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CONSUMER RAGE (P. 32) lANXIETY AT BOEING (P. 38) lGOLF GIFTS FOR DAD (P. 72) JUNE 19, 2006 www.businessweek.com In this issue: Introducing our innovation and design quarterly Innovation Champions The new breed of managers and their radical cultures of creativity inmanifesto With this inaugural issue of IN: Inside Innovation—we dedicate ourselves to the proposition that making innovation work is the single most important business challenge of our era. Our goal is to make a meaningful difference in the difficult journey toward building innovative business cultures. IN hopes to inspire, to provoke, to teach, and to be a trusted advisor and guide. Every quarter, we’ll provide you with a how-to tool kit of lessons and WWW.BUSINESSWEEK.COM/INNOVATE case studies that address specific problems managers face in changing their organizations. In this premier issue, we show exactly how five key “C-Suite” drivers of innovation inside big corporations do it. In future issues, we will offer the best innovation metrics, show how to build open-source idea machines, manage global networks of engineers and trend-spotters, find truly creative talent, and instill design thinking to satisfy unmet consumer needs. IN is also a community. It links you to our online Innovation & Design site (businessweek.com/innovate), with its blogs, columnists, metrics, and stories. Join us. DESIGNERS UNMASKED NUSSBAUM ON DESIGN 3 INNOVATION METRICS ARCHITECTURE AUTO DESIGN LOGO DOCTOR GIRL IMPROVED ROGER MARTIN JENEANNE RAE BRAND EQUITY NEWSLETTER GAME ROOM Bruce Nussbaum, Editor JUNE 2006 IN BUSINESSWEEK.COM/INNOVATE JUNE 2006 08 18 12 Editor Bruce Nussbaum Managing Editor Jessie Scanlon Contributors Spencer E. Ante, Robert Berner, Michelle Conlin, Jay Greene, Reena Jana, Megan Tucker, Matt Vella Copy Chief Larry Dark Production Susan Fingerhut, Ken Machlin-Lockwood Photo Editor Sarah Morse Art Direction and Design Modernista! Design Director Bruce Crocker Art Director Katie Andresen BusinessWeek Editor-in-Chief Stephen J. Adler Executive Editor John A. Byrne Art Director Malcolm Frouman 12 inprofile DESIGN VISIONARY Patrick Whitney is out to bridge the chasm between business and design 18 indepth CHAMPIONS OF INNOVATION Meet five archetypal achievers from the ranks of the IN25—a list of the corporate world’s leading innovators 28 inprogress CASE STUDY: BANK OF AMERICA How BofA developed its Keep the Change program and attracted new accounts 03 COVER PHOTOGRAPH BY MARKHAM JOHNSON. COLOR ENHANCEMENT BY IN: INSIDE INNOVATION; (TOP RIGHT) PAUL ELLEDGE inmanifesto What IN: Inside Innovation is all about 27 indata Charting forces that may shape the future 06 inshort Tools and trends to spur creativity 30 inblogs Three sources for trends and ideas 08 inproduct Koenigsegg CCR: The ultimate supercar? 31 indesign Microsoft’s Xbox 360 console 10 intouch A blog conversation about Intel’s surprising use of enthnographic research 32 insight Five key strategies for managing change from Jump Associates’ Dev Patnaik JUNE 2006 IN 5 inshort Reena Jana TOOL: TEEN TRENDTRACKING WEB SITES What better way to tap into the tastes and buying habits of teens and ’tween girls than to consult with in-theknow members of the actual demographic? The teen-run Web site of 3iYing presents kicky prose and sharp observations on bigcompany blunders and offers its own marketing strategies that will work best for teenage girls. Also, check out Look-Look and Girls Intelligence Agency. TOOL: GAPMINDER’S DYNAMIC DATA VISUALIZATION AND MAPPING Forward-looking companies need dynamic delivery of statistics beyond old-school bars, pies, and x- and y-axes. Data visualization is the ticket. Hans Rosling’s Gapminder uses software that punches up ho-hum international economics stats with colorful, entertaining digital animations like cascading words and numbers. Currently positioned as a nonprofit educational device, Gapminder’s Trendalyzer software holds massive potential for business and financial stats. 6 IN JUNE 2006 PHOTOGRAPH (LEFT) BY SAM HOLLENSHEAD/POLARIS TREND: LEARNING JOURNEYS Executives traditionally take benchmarking trips to other companies to measure the best quality, cost, and process procedures. Now many are traveling to observe the cultures and behaviors of their own customers in their native habitats. Managers from Design Continuum, for instance, go on scavenger hunts to gain a better understanding of how products are made and used. Ecco Design arranges trips to China. Smart Design leads journeys around the world. ziba Design travels to Asia and Europe with middle managers. BrainReactions takes American managers to India and China and Indians and Chinese to the U.S. ideo arranges excursions for ceos to shop for their own products. TOOL: METHOD CARDS One way to score a winning hand in the innovation game: decks of cards issued by the Foresight & Innovation team at Arup, a leading-edge engineering design firm, and ideo, a top innovation consultancy. These portable stacks of idea-inspiring images, social and technological trends, and market statistics aim to spark creative thinking. Consultant Creative Advantage also has a deck. For the paper-averse: KnowBrainer cards are also available in a pc-based Flash program. TREND: CONSUMER EXPERIENCE SELLS What drives top-line growth and above-average profits? Peer Insight, the service innovation consultancy, has devised a chart and table (below) that correlate and index a portfolio of companies that provide great consumer experiences (cX) with sales and stock-market performance. The evidence speaks for itself: the likes of Starbucks and Whole Foods Markets, which focus on their consumers’ needs and wants, fuel their innovation and profits by keeping the customer in mind. HYPOTHETICAL cX PORTFOLIO $2500 cX Portfolio $2,424 5-YEAR AVG. RETURN = 20.4% TREND: PLUG-AND-PLAY NETWORKS Creating and managing networks has become an essential skill for executives. Managers are harnessing networks of scientists and engineers outside their corporations for new ideas and solutions. NineSigma.com, InnoCentive.com, and YourEncore.com are just a few. Others are also joining select consortiums to quietly exchange best practices. ibm’s Global Innovation Outlook encourages cross-pollination of ideas among peers from different companies. Still others are using new Wikipedia-type tools, including TWiki (used by such clients as British Telecom and Michelin China) and Confluence (Earthlink and Lockheed Martin), to keep the creative juices flowing between managers and workers. 2000 1500 1000 500 $1,000 investment on January 1, 2001, would have returned: S&P $1,028 5-YEAR AVG. RETURN = 2.1% 2004 COMPETITOR AVERAGE 2002 2003 2001 2005 PORTFOLIO OF cX-FORWARD COMPANIES* P&G Starbucks Starwood Target $56,741 6,369 5,977 52,620 $16,191 7.3% 24.0 6.6 7.4 12.8% 7.0% 10.3 6.4 8.5 5.5% 15.4% 10.4% 39.2 0.93 13.8 13.2 9.8 15.3 28.7% 10.6% DATA: 2006 PEER INSIGHT LLC *INDEX BASED ON NINE COMPANIES **COMPOUND ANNUAL GROWTH RATE PHOTOGRAPH (RIGHT) BY ANDREA GUIDA; ILLUSTRATION ABOVE BY HORT; COLUMNIST PORTRAITS BY QUICKHONEY TREND: INNOVATION CAMP Flash back to summer camp and the many lessons learned in an intense, unfamiliar environment. Innovation consultancies such as Doblin, ziba Design, ideo, Jump, and Idea Factory offer immersion workshops on creative thinking. Tomorrow Makers ran the ceo Creativity workshops at the World Economic Forum in Davos. The aim of such experiences is to change managerial culture. JUNE 2006 IN COMPETITOR AVERAGE 2005 REVENUES 5-YEAR IN CAGR** 5-YEAR REVENUE CAGR** 7 inproducts Koenigsegg CCR Power and beauty. This Swedish supercar embodies both Sweden’s Christian von Koenigsegg always dreamed of building the ultimate supercar. Now, his Koenigsegg CCR is breaking records. Clocking in at 245 miles per hour, Koenigsegg Automotive broke the world speed record for a production car last year with the Koenigsegg CCR. It has 806 horses under the hood, nearly twice as many as Porsche’s top-of-the-line 911 GT3, and more than Mercedes-Benz’ supercar, the SLR McLaren. Since the first production car rolled off the assembly line in 1996, Koenigsegg has shipped ultrafast autos to the Middle East, Hong Kong, Eastern Europe, Russia, Britain, and Japan. But none to the U.S. because of safety and emissions standards. Until now. A new model, the Koenigsegg CCX, engineered to comply with U.S. specifications will be available this summer. The CCX will carry a supercar price tag—$722,534, fully equipped and before taxes. (The price even includes driving lessons from the world record-setting driver himself, Loris Bicocchi.) –Matt Vella 8 IN JUNE 2006 intouch Bruce Nussbaum BusinessWeek.com/innovate/NussbaumOnDesign Join our online conversation on key issues. POSTED BY: BRUCE NUSSBAUM Ethnography Is the New Core Competence Ethnography is hot. You’d expect the Nikes and Apples of the world to use it since their products are so directly linked to consumer wants and needs. But it’s surprising that Intel Corp., a chipmaker whose products you never see, is into enthnography. In fact, the company is very serious about the science of observing customers to zero in on their needs—and is way ahead of many other global corporations. Intel’s effort is led by anthropologist Ken Anderson, manager of people and practice research. He’s using anthropology and other social science disciplines to “develop a deep understanding of how people live and work.” The knowledge is then used by Intel to inform and guide the company’s direction for technology and its strategy for product development. POSTED BY: One bit of interesting research posted at Intel’s Web site is on GEORGES DE WAILLY transnationals and cosmopolitans—people who live outside their Ethnography or, more seriously, “ethhome countries and who move back and nology,” is a field a designer shouldn’t POSTED BY: forth between countries. Anderson estiignore. It’s like art history or mythology. STEVE PORTIGAL mates that as much as one-third of the Ethnology deals with ethnic groups’ population of cities such as London are Intel has the resources to put together culture, while ethnography deals with these incredible projects to go broad, made up of transnationals. How they use groups’ repartition. If you want to dedeep, and far afield. Most of us are sign a product that will be accepted by a information and communication techworking in a shorter timeframe (both population, know its uses and habits. nologies (laptops, cell phones, Web sites, the horizon of the research impact and The best-designed product is the one instant messaging, video cameras) is inthe time spent on it), and with more tacthat refers to the user’s fundamentals. triguing. Ghanaians living in London use tical objectives than Intel’s folks. So ethnography is a field of investigaWe are putting together, piece by them to “look homeward,” to keep contion for designers and not only to develpiece, a grand amount of insight on op products. It’s also a way to open nected. They also use information and Portland, Tulsa, San Francisco, and so someone’s mind to the wide world. communications technology (ict) to conon. But no one knows about any of it. nect to the global grid, searching the Net It’s all proprietary. The research is reand blogs for jobs, contacts, etc. When Ghanaian transnationals peated over and over again for different groups with different objectives. go home, they are the leading vector for introducing ict to their cities, towns, and villages. There is a lot more cool stuff on the Intel site. I’d love to see this really cool kind of research done on American cities like Portland, Ore., New York, or San Francisco. Just for fun. Recent Posts China’s President Hu Jintao Visits Microsoft’s Bill Gates—Who is More Innovative? Infosys Makes The Top Innovators List for Asia-Pacific What Senior Execs Really Think of IBM and Innovation Recent Comments Google, IBM. and Grain (1) What Top Execs Really Say About Apple (1) The Randomness of Corporate Innovation (4) Innovation Ideas from Davos (1) 10 IN JUNE 2006 inprofile DESIGN VISIONARY PATRICK WHITNEY IS OUT TO BRIDGE THE CHASM BETWEEN THE CULTURES OF BUSINESS AND DESIGN BY ROBERT BERNER L ooking for talent? Of course you are. A titanic talent search is under way as managers scour the globe for innovators. Companies are struggling to transform themselves from cultures driven by cost and quality control to organizations that profit from creative thinking. Everybody knows where to find Six Sigma black belts, financial hotshots, and vice-presidents into Total Quality Management. Harvard, Northwestern, Stanford, and lots of B-schools churn them out. But innovators? Enter Patrick Whitney, a 54-year-old Canadian native who is director of the IIT Institute of Design in Chicago, the largest graduate school of design in the U.S. Whitney is a visionary, a key leader in a new movement to create a discipline of design. Like W. Edwards Deming, who transformed the “mushy” notion of quality into the rigorous, useful tqm methodology, Whitney is turning design into a core methodology of innovation. In doing so, this soft-spoken man has quietly become the guru of integrating the best of business and design thinking. Whitney believes that companies today face an “innovation gap.” They have the tools of technology to make virtually anything, but lack the tools of empathy to understand what consumers really want. Filling this gap is the task at hand. It is also the sweet spot for top-line growth and high-margin profit. To Whitney, design is uniquely suited to mine users’ unarticulated needs, whereas focus groups are limited to what consumers already know. “Design thinking can offer greater, deeper, and faster insight into users’ lives to help businesses know what to make in the first place,” he says. Traditionally, design education is based on visual expression, and students learn through drawing, model making, and studying the work of other designers. That is still the case in most design schools. Little emphasis is placed on how design fits into a business context. Whitney pioneered a completely different model. The id curriculum focuses directly on design strategy and innovation. Some 80% of the school’s courses don’t involve making things. User Observation & Early Prototyping aims at understanding consumers’ wants, the crux of the innovation gap. In New Product Development, students also learn how to read a balance sheet. In Design Languages, they learn how to make effective business presenta- 12 IN JUNE 2006 PHOTOGRAPH BY PAUL ELLEDGE inprofile HOW TO LEARN WHAT CONSUMERS WANT ENTHNOGRAPHY SOFTWARE > Companies need to gather and compare huge amounts of information on consumers. The Institute of Design under Patrick Whitney and Associate Professor Vijay Kumar have developed the User Insight Tool, designed specifically for business. It relies on disposable cameras, field notebooks, and special software that teases out new understandings from consumer observations. Procter & Gamble Co. and China’s Lenovo Group Ltd. have both used it. 1 Researchers give disposable cameras to people in the study, to record human behavior (for instance, about consumers’ use of electronics) With photos in hand, researchers interview consumers, using structured field notebooks Researchers enter field notes, photos, and general insights into User Insight Tool software 2 3 4 tions. In Systems Design, students look at designing business organizations. Graduates of id know how to design business processes as well as products and services. “Most designers don’t understand business,” says John Seely Brown, the former director of Xerox’s Palo Alto Research Center. “Patrick has done more than anyone in crossing this chasm.” Whitney’s latest effort is a dual master’s program. The first of its kind, it coordinates courses between id and the Stuart Graduate School of Business (both schools are part of the Illinois Institute of Technology). Students can get full 2 design and mba degrees in as little as 2 1⁄ years, vs. the four years that kind of load usually takes. More than half its graduates already cross the design divide and take jobs in strategy, marketing, brand management, and business planning.. The new dual degree option makes that crossover easier, says Brad Nemer, a senior business planner at Motorola, who has a design degree and an mba from iit. When you graduate, says Nemer, “you are fully conversant in all the business conversations you are going to have.” Whitney’s efforts at bridging business and design extend to conferences, which are becoming standing-room-only events for senior managers. In Beijing last December, his Design for the New China Markets conference brought an A-list of more than 200 Chinese, American, and European execs and high Chinese government Software organizes the data into clusters and displays it so that patterns of behavior can be seen One advantage of the method is that other studies can be done in different locations and at different times using the same tools: cameras, notebooks, and software This structure allows a company to compare studies on how consumers use electronics in India versus the U.S. or Europe and to archive research so it can be used in future consumer research projects 5 6 and university officials. With so much innovation shifting to Asia, Whitney made it a mustattend conference. Corporations have traditionally mined the best B-Schools for by-the-numbers managerial talent. But who really wants to hire people with masters degrees in “administration” when today’s business culture demands managers who can master the process of innovation. Patrick Whitney has made the iit Institute of Design one of the best sources of creative talent for business today. IN 14 IN JUNE 2006 CHAMPIONS OF INNOVATION MEET FIVE ARCHETYPAL ACHIEVERS FROM THE IN25, OUR LIST OF FORWARD-THINKING LEADERS BY MICHELLE CONLIN T PHOTOGRAPHS BY MARKHAM JOHNSON hey are the best-kept secret of the business world: a whole new breed of “C -suite” managers who wear titles such as “chief marketing officer,” “director, design and brand experience,” or the voguish new moniker “chief innovation officer.” They are different from others before them, polymath in skill (think an entire multidisciplinary team in one person), “bipolar” in thinking (using both the left and right brain in framing problems), and eclectic in education (dual math and art majors, English lit and mba degrees). ceos from Citigroup to HarleyDavidson, from Google to Procter & Gamble, are empowering these managers to build radically new cultures of creativity. Let’s welcome the Champions of Innovation. In an era when Six Sigma controls no longer guarantee competitive advantage, when outsourcing to China and India is universal, when creeping commoditization of products, services, and information hammers prices, innovation is the new currency of competition. It is the key to organic growth, the lever to widen profit margins, the Holy Grail of 21st century business. Which is why these forward-thinking leaders have so much power. They roam the vast spaces of global corporations fighting to make innovation routine, not random; central, not marginal; exciting, not scary. They educate, Hewlett-Packard’s inspire, cajole, hire, bribe, punish, Lucente (left) holds a build—all to transform their comprinter, part of a suite of panies’ cultures. new photo products. So who are they and what, exactA conference room at ly, are they doing? The IN25 is our Google (above), where the creative process is directory of the top Champions of also transparent. Innovation. They share many traits, but three stand out: First, they JUNE 2006 IN 19 Google’s Mayer leads a session to evaluate and critique pitches for the next big thing. Ideas are projected on one side of a wall, comments on the other, as a clock counts down 10 minutes. MARISSA MAYER’S 9 NOTIONS OF INNOVATION Ideas come from everywhere Google expects everyone to innovate, even the finance team. Innovation, not instant perfection Google launches early and often in small beta tests, before releasing new features widely. Share everything you can Every idea, every project, every deadline—it’s all accessible to everyone on the intranet. You’re brilliant, we’re hiring Founders Larry Page and Sergey Brin approve hires. They favor intelligence over experience. Worry about usage and users, not money Provide something simple to use and easy to love. The money will follow. Creativity loves restraint Give people a vision, rules about how to get there, and deadlines. A license to pursue dreams Employees get a “free” day a week. Half of new launches come from this “20% time.” 4 6 Don’t politic, use data Mayer discourages the use of “I like” in meetings, pushing staffers to use metrics Marissa Mayer helps run one of the world’s most innovative companies by being an amazing talent finder. As Google’s vice-president for search products and user experience, she is the last stop before founders Larry Page and Sergey Brin on the way to final MARISSA MAYER THE TALENT SCOUT 20 IN JUNE 2006 PHOTOGRAPHS BY MARKHAM JOHNSON speak the language of design and user-friendliness. Second, they derive their clout directly from the top and are the ceo’s consiglieri on creativity. And finally, they are mostly women. Nearly 70 percent of the Innovation Champions are female. Ponder that. We picked five from this group of 25 to show in detail how they do it. Every one of them does many things well but one best: Each represents an archetype who builds a culture of creativity in a specific way. There is The Talent Scout, who hires the über-best and screens ideas at warp speed. The Feeder, who stimulates people’s minds with a constant supply of new trends and ideas. The Mash-up Artist, who tears down silos, mixes people up, and brings in outside change agents. The Ethnographer, who studies human behavior across cultures and searches for unspoken desires that can be met with new products. The Venture Capitalist, who generates a diversified portfolio of promising ideas that translate into new products and services. Here are their stories: approval of any new feature that appears on the Web’s most valuable real estate. She thrives by practicing obsessive fastidiousness in hiring, fanatical social networking in managing, and apolitical critiquing of new ideas. Mayer fits the classic mold of Innovation Champion. Growing up in Wausau, Wis., she captained both the debate team and the pom-pom squad. Her father is an engineer, her mother an art teacher. Yet her brains (Stanford University degrees in symbolic systems and computer science, patents in Artificial Intelligence pending), position (keeper of the keys to search), grit (Google’s first woman engineer), wealth (employee No. 20), youth (born in 1975), and even her looks (Midwest beauty) draw bloggers and headhunters alike. Mayer has been a Champion of Innovation longer than most, long enough to create her Nine Notions of Innovation (table). Her Third Notion—hire not just the best but the most brilliant— is perhaps the most important. An enormous global talent hunt is under way, with companies shifting from process and quality control to creativity and empathy as the key competitive edge. Mayer gets this. She still personally approves every hire for the products group at the 6,000-plus person company. She scans the résumés of interns, many of them Rhodes Scholars. And she picks the Google Associates, who are hired right out of college 9 8 2 5 3 7 1 Don’t kill projects—morph them There’s always a kernel of something good that can be salvaged. and trained internally. Mayer also shepherds each class on a summer trip overseas to stimulate creativity. She’s a big reason why Google functions as a single, open social network, where every piece of work is laid bare on the company’s intranet. This allows Googlers to look for those working on similar technologies, find relevant expertise, or join projects. At the same time, Mayer imposes on the wildly creative company a rigid, procedure-filled structure. Insiders call it the “Marissa Gauntlet.” This is the intellectually titillating and intensely grueling process whereby new features are pitched and critiqued à la art school. New features are digitally projected onto the right side of a conference room wall, big as a movie screen. Everything Mayer and others say is tran- scribed and projected on the left. Underneath both looms a giant mega-timer. Everyone gets an average deadline of 10 minutes. Mayer and her team add and subtract to the feature as time runs down. It is iteration at lightning speed. Ivy Ross feeds consumers a constant diet of contemporary cultural zeitgeist. That’s why when you walked into Old Navy stores this spring you were hit with the heavily organic vibe of the “pure and natural” clothing line. The products filled Old Navy stores at the exact same time as global warming and $3 gas were filling the headlines. To create this kind of in-the-moment innovation, Ross constantly feeds her employees ideas, influences, and new IVY ROSS THE FEEDER Old Navy’s Ross at work in her office (above). Details from her habitat (right) include: fabric swatches, bottles etched with an inspirational word, and thoughtprovoking books. JUNE 2006 IN 21 IVY’S BLOGS & BOOKS myfashionlife.com psfk.com mocoloco.com Orbiting The Giant Hairball Messages from Water Synchronocity SAM’S BLOGS & BOOKS techcrunch.com zpluspartners.com designobserver.com Creating Breakthrough Products The Autobiography of Benvenuto Cellini 22 IN JUNE 2006 MARISSA’S BLOGS & BOOKS Google Desktop goodexperience.com Nussbaum On Design The Paradox of Choice The Psychology of Everyday Things The Art of Innovation CLAUDIA’S BLOGS & BOOKS metacool.typepad.com experientia.com/blog/ headrush.typepad.com Cradle to Cradle A General Theory of Love Rules of the Red Rubber Ball AMY’S BLOGS & BOOKS coolhunting.com core77.com innovationtools.com strategy-business.com springwise.com Dealing With Darwin Seeing What’s Next JUNE 2006 IN 23 perspectives. When she was at Mattel, Ross made herself famous in innovation circles by commandeering a large corporate space and taking teams off their jobs for 12 weeks to travel, see, learn, and think. By week 11, the Mattel brass was worried. But the resulting building toy for girls, “Ello,” was an instant hit. At Old Navy, Ross has created an in-house blog, called Culture Feed, and hired ace cool hunter Jody Turner to write it. Turner curates what’s available on the Internet for Ross’s designers. “You can’t get the right outputs without giving people the right inputs,” says Ross. That has to start from Day One. After taking the Old Navy job in 2004, Ross had a problem: how to get the 120 transplants from New York and other places to click instantly with the 600 Old Navy staffers who had worked together in San Francisco. Instead of the usual town hall or dinner, she hired a documentary filmmaker. Then she told staffers they each had three minutes to tape something so personal that normally it would take years of working closely with other people to reveal. The result was a Facebook-style cd that was a hit with the twenty- and early-thirtysomethings who already live in a socially-networked world. TheIN25 THE TOP INNOVATION CHAMPIONS FROM AROUND THE WORLD CHRIS BANGLE SAM LUCENTE Chief of Design BMW Group DONNA BANKS VP, Design Hewlett-Packard DIVAKARAN MANGALATH Sr. VP, Global Supply Chain Kellogg Company STEPHANIE BARRY Chief Technology Officer Wipro Technologies MARISSA MAYER Director, Global Innovation WD-40 Company DONDEENA BRADLEY VP, Search Products & User Experience Google MARY MINNICK Director, Strategic Marketing McNeil Nutritionals MARY JO COOK EVP and President, Marketing, Strategy & Innovation Coca-Cola CHERYL PERKINS VP, Laundry and Home Care New Businesses Clorox NICHOLAS DONOFRIO Sr. VP & Chief Innovation Officer Kimberly-Clark CAROL PLETCHER EVP, Innovation & Technology IBM MICHAEL FRANCIS Chief Innovation Officer Cargill AMY RADIN EVP, Marketing Target TINKER HATFIELD Chief Innovation Officer Citigroup IVY ROSS VP Innovation Nike JOHAN HJERTONSSON EVP, Product Design & Development Old Navy NANCY SNYDER Director, Consumer Innovation Program Electrolux JONATHAN IVE Corporate VP, Strategic Leadership & Competency Creation Whirlpool ANDREA THOMAS Senior VP, Industrial Design Apple Computer SARAH LLOYD JONES VP, Global Chocolate Hershey MARGARETA VAN DEN BOSCH Innovation Champion Unilever Kotchka (above) in Procter & Gamble’s new environs, which were revamped to encourage creative thinking, and (below) at work in her cubicle CLAUDIA KOTCHKA Head of Design H&M Hennes & Mauritz TINA ZINTER-CHAHIN VP, Design Innovation & Strategy Procter & Gamble LARA LEE Sr. VP, Research & Development Fisher-Price (Mattel) VP, Enthusiast Services Harley-Davidson IN talked with innovation consultants, thought leaders, managers, and drivers of change inside corporations for this list. 24 IN JUNE 2006 Hewlett-Packard’s Lucente (top right) tests a digital camera, a new photo printer (bottom right), plus workplace details, including objects from a collection of old HP products. PHOTOGRAPHS (LEFT) BY KENNY TRICE (2); (RIGHT) MARKHAM JOHNSON (6); PAGES 22-23: MARKHAM JOHNSON (ROWS 1,2,4); KENNY TRICE (ROW 3); STEVE PYKE (ROW 5) Employees devoured the cd with the passion of high school seniors studying their yearbooks. One designer decorated her workspace in floor-to-ceiling denim, looked straight into the camera and said: “I want to rock the world of denim with you guys.” Then she spoke about her lifelong dream: to build a spacesuit for nasa made entirely of jeans. Passersby were giddy with the frisson of each other’s Warholian fame. The instant, digital introductions infused the new group with a close tightness, essential for innovation. “You first have to set the field up for innovation,” Ross says. A decade ago, p&g was a place of starched white shirts, wood-paneled walls, and museum silence. Information was held tight by managers. Scientists toiled alone and rarely shared ideas. p&g was a series of locked doors. The biggest lock was on the door to the outside world. Today the company has gone from insular to open source, thanks in large part to its cultural alchemist, Claudia Kotchka. In 2000, new ceo A.G. Lafley took office and in 2001 created Kotchka’s position of vice-president for design innovation and strategy. He told Kotchka to help him open up the cloistered halls of p&g and inject design thinking into every corpuscle of CLAUDIA KOTCHKA THE MASH-UP ARTIST the company. Call it the MySpace-ification of p&g. To help change the culture, Kotcha, the mash-up artist, mixes things up. Bring down the walls to get inside people together and throw open the doors to bring in outsiders. Innovate by being connected and inspired by people around you. Be creative by being transparent, open and stimulated by outside, global ideas. For the first time, fresh ideas flow into p&g from networks of outside scientists, engineers, and trend-spotters. Inside silos are gone—well, going—creating hybrid products born of collaboration like the new Allessi-looking version of the Swiffer. Kotchka has brought in an outside design board of world-class designers to weigh in on product launches. As for her own working area, it is a tiny, messy affair. She spends most of her time in the halls, listening, learning, talking. To open up communication, Kotcha advocates spending more on common spaces for designers than on private workplaces. The message: p&g wants employees to hang out and connect. In innovative companies, the new r&d lab is the break room. Among the paintings of Van Gogh and the architecture of Frank Lloyd Wright in the Museum of Modern Art’s permanent collection in New York City sits the work of an artist named Sam Lucente. It is SAM LUCENTE THE ETHNOGRAPHER JUNE 2006 IN 25 Citigroup’s Radin (left) and the back of a mosaic she keeps in her office with a phrase that epitomizes her tenacious approach to creative thinking ibm’s Leapfrog computer, which Lucente co-designed with Richard Sapper in 1993. Lucente has been an artist since early childhood. At 5, he was taking adult drawing classes at the Dayton Art Institute, training his eyes to observe the people and world around him. Ponytailed, soft-spoken, and always clad in midnight blue or black, Lucente is still an artist. But now he also leads the turnaround in design at Hewlett-Packard. For Lucente, the ethnographer, consumer observation has been a big route out of hp’s dilemma. Until recently, hp’s merger with Compaq Computer had produced an unintegrated company with hundreds of isolated businesses and thousands of products. To help build a unified, creative culture and reconnect with hp’s customers, Lucente launched a major research project. He involved members from all departments—design, marketing, r&d, even outside consultants—to immerse themselves in the lives and homes of 28 families around the world. The goal was to make sure that hp was “living and breathing with the customer,” Lucente says. What the trips showed was that families across the globe were deluged with information from their phones, computer screens, cameras, and social networking connections. They were lost, with no idea how to navigate through the information. To Lucente, the obvious answer was a steering wheel. Lucente’s design team came up with Q control. This standardized start-button-cum-steering-wheel, which looks like a backwards Q, is in the process of being attached to all of hp’s products. Not unlike the dial on an iPod, it’s intuitive and simple to use. It requires no owner’s manual. It has a quick and dirty “savior” button so consumers can go back. Lucente is effective inside hp because he doesn’t “talk design.” Rather, he speaks the language of business. Observing how people work, socialize, eat, cook, even sleep shows Lucente where the gaps are: what people need and what they don’t have. He then maps out these findings on an algorithmenhanced database that identifies which areas present the biggest opportunities. He made the case for Q control by showing the financial and marketing benefits of using a common design device that could be replicated across all of hp’s products. Next up for Lucente: helping people organize a personal library of digital photos. Lucente plans to do for photos what Steve Jobs did for music. In March, at age 47, Citigroup Chief Innovation Officer Amy Radin gave birth to her third child. She had broken the news of her pregnancy to ceo Chuck Prince this way: “It’s innovative and disruptive,” she told him. “But it’s not scalable.” That’s classic Radin. Half Brooklyn wisecracker, half deadpanning banker. At the time, the company had just announced that innovation was a new strategic goal and that Radin would lead the effort. The job followed her tour de force as head of citicards.com, which she built into a top online credit card site. Today she’s crafting her role at Citigroup in the fashion of a Silicon Valley venture capitalist. With strong backing from Prince, Radin is building a portfolio of small, ethnographically derived and metric-proven innovation ideas. Like any good vc, Radin expects some to fail. But that’s good. “We are building failure into the model,” says Radin. It’s the vc model—diversify your assets and see which hits. One of Radin’s first plays will appear in New York this summer: Citi PayPass. New Yorkers are time-starved speed-seekers. So Citi has developed a payment tag that is an E-Z pass for the subway turnstile. Radin deliberately kicked off Citi’s innovation mission with PayPass because she knew it would be a small, early win. Racking up early wins is key to getting widespread buy in. Radin has trials in the pipeline for phones embedded with a debit-card chip as well as individual wands—either could one day take the place of paper cash in an economy of virtual money. Says Radin, “The point is to position the portfolio so that, no matter which way things go, Citi is covered.” IN AMY RADIN THE VENTURE CAPITALIST 26 IN JUNE 2006 PHOTOGRAPHS BY STEVE PYKE indata FORCES SHAPING OUR FUTURE We know the world is changing fast. But how fast— and why? Step back and examine the technological, economic, and geographic forces that are at work on our world. Consumer electronics in the world 2 billion mobile phones Last year, human beings produced more transistors (and at a lower cost)… …than they did grains of rice. 1.5 billion TV sets What advertisers spent on placing ads in video $56 million games $34 million 2004 32% of the world’s languages are from Asia 874 million native Chinese speakers 2005 355 million Hindi speakers The U.S. blog-reading audience is already 20% the size of the newspaper-reading population 207 million Bengali speakers 820 million PCs Who’s online? 88% 84% 71% 32% age 19–29 INFORMATION GRAPHICS BY NIGEL HOLMES 30–49 50–64 65+ 190 million Game Boys 70 million iPods (plus: 91% of adults with household incomes of $75,000) World oil consumption is expected to rise 50% by 2030 50 million PDAs 3.2 million BlackBerrys 2006 2030 CEO Sam Palmisano, IBM Yankee Group ARUP IDEO Motorola, Microsoft TV Group, Computer Industry Almanac, Nintendo, Piper Jaffray, Gartner Group Data: Pew Internet & American Life Project Stone Yamashita JUNE 2006 IN 27 inprogress Case Study: Bank of America How it learned that what customers really want is to Keep the Change THE PROBLEM Innovation in services is rare. In financial services, the last big breakthrough was online banking, nearly a decade ago. In October, 2005, Bank of America brought out a radically different product that broke the paradigm. It’s called Keep the Change. The concept solves a critical banking problem—how to get consumers to open new accounts. The product works like this: Every time you buy something with a BofA Visa debit card, the bank rounds up your purchase to the nearest dollar and transfers the difference from your checking into your savings account. It also matches 100% of transfers for the first three months, and 5% of the annual total, up to $250 a year. Since the launch, 2.5 million customers have signed up for Keep the Change. Over 700,000 have opened new checking accounts and 1 million have signed on for new savings accounts. THE RESEARCH How did Bank of America create Keep the Change? In the spring of 2004, it hired an innovation and design research firm in Palo Alto, Calif., to help conceive of and conduct ethnographic research on boomer-age women with children. The goal was to discover how to get this consumer segment to open new checking and savings accounts. For the next two months, a team of five BofA researchers and four researchers from a West Coast consulting firm visited Atlanta, Baltimore, and San Francisco. They observed a dozen families and interviewed people on the streets. They watched people at home as they paid and balanced their checkbooks. They tagged along with mothers as they shopped at Costco, dined at Johnny Rockets, and made deposits in drive-through tellers. Ray Chinn, senior V.P. for new product introduction, along with Faith Tucker, another BofA senior V.P., saw two themes emerge from the research. In Atlanta, the team met a mother who always rounded up her checkbook entries to an even dollar because it was quicker. People also rounded up their financial transactions because it was more convenient. The second realization: Many boomer women with children couldn’t save. For some, it was a lack of money. For others, it was a matter of not being able to control their impulse buying. 28 IN JUNE 2006 ILLUSTRATION BY JOEL HOLLAND Go into a store and buy a cup of coffee for $1.50 Pay for it with your Keep The Change debit card. BofA rounds it off to $2. BofA transfers 50 cents from your checking to your savings account, matching 5% of the annual total up to $250 PROTOTYPING In the summer of 2004, Chinn and Tucker put together a team of product managers, finance experts, software engineers, and operations gurus and held 20 brainstorming sessions. The team generated 80 product concepts, boiled them down to 12, and overwhelmingly favored one: rounding up the financial transactions of consumers and transferring the difference to their savings. The team created a Web-based cartoon that showed a woman buying a cup of coffee in a store for $1.50. Then it displayed the rounding up and putting the 50¢ into a savings account. Tucker and Chinn tested out the cartoon and concept in an online survey of 1,600 consumers. The result? Sky-high scores on uniqueness. In December, 2004, Diane Morais, Chinn’s and Tucker’s boss, pitched the idea to the bank’s consumer division and got the green light. The first challenge was a name. A woman in a focus group suggested Keep the Change. That stuck. Three features were added to the original concept: (1) a summary of the rounded-up transactions in a consumer’s checking and saving accounts, (2) a fail-safe feature that automatically prevented a transfer from pushing a customer’s account into overdraft, and (3) a promotion to match the rounded-up transfers to savings up to $250 a year. MARKETING The next challenge was selling Keep the Change to the public. The team stumbled upon an approach in another focus group when someone suggested getting people to dig for change among the cushions of a couch. The bank tweaked the idea by creating a custom-made 20-foot-long red-velvet monstrosity that would really grab eyeballs. To launch the product on Oct. 5, the bank staged a marketing event-cum-press conference in New York’s Grand Central Terminal. The staff lugged the megacouch into the station, stuffed it with coins and invited people to look for change. The bank sent replicas of the sofa to malls in Boston, Dallas, Los Angeles, and Miami and co-sponsored events with the National Football League. Wives of nfl players and retired gridiron stars such as Ed “Too Tall” Jones were hired to show up at malls and dig for change. Proceeds were donated to charity. Bank of America ran tv commercials for the program during the winter Olympics. The bank continues to promote Keep the Change on its Web site, and it has bought ads with search engines. To date, BofA says 99% of the people who signed up for Keep The Change have stayed with it. –Spencer E. Ante JUNE 2006 IN 29 inblogs Jessie Scanlon CREATING PASSIONATE USERS headrush.typepad.com A must-read guide for CEOs, brand managers, and anyone trying to create passion in their customers. EXCERPT FROM SITE People take the first step toward something they develop a passion for because: 1) There is a clear, compelling picture of what it might be like to be an expert at this thing. 2) There is a clear path to getting there. 3) There is an obvious and relatively easy first step. EDGE PERSPECTIVES WITH JOHN HAGEL edgeperspectives.typepad.com Insightful writing and analysis on innovation and business strategy. EXCERPT FROM SITE As offshore outsourcing moves to a greater focus on skill building arbitrage, we see a shift to “second generation” outsourcing …. networks of companies coming together under an orchestrator who brings together specialized talent to serve a client’s needs. SPRINGWISE BACKGROUND PHOTOGRAPH BY MARKHAM JOHNSON www.springwise.com New business ideas and entrepreneurial trends assembled by 8,000 spotters around the globe. Bonus: searchable by date, industry, or key word. EXCERPT FROM SITE The Laundress is a collection of high-end fabric detergents and care products….Rinse and repeat after us: “Any product or service can be upgraded to massclusivity or überpremium status!” 30 IN JUNE 2006 indesign Designers from the U.S. and Japan collaborated to create a console for Microsoft with an appeal it hopes will reach beyond gamers If you ask Jonathan Hayes, design director for Microsoft’s Xbox 360, to capture the soul of his video-game console, he’ll say “Bruce Lee.” Hayes wants the machine to convey power and grace, hallmarks of the martial arts star. It is the most powerful video game console available, and its white color with hints of green and hourglass curves give it élan. The first Xbox in 2001 was more like the Incredible Hulk—a black, industrial box that bulged at the top and burst with power. It fared poorly against Sony’s PlayStation.The brute force of the Xbox played well in the U.S. but left consumers in the gaming mecca of Japan unhappy. The Xbox was deemed too big, too garish, too American. Hayes hired Astro Studios, the San Francisco firm that designs the hightestosterone gaming pcs from Alienware Corp. Then he brought on Hers Experimental Design Laboratory of Osaka, which designs pcs and cell phones for the Asian market. The Hers designers spoke no English, and the folks at Astro spoke no Japanese. No matter. Astro talked to gamers old and young, watched people set up consoles, and played a bunch themselves. This proved critical to designing the new box. And while it hasn’t sold well in Japan, Microsoft still believes the Xbox 360 will win over consumers who want to use it to show photos and play dvds as well as games. In short, it needed to be elegant as well as powerful. With its color and sculptural lines, the Xbox 360 has the feel of an iPod. Enough said. –Jay Greene Xbox How It’s Designed to Thrill The Xbox 360 went through several iterations (far right), before a new console that melds Western power with Asian grace emerged JUNE 2006 IN 31 insight Dev Patnaik The Founder of Jump Associates Offers Five Key Strategies for Managing Change Innovation champions tend to be one-of-a-kind in their organization. It’s therefore critical for these folks to look outside their companies for advice and mentorship. For the last several years, many leaders have turned to Jump Offsite—an invitation-only gathering hosted by Jump Associates, an innovation strategy firm based in San Mateo, Calif. Here are some of the lessons that past attendees have taken away: 1 Avoid the innovation title Calling a new team the “innovation department” is a good way to get everyone else in your company to hate you. After all, if you’re all about innovation, what does that make the rest of us—chopped liver? Some of the most successful innovation groups flew under the radar by using innocuous-sounding names like Ancillary Services, Platform Development, or Department of Vaguely Interesting Tangential Stuff That Might Pay Off Someday. Pick a name for your group that doesn’t induce hostility among your co-workers. You’ll need them on your side. 2 Use the buddy system The most successful innovation leaders often have a partner in crime to help get the job done. Sometimes it’s a subordinate; other times she’ll actually share the same title. These duos act as a yin and yang, compensating for each other’s strengths and weaknesses. For instance, one might be a relative newcomer to the organization with outside knowhow, while the other is a trusted insider. Find yourself alone in an innovation job? Seek out a like-minded collaborator in another part of the company as soon as possible. 3 Set the metrics in advance Innovation teams often find themselves producing new business ideas that can’t possibly survive the hurdles of corporate scrutiny. That can be because companies measure success by focusing on incremental ideas. Successful innovators have been able to establish different sets of funding, testing, and performance criteria for incremental, experimental, and potentially disruptive innovations. Set these metrics up as soon as possible, preferably before your team comes up with a big idea, so you’re not accused of simply trying to get an exemption for your pet project. 4 Aim for quick hits first Too many leaders set off to create the platform that is going to save their company, only to discover that the organization’s patience runs out long before that new venture can come to fruition. That’s because game-changing initiatives can take a few years to develop, while most new leaders have only a short window of time to prove themselves. Spend your honeymoon period on quick hits, easy ideas that demonstrate to your CEO that you know how to get things done. Then switch to bigger initiatives before those base hits start to box you in. 5 Get data to back up your gut How do you know if you have a good idea? The overwhelming majority of successful innovation leaders sum it up in two words: your gut. They often rely on years of experience to be able to recognize when they’re on to the big idea. They then use quantitative measures as a way to justify their intuition to the rest of the organization. That doesn’t mean that testing isn’t an important way to get feedback and improve an idea. It’s just rarely the final go or no go. 32 IN JUNE 2006