain Game
which means challenging the conventional wisdom For many companies, labor is a bigger supply chain
of vested interests, and they must do so before their issue than the environment. Big-brand manufactur-
competitors do. ers have teamed with the World Bank and the ILO to
Emerging Markets form Better Work, an organization that recruits assis-
tance from local governments, local manufacturers,
New players in the game are challenging tradi-
trade unions, and laborers themselves to correct poor
tional management models. In the West, drivers of
labor practices. Other issues may be so complex and
sustainable excellence are often external: investors,
involve such tradeoffs that they also are best handled
consumers, and other stakeholders. In emerging mar-
by coalitions of companies to ensure the availability
kets, however, most businesses are owned by a single
of materials. For example, the Clean Cargo Working
family, or by the state. While governmentally con-
Group was formed in 2001 by 27 companies to reduce
trolled investment funds have the greatest impact, in
the impact of road, rail, and ocean shipping.
a family business publicly-traded shares are too few
to allow outsiders any substantive control. The chief WalMart has the greatest impact on world supply
risk of such non-public ownership is the lack of trans- chains, accounting for 10% of China’s exports. The
parency. The risk is balanced, though, by a single clear company’s move toward sustainability has actu-
vision from the top, which allows the organization to ally led to lower costs to them and to the consumer.
react swiftly to change. In some places, however, this WalMart’s demand for more transparency from its
top-down model is challenged by an emerging grass- suppliers leads some analysts to say that WalMart is

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 4
Sustainable Excellence Aron Cramer & Zachary Karabell

a more effective regulator than the US government. companies are trying to meet consumers’ needs in
cheaper, greener ways is found in the use of recycled
Rather than thinking of supply chains, with their
materials, smaller cars, more efficient buildings. The
“make it where it is cheapest” mentality, it is now
problem has been redefined, and the answers are
more reasonable to think in terms of value chains.
more creative than ever.
Value chains allow analysis of the processes by which
value is added to a product at each stage of manufac- Follow the Money
ture, and are particularly useful when outsourcing is Investors prefer well-run, established companies
involved. It is a systems-based approach to managing committed to sustainable excellence, even in the
both price and quality, and allows factoring in con- finance industry. Socially responsible investing is on
sumer use and ultimate disposal of the product. the rise, as is an accompanying scrutiny of issues of
However, the question still remains: how resilient are environmentalism, social responsibility, and gover-
global value chains? The challenges are serious. Fuel nance (ESG). Companies focused on environmental
prices are expected to continue rising over the next 20 issues generally score well on the other two.
years, and pollution of air and water continues to be In 2010, an estimated eighteen trillion dollars was at
a concern. The economic crisis has tended to under- least nominally committed to ESG criteria. Much of
mine political support for reform. In the end, all value the money came from state or national pension plans.
chains must be highly adaptable, and all businesses The investing institutions must balance political influ-
must have a value chain strategy as part of their over- ences against fiduciary responsibility. Recognizing the
all plan. need for reliable standards, a few Wall Street firms,
Sell Solutions, Not Products! notably Bloomberg, have begun assessing the perfor-
mance of businesses with regard to sustainability. A
If the goal of the overall plan is sustainability, two
slow move towards greener operations has begun.
routes are open to any organi-
zation. The obvious choice is to Companies that understand they must be in the business of
build and market a better, greener
meeting needs and not simply tweaking old products and pro-
mousetrap. This business-as-
usual approach is unlikely to duction lines, are the ones that will survive and thrive, and
succeed over time. An organiza- allow the planet to do the same.
tion on track for success, on the
other hand, will adopt a more creative approach. Two major issues can create slowness in this transi-
Rather than focus on the product, this firm will strive tion into sustainable practices. First, the global system
to identify the need its product fills, and find other, is in for a major shift in the production and use of
greener ways to meet customer needs. In so doing, the energy, no one can predict the pace of the change. Sec-
firm will move away from the twentieth-century prac- ondly, people are still trapped by short-term thinking.
tice of guarding intellectual property, and embrace So far, industry and transportation have polluted air
the partnerships that will characterize successful and water, while industrial-strength agriculture has
enterprises in the twenty-first century. degraded the fertility of much farmland, but no one
has been asked to pay for the damage. No one com-
The underlying issue is consumption, and the experts
pany or nation has been singled out and the debate on
say the West’s present rate of consumption must
true cost accounting still rages.
change. In 2010, the World Economic Forum at Davos
featured discussions by more than twenty CEOs Banks and oil industry giants have joined producers of
about how to shift prevailing business models away consumer goods in calling for sustainable consump-
from the “growth is good, buy more stuff” mantra tion. Wall Street invests in emerging markets and in
of the last century and toward a program of increas- green energy—but the bottom line still drives this
ing value, not proliferating things. The talk was of feel-good activity, with one exception: Silicon Valley.
greener manufacture and delivery. Evidence that Here, clean technology is the rage, and private equity

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
Sustainable Excellence Aron Cramer & Zachary Karabell

firms have gone green in a big way, with a strange requires more than government permission. A busi-
mix of naïve idealism and business savvy driving the ness also needs a social license to operate, which
activity. Silicon Valley venture capitalists know that is conferred or withheld by fluid combinations of
the marketplace is a highly competitive one, with NGOs, the media, and local activists, entities often
China investing heavily in “greenovation”. They also stricter than some regulators. Like it or not, all cor-
understand that capital is necessary but not sufficient. porations must eventually embrace the principles of
At present, green energy attracts more investor dol- sustainable excellence if they are to survive. Sadly,
lars than it can effectively allocate. resource companies can do only so much, and years
will pass before their efforts begin
There are also [prominent] economists [who] have critiqued the to pay off.
underlying belief that growth is in and of itself an absolute good Smarter, Greener Cities
and noted the degree to which the push for growth for its own By 2050, an estimated 70 percent of
sake has contributed to the recent crisis of capitalism. humankind will be urban. Mega-
cities of more than 10 million are
expected to develop, facing the
What About Commodities? same complexities that daunt their smaller precursors
Eighty percent of the world’s energy is supplied by today. Information technology will be bigger than
natural gas, coal, and oil, and many products are also ever.
petroleum-derived. Increasing demand for raw mate- Efforts to reduce energy consumption with products
rials has already led to market volatility, problems in like LED lights have been successful, but many com-
shipping, storing, and refining those materials, and panies are aiming at some system of smart meters
regulatory and political tangles. Forecasting amid and smart grids that will allow customers to monitor
such complexity is guesswork. the energy use of each appliance, and enable utili-
Reconfiguring the world’s energy supply will be a ties to manage power flow at peak efficiency. Such
decades-long process. Americans and Europeans join meters and grids already exist, but are expensive and
in reviling big energy companies—from behind the unwieldy.
wheel of their SUVs. Energy is the crux of sustainabil- Undeterred, I.T. companies continue to develop these
ity and of economic development. Some extractive software systems, and implement them on their own
businesses have begun to focus on consumer needs campuses, demonstrating their software products
rather than on their legacy products. They use the while reducing their own carbon footprint. This soft-
goal of sustainable excellence to drive innovation and ware, say the authors, is “the lifeblood of reduction, a
to calibrate incentives. pipeline for information, and a facilitator of transpar-
Big Oil controls a vital resource and always turns a ency.” And new business models like eBay, the virtual
huge profit, but oil companies are declining in impor- mall, are springing up.
tance. The big six (ExxonMobil, Shell, ConocoPhilips, Actions Speak Louder…
Total, BP, and Chevron) control a mere five percent
Marks and Spencer’s, the one-stop shopping location
of oil production. The ten biggest oil companies, con-
for much of Great Britain, has made headlines with its
trolling 90 percent of the world’s oil, are state-owned,
Plan A initiative. They decided to call because there
like Saudi Aramco or Brazil’s Petrobras. The big six
is no Plan B for anyone on the planet. Points include:
continue to power the US economy. They are not the
biggest players, but they are adapting in the face of • Being carbon-neutral by 2020.
environmental and social activism by NGOs. Some • Seeing that all merchandise meets at least one cri-
have crafted a sustainable development framework terion of sustainability—organic status, recyclabil-
and allow third-party audits. ity, fair trade practices, or made from sustainable
Operating a business in the twenty-first century resources.

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 6
Sustainable Excellence Aron Cramer & Zachary Karabell

• Ensuring that all 500,000 of its employees—and that become global norms.
those of its suppliers —will have fair wages, basic
The top-down model of decision-making is obsolete.
health care, and protected workers’ rights.
As millennials flock to work, they bring their pref-
The initiative is too far-reaching and too costly to be erence for autonomy over hierarchy. Collaborative
mere greenwashing. It illustrates the importance of relationships are increasingly the rule. Many corpo-
customer/company communication. This is especially rations now bring NGOs into the decision-making
true in the area of sustainability, as consumers, NGOs, loop for their input on the sustainability of develop-
and media alike are all swift to pounce on suspected ments, because they acknowledge and want to keep
greenwashing. their social license to operate. In addition, new orga-
Companies have lost the option of silence, as demon- nizational forms have begun to appear, connecting
strated by the proliferation of green advertising. Some businesses and NGOs to work for common goals.
of the earliest purchasers of green advertisements There are occasional problems with these unconven-
were in fact major polluters. It was left to manufac- tional partnerships. Too often a company is put at a
turers of non-automotive products to take the lead competitive disadvantage with its peers where price
worldwide. Numerous exposés have pointed out is concerned. Many initiatives have been under-
inconsistencies, however. In fairness, yesterday’s vice staffed and underfunded. Nevertheless, by the time
does not negate today’s virtue. The biggest offenders the Copenhagen Climate Summit ended, many of the
in the past have the strongest motivation to change. most prominent multinationals were aligned more
Promiscuous accusations of greenwashing are just as closely with NGOs than with governments.
bad as the hypocrisy itself.
Thus, businesses find themselves The question of whether to communicate about the social and
at a crossroads—they no longer environmental dimensions of business is about as relevant
control their own image. Prop- today as whether to have a company Web site. The question is
erly approached, the demand
for radical transparency and for
how to do so in a world where companies no longer control the
evidence of some sort of social public debate about their brands.
conscience both drives and sus-
tains the quest for sustainable excellence through The best partnerships have tended to be those where
innovation, even in boardrooms. tensions and conflicts have been addressed openly
Unlikely Bedfellows and respectfully. NGOs and businesses have different
charters, objectives, skills, and other resources. Thus,
Businesspeople and advocacy groups have begun to
each has much to offer the other. Sometimes old-fash-
see the advantages of cooperation. The last twenty-
ioned relationship building is more useful than hours
odd years have seen a small revolution in their
of training in stakeholder relations.
relationship. The NGOs continue to be watchdogs,
but many have discovered that working with busi- These partnerships are a new life form. As such, they
ness is a better lever for societal change. are both full of potential and extremely fragile. More-
over, social networking has introduced a new player:
A main factor in this new paradigm is the disap-
the informal, ad hoc groups that form around a single
pearance of government or corporate monopolies on
issue. These are first posted on Facebook, and sud-
power, information, and expertise that characterized
denly capable of toppling a government. Compared
the twentieth century. In a setting where everyone is
to this amorphous force, businesses may prefer to
informed and empowered, NGOs can give businesses
work with NGOs in the pursuit of sustainability.
early warning of changing perspectives and emerg-
ing issues. Companies work with NGOs to enhance Ten to Watch in the Next Decade
credibility; NGOs working with businesses can move Though predictions are notoriously unreliable, the
more quickly than governments to create standards authors single out ten companies to watch:
Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
Sustainable Excellence Aron Cramer & Zachary Karabell

1. Walmart has set its corporate sights on sustainabil- those of running a sustainable one.
ity, and is simply too big to overlook.
Sustainable excellence is not only vital to business
2. Better Place is an Israeli company that sells electric success, it is vital to the planet and all its inhabitants.
cars—with strategically placed charging stations Even as a new middle class emerges, with a vora-
accessible to owners via key card. cious appetite for natural resources, many other parts
of the world are succeeding in using those resources
3. Dupont, the chemical giant, is focusing on produc-
more efficiently. The digital revolution has opened
ing chemicals from renewable resources.
countless possibilities. Businesses have driven these
4. Schneider Electric manufactures equipment for achievements, but they cannot do so on a global scale
monitoring and managing energy usage in com- without demonstrating that they are serious about
mercial and residential settings, creating a sustainable economy.
5. Google offers free software that allows people to
monitor energy usage in the home. It aims at be- g g g g

coming a centralized information hub.

6. Autodesk is investing heavily in new software that
Features of the Book
allows engineers and architects to design energy- Reading Time: 4 hours, 269 Pages
efficient buildings made of sustainable materials. Sustainable excellence is the next wave in global busi-
7. Grupo ABC is a Brazilian marketing company al- ness. It is the authors’ hope that, in time, the idea will
ready chosen to create the logo for the 2014 World become the new normal. They recognize that sustain-
Cup, and is determined to integrate social inclu- able excellence is vital to the health of companies,
sion into its messaging. to the global economy, and to daily life. They are
encouraged by signs of progress, and encourage all to
8. Spain’s Iberdrola, the world’s fourth largest utility
accept the challenge. Sustainable Excellence contains
company, has committed to using only renewable
a vital and timely message, and is best read straight
energy.
through. Both authors draw on their long experience
9. ICICI, a leading Indian bank in retail and corpo- with Global 100 companies. Multiple examples and
rate banking as well as microfinance, has devel- case studies furnish ample support for their claims.
oped mobile banking for customers in the hinter- This book is intended for anyone with an interest in
lands. cultivating a sustainable business.

10. Tsing Capital is the first clean-technology Contents

venture capital fund in China. Chapter1: What Is Sustainable Excellence?
Conclusion Chapter 2: How We Got Here
Current levels of prosperity are a fading dream in the
Chapter 3: Sustainability: A New Dimension of Busi-
West, but people in emerging markets see the next
ness Strategy
century as one of infinite possibilities. They are con-
fident that, though the West dominated the twentieth Chapter 4: Leadership
century, it is their turn to dominate the twenty-first. Chapter 5: New Sustainability Champions
These attitudes shape opinions about business and
government. Westerners have grown skeptical of Chapter 6: Value Chains: Unlocking Solutions
both, believing neither sector capable of solving the Chapter 7: It’s the Product, Stupid!
enormous global challenges that loom ahead. There is
some evidence to bolster the skepticism. The authors Chapter 8: Money, Money, Money Makes the World
are struck, however, with the convergence between Go Round
the demands of running a profitable business and Chapter 9: The Commodity Conundrum

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
Sustainable Excellence Aron Cramer & Zachary Karabell

Chapter 10: Smarter Cities, Greener Grids, and the

Wonderful New World of IT
Chapter 11: Practicing What You Preach
Chapter 12: Guess Who’s Coming to (the Board)
Dinner?
Chapter 13: Ten Companies That Will Shape the
World in 2020
Conclusion: Sustainable Excellence = Excellence
Acknowledgments
Index

Business Book Summaries® December 19, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 9
 Book
Business Book Review™
usiness

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We Select and Review Only the
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Volume 23, Number 22 • Copyright ©2006 Business Book Review, LLC • All Rights Reserved

The Ten Faces of

Innovation
IDEO’s Strategies for Beating the Devil’s Advocate
& Driving Creativity Throughout Your Organization

Tom Kelley with Jonathan Littman

©2005 Tom Kelley

Adapted by permission of Currency Doubleday
ISBN: 0-385-51207-4

Reviewed by Lydia Morris Brown

Introduction
According to Tom Kelley (The Art of Innovation), individuals, who assume the role of Devil’s Advocate, can be some
of the most potent destroyers of innovation in a corporation. These ubiquitous idea wreckers, cloaking themselves in the
seemingly innocuous and objective Devil’s Advocate persona, raise the questions and concerns that effectively kill fragile
new ideas, without having to take any responsibility for their negative, mean-spirited attacks. Thus, at a time when great
new insights, ideas, concepts, and plans are the most critical ingredients in the long-term success of any organization, the
Devil’s Advocate represents a subtle (and, therefore, dangerous) threat to the entire business world.
The Ten Faces of Innovation is designed to help individuals, throughout the organization, bring the human
element of innovation to the workings of the enterprise. Inspired by the strategies and roles that have emerged at IDEO,
Kelley examines the ten learning, organizing, and building personas individuals can undertake as a means of fending
off creativity-stifling naysayers and fostering innovation. The result is a practical guide to nurturing and sustaining a

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

culture of “serial” renewal—one in which more learning

opportunities are tapped, more ideas are screened and
Key Concepts
validated (via enlightened trial and error), and more new In this postdisciplinary world, ten new
initiatives are successfully driven forward. innovation personas give individuals
permission to make their own unique
contributions to team performance and keep
PART I: THE DEVIL’S ADVOCATE—A SUBTLE
the Devil’s Advocate in his or her place.
MENACE
As Kelley notes, everyone can relate to the damning 1. The Anthropologist brings new learning and
insights.
effects of the Devil’s Advocate. This individual invariably
appears at pivotal meetings where someone is passionately 2. The Experimenter continuously prototypes new
pushing a new idea, concept, or proposal. And, just as the ideas.
groundswell of support is about to reach critical mass, 3. The Cross-Pollinator gathers ideas from other
someone grabs the floor and says, “Let me just play Devil’s industries and cultures.
Advocate for a minute.”
4. The Hurdler overcomes the roadblocks to
Having invoked the protective power of that seemingly innovation.
innocuous phrase, the naysayer now feels free to take
5. The Collaborator brings eclectic groups
potshots at the idea, with complete impunity. By implying
together.
that the Devil is making him or her speak out, the individual
neatly sidesteps any responsibility for a verbal attack, which 6. The Director gathers a talented cast and crew,
has effectively managed to torch the fledgling idea. sparking their creativity.
Kelley believes that this subtle gambit, which strikes 7. The Experience Architect designs compelling
so regularly in meetings throughout corporate America, experiences.
may be the biggest innovation killer in business. The 8. The Set Designer creates a stage that fosters
Devil’s Advocate encourages idea wreckers to see only innovation.
the downside of any proposal, thus, they can drown a
9. The Caregiver delivers exceptional customer
new initiative in negativity—and this is no trivial matter. care.
Because innovation is the lifeblood of all organizations,
the ubiquitous Devil’s Advocate is toxic to all of business; 10. The Storyteller uses compelling narratives to
build internal morale and external awareness.
as The Economist stated, “Innovation is now recognized
as the single most important ingredient in any modern * * *
economy.”
Information about the author and subject:
Although great products are one important element
www.tenfacesofinnovation.com
in the formula for business success, sustained competitive
Information about this book and other business titles:
advantage demands 360-degree innovation, in all aspects of
www.currencybooks.com
the business, and among every team member. The business
world is increasingly recognizing that fostering a culture Related summaries in the BBR Library:
of innovation is as critical to success as devising effective The Art of Innovation
competitive strategies and maintaining good margins. And, By: Tom Kelley
while acquisitions can yield synergy, and reengineering The Inventive Organization
can streamline operations, a culture of innovation may By: Jill Janov
be the ultimate driver of long-term growth and brand
development.
Nonetheless, innovation does not combust the implementation of new ideas.” People make innovation
spontaneously—it is neither self-starting nor self- happen through their imaginations, willpower, and
perpetuating, but is about “People creating value through perseverance. Whether one is a member of a team, a group

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 2
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

leader, or an executive, one cannot innovate alone—the only PART II: BEYOND THE DEVIL’S ADVOCATE—
real path is through people. LEARNING, ORGANIZING, BUILDING
Neither is innovation about luminaries, such as Thomas Because the world is changing at an unprecedented
Edison or even celebrity CEOs. Rather, it is about the rate, making today’s great idea tomorrow’s anachronism,
countless unsung heroes who work on the front lines, the Anthropologist, Experimenter, and Cross-Pollinator
making innovation happen day in and day out. are driven by the realization that no company can afford
IDEO used to spend a majority of its time dealing with to be complacent. Understanding that individuals and
product-based innovation, but it has since come to realize organizations need constantly to gather new sources of
that innovation is a pivotal management tool across all information, in order to expand their knowledge and
industries and market segments
“Like a Method acting immersing himself in a new role, you many
as well as a tool for transforming
find that walking in the shoes of a new persona changes your
the entire culture of organizations. attitude and outlook, even your behavior. ... The new personas are
Accordingly, it has developed ten about ‘being innovation’ rather than merely ‘doing innovation.’ ”
people-centric tools (which can
be called talents, roles, or personas) to help teams express grow, these three learning roles have enough humility to
a different perspective and create a broader range of question their own worldviews and to remain ever open to
innovative solutions. new insights.
Many of these personas already exist in companies, Most companies have great problem-solvers; however,
as a reservoir of underdeveloped or unrecognized energy, the difficulty comes in knowing what problems to solve.
waiting to be tapped. Kelley believes that, when People filling the Anthropologist role, informed by their
organizations give individuals permission to make their own insights in the field, can be extremely good at reframing a
unique contributions as Anthropologists, Experimenters, problem and, thus, can elicit the kind of solution that sparks
Cross-Pollinators, Hurdlers, Collaborators, Directors, a breakthrough. For example, when IDEO’s human-factors
Experience Architects, Set Designers, Caregivers, and/ person camped out in a hospital room for 48 hours (with
or Storytellers, they can empower a new generation of an elderly patient undergoing surgery), helping to develop
innovators.. new health care services, she was living the life of the
Anthropologist.
Anthropologists bring new learning and insights
About the Authors
into the organization by observing human behavior and
developing a deep understanding of how people interact
Tom Kelley, author of the bestselling The Art physically and emotionally with products, services, and
of Innovation (with Jonathan Littman) is the spaces. Thus, this role can be the single biggest source of
general manager of IDEO, a global design firm innovation.
that helps companies worldwide innovate their The Anthropologists at IDEO have a solid grounding,
products, services, and environments. In this role,
and advanced degrees, in the social sciences; however,
he has been responsible for such diverse areas
their sense of “informed intuition” (what Harvard Business
as business development, marketing, human
School professor, Dorothy Leonard, calls Deep Smarts) is
resources, and operations. And, as a much
sought-after speaker, he addresses business
more apparent than their academic knowledge. Kelly has
audiences on how to use innovation to transform noticed that this informed intuition has six distinguishing
their cultures and their strategic thinking. characteristics that are both strategic and tactical.
1. Unusually willing to set aside what they “know,”
Jonathan Littman is the author of several books
Anthropologists practice the Zen principle of “beginner’s
on business, crime, and sports.
mind.”
2. Anthropologists embrace human behavior with all
its surprises. As lifelong students of human behavior, they

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 3
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

develop a genuine love of watching and talking to people The Experimenter’s best friend is speed—“they put
and, instead of judging, they observe and empathize. roller skates on the scientific method,” to ensure that
3. Whereas business-school curricula and on-the- everything is faster, less expensive, and hopefully more
job learning focus on exercising left-brain analytical fun. They embrace little failures at the early stages so as
skills, Anthropologists are quick to draw on their own to avoid big mistakes later in the process. They work with
instincts. When developing hypotheses about the emotional teams of all shapes and sizes. And, they invite colleagues,
underpinnings of observed human behavior, they listen to partners, customers, investors, and kids—all the possible
their intuition. stakeholders who might have insights that can make a
4. Anthropologists experience epiphanies through prototype better—to try out their works-in-progress.
a sense of “Vuja De”—the ability to “see” what has At IDEO Experimenters make ideas tangible by
previously gone unnoticed—what others have failed to see dashing off sketches, piecing together foam core creations
or comprehend, because they stopped looking too soon. with duct tape, and shooting quick videos in order to give
5. Anthropologists keep “bug lists” and/or “idea personality and shape to a new service concept. Here,
wallets.” In much the same manner as novelists or stand-up experimenting typically means prototyping, which is
comics, they consider everyday experiences to be potential central to the IDEO tool set.
material, and write down the bits and pieces that surprise In the last few years, the firm has learned that just
about anything can be prototyped.
“Whether the idea wallet lives electronically in your PDA or is
This includes services, as well as
simply a low-tech index card in your back pocket, it can sharpen
your powers of observation and your skill as an Anthropologist.” products, and virtually every step along
the ideation path, from development
them—especially those that seem broken. The bug list (even proposals) through marketing,
focuses on the negative (i.e., things that frustrate), and distribution, and sales. Moreover, first-draft prototypes
idea wallets contain innovative concepts worth emulating do not have to be fashioned in machine shops or by
as well as problems that need solving. Both can sharpen designers, but can be pretty crude. It is an approach that
an individual’s powers of observation and skills as an celebrates the process rather than the tool and creates an
Anthropologist. environment where it is okay to experiment with less than
6. Anthropologists look beyond the obvious and perfect models.
willingly seek inspiration in unusual places where insights Kelley believes that lowering the bar, and being open
are least expected—before customers arrive, after they to low-fidelity prototypes, allows literally anyone in the
leave, even in the garbage—if that is where learning can organization to float a trial balloon so that lots of ideas get
be found. previewed. When a creative individual shows a good idea,
When BMW bypassed all its traditional advertising which is still rough around the edges, people pay attention
channels and created theater-quality short films for to whether the organization builds on the idea or ridicules
bmwfilms.com, no one knew whether the experiment it. Management that focuses on the promise, rather than
would accomplish anything. However, BMW’s runaway the imperfections, sends a message to all the budding
success underscores the value of Experimenters—those Experimenters that trying new things is acceptable.
who prototype new ideas continuously and learn by a Organizations that treat life as one big experiment will
process of enlightened trial and error. start building a framework for continuous learning, which
Although the word “Experimenters” brings to mind is part and parcel of a culture of innovation. And, because
such great inventors as da Vinci and Edison, when it comes Experimenters are willing to take calculated risks, they
to innovation, Experimenters do not need to be geniuses. keep the organization fresh in this regard. Experimenters
All that is required is a passion for hard work (“they strive understand that experimentation is one of the best ways to
for inspiration but never shy away from perspiration”), a push toward the next breakthrough. They do not just wait at
curious mind, and being open to serendipity. the starting line, trying to figure out the entire race. They

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 4
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

just get moving, trying things as they go, and hoping that 2. Hire lots of diversity. IDEO has never viewed hiring
along the way they will discover a new way to win. as merely a process of addition or acquiring “more of the
When an open-minded Japanese businesswoman same.” It sifts through a wide variety of applicants, looking
traveled 5,000 miles to find “At IDEO, we’ve found that some of our most valuable Cross
inspiration for a new brand, she Pollinators are what we call ‘T-shaped’ individuals. That is, they
found a concept that sparked Muji, enjoy a breadth of knowledge in many fields, but they also have
a billion-dollar retail empire, and depth in at least one area of expertise.”
demonstrated the leverage of a
Cross-Pollinator. Cross-Pollinators, with their eclectic for those who will expand the firm’s talent pool or stretch
backgrounds and multiple interests, stir up new ideas by its capabilities.
exploring worlds that may at first glance seem to have little 3. Stir the pot with space. IDEO understands that a
relevance to the problem at hand. Through the unexpected company’s physical surroundings can be a powerful tool
juxtaposition of seemingly unrelated ideas or concepts, they for advancing its strategic agenda; thus, it supports the
often discover a clever solution in one context or industry, belief that there is magic in using space to cross-pollinate.
and then successfully translate the idea to another. It creates lots of multidisciplinary project rooms and
Kelley notes that it was a Cross-Pollinator who leaves ample areas for “accidental” or impromptu meetings
transplanted the piano keyboard from the musical world to among people from disparate groups. Even the stairwells
the business world, creating the early manual typewriter. are broad so that people can “meet halfway.”
And, in the history of innovation, one of the greatest Cross- 4. Cross cultures and geographies. Understanding that
Pollinators was Leonardo da Vinci the painter architect, a well-blended international staff seems to cross-pollinate
engineer, mathematician, and philosopher, who integrated naturally from other cultures, IDEO favors a cultural
his diverse talents into remarkably prolific ideas. melting pot, seasoned with a steady mix of international
In the corporate world, Cross-Pollinators are the project flavors. At its Boston location, for example, 18 different
members who translate the research lab’s arcane technical countries are represented in an office of just 40 people.
jargon into vivid insights accessible to everyone. They are 5. Host a weekly “Know How” speakers series. Nearly
the travelers who range far and wide, returning home to every week, world-class thinkers (e.g., Gladwell on snap
share what they learned as well as what they saw. They judgments, Rheingold on smart mobs, and Hawkins on the
are the voracious readers, devouring books, magazines, workings of the human brain) show up at IDEO to share
and online sources so as to keep themselves and their teams their thoughts. It is a weekly burst of cross-pollination that
abreast of current trends and topics. keeps the thinking and the conversations continuously
From the very beginning, IDEO has always endeavored fresh.
to nurture the Cross-Pollinator role, seeking to assemble the 6. Learn from visitors. Kelley’s role at IDEO includes
key elements that encourage cross-pollination to flourish. the opportunity to meet with a continuous stream of
In the process, the firm has learned to apply its “design interesting people. Most are prospective clients, who share
thinking” approach, used in product-innovation programs, their perspectives and information about their industries
to the worlds of services, experiences, and cultures. Kelley and companies, providing Kelley with a “postgraduate
identifies seven “secret ingredients” in this successful education” in current trends.
recipe—all of which can be translated to any company 7. Seek diverse projects. At IDEO, a 40-year career is
worldwide: not just the same year repeated 40 times. The broad range
1. Show and tell. Whenever IDEO groups meet, they of its client work, which spans dozens of industries, allows
enjoy sharing fresh insights or new technologies that do the firm to cross-pollinate from one world to another and
not always relate to projects on which the firm is currently create a culture of continuous learning.
working. It is a serendipitous source of continuous renewal, Kelley notes than none of these individual elements
built into the work practices of the organization. is especially difficult to implement. And, when they are
combined, along with a hundred tiny details that support

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The Ten Faces of Innovation Tom Kelley with Jonathan Littman

a firm’s social ecology, they represent a commitment to to tackle a challenge head-on, if they can find a way to
cross-pollination that yields benefits in everything from sidestep it.
team morale to competitive advantage. IDEO’s Zero20 group either attracts a lot of Hurdlers
The Hurdler, Collaborator, and Director personas or brings out that persona in its team members. Zero20
are organizing roles, played by individuals who are pitches hundreds of toy concepts a year, brainstorms nearly
knowledgeable about the often counterintuitive process of every day, and is always prototyping new ideas. Although
how organizations move ideas forward. They understand members consistently push the limits, and have their share
that ideas do not just speak for themselves, but must of near disasters, they are distinguished by the fact that they
continuously compete for time, attention, and resources. never seem to look down. This drive plays a significant role
Thus, they do not dismiss budgeting and resource allocation in major new innovations, turning the greatest challenges
as “politics” or “red tape,” but recognize them as being part into the greatest successes. Given this potential, Kelley
of a complex game of chess, which they play to win. advocates nurturing and cherishing the Hurdlers in one’s
As Kelley notes, it is merely a myth that groundbreaking organization, despite the fact that, at times, they can seem
companies are always open to new ideas and always give a bit stubborn.
individuals wide latitude to pursue unusual projects. The When a customer-service manager, playing the role
reality is, of course, that innovation teams must often jump of Collaborator, won over a skeptical corporate buyer to
the hurdles set up by well-meaning company management the idea of brainstorming new forms of cooperation, the
resulting new program doubled sales.
“Sometimes it takes time for the biggest new ideas to upend
the status quo. When an industry has a large investment in As is characteristic of the role, this
infrastructure—outdated or not—you’ve often got to stay the individual leaped over organizational
course for many years before your new innovation can take boundaries, brought eclectic groups
hold. ... The essence of the Hurdler is perseverance.” together, and led from the middle of the
pack, to create new combinations and
in order to overcome “just-do-your-job” pressure, to multidisciplinary solutions.
circumvent company bureaucracy, and to see beyond Although multidisciplinary teams are important, a
initial failures. Collaborator is needed to coax members out of their
For example, when a 3M worker’s idea for Scotch tape silos, and patterns of thinking, so as to lead them
was initially rejected, he refused to give up. Staying within into uncharted territory. Collaborator Thomas Edison is
his $100 authorization limit, this Hurdler signed a series considered America’s greatest inventor because he was
of $99 purchase orders to pay for the critical equipment a master at championing and cheerleading talented and
needed to produce his product, which has since garnered coordinated teams that churned out a tremendously wide-
billions of dollars in cumulative profits for 3M. ranging series of inventions and innovations.
Knowing the path to innovation is strewn with Collaborators are proactive cross-trainers, who use
obstacles, Hurdlers develop a quiet, positive determination their diplomatic skills to hold disparate groups together
to overcome or outsmart these roadblocks. They are such when they threaten to splinter or disband. And, when
tireless problem-solvers that sometimes it seems as if the energy or enthusiasm flags, they are the quintessential
obstacles never existed in the first place. And, because cheerleader.
they are often the most street-smart members of the team, Kelley believes that IDEO’s distinguishing
breaking rules, and cleverly working outside the system, characteristic is perhaps its ability and eagerness to
comes naturally. collaborate with an increasingly broad mix of
Hurdlers do more with less and get excited about trying organizations. In this role, it has helped hospitals improve
something that has never been done before. They love to the patient experience; fine-tuned the design of planes,
turn lemons into lemonade, thus, they are likely to excel trains, and automobiles; helped leading universities
when given constraints, tight deadlines, and small budgets. innovate the learning process; and even sparked new
Nonetheless, they know that it is not always necessary thinking at the IRS.

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The Ten Faces of Innovation Tom Kelley with Jonathan Littman

The ultimate proof of IDEO project team success • embrace the unexpected, improvising with
is “when our counterparts at the client company get whatever techniques, strategies, and resources are
promoted.” The firm works alongside its client groups, at their disposal (i.e., they solve problems in real
influencing their cultures, altering their patterns of time).
innovation, and giving them new tools with which to The role does not, however, have to be about formal
continue their forward momentum. authority. If the word gets out that a person is passionate
Thus, the Collaborator is that rare person who truly about innovation, and always interested in new ideas,
values the team, and its goals, over the
achievements of the individual. Given
“There’s an old adage in Hollywood that ‘directing is 90 percent
casting.’ Great Directors build a team of people who need little
this mindset, Collaborators can be an
direction and can lead by example themselves. Directors can
organization’s best defense against
make something out of nothing. They can field a project team
internal skeptics, performing a subtle and motivate its members, even without formal authority.”
form of corporate “jujitsu” that ultimately
turns the strength of any initial opposition into a positive before long, he or she will quickly become the “go to” person
force. When Collaborators win over the skeptics, they go for sparking positive change.
on to champion the process and to excel in the handoffs That said, Kelley believes that the Director’s first and
between departments and team members. most prominent task is to keep the production moving
When a creative Mattel executive assembled an ad forward toward the goal. Whether it is moviemaking or
hoc team, which she called Platypus, she launched a novel delivering services, Directors need to grasp the fundamental
process that created a $100 million toy platform in three truth that they are not just in charge of current operations,
months. As a Director, this executive not only gathered they are also responsible for the future. Thus, they must
together a talented cast and crew but also helped to spark constantly juggle to replace just-finished innovation with
their creative talents. fresh explorations into other opportunities.
Directors are unlike all the other personas because The most critical part of directing is, however, getting
their primary purpose is to inspire and direct other people, started—getting the work, spawning a creative culture, and
develop team chemistry, target strategic opportunities, hatching new ideas. However, the challenge of determining
and generate and sustain momentum. In the same manner where to start can seem so complex and ambiguous that
as successful moviemakers, effective “Directors” of organizations sometimes have trouble embarking on the
innovation: journey. Kelley believes that setting off a chain reaction of
• give center stage to others—confident that their brainstorming is one of the easiest ways to begin.
behind-the-scenes work will make the whole Brainstorming is high energy, fun, morale boosting,
production come together; and can generate results faster than any other technique. In
• love finding new projects and leading when the fact, the benefits go beyond the immediate ideas generated
need arises; and can, according to Stanford professor Bob Sutton,
• view team chemistry as an intrinsic part of project support organizational memory and reinforce an attitude
success and put together the very best teams they of wisdom (a healthy balance between confidence in what
can find and afford (sometimes willingly delaying one knows and a willingness to listen to ideas that challenge
or restructuring a project in order to accommodate one’s worldview).
the right players); Because brainstorming can also create “status
• expect the hardship of long hours, ebbing budgets, auctions” that reinforce personal brands, building a culture
looming deadlines, and inevitable setbacks; of brainstorming represents a great start toward nurturing
• shoot for the moon, pursuing bold strokes and a culture of innovation. Multidisciplinary brainstorming
laying out difficult (and even impossible goals), as allows individuals to see other people in action and be
they work to make their dreams a reality; and seen themselves. Creative people who excel in this intense

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 7
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

environment can, thus, gain the attention and status that they might turn the ordinary into something distinctive—
might otherwise pass them by. even delightful.
The Experience Architect, Set Designer, Caregiver, Wise Architects also know how to focus their energies.
and Storyteller personas are building roles that apply They understand that if they set out to make everything
insights from the learning roles, and channel the better about a product or service, they may end up with a
empowerment gained from the organizing roles, to make “gold-plated” offering few customers can afford, or with
innovation happen. People adopting these highly visible unfocused features that few fully appreciate.
talents are often right at the center of the action and, thus, Thus, they start by asking what is truly important to the
stamp their mark on the organization. customer, and they find that the answer may be something
When an ice cream shop turned the preparation of small, irrational, elusive, and completely surprising. It is
its product into a fun, dramatic “performance,” it was often just one or two essential elements, but fixing a problem
designing a successful new customer experience. The or designing a great experience around these “trigger
premium prices and marketing buzz that followed were points” can be crucial to the organization’s success.
the rewards associated with playing the role of Experience The lesson is that Experience Architects can help
Architect. Individuals in this persona design the kind of transfer even the most tradition-bound industry. They
“Too much time standing in one place is bad for your corporate are the right individuals to remind
health. Drive, run, or walk to your customers with technology, organizations that the first step in
information, and personalized service. Wait too long to take becoming extraordinary (i.e., in beating
the first step and somebody else will get there first.” the competition, outperforming the
market, and exceeding the norm) is simply
compelling experiences that connect at the deeper level to stop being ordinary and to start creating remarkable
of latent or expressed customer needs—far beyond mere experiences for customers, partners and employees.
functionality. When a business team doubled its usable output after
Good Experience Architects set the stage for customers reinventing its space, and a sports team discovered the ability
to have positive encounters with an organization through to win again in a new stadium, they were demonstrating the
products, services, digital interactions, spaces, or events. value of the Set Designer. Set Designers transform physical
They are the hosts who never forget that giving something environments into powerful tools for influencing behaviors
special to customers (and employees) is both good business and attitudes by creating “stages” on which innovation
and good karma. By engaging all the senses, they keep team members can do their best work. Organizations that
experiences from being relegated to the commodity world, tap into the power of the Set Designer sometimes discover
where price is the only point of comparison. remarkable performance improvements that make all the
Experience Architects view the world as a stage. They space changes worthwhile.
believe in the movable “feast” and bring offerings nearer to Set Designers see every day as a chance to liven
the customer. They see products and services as “journeys” up the workplace. They create collaborative spaces for
to be mapped. And, they have a talent for finding the “neighborhood” teams and balance them with private
experience in everything—even the most run-of-the-mill sanctuaries for individual work. They gauge how space
products. behaves and make subtle adjustments so as to keep it
Fending off the ordinary wherever they find it, they responsive to shifting needs. They create project spaces that
fight against the forces of entropy and commoditization allow projects to live and breathe for weeks or months. And,
by asking remarkably simple, yet effective questions: they help people move and migrate, forming new groups
“How’s the experience of calling your customer-service and potent combinations.
line—ordinary or extraordinary?” “What’s the experience Of course, most organizations have someone who
of a first-time customer?” “How tasty is the menu when your oversees all the many decisions concerning where teams
project team has a noon meeting?” “How extraordinary is and divisions sit and work. And, they also periodically
the first day as a new employee?” Having spotted these areas
of opportunity, Experience Architects then determine how
Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 8
The Ten Faces of Innovation Tom Kelley with Jonathan Littman

hire interior designers and architects to plan new spaces or they should make workspace one of their most versatile
modify existing ones. Kelley believes, however, that there and powerful tools.
is room for more people to take an active role in the nuts The Manhattan wine shop that teaches its customers
and bolts of designing office space. At heart, everyone is how to enjoy the pleasures of wine, without talking down
a Set Designer—even those little decisions about how an to them, is demonstrating the Caregiver role, and earning
individual arranges his or her desk, chair, and/or dictionary a solid profit in the process. Good Caregivers build on
can make a difference in that person’s daily work. the metaphor of the health care professional to deliver
Nonetheless, as the author notes, bland office customer care in a manner that goes beyond mere service.
environments have become such a part of the business Kelley suggests that when one sees a service that is really
landscape that most do not even notice what Tom Peters in demand, there is usually a Caregiver—the foundation of
calls The Great Blight of Dullness. According to Peters, human powered innovation—at the heart of it.
“Dreariness, from the reception area to the research lab Dedicated doctors and nurses represent the purest form
... destroys the spirit. It’s utterly impossible to imagine of Caregiver. Skillful medical professionals draw on all their
people laughing in such settings, or weeping ... or producing training and experience to make people more comfortable.
anything interesting!” They exude competence and confidence—demonstrating
IDEO believes that everyone knows what Peters means what has come to be called “a great beside manner.” Their
and knows there are better alternatives. It understands that well-reasoned answers to all questions help smooth away
giving employees more latitude in the
“Put people in great work environments and you may find they
shape and character of their workspace feel like staying a little longer or putting in a little extra effort.
helps reinforce a company persona that Maybe your group is poised for greatness and the right space
is fun, welcoming and stimulating. Thus, would be just enough to help you cross over the line.”
the Set Designer role is hardwired into
the firm’s collective psyche. From the beginning there worry. And, though they may not spend much time with
has been the implicit belief that a creative office is like a their patients, their presence is very reassuring. They leave
well-designed stage or movie set that contributes to overall people with the calming sense that the Caregiver has set
performance. And, the unofficial Set Designers, who them on a better path.
constantly tweak the design and layout of IDEO offices, These dedicated individuals have empathy, and they
know that they are supporting the culture as well as the work to extend the relationship, taking great pains to
work. understand each individual patient. Knowing that the
Some workplaces are so dull, however, that the best care is geared to personal interests and needs, they
organization only has to lift one or more small restrictive accomplish the task at hand, while treating the individual
rules to make improvements. But, corporations that embrace as a person throughout the process. They make many
innovation more fully can do a lot more. For example, services simpler and much more human. They show, rather
Procter and Gamble, embracing the power of design and than teach, and are very good at guiding an individual’s
innovation, recently decided it needed a special place to choices.
nurture fresh innovation initiatives. Thus, IDEO helped Although most companies are not in the business of
P&G design a 10,000-square-foot space they call The practicing medicine, the lessons that can be learned from
Gym—a place where teams can collaborate and brainstorm these Caregivers about simplifying and humanizing care
about (in addition to new products and services) the process translate directly into many other industries. Whether one
of innovation that keeps the company ahead of the curve. sells products or services, or even serves internal customers
Essentially the lesson is for organizations to not let within a large organization, these lessons have broad value
space be their weakest link but, instead allow it to enhance in highlighting the opportunities inherent in:
morale, improve recruiting, and even increase the quality • “curating the collection”—in most product/service
of the work. Tapping into the power of the Set Designer, categories, customers are overwhelmed by too
many alternatives and too little clarity about the

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The Ten Faces of Innovation Tom Kelley with Jonathan Littman

right choice. But, by providing a small selection of initiative, hard work, and innovation that celebrate success
the best of the best choices, and having a point and honor stirring recoveries.
of view about why they chose these few, Caregivers These modern Storytellers, go beyond their oral
offer customers the needed expertise and tradition and, now, work in whatever medium—video,
knowledge required to sort through all the narrative, animation, even comic strips—that best fits their
possibilities; skills and their message. They help inspire other Storytellers
• building extra expertise—companies that become to spread the word but, most important, they make heroes
trusted sources of information or advice build a out of real people.
base of loyal and informed customers; Kelley notes that, because stories make an emotional
• thinking small—envision café or bistro when connection, they persuade in a way that facts, reports,
creating a service or sales outlet. Maintaining and market trends seldom do. In this way, the Storyteller
this kind of customer intimacy translates into a (anyone who can turn a status meeting into a riveting tale is
greater concentration of people and more a master at the art of storytelling): (1) builds credibility, (2)
anticipation and action; helps teams bond, (3) gives teams “permission” to explore
• building sustainable relationships—inviting controversial or uncomfortable topics, (4) sways a group’s
customers to recycle products will create a virtuous point of view, (5) creates heroes, (6) gives organizations
cycle of giving and receiving. They will earn a sense new vocabularies that can spawn novel frameworks for
of satisfaction from knowing that they are helping innovation and change, and (7) helps create order out of
others and also have another reason to bond with chaos.
the brand; and The author believes that adopting even one of the
• inviting customers to “join the club”—the loyalty ten roles can bring cultural and business benefits to an
programs that have become an extremely powerful organization. However, the real payoff in innovation comes
tool for Caregivers in the airline and hotel industries from gathering several roles together and integrating them
also have currency in many other industries and into a multidisciplinary team in which all are performing
settings. It is simply a matter of good business to at the top of their game. Innovation is ultimately a team
identify the most loyal (or most profitable) sport.
customers and give them “special customer status,” Nonetheless, successful teams do not necessarily need
whatever that might mean in a particular to be best of class at the skills and tools of every persona.
company. If a team excels at the fieldwork of the Anthropologist, it
Finally, the Storyteller builds internal morale and can perhaps do without a world-class Set Designer. Or, the
external awareness through compelling narratives that insights gained from an Experimenter’s practice of trial and
communicate a fundamental human value or reinforce a error just may offset the need for a strong Cross-Pollinator.
specific cultural trait. For example, Medtronic is celebrated Essentially, what counts is the total score—the ability to
for its product innovation and consistently high growth. regularly outperform the competition in the full range of
It reinforces its culture with straight-from-the heart challenges every organization faces daily.
storytelling that comes from patients’ firsthand narratives
of how Medtronic products changed, or even saved, their * * *
lives. A subject index is provided.
Storytellers have captured the attention of their fellow
human beings for as long as there have been fires around
which to tell tales. However, brand-savvy modern business
organizations are also good raconteurs, telling stories
to their customers, their partners, and themselves. They
capture the imagination with compelling narratives of

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The Ten Faces of Innovation Tom Kelley with Jonathan Littman

Remarks moment, because I have personally watched our customers

suffer with this issue for months, and this new idea just
In The Art of Innovation: Lessons in Creativity from might help them.” And, this voice could encourage others
IDEO, America’s Leading Design Firm (2001), Kelley to say, “Let’s think like Experimenters for a moment. We
revealed the secrets of each stage of IDEO’s process of could prototype this idea in a week and get a sense of
strategic creativity, demonstrating how the firm makes whether we’re onto something.”
innovation a way of life. Now, in The Ten Faces of Thus, the innovation roles offer a new vocabulary that
Innovation, he revisits the highly energized award-winning can ignite fresh discourse, which, in turn, can open up new
design and development firm to examine the human face attitudes, perspectives, and behavior, allowing everyone to
of strategic creativity, showing how people can embody make his or her own unique contributions to the success
the methods and techniques that infuse an enterprise with of the enterprise. Moreover, this vocabulary for keeping
a “continuous spirit of creative evolution” and, thus, seize Devil’s Advocates in their place is not at all intended to
opportunities for innovation in a company or industry. institute a “yes-man” culture. What Kelly amply illustrates
The critical lesson is that innovation requires more is that strong innovation roles lead to more critical thinking,
than just the good ideas IDEO is famous for; it also a broader perspective from which to view projects, and the
requires action or implementation—requires proactive, lever for people to stand up for what they believe in.
energetic people. Thus, the innovation personas Kelley
describes essentially represent that “place to stand” to which
Archimedes alluded. Their tools, skills, and perspectives
form the requisite lever. And, as the book demonstrates, Reading Suggestions
when these are combined with energy and intelligence,
a remarkably powerful force is generated for moving the Reading time: 8-10 hours, 285 Pages in Book
world—innovation by innovation. As with The Art of Innovation, there are no minutely
Throughout, Kelly provides ample evidence of this detailed implementation techniques, comprehensive
transforming power via examples of companies where process charts, no in-depth methods of market research,
innovation is no longer merely about generating new and no soporifically ponderous theoretical ruminations.
products and services, but is about the creative process Moving swiftly from point to point, Kelley never obscures
itself. And, of course, he showers us with the fun and meaning with rhetoric or jargon, and always energizes
serendipitous basket of creative goodies that IDEO and each page with the apt quotation and telling example.
its talented team of personas have to offer. The appeal His enthusiasm for the subject is palpable and infectious;
of the offering is in the evidence that the personas work, however, if you’re familiar with this author, we suspect that
“not in theory or in the classroom but in the unforgiving we’re not telling you anything new here.
marketplace.” Because the narrative style allows you to zip through
Of course, Kelley’s list does not presume to be the material, without breaking much of a sweat, you will
comprehensive, but is only offered to expand the repertoire have the time to read the book in its entirety. Although it
of teams so that they can create a broader range of innovative revisits quite a bit of the material presented in The Art of
solutions. Thus, the roles do not describe the most powerful Innovation, the overlay of the ten personas adds a deeper
people one might meet in the organization. They are, dimension, and a novel context, that you cannot afford to
instead, about the bright, capable people, who would like to miss.
make bigger contributions, but whose functions don’t quite Moreover, the work is offered to help you “broaden your
fit into such traditional (and often constraining) categories color palette” so you can take on multiple roles, as you move
as engineer, marketer, or project manager. from project to project. In order to do this effectively, it is
Empowered by these roles, they may be emboldened necessary to understand how each can contribute to a team
to respond to the “let me play the Devil’s Advocate for a effort, which roles fit you better than others, and which of
moment” gambit with “Let me be an Anthropologist for a them you might be better at than you imagined.

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The Ten Faces of Innovation Tom Kelley with Jonathan Littman

Obtaining this information does not, however, require

that you read each chapter in the order presented. We believe
that the sequence you choose will depend upon your own
creative process and how you might see yourself combining
the skills that each persona suggests.

CONTENTS
Chapter 1: The Anthropologist
Chapter 2: The Experimenter
Chapter 3: The Cross-Pollinator
Chapter 4: The Hurdler
Chapter 5: The Collaborator
Chapter 6: The Director
Chapter 7: The Experience Architect
Chapter 8: The Set Designer
Chapter 9: The Caregiver
Chapter 10: The Storyteller
Chapter 11: In the Mix

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a service to busy professionals, as we recommend only those books that are worth your time to read in their
entirety. We apply stringent criteria in selecting only the best business books, and in that selection process,
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ISSN 0741-8132

Business Book Review™ Vol. 23, No. 22 • Copyright © 2006 Business Book Review, LLC • All Rights Reserved Page 12
 July 18, 2011

Think Better
An Innovator’s Guide to Productive Thinking
Tim Hurson

Adapted by permission of The McGraw-Hill Companies from Think

Better by Tim Hurson. ©2008 The McGraw-Hill Companies
ISBN: 978-0-07-149493-9

Introduction
Think Better by Tim Hurson outlines a six-step pro- Part 1: Productive Thinking in Context
ductive thinking program that helps individuals to Productive Thinking
think more efficiently, more powerfully, and more
Productive thinking is a thinking style that aims to
strategically. The program entails making a long list
create something brand new while providing the
of ideas, until the normal ideas run out and the cre-
thinker with unique and useful insights. Productive
ative ideas begin to flow. This forces the individual
thinking also helps individuals make unexpected
to reach into the depths of their mind and come up
connections which lead to an “aha!” moment. An
with ingenious solutions to problems they would not
“aha!” moment occurs when an individual comes up
have been able to solve otherwise. Hurson explains
with an idea that is unique and perfectly applicable
how the brain’s need to recognize and establish pat-
to the issue at hand. Productive thinking is a skill that
terns has helped the human race maintain its survival,
can be learned, and like many other learnable skills,
but inhibits the creative thinking process. Through
it requires practice. Individuals seeking to learn pro-
the use of specific brainstorming tools and by follow-
ductive thinking methods must prepare themselves
ing the six-step framework, individuals can overcome
to make time to practice and utilize their new ability.
the “patterning” effect of the brain and begin to create
Productive thinking also allows individuals to mold
unique, effective, and creative solutions for the many
the future by imagining what it could or should be
problems that lay within the ever-changing world of
like. It is an essential tool for those seeking to open
business today.
their minds and create ingenious solutions to the
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
Think Better Tim Hurson

world’s problems. Unfortunately, productive think-

ing is much less common than reproductive thinking.
Reproductive Thinking
Key Concepts
Reproductive thinking is a thinking style that refines Think Better by Tim Hurson outlines a six-
what is already known to achieve its goal of improving step productive thinking program that helps
efficiency. Reproductive thinking has three forms. The individuals to think more efficiently, more pow-
first and most basic form consists of mindless reaction erfully, and more strategically. Hurson’s strategy
and automatic response. When people do things just includes topics such as:
because “that is the way they have always done it,” • The key to productive thinking is to make
even though the things they do may not make logi- long and comprehensive lists of ideas with-
cal sense, they are acting out the most basic form of out using any kind of judgment, and then
reproductive thinking. The second form of reproduc- use critical thinking to narrow down the
tive thinking entails consciously recreating learned lists to the ideas which are most effective.
activities to achieve predictable results. When doctors
repeat the same stitching technique because it heals • Compiling long lists allows the mind to
wounds efficiently and provides the least amount of empty itself of its obvious and generic ideas,
scarring, they are acting out the second form of repro- which forces it to come up with more inno-
ductive thinking. It is not necessarily a bad thing; it vative and creative solutions toward the end
just does not leave room for improvement. of the idea list.
• In order to effectively solve a problem, it is
Part 2: Productive Thinking in Principle
necessary to have a complete understand-
Kaizen vs. Tenkaizen
ing of the situation, define what success
The third form of reproductive thinking involves con- in dealing with the situation would entail,
sciously following legitimate patterns while looking determine what the true question of the sit-
for ways to improve them. This form of thinking is uation is, generate useful answers, use the
also known as “kaizen” thinking, which means “good most applicable answers to forge a solution,
change” in Japanese. Kaizen thinking aims to refine and align all of the resources that are neces-
and improve processes over time, which makes it the sary to solve the problem.
best form of reproductive thinking, but it is also very
• No one can change his or her thinking pat-
dangerous because it operates under the guise of inno-
tern without practice.
vation, while in reality the improvements being made
are very small and incremental, rather than large and g g g g
revolutionary. Kaizen has been used to improve the
Information about the author and subject:
efficiency of production lines and reduce medical
www.timhurson.com/thinkbetter.php
errors, but no amount of incremental improvement
Information about this book and other business titles:
will create a drastic and comprehensive change.
www.mhprofessional.com
Productive thinking creates breakthrough ideas that
cause revolutionary changes. Tim Hurson created the Related summaries in the BBS Library:
phrase “tenkaizen” to describe productive thinking; How Successful People Think
it translates to “traditional change good” in Japanese. Change Your Thinking, Change Your Life
The more change one wants to create, the more useful John Maxwell
productive thinking becomes. Productive thinking No Problem
is most useful when the consequences of failure are Alex Lowy
inconsequential. The vast majority of ideas are bound
to fail, and learning from that failure is an important
part of productive thinking. Productive thinking is
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
Think Better Tim Hurson

made up of two different aspects, the first being cre- aspect of critical thinking is that it is selective, mean-
ative thinking and the second being critical thinking. ing it requires the individual to narrow down their
choices based on a set of standards. Each of the two
Creative thinking is composed of three characteristics.
parts of productive thinking are very useful, but they
The first is that creative thinking is generative, mean-
cannot be done simultaneously, the key is to alternate
ing that it creates something that was not there before.
between creative and critical thinking to come up
The second is that it is nonjudgmental, meaning that
with fresh ideas and then narrow them down to those
ideas cannot be created and judged at the same time.
that are of the most use.
The third and final characteris-
tic of creative thinking is that it One of the characteristics of productive thinkers is their ability to
is expansive, meaning that by
resist the urge to answer, the urge to know. They understand that
coming up with ideas without
judging them, individuals are settling on an answer may be the same as settling for an answer.
able to come up with a greater
total number of ideas. Stay in the Question
Critical thinking is the opposite of creative think- In order to think productively, it is essential that indi-
ing. Where creative thinking entails coming up with viduals “stay in the question,” which requires them to
as may ideas as possible without holding them to a keep coming up with possible solutions, even when
standard, critical thinking entails judging, sorting they think they have found a solution that may work.
and ranking ideas. There are three aspects of critical Human beings have an intense drive to solve prob-
thinking as well. First, critical thinking is analytic, lems, and often times they will create a solution for a
meaning that it questions, investigates and measures. problem that does not actually work that well, just so
The second aspect is that it is judgmental, meaning they can feel that they solved the issue. The desire to
that it involves assigning value to things. The third know is one of the biggest roadblocks to productive
thinking. Individuals who “know” things will be able
to tell others why something cannot be done, they
About the Author have the answer to everything, and they also become
individuals who “no”. Knowing is closed off and sees
Tim Hurson is an expert in the field of pro- challenge as a threat, whereas knowledge is open and
ductive thinking. He has worked with many sees challenge as an opportunity. To resist the urge to
different types of organizations, from large For- know, individuals must stay in the question in order
tune 500 companies to small non-profits, in an to prevent themselves from jumping ahead to a medi-
effort to increase their innovation, productiv- ocre solution.
ity and creativity. He is a founding partner of
Resisting the urge to know is extremely difficult for
Thinkx Intellectual Capitol, a firm that provides
humans for several reasons. First, the human mind is
companies with consultation and training in
wired to categorize, judge, and assign meaning to all
innovation and productive thinking. Hurson
sensory inputs, which makes it very difficult not to
travels extensively, giving lectures all around
jump to conclusions. Second, human cultural systems
the globe to individuals in various fields in
have a strong tendency to reward answers more than
which he explains how people and corporations
the actual process of thinking. Once humans assign an
can use productive thinking to generate new
answer to something, the mind becomes locked onto
information on a daily basis and adapt quickly
it and it becomes very difficult to come up with a solu-
to changes in their environment, technologies,
tion that is dissimilar from the original one. Humans
mandates and markets. He currently resides in
also place a high emphasis on the speed at which one
Toronto, Canada with his wife and four chil-
can answer a question; the faster, the better. This is
dren.
particularly true in business, where the executive
who makes decisions quickly and efficiently is highly

Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
Think Better Tim Hurson

rewarded, so long as the results of those decisions are essential that individuals create long and exhaustive
satisfactory. This culture leaves little room or time for lists of ideas when brainstorming. Getting to the third
brainstorming and thorough productive thinking. third does not mean the last three of nine ideas, but is
more along the lines of the last thirty-three of ninety-
The Miracle of the Third Third
nine ideas. Creating long lists of ideas flushes all of
Good brainstorming entails separating creative and the regular, generic thoughts out of a person’s mind
critical thinking and using them to come up with long and allows them to begin to think outside of the box.
lists of ideas, which are then narrowed down to the This is referred to as “kenosis”, which in Greek means
most appropriate and effective choices. In corporate “self-emptying”. The mind is like a cup, and unless it
brainstorming sessions, it is often the case that the ses- is first emptied, it cannot be filled with new thoughts.
sion will end as soon as a reasonably viable solution
Although brainstorming in a group is encouraged,
is suggested, and that the majority of the suggestions
it is possible to brainstorm individually as well. One
are aimed solely at pleasing the boss, not at creating
of the most effective tools for brainstorming on one’s
something new. This destroys productive thinking
own is called the “wind tunnel”. The wind tunnel
because it does not allow the session participants to
entails the use of either a voice recorder or a piece
get to the “third third”. The third third includes the
of paper. The individual should write down their
ideas that an individual comes up with at the very
question so that they can keep referring back to it
end of an exhaustive brainstorming session. They
throughout the session. They should then set a target
are the wild ideas that are thrown out when all other
of either the number of ideas they want to generate
options have been suggested and judgment is nonex-
during the brainstorming session or the length of
istent. These ideas are the ones revolutions are made
time that they want the session to last. The first time
of; they can turn industries on their head, or create
someone tries this method, it is suggested to either
new industries entirely.
start with 50 ideas or creating a
Whereas bad brainstorming tends to stop at the first reason- five-minute time limit, and then
they can increase it from there
able idea and judge all other ideas out of existence, good brain- with practice. Next, the individual
storming encourages the generation of long lists of ideas by should begin writing down or stat-
separating creative thinking and critical thinking. ing every possible idea that would
help answer the question, with-
A good brainstorming session has several characteris- out screening or judging the ideas. Even if what they
tics. First, criticism is ruled out; the judgment of ideas are saying seems ridiculous, they need to just keep
should be done after the brainstorming session is fin- going until they reach the numeric goal or the time
ished. Second, quantity is wanted, so the more ideas limit. The further the individual pushes past what is
that are put forth, the better. Third, freewheeling is normal, the greater the number of creative ideas they
welcomed. Essentially, wild ideas are preferred over will come up with.
plain ones because it is easier to tame an idea than
In the modern world, information is everywhere and it
to think it up. Fourth, combination and improvement
is easier and faster to access than ever before. Because
are sought, which means that participants are encour-
of the Internet and other new technology, there is no
aged to suggest improvements upon others’ ideas
longer a great gap between those who have access to
or to suggest combinations of previously suggested
information and those who do not. Today, how you
ideas. Even with these guidelines, the first third of the
think is more useful than what you know. The abil-
brainstorming session is still likely to result in regu-
ity to properly and effectively sift through knowledge
lar, obvious ideas. The second third is likely to result
and determine what purpose it is well suited for is
in ideas that are beginning to push the edge, but are
an essential skill. Productive thinking is a skill that
still within the realm of normalcy. But the ideas in the
any person can learn and improve upon. The produc-
third third are innovative and unique, and are often
tive thinking model is a process that anyone can use
where the unexpected connections are made. It is

Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 4
Think Better Tim Hurson

to think better, but as with any skill, it must be con- inhabit this part of the brain. The large size and com-
tinually practiced in order to be improved upon. Any plex function of our cerebral cortex is essentially what
brain, regardless of IQ, can be taught to think more makes us human. The other two parts of the brain are
creatively, understand more thoroughly, and plan the limbic system, which is concerned with creating
more successfully. emotional responses to sensory input, and the stem
brain, which simply processes and reacts to sensory
Productive thinking allows individuals to find the
input. These two parts of the brain are purely instinc-
missing connection between ideas that they have
tive. The neural fibers that run through the brain go to
been searching for. It frees the mind of judgment and
the stem brain, then the limbic system, then the cere-
lets the brain make connections between thoughts
bral cortex. This creates a difficult sequence of events
that would not have been connected otherwise. Pro-
when it comes to creative thinking because it encour-
ductive thinking also creates a vision for the future by
ages the brain to react quickly, without first giving
allowing the mind to imagine what the future should
thorough thought to the situation at hand.
look like. It allows individuals to see past what cur-
rently exists and think of more
creative and ingenious solutions
The Productive Thinking Model builds on our natural three-
to the problems of tomorrow. step problem-solving process—perceive a problem, pick a solu-
This is done by increasing the tion, do something—and transforms it into a comprehensive,
individual’s ability to discover, repeatable six-step framework for thinking better.
nurture, and implement unex-
pected connections and innovative ideas. But in order The third regular activity of the brain is patterning.
to do so, there are several biological barriers that the The mind will repeatedly choose to follow well-worn
mind must overcome. The human brain makes up patterns that have served it well in the past, rather
about 2 percent of the average human’s total body than generating time and energy-intensive new
mass. However, it makes up about 20 percent of the thoughts. In fact, the majority of the neural circuitry
average human’s RMR, or resting metabolic rate. This in the brain is dedicated to storing, processing and
means that 20 percent of the average human’s energy retrieving patterns. Patterning is one of human’s most
goes to their brain, and that is just at the brain’s rest- important survival mechanisms, but it also makes it
ing rate. When the human brain is reading or engaged difficult for individuals to think outside of what they
in challenging mental activities, the amount of energy have already thought before. Humans often see pat-
consumed is even higher. The act of thinking is hard terns more clearly than they see facts, which can cause
physical work for the human brain, which is why them to make decisions that are based more on the
it usually falls into one of three regular activities in past than on what is right in front of them. Follow-
order to save energy, and they are distraction, reac- ing well-worn patterns is not conducive to productive
tion and patterning. thinking because it discourages new ways of thinking
and makes it difficult for individuals to come up with
Distraction happens to humans all of the time. When
fresh and innovative solutions to both simple and
someone is reading a book, they may start to day-
complicated issues. This is why the productive think-
dream while reading and suddenly realize that they
ing model is so vital; it allows individuals to overcome
have no idea what they just read during the previous
the brain’s natural responses and, over time, encour-
two paragraphs. The human mind has a mind of its
ages the brain to think in new and unexpected ways.
own at times, and it can be difficult to manage. Reac-
tion is another one of the regular functions of the Part 3: Productive Thinking in Theory
brain. Instinctive reaction is a large part of what has In order to think productively, individuals should
allowed humans to survive and thrive for so long. The follow this six-step outline:
human brain is made up of three mini-brains. The first
• Step 1: What’s Going On?
is the cerebral cortex, which is the part of the brain
humans think with. Art, language, and literature all • Step 2: What’s Success?

Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
Think Better Tim Hurson

• Step 3: What’s the Question? the itch that has been selected. The following ques-
• Step 4: Generate Answers tions can be asked in order to create a long list of
possible impacts of the itch:
• Step 5: Forge the Solution
• What is most concerning about the itch?
• Step 6: Align Resources
• Is the itch a priority? Why or why not?
Step 1: What’s Going On?
• What is the individual or group’s gut feeling?
The first step, “What’s going on?” exists to help the
problem solver fully comprehend the issue that they • What made their itch most important to them?
are being faced with so that they may eventually form After compiling a list of impacts, the problem solver
a suitable solution. “What’s going on?” consists of five should cluster them into groups and pick the impact
questions that are designed to help the individual gain or group of impacts that resonates most strongly with
a complete understanding of the issue at hand. The them. The third substep is to determine “What’s the
first question is “What’s the itch?” This entails finding information?” This means the individual needs to
out what the irritant is that is causing the individual determine what they already know about the prob-
to want to change the situation. To find out the true lem and what they need to find out. In order to do so,
“itch”, the problem solver should explore the issue they should use the “KnoWonder” tool, which entails
by making a long and comprehensive list of possible making a chart with two columns, one labeled “know”
itches. The listed itches do not have to be reasonable and the other labeled “wonder” and first listing all
or statistically justified in any way; the key is not to of the things they know to be certain under “know”,
analyze the itches as they are being listed, but to just and then moving on to list all of the things they are
keep a free flow of ideas. When it becomes difficult to curious or wondering about under “wonder”. They
think of more possible itches, the following questions should then look over their list and select the items
can be asked in order to elicit more possibilities: that would be most useful in gaining a comprehen-
sive understanding of the issue.
• What could be improved?
• What is out of balance? The fourth substep asks “Who’s involved?” This entails
writing a long list of everyone who is affected by the
• What is bugging the group or individual?
issue, everyone who has influence over the issue,
• What would they like to change? and listing what is at stake for each individual listed.
• What do they wish worked better? After creating a long list, the problem solver should
examine it and select the individu-
Look for Itches that are implicit as well as explicit. Does one als that will be most affected by
Itch imply another? Is there an overarching Itch that may con- the issue and those who will have
the greatest influence to change
tain a number of the other Itches in your list? Are there any it. The fifth and final substep asks
hidden Itches, Itches that you haven’t named because they are “what’s the vision?” This involves
too painful, too embarrassing, too politically incorrect? creating a vision for the future,
otherwise known as setting the
“target future”. The target future is a description of
After a long list of possible itches has been compiled,
the place that the problem solver wants to get to; it is
the list should be broken down into thematic groups
not a description of the solution, it is a vision that can
of similar itches, with the common thread labeled
be looked toward. The problem solver should gener-
above each group. By grouping the itches, the prob-
ate long lists of target futures, and then go back over
lem solver will get a clearer picture of the problem
the list and select a few that they feel hold the most
as a whole. The problem solver should then narrow
promise. They should then determine if they have the
the list down to the specific itches that they feel most
three following characteristics: influence, importance
strongly about. The second substep asks, “What’s the
and imagination. If the target future is something
impact?” and focuses on determining the impact of
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 6
Think Better Tim Hurson

that the individual or group can influence, it meets problem at hand.

the influence criteria. If the target future is something
Step 3: What’s the Question?
that is important to the individual or group, it meets
the importance criteria. If the target future will be best The third step of productive thinking asks “What’s
served by imaginative thinking or new solutions, it the question?”, and helps problem solvers learn to
meets the imagination criteria. The ideal target future ask the right questions in order to obtain the right
should meet all three of these criteria. solution to the problem. To do so, they should start by
listing problem-related questions that attract answers,
Step 2: What’s Success?
such as “How might we reduce overhead?” Then
The second step of productive thinking asks, “What’s they should go through the list and select the most
success?”, and consists of two substeps. The first step important and insightful questions, which are their
involves imagining an ideal future where the issue “catalytic questions”. The answers to these few ques-
has been resolved. The “imagined future”, or IF, exer- tions should incite the potential to reach their target
cise entails writing out a long list of aspects of what future. The problem solver should go back to their
it would be like to live in a future where the problem selections from the previous steps and ensure that
has been solved. Then the individual or group should the catalytic question(s) that they decide on are in line
choose the most important and motivating aspects with the most common threads and important facets
from their list and write a day-in-the-life story about of each step.
what it would be like living in a
world where their issue has been One of the greatest strengths of the productive thinking pro-
solved. This serves to pull the cess is that it forces you to hold back from coming up with
individual or group forward and
answers. . . Coming up with answers too early is like drawing
motivate them to reach their IF.
The second substep involves cre-
a bow just a few hand lengths before letting it go. Your arrow
ating a set of observable success will fly, but only for a few feet or meters.
criteria that will allow individu-
Step 4: Generate Answers
als or groups to determine whether or not they have
reached their IF. The fourth step of productive thinking is to “gener-
ate answers”. The problem solver needs to pick one
To create these criteria, it is necessary to use the
of their catalytic questions, and then begin to write
DRIVE tool. The DRIVE tool entails creating a chart
a long list of possible solutions. This should be done
with five columns, the first column is “do”, where
without judgment, and may take a while. If they
they list all of the things they want their solution to
become stuck, there are a few questions that they can
do. The second column is “restriction”, where they
use to help get them through to the third third:
list all of the effects and changes their solution must
avoid. The third column is “investment”, where they • How would their best friend answer it?
list the resources they will need to invest in the solu- • How would their boss answer it?
tion. The fourth column is “values”, where they list
• How would a child answer it?
the values they must live in accordance with when
achieving their solution. And the fifth, and final, • How would their enemy answer it?
column is “essential outcomes”, where they list It is also helpful to ask how else they might answer
the elements of success that are essential to solve it. Asking “How else?” helps open the mind up to
their issue. The group or individual should then go new possibilities and forces it to turn away from what
through the DRIVE chart and select the success cri- is has already come up with. They could also listen
teria that appear the most often throughout the chart to music in an attempt to generate ideas, or take a
in multiple columns, and those that they simply feel notebook with them to an area that is related to the
are most important. These will be the criteria against problem at hand and come up with solutions based on
which they will measure their success in solving the their observations. After they have created an exhaus-
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
Think Better Tim Hurson

tive list of possible solutions, they should use the “C 5” power grid and select any points that are particularly
tool to sift through the ideas and choose those that are important or useful. They should see if they are able to
most effective. The first step is to “cull” by separating come up with any other ideas by going over the high-
the ideas that are considered wild and placing them in lighted elements of the power grid. They should also
their own category. The second step is to “cluster” by go back to step four and see if there are any ideas that
grouping similar ideas, with no more than five ideas were not used but could be incorporated into a new
per cluster. The third step is to “combine” by look- solution based on the power grid. The last substep of
ing over the list for any multiple answers that can be step five is to summarize their new, powered-up solu-
combined into an even more effective single answer. tion. This should be a very clear description of what
The fourth step is to “clarify” by labeling each cluster their solution will entail, and may start off with what
with a descriptive statement that clearly summarizes they see the company doing or what they see them-
the heart of its ideas. And the fifth, and final, step is to selves doing to solve the problem.
“choose” the ideas that they want to develop further.
Step 6: Align Resources
At this step, it is often best that they go with their gut
reaction. The sixth and final step is to “align resources”, which
entails determining what must
Ideas are mutable. They are always capable of growing . . . By be done in order to actualize the
reevaluating your ideas, you give them a second chance to live. chosen solution. The first sub-
I call this kind of assessment Generative Judgment: a philoso- step is to define the tasks that will
need to be accomplished by cre-
phy of evaluation designed to improve the quality of things ating long lists of possible tasks
we’re examining rather than simply accepting or rejecting and then using divergent thinking
them. to narrow them down and clus-
ter them into related groups. The
Step 5: Forge the Solution
clusters should be clearly labeled. The next substep is
The fifth step of productive thinking is to “forge to make a long list of assistors; these are the individu-
the solution”. The first substep of this step involves als who will make the solution possible. Again, use
measuring the selected solutions against the solu- divergent thinking to narrow the list down to those
tion criteria that was developed in step two. The who are most important and have the highest degree
ideas that meet the most of the solution criteria are of influence. Repeat this process with the resistors,
the most stable and applicable. Ideally, the problem (these are the individuals that would be against the
solver should try to alter the solution so that it meets solution). The problem solver should then ask them-
all of the previously established solution criteria. The selves how they might be able to make the resistors
second substep entails “powering-up” the solution; more open to their solution.
to do so, they need to create a chart with five col-
The next substep is to use this information to create a
umns. The first column is labeled “positives”, where
calendar made up of the action steps that need to be
they will list what is best about the idea. The second
undertaken in order to reach their solution. Each action
column is labeled “objections”, where they will list
step should be assigned to a group or individual and
all of idea’s flaws. The third column is labeled “what
they should be held accountable for the completion of
else?”, where they will list anything that is left in
the step. The final substep is to produce an “EFFECT”
the idea that has not yet been articulated. The fourth
for the solution. To do so, they need to create a chart
column is labeled “enhancements”, where they will
with six columns and as many rows as there are actions
list everything that could make the positives even
steps. The first column is for “energy”, where they
more powerful. And the fifth, and final, column is
will list what type of energy commitment the action
labeled “remedies”, where they will list the ways in
step will require. The second column is for “funds”,
which the objections may be overcome.
where they will list all of the financial resources the
The problem solver should then go through their action step needs for completion. The third column

Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
Think Better Tim Hurson

is for “free time”, where they will state the amount powering up any proposed solution by utilizing the
of time the action step will require to complete. The following five-step questionnaire:
fourth column is for “expertise”, where they will list
1. Positives: What is great about the idea? What
the types or levels of knowledge that will be necessary
makes it likely to succeed?
to complete the action step. The fifth column is for
“conditions”, where they will list any conditions that 2. Objections: What is wrong with the idea? Does it
will need to be in place to meet the requirements of have flaws?
the action step. And the sixth, and final, column is for 3. What Else: What could still be improved? Is there
“things”, where they will state the material resources anything about the idea that has not been ad-
that they will need to complete the action step. At the dressed yet?
end of this entire process, the problem solver will be
left with a thorough understanding of the issue they 4. Enhancements: How could they make the positives
are being faced with, a comprehensive solution to the even more effective?
problem, and a detailed plan to enact it. 5. Remedies: How might they be able to fix the objec-
Part 4: Productive Thinking in Practice tions?
Old habits are hard to break. The majority of individ- If they need further proof, they can use other aspects
uals have been using their minds in ineffective ways of the productive thinking model, such as approbation.
their entire lives, and while making the initial change Approbation means that someone is giving an official
is difficult, the hardest part is sticking with that and formal approval of something. It requires more
change and fully incorporating it into their life. It is than a mere nod, but a firm commitment to some-
easy for people to slip back into their old ways, espe- thing’s utility and purpose. To effectively introduce a
cially when learning something new requires work, new method of thinking into a business, senior man-
energy, and time. There is a way to help integrate agement needs to thoroughly be on board, and the
these new changes into an individual’s life however, most efficient way to gain their approval is to dem-
and it involves entraining. Entraining creates a dif- onstrate a quick win using the productive thinking
ferent workflow and develops an individual’s skills, model.
whereas training simply refers to
the act of transferring knowledge. No matter how powerful the new technique you’ve learned is,
If an individual wants to become
as soon as you relax your attention, you inevitably slip back
entrained in a new way of think-
ing, they need to comprehend the into the old ways. When it comes to developing new skills of
four following requirements for any kind the major challenge is generally not learning them
permanently incorporating new but making them stick.
skills sets:
1. Proof Language has a very strong effect on whether or not
people are receptive to change. When individuals are
2. Approbation
given a new vocabulary to go along with a new con-
3. Language cept, it helps broaden their horizons and helps them to
4. Practice think outside of their normal realm of thought. This is
why it is important that the vocabulary that is used is
Individuals need to be able to believe that something clearly and effectively explained and communicated.
new will be worth their effort before they go forth and
try it, and this usually requires some sort of proof of The last requirement for permanently incorporating
the method’s effectiveness. In order to prove the util- new skill sets is practice. Individuals cannot become
ity of thinking better, individuals should start out by good at something if they never do it, and they cer-
using the POWER tool. Using the POWER tool entails tainly cannot make it a habit that way. It is very
important that companies who are instating the pro-
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 9
Think Better Tim Hurson

ductive thinking model create opportunities for their Chapter Nine: Step Three: What’s the Question? Great
employees to practice these new methods of thinking Answer (Wrong Question)
and brainstorming. If an individual is trying to think
Chapter Ten: Step Four: Generate Answers: Ten Thou-
differently on their own, they should make sure to set
sand Failures
aside time to practice their new skills.
Chapter Eleven: Step Five; Forge the Solution: Masa-
g g g g
mune’s Katana

Features of the Book Chapter Twelve: Step Six: Align Resources: Here Be
Lions
Reading Time: 5-6 hours, 292 pages
Part Four: Productive Thinking in Practice
Think Better by Tim Hurson would be most ben-
Chapter Thirteen: Productive Thinking Redux
eficial to those working in positions where they are
continually expected to solve problems and come up Chapter Fourteen: Training vs. Entraining
with creative and innovative solutions. The book is
Six Step Case Study, Jetways
easy to read and cites many real-life business exam-
ples throughout that illustrate some of its points and Glossary
steps. There are helpful charts throughout the book
Notes
that illustrate the diagrams described in the six-step
productive thinking model. Every chapter ends with Bibliography
a chapter summary, and there is also an appendix at Index
the end that summarizes the various tools and charts
utilized throughout the productive thinking model. About the Author
The book should be read cover to cover to best under-
stand the concepts behind productive thinking.

Contents
Preface
Acknowledgements
Part One: Productive Thinking in Context
Chapter One: Why Think Better
Chapter Two: Monkey Mind, Gator Brain, and the
Elephant’s Tether
Part Two: Productive Thinking in Principle
Chapter Three: Kaizen vs. Tenkaizen
Chapter Four: Stay in the Question
Chapter Five: The Miracle of the Third Third
Part Three: Productive Thinking in Theory
Chapter Six: Productive Thinking by Design
Chapter Seven: Step One: What’s Going On? Puzzles,
Probes, Possibilities
Chapter Eight: Step Two: What’s Success? The Future
Pull Principle
Business Book Summaries® July 18, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 10
 Book
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Volume 21, Number 12 • Copyright ©2004 Business Book Review, LLC • All Rights Reserved

The Toyota Way

14 Management Principles from the
World’s Greatest Manufacturer

Jeffrey K. Liker

©2004 McGraw-Hill
Adapted by permission of McGraw-Hill
ISBN: 0-07-139231-9

Reviewed by Lydia Morris Brown

Introduction
When Gary Convis, managing officer and president of Toyota Motor Manufacturing in Kentucky, joined Toyota after
working in the U.S. auto industry for 18 years, he witnessed how one of the worst workforces in General Motors was
transformed into one of the best in any U.S. manufacturing facility. This transformation, which occurred at NUMMI (the
Toyota/GM joint venture plant in Fremont, California), was a direct result of the “Toyota Way,” the fundamental method
by which Toyota does business. This approach, when coupled with the Toyota Production System—the basis for much of
the worldwide “lean production” movement—makes up Toyota’s “DNA.”
The Toyota Way describes the 14 principles that form the foundation of this uniquely successful management style.
Using profiles of a diverse group of organizations, from a variety of industries, it demonstrates how this model of success
can be applied in any organization, to improve the quality, efficiency, and speed of any business process, including sales,
product development, marketing, logistics, and management. This blueprint of Toyota’s management philosophy offers

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved
The Toyota Way Jeffrey K. Liker

managers in blue-collar, white-collar, manufacturing, value, defining the value stream, making it ‘flow,’ ‘pulling’
or service environments specific tools and methods for from the customer back, and striving for excellence.” A
becoming the best in their industries on cost, quality, and lean enterprise is, then, the end result of applying TPS to
service. all these aspects of a business.
After World War II, Ford and General Motors used
PART I: USING OPERATIONAL EXCELLENCE AS A economies of scale and big equipment to produce as many
STRATEGIC WEAPON parts as possible, as cheaply as possible. However, because
Liker believes that Toyota’s consistent success is a Toyota’s market was small, forcing it to make a variety of
direct result of its turning operational excellence into a vehicles on the same assembly line, flexibility was key to
strategic weapon, using such tools and
quality improvement methods as just- “All manufacturing and service companies that want to be suc-
in-time (JIT), one-piece flow, jidoka, cessful in the long term must become learning enterprises.
and heijunka (that make up the Toyota Toyota is one of the best models in the world.”
Production System [TPS]). But its its operations. This need to be flexible led to the critical
continued success at implementing these tools comes discovery that when lead times are short, and production
from its philosophy (the Toyota Way), which is based on lines are kept flexible, higher quality, better customer
an understanding of people and what motivates them. Thus, response, better productivity, and better utilization of
the company’s achievement ultimately emerges from its equipment and space ensue. This drive (in the 1940s and
ability to cultivate leadership, teamwork, and culture; to 1950s) to eliminate wasted time and material from every
devise strategy; to build supplier relationships; and to step of the production process, from raw material to finished
maintain a learning organization. In this manner, the Toyota goods, addresses the same need companies face today—
Way and the TPS form the “double helix” of the company’s “the need for fast flexible processes that give customers
“DNA,” for they define its management style and what is what they want, when they want it, at the highest quality
unique about the company. and affordable cost.”
TPS, Toyota’s distinctive approach to manufacturing, is Toyota has discovered that non-value-added waste has
the basis of the “lean production” revolution it helped spawn. little to do with running labor and equipment as hard as
According to Womack and Jones (Lean Thinking), “lean possible and everything to do with the manner in which
manufacturing [is] a five-step process: defining customer raw material is transformed into a saleable commodity.
This is why TPS begins with the customer, “because the
About the Author only thing that adds value in any type of process—be it
Jeffrey K. Liker, PhD, a principal of Optiprise, a manufacturing, marketing, or … development … is the
lean enterprise/supply chain management consult- physical or information transformation of that product,
ing firm, is professor of Industrial and Operations service, or activity into something the customer wants.”
Engineering at the University of Michigan, where The roots of these TPS and Toyota Way principles
he is also cofounder and director of the Japan can be traced back to the history and personalities of
Technology Management Program Lean Product the company’s founders, who left their indelible marks
Development Certificate programs. Dr. Liker, who on Toyota’s culture, through generations of consistent
was the editor of Becoming Lean: Experiences of
leadership.
U.S. Manufacturers (which won the 1998 Shingo
In the 1890s, Sakichi Toyoda used trial-and-error
Prize for excellence in manufacturing research),
tinkering and getting his hands dirty (genchi genbutsu—
has written on Toyota for The Harvard Business
Review, Sloan Management Review, and other
an approach that would become part of the foundation
leading publications. of the Toyota Way), to invent a sophisticated and highly
successful automated wooden loom, which contained a
For more information, please visit: special mechanism for automatically stopping the loom
www.optiprise.com
whenever a thread broke. It was a capability that evolved

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 2
The Toyota Way Jeffrey K. Liker

into the broader system, jidoka (automation with a human leaders who shaped sales, manufacturing, product
touch), one of the two pillars of TPS. Essentially, jidoka development and, most importantly, TPS.
means “mistake proofing,” or building in quality as In 1950, Eiji gave plant manager, Taiichi Ohno, the
material is produced. It also refers to designing operations assignment of improving Toyota’s manufacturing process
and equipment so that workers are not tied to machines and so that it equaled Ford’s productivity. Nonetheless, this did
are free to perform value-added work. not mean competing head-on with Ford, it meant improving
In 1929, Sakichi sent son Kiichiro to England to sell the Toyota’s manufacturing within the protected confines of
patent rights for the popular “mistake-proof” loom. With the Japanese market. So Ohno began by benchmarking
the 100,000 English pounds received from the sale, he gave the competition and studying Henry Ford’s book, Today
Kiichiro the task of building the Toyota Motor Corporation. and Tomorrow, which preached the importance of creating
The objective was not to increase the family fortune, but to continuous material flow throughout the manufacturing
move the company into a future technology (automobiles) process, standardizing processes, and eliminating waste.
and to give his son his opportunity to contribute to the What Ohno saw, however, was that the company did not
world. always practice what it preached, for it used “wasteful
batch production methods that built up
“Everyone should tackle some great project at least once in
huge banks of work-in-process inventory
their life. … should make an effort to complete something
throughout the value chain, [pushing]
that will benefit society.”
--Sachichi Toyoda product onto the next stage of production.”
Toyota did not have the luxury of creating
Despite his formal engineering education, Kiichiro, like this kind of waste, but it could use Ford’s idea of continuous
Sakichi, learned by doing and added his own innovations to material flow to develop an efficient system of one-piece
his father’s philosophy and management approach. He was flow, flexible enough to change, according to customer
especially influenced by the U.S. supermarket system of demand.
replacing products on the shelves as customers purchased Ohno turned to Toyota’s shop floor for a “hands-on”
them. Thus, while Sakichi contributed the jidoka pillar to application of the principles of jidoka and one-piece flow,
TPS, Kiichiro contributed JIT. Still, it was his actions as which he combined with the concept of the “pull system,”
a leader that left the greatest imprint on Toyota. For after inspired by American supermarkets. On the shop floor,
World War II, when rampant inflation threatened the this means that the first step in a process does not replenish
company, Kiichiro resigned as president—despite the fact parts until the second step uses up its supply from step one,
that the crisis was beyond anyone’s control. Not only did down to a small amount of “safety stock.” In this manner,
this personal sacrifice help quell worker dissatisfaction, it every step of every process has the equivalent of a built in
also laid the foundation for Toyota’s philosophy (one still “gas gauge” (kanban), signaling the previous step when
extant in the company today) of thinking beyond individual parts need to be replenished. This creates backwards pull
concerns to the long-term good of the company and taking to the beginning of the manufacturing cycle. Thus, JIT is
responsibility for any problems. dependent upon kanban.
One of the family leaders who shaped the company Toyota also assimilated the teachings of American
after Kiichiro was cousin Eiji Toyoda, who eventually quality pioneer, W. Edwards Deming, who taught that, in
became Toyota’s president and, then, chairman, helping to a business system, meeting and exceeding both external
build the company into a global powerhouse. Like Sakichi and internal customer requirements is the task of everyone
and Kiichiro before him, he learned to get his hands dirty, in the organization. Thus, he originated the “the next
learned the spirit of innovation, understood the value of process is the customer” principle, which in a pull system,
contributing to society, and had the vision of creating a translates into “the preceding process must always do what
special company with a long-term future. He also played a the subsequent process says” (atokotei wa o-kyakusama);
key role in selecting and empowering Toyota’s subsequent otherwise, JIT does not work.

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 3
The Toyota Way Jeffrey K. Liker

Deming also advocated the systematic Plan-Do- opportunities for reducing waste by getting rid of, or
Check-Act (PDCA) Cycle approach to problem solving reducing, non-value-added steps.
that is a cornerstone of continuous improvement (kaizen). Toyota identifies seven major types of non-value-
This is the process of making incremental improvements, adding muda, to which Liker adds an eighth (all can be
no matter how small, and achieving the lean goal of applied to any process in manufacturing, information or
eliminating all waste that adds cost without adding value. It service):
is a total philosophy that strives for perfection and sustains 1. overproduction, which generates excess inventory,
TPS on a daily basis, in that it pushes the decision making which, in turn, leads to overstaffing and increased storage
and/or proposal making down to the workers and requires and transportation costs;
open discussion and a group consensus before any decision 2. waiting for the next step, tool, part, etc;
can be implemented. 3. unnecessary transport or conveyance of work in progress
This new manufacturing system, which Ohno and (WIP);
his team created, did not just pertain to one company 4. overprocessing or incorrect processing due to poor tool
in one market and culture, but was a new paradigm in and product design;
manufacturing or service delivery.
“Out of the rubble of WWII … ‘with a creative spirit and courage’
It was a new way of seeing,
[Ohno] solved problem after problem and evolved a new produc-
understanding, and interpreting what tion system. … This same process has been played out time
is happening in a production process and again throughout the history of Toyota.”
and, as a result, propelling a company
beyond the mass production system. Still, the power of TPS 5. excess inventory in the form of excess raw material, WIP,
and lean manufacturing remained mostly unknown outside or finished goods, causing longer lead times, obsolescence,
of Toyota and its affiliated suppliers until the business damaged goods, transportation and storage costs, and delay
world was overtaken by the quality movement and learned (excess inventory also hides production imbalances, late
that when companies focus on quality rather than solely supplier deliveries, defects, equipment downtime, and long
on cost, costs are reduced even more. Moreover, through setup times);
the work of Womack, Jones, and Roos (The Machine That 6. unnecessary movement, such as walking and/or looking
Changed the World), manufacturing worldwide discovered for, reaching for, or stacking parts or tools;
“lean production”—what the authors identified as Toyota’s 7. defects that result in repair, rework, scrap, replacement
way of “shortening lead time by eliminating waste in each production, and inspection; and
step of a process [so as to get the] best quality and lowest 8. unused employee creativity (i.e., losing time, ideas, skills,
cost, while improving safety and morale.” improvements, and learning opportunities by not engaging
As Liker notes, the first question in TPS is always or listening to employees).
“What does the internal and external customer want
from this process?” Thus, many of the tools of TPS and PART II: FOURTEEN PRINCIPLES—THE CULTURE
principles of the Toyota Way derive from the focused BEHIND TPS
behavior of eliminating non-value-added waste, or muda, Liker contends that if a company does not understand
in business or manufacturing processes. The traditional the culture behind TPS, even though it has all the tools and
approach to process improvement focuses on identifying techniques of TPS in place, the real work of implementing
local efficiencies, such as improving uptime, making a lean has just begun. Essentially, TPS is about applying
cycle faster, or using automated equipment to replace the the principles of the Toyota Way so that workers are
human being. And, though there might be a significant contributing to the improvement of the system and of
improvement for an individual process, there is little impact themselves. The Toyota Way encourages, supports, and
on the overall value stream. Without a lean improvement demands employee involvement, for it is people who bring
initiative, most companies are unable to see the huge the system to life by working, communicating, resolving

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 4
The Toyota Way Jeffrey K. Liker

issues, and growing together. Thus, it is a culture even moreContinuously Solving Root Problems Drives Organizational
than a set of efficiency and improvement techniques. Learning
Based on the author’s 20 years of studying Toyota, Principle 12: Go and see for yourself to thoroughly
he offers 14 principles that constitute the Toyota Way understand the situation (genchi genbutsu).
and form the basis of the culture behind TPS. For ease Principle 13: Make decisions slowly by consensus,
of understanding, he divides these principles into the four thoroughly considering all options: implement decisions
categories—Philosophy, Process, People/Partners, and rapidly (nemawashi).
Problem Solving—that correlate to the four high-level Principle 14: Become a learning organization through
principles (genchi genbutsu, kaizen, respect, and teamwork) relentless reflection (hansei) and continuous improvement
explained in Toyota’s own internal Toyota Way training (kaizen).
document. Throughout the company, every person has a
Long-Term Philosophy philosophical sense of purpose that supersedes any short-
Principle 1: Base management decisions on a long-term term decision making, and all work, grow, and align the
philosophy, even at the expense of short-term financial entire organization toward a common purpose that is bigger
goals. than making money. Generating value for the customer,
The Right Process Will Produce the Right Results society, and the economy is the starting point, and every
Principle 2: Create continuous process flow to bring function is evaluated in terms of its ability to achieve this
problems to the surface. objective. Each person understands his or her place in the
Principle 3: Use “pull” systems to avoid overproduction. history of the company and works to bring the organization
Principle 4: Level out the workload (heijunka)—work like to the next level. Thus, individuals strive to be responsible,
the tortoise, not the hare. to act with self-reliance, to trust in their own abilities, and
Principle 5: Build a culture of stopping to fix problems, to to maintain and improve the skills that enable them to
get quality right the first time. produce added value.
Principle 6: Standardized tasks are the foundation for Toyota strives to cut back to zero the amount of time
continuous improvement and employee empowerment. that any work project is sitting idle. When a customer
Principle 7: Use visual control so no problems are places an order, this triggers the process of obtaining the
hidden. raw materials needed for that specific order. These materials
then flow immediately to supplier plants that
“TPS is not a toolkit. It is not just a set of lean tools. … It
immediately fill the order with components that
is a sophisticated system of production in which all of
flow immediately to a plant and are assembled.
the parts contribute to the whole. … When looked at
more broadly, TPS is about applying the principles of the The completed order then flows immediately to
Toyota Way.” the customer (the entire process is designed to
take a few hours or days, rather than a few weeks).
Principle 8: Use only reliable, thoroughly tested technology Creating this kind of one-piece flow, whether of materials
that serves your people and processes. or of information, and using small lots and closely situated
Add Value to the Organization by Developing Your People processes, exposes any inefficiencies or defects that demand
and Partners immediate attention, motivating everyone concerned to fix
Principle 9: Grow leaders who thoroughly understand the the problem. It is an approach that builds in quality, creates
work, live the philosophy, and teach it to others. real flexibility, results in higher productivity, frees up floor
Principle 10: Develop exceptional people and teams who space, improves safety, improves morale, and reduces cost
follow the company’s philosophy. of inventory.
Principle 11: Respect your extended network of partners Toyota provides its downline customers with what they
and suppliers by challenging them and helping them want, when they want it, and in the amount they want.
improve. This practice of letting consumption initiate material
replenishment is the basic principle of JIT, which minimizes

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 5
The Toyota Way Jeffrey K. Liker

work in process and warehousing of inventory by stocking “Why?” five times when a problem is uncovered, in order
small amounts of each product and frequently restocking, to get a root-cause analysis and to discover the proper
based on what the customer actually takes away. Thus, countermeasures.
Toyota is responsive to day-by-day shifts in customer At Toyota, standardized work is not intended to be a
demand and does not rely on computer schedules and coercive management tool imposed on a hapless workforce;
systems to track wasteful inventory. quite the contrary. Rather than enforcing rigid standards
Pulling a system to avoid overproduction goes hand in that make jobs routine and degrading, standardized work
hand with heijunka. Eliminating waste is just one-third of is the basis for empowering workers and innovation. As
the equation for making lean successful. It is also necessary a foundation for flow and pull, the organization uses
to eliminate any overburden to people and equipment stable, repeatable methods everywhere to maintain the
(muri) that comes as a result of uneven production schedules predictability, regular timing, and regular output of its
(mura). Thus, as an alternative to the stop/start approach processes. In this way (by standardizing today’s best
of working on batches that is typical at most companies, practices), it can capture the accumulated learning about
Toyota levels out both volume and product mix of all a process up to a point in time. This allows creative and
manufacturing and service processes.
“If production levels—the output—varies from day to day, there
Instead of building products according
is no sense in trying to apply those other systems, because
to the actual flow of customer orders,
you simply cannot establish standardized work under such cir-
which can swing up and down wildly, it
cumstances.”
takes the total volume of orders in a period
and levels them out so the same amount and mix are made individual expression to emerge from those actually doing
each day in a predictable sequence, spreading out different the work so that they can improve upon the standard and
product types and leveling volume. This provides Toyota hand this learning off to the next person.
the flexibility to make what customers want when they In Japan there are “5S programs” for eliminating
want it, reduces the risk of unsold goods, balances use of wastes that contribute to errors, defects, and injuries in
labor and machines, and smoothes demand on upstream the workplace (i.e., for cleaning it up, making it visual).
processes and the plant’s suppliers. These five S’s are: (1) sort—separate items and dispose
Nonetheless, warns Liker, there are some basic of what is not needed); (2) straighten—make a place for
requirements to meet before any of these benefits can everything and put everything in its place; (3) shine—as
be garnered. Not only must the first three principles, a form of inspection, clean up, so as to expose abnormal
be in place, principles five, six, seven, and eight must conditions that could hurt quality or cause machine
also be adhered to. Because Toyota believes that quality failure; (4) standardize—develop systems and procedures
should be built in, devices are built into machines to to maintain and monitor sort, straighten, and shine;
detect abnormalities and automatically stop an operation. and (5) sustain—impose self-discipline to maintain a
Moreover, in the case of humans, the company gives them stabilized workplace as an ongoing process of continuous
the power to push buttons, or pull cords—called andon improvement. Nonetheless, the Toyota Way is not about
cords—which can bring an entire assembly line to a halt. using 5S to maintain a clean and shiny environment, but
Every team member has the responsibility to stop the line to support a smooth flow and to help make problems
every time something is out of standard. Thus, quality is visible.
the responsibility of every individual, and every individual At Toyota, visual control refers to the design of JIT
is empowered to make it happen. information of all kinds, integrated into the process of
Because building in quality is a principle, not a value-added work, to ensure fast and proper execution
technology, quality control is simple and involves team of operations and processes. Its well-developed visual
members, rather than a lot of complex statistical tools. It control system (which includes such lean production tools
entails: going and seeing, analyzing the situation, using as kanban and andon) increases productivity, reduces
one-piece flow and andon to surface problems, and asking defects and mistakes, helps meet deadlines, facilitates

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 6
The Toyota Way Jeffrey K. Liker

communication, improves safety, lowers costs, and generally company’s philosophy. This is not a matter of adopting
gives workers more control over their environment. And, simple solutions or applying motivational theories as an
because the Toyota Way recognizes that visual management afterthought. Rather, it is about making the training of
complements the visual, tactile, and auditory orientations exceptional people, and the building of individual work
of humans, it seeks a balance and takes a conservative groups, the backbone of the company’s management
approach to using information technology to maintain approach—one that integrates the social system with the
its values. It does not avoid information technology, but technical system. Toyota’s “respect-for-humanity” social
creatively uses the best available means to create true framework and its culture of continuous improvement
visual control. fully support the system in which one-piece flow drives
Although Toyota does not lead the industry in positive problem-solving behaviors and motivates people
acquiring technology, Liker notes that it is a global to improve.
benchmark on how to use value-added technology that Toyota also follows a principle of finding solid partners
supports the appropriate processes and people. At Toyota, and growing together with them so both can benefit in
new technology is introduced only after it has been the long term. New suppliers must prove their sincerity
and commitment to Toyota’s
“First work out the manual process, and then automate it. Try to
high performance standards for
build into the system as much flexibility as you possibly can. …
quality, cost, and delivery. If they
And always supplement the system information with ‘genchi gen-
demonstrate this, they get larger
butsu,’ or ‘go look, go see.’ ”
orders, are taught the Toyota Way,
thoroughly evaluated and tested, with a broad cross-section and adopted into the Toyota family. Once inside, they are
of people, to ensure it adds value to the process and does not not kicked out except for the most egregious behavior. As
conflict with the principles of valuing people over systems, Ohno has stated, “Achievement of business performance
using consensus decision making, and eliminating waste. by the parent company through bullying suppliers is totally
If it meets these criteria, it is used to support continuous alien to the spirit of the Toyota Production System.” It is
flow in the production process and help employees perform unthinkable for the company to switch suppliers simply to
better, according to Toyota Way standards. save a few percentage points in cost. Nonetheless, Toyota
Throughout Toyota’s history (with the Toyoda family, is not an easy mark. Just as it challenges its employees to
behind the scenes, carefully selecting and grooming), key improve, it challenges its suppliers to develop by setting a
leaders have been found within the company, at the right series of aggressive targets and challenges.
time, to shape the next step in the company’s evolution. Liker has found that genchi genbutsu is the factor that
Unlike typical U.S. companies that at every crisis, go most distinguishes the Toyota Way from other management
“shopping” for new CEOs and presidents to take them approaches. Tables and numbers may measure results,
in new directions, Toyota develops its leaders to live and but they do not reveal the details of the actual process
thoroughly understand its genchi genbutsu culture day by being followed every day. Thus, whether they are in
day. Leaders must demonstrate this ability and understand manufacturing, product development, sales, distribution,
how work gets done at the shop-floor level. Leaders must or public affairs, people trained in the Toyota Way take
teach their subordinates the Toyota Way, which means nothing for granted, nor do they rely on reports, but go
they must understand and live the philosophy. And, they and see for themselves. Moreover, observing is not enough,
must support the culture continuously so that it can create employees and managers must also “deeply” understand the
the environment for a learning organization and lay the processes of flow and be able to provide critical evaluations
foundation for genuine long-term success. and analyses.
Toyota encourages its employees to work diligently, to According to Alex Warren, former senior vice president
do their jobs perfectly, and to strive for daily improvement of Toyota’s manufacturing plant in Kentucky, Toyota will
by building a system that conforms to the principle of spend nine to ten months planning a yearlong project. Then
developing exceptional people and teams who follow the it will implement in a small way with a pilot project and

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 7
The Toyota Way Jeffrey K. Liker

be fully implemented by the end of the year, with virtually difficulty of understanding the workflow in technical and
no remaining problems. This is in direct contrast to most service organizations in the same way it is possible to map
American companies that tend to spend about three months the transformation of a physical product, it can indeed
planning, before implementation, and then spend the rest of be made more manageable via the following five-step
the year correcting all the problems they encounter. procedure: (1) Identify who the customer is for the each
For Toyota, how a decision is arrived at is just as process as well as the added value the customer wants.
important as the quality of the decision. Underlying the (2) Separate the repetitive processes from those that are
entire process of planning, problem solving, and decision one-of-a-kind and apply TPS to the repetitive processes.
making lies careful attention to every detail including: (1) (3) Map the flow to determine value added and non-value
finding out what is really going on (genchi genbutsu is added. (4) Think creatively about applying the broad
an important part of this); (2) understanding underlying principles of the Toyota Way to these processes, using a
causes (asking “Why?” five times); (3) broadly considering future-state value stream map. (5) Start implementation and
alternative solutions and developing a detailed rationale learn by implementing, using a PDCA cycle. Then, expand
for preferred solutions; (4) building consensus within implementation to the less repetitive processes.
the team, including employees and outside partners; and The author notes, however, that it is the broader
(5) employing very efficient communication vehicles to philosophy—the way Toyota leads people and partners,
complete the first four items, preferably using one side of solves problems, and learns—that is the most difficult for
one sheet of paper. This five-step approach helps to uncover organizations to adapt, develop, and sustain. The toughest
facts that could lead to many problems down the road, it and most basic challenge is “how to create an aligned
gets support from all parties before implementation begins, organization of individuals who each have the DNA of the
and a great deal of learning is achieved up front before organization and are continually learning together to add
anything is planned or implemented. value to the customer.” Thus, the essential thing to take from
Liker believes that this last point, learning, is Toyota’s Toyota’s example is the importance of developing a system,
greatest accomplishment. The company is a true learning sticking with it, and improving it. The Toyota Way model
organization, for it views continuous improvement as was built from the ground up, intentionally, starting with
a relentless companywide process in which superiors a philosophy that starts with the CEO. The top executive
motivate and train subordinates, “A prerequisite for change is for top management to have an
predecessors do the same for understanding and commitment to leveraging the Toyota Way to
successors, and team members at become a ‘lean learning organization.’ ”
all levels share knowledge. As he
has emphasized, the Toyota Way is far more than tools and the executive team must be committed to a long-term
and techniques—it is designed to push everyone to think vision of adding value to customers and society in general,
and grow through a process in which mistakes are used as and they must be committed to developing and involving
opportunities for learning. This involves: perceiving the employees and partners. Moreover, there must be continuity
problem, clarifying it, determining the root cause of the in top leadership philosophy. This does not mean that the
problem, providing effective countermeasures, evaluating same people should run a company forever, only that they
the results, and standardizing the approach. Then, the new must develop successors with the company’s DNA (as
knowledge is transferred to the right people so as to make opposed to installing a new cast of characters with each
it part of the company’s repertoire of behavior. crisis and/or frequent buyout).
In the meantime, Liker offers the some general tactical
PART III: APPLYING TPS AND THE TOYOTA WAY tips for transitioning into this kind of lean enterprise: Start
As manufacturing companies worldwide apply TPS on with changes in the technical system; follow quickly with
the shop floor and experience extraordinary improvements, cultural change. Learn by doing first and training second.
many ask how the process can be applied to their technical Start with value stream pilots as a means of demonstrating
and service operations. Although Liker acknowledges the lean as a system and providing a “go see” model. Use value

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 8
The Toyota Way Jeffrey K. Liker

stream mapping to develop future state visions and to help and Jones, 1996), and both stand as excellent resources
“learn to see.” Use kaizen workshops to teach and make on the subject. The first introduced the world to the tools
rapid changes. Organize around value streams. Make the and techniques of lean manufacturing by extracting its
shift to lean mandatory. Be opportunistic in identifying principles from their initial Japanese application and
opportunities for making big financial impacts. Realign examining them in detail. And, the second explained how
metrics with a value stream perspective. Build on your “to make value flow smoothly at the pull of the customer
company’s own roots to develop its own “Toyota Way.” in pursuit of perfection.”
Hire or develop lean leaders and create a succession system. The Toyota Way is, however (according to Liker),
And, use experts for teaching and getting quick results. the first business book in English to provide a blueprint
of Toyota’s management philosophy for general business
* * * readers, dispelling the misconceptions that TPS is merely
End notes by chapter, a chapter-by-chapter a collection of tools that lead to more efficient operations.
bibliography, recommendations for further reading, Of course, there is no way of ascertaining the validity
and a subject index are provided. of this claim, without an extensive and time consuming
exploration of the literature, but that truly doesn’t matter.
The Toyota Way is an approach of such breadth, depth,
Remarks and significance to the world of business that it has yet
to be fully understood; thus, the subject has not yet been
Everyone in the auto industry is familiar with Toyota’s fully exhausted. Liker’s keen sense of the subtleties of
dramatic business success and, of course, consumers are TPS intrepidly challenges conventional understanding
demonstrably aware of the company’s world-renowned and transforms it with eloquent simplicity. He takes the
quality. In fact, Toyota has done so well that, as Liker reader deeply and comprehensively into the “heart and
points out, many consider the company to be “boring.” intelligence” of Toyota’s “way,” giving businesses in diverse
For, after all, steadily growing sales, consistent profitability, industries some very practical and effective ideas that they
huge cash reserves, operational efficiency (combined with can use to develop their own unique approach to TPS.
constant innovation—not an easy complement to pull off),
and top quality, year after year, are not the stuff of breaking
news. But, despite this reputation as the best manufacturer
in the world, and despite the huge influence of the lean Reading Suggestions
movement, most attempts to emulate and implement
lean production have been fairly superficial, with less Reading Time: 28-30 Hours, 352 Pages in Book
than stellar results over the long term. “Dabbling at one Liker notes that if you follow only a select few of the
level—the ‘Process’ level,” U.S. companies have embraced Toyota principles, the “result will be short-term jumps on
lean tools, but do not understand what makes them work performance measures that are not sustainable.” And, Fujio
together in a system. Cho, president of Toyota Motor Company, says that what
This integration is precisely what The Toyota Way is unique about Toyota’s remarkable success is putting all
examines, explaining how to create a Toyota-style culture the elements of the Toyota Way together as a system and
of quality, lean, and learning that takes quantum leaps practicing this system daily and consistently, not in parts.
beyond any superficial focus on tools and techniques. Thus, as far as we’re concerned, if implementation doesn’t
Suffice it to say, there are hundreds of books out there work in bits and pieces, fits and starts, there’s no point in
explaining, analyzing, and advocating lean—providing reading this book in bits and pieces, fits and starts. Even
details and insight into the tools and methods of TPS. The if your company has already “dabbled” in TPS (especially,
two most noted among this treasure trove are, of course, if you’ve merely dabbled), your greatest value lies in
the contributions of The Machine That Changed the World practicing a little genchi genbutsu from the beginning and
(Womack, Jones, Roos, 1991) and Lean Thinking (Womack discovering and understanding as much as possible about

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 9
The Toyota Way Jeffrey K. Liker
the purpose of The Toyota Way, the centrality of people in Chapter 10: Principle 4—Level Out the Workload (Heijunka)
that purpose, and appropriately applying that understanding Chapter 11: Principle 5—Build a Culture of Stopping to Fix
to your particular situation. Problems, to Get Quality Right the First Time
Liker is a longtime fan of the Toyota Way and brings Chapter 12: Principle 6—Standardized Tasks Are the Foundation
the incisive energy of a perennial admirer to his vigorous, for Continuous Improvement and Employee
articulate, and accessible discussion. The book is an easy Empowerment
read, and each chapter is mercifully short and to the point, Chapter 13: Principle 7—Use Visual Control So No Problems
but you should not expect to just zip through. Our estimated Are Hidden
reading time of 28 to 30 hours might be an overestimate, but Chapter 14: Principle 8—Use Only Reliable, Thoroughly Tested
we want to impress upon you the importance of taking your Technology That Serves Your People and Processes
time. We suspect that you will want to take notes, take time Section 3: The Right Process Will Produce the Right
to reflect, and perhaps even reread much of the material. In Results
any event, you should perhaps plan ahead, schedule a block Chapter 15: Principle 9—Grow Leaders Who Thoroughly
of time each day, and prepare to read no more than two or Understand the Work, Live the Philosophy, and
three chapters each sitting. Teach It to Others
Chapter 16: Principle 10—Develop Exceptional People and
CONTENTS Teams Who Follow Your Company’s Philosophy
PART 1: THE WORLD-CLASS POWER OF THE Chapter 17: Principle 11—Respect Your Extended Network of
TOYOTA WAY Partners and Suppliers by Challenging Them and
Chapter 1: The Toyota Way—Using Operational Excellence as Helping Them Improve
a Strategic Weapon Section 4: Continuously Solving Root Problems Drives
Chapter 2: How Toyota Became the World’s Best Manufacturer— Organizational Learning
the Story of the Toyoda Family and the Toyota Chapter 18: Principle 12—Go and See for Yourself to Thoroughly
Production System Understand the Situation (Genchi Genbutsu)
Chapter 3: The Heart of the Toyota Production System— Chapter 19: Principle 13—Make Decisions Slowly by Consensus,
Eliminating Waste Thoroughly Considering All Options; Implement
Chapter 4: The 14 Principles of the Toyota Way—an Executive Decisions Rapidly
Summary of the Culture Behind TPS Chapter 20: Principle 14—Become a Learning Organization
Chapter 5: The Toyota Way in Action—the “No Compromises” Through Relentless Reflection (Hansei) and
Development of Lexus Continuous Improvement (Kaizen)
Chapter 6: The Toyota Way in Action—New Century, New Fuel,
New Design Process—Prius PART 3: APPLYING THE TOYOTA WAY IN YOUR
ORGANIZATION
PART 2: THE BUSINESS PRINCIPLES OF THE TOYOTA Chapter 21: Using the Toyota Way to Transform Technical and
WAY Service Organizations
Section 1: Long-Term Philosophy Chapter 22: Build Your Own Lean Learning Enterprise,
Chapter 7: Principle 1—Base Your Management Decisions on a Borrowing from the Toyota Way
Long-Term Philosophy, Even at the Expense of
Short-Term Financial Goals
Section 2: The Right Process Will Produce the Right
Results
Chapter 8: Principle 2—Create Continuous Process Flow to
Bring Problems to the Surface
Chapter 9: Principle 3—Use “Pull” Systems to Avoid
Overproduction

Business Book Review™ Vol. 21, No. 12 • Copyright © 2004 Business Book Review, LLC • All Rights Reserved Page 10