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Steering Clear of an Innovation Shipwreck
February 22, 2007
By Michael Megalli
The castaways on Gilligan's Island were a crafty bunch. From their bamboo Geiger counter to their jerry-rigged seismograph to a Da Vinchian flying machine, the unfortunate survivors of that fateful trip had to rely on their wits in order to survive.
And yet the vast majority of the island's innovations came from only two castaways: Gilligan and the Professor. The Professor's style was just what you would expect—brilliant scientific analysis, uncanny resourcefulness and a natural authority over the others. Gilligan on the other hand, was more of a savant; he got by purely on his intuition combined with an unfailing knowledge of all the island's happenings, And yet Gilligan seemed to instinctively hold the key to any successful effort.
By working together, Gilligan and the Professor were able to help the group overcome its terrible fate. Had one or the other of them not contributed, life on the island would have been much more difficult—if not impossible.
Divergent Paths to Innovation
Like the survivors from that infamous shipwreck, businesses today are on a universal quest for innovation. And like the castaways, this quest is about survival—creating the innovations that will help them to stave off the looming specter of commoditization, protect their market share and grow their business.
And yet many of these businesses fail in their innovation efforts. Recently Booz Allen Hamilton released the findings from its "Global Innovation 1,000," a study measuring the effectiveness of research and development spending among the top global spenders. The study found that with the exception of 94 companies, most did not see a direct impact of their spending on corporate performance.
Those that succeed do so by balancing their approach between two extremes—that of the Professor and that of Gilligan, of the engineer and the marketer. Marketing and engineering are two distinct mindsets. The tension underlying their relationship is at the center of a business duality which is as unnecessary as it is costly. There is much at stake here—namely success or failure in the quest for this elusive prize.
In the midst of the frenzy to innovate, it's worth questioning whether or not your innovation efforts are balanced. This begins by asking a simple question: Are we engineers or are we marketers? The companies that innovate most effectively—Booz Allen calls them "high-leverage innovators"—are the companies that successfully tap into both.
Meeting of the Mindsets
For most of us, the words "engineer" and "marketer" will conjure very specific images and associations. These associations are worth considering as they are at the core of the cultural tension which keeps so many companies from successfully innovating.
The engineers' milieu is the lab. They focus on conducting controlled experiments with the purpose of developing product features which they believe customers will prefer. They tend to pursue either incremental improvements to existing products or radical new products which fundamentally "change the game." The features and enhancements that they create tend to be quantifiable, measurable improvements. The engineer prefers a scientific approach: working methodically, and with a clear process.
By contrast, marketers work in the competitive context of the marketplace. They attempt to work around the core commoditization of their offering and build relationships with customers by focusing on "higher order" benefits. This approach is founded in the belief that customers will form stronger bonds with a company and its products if they have a branded experience that satisfies them emotionally. Rather than being driven by process, marketers tend to work "from the gut," using market insights to develop ways of building stronger relationships. Increasingly they attempt to democratize innovation and "open it up"—with every employee, or even customer, being given the opportunity to influence innovation.
The illuminating thing about these two personalities and their approaches is the fact that companies themselves exhibit their traits. Corporate cultures are shaped by whichever mindset dominates.
I recently attended a panel discussion on innovation that elegantly illustrated the distinction between the two cultural realities. Two members of the panel were retail bankers with similar backgrounds and job responsibilities, but with one major difference: one came from an engineering-oriented culture and the other from a marketing-oriented one.
The companies that they represented face nearly identical business issues. Both are struggling against the commoditization which pervades their industry. Both are striving to introduce innovations to give them advantages in a tightly competitive market. And both are adjusting to the new and emerging competitive landscape that is being formed by a decade's worth of voracious consolidation. However, the two organizations take significantly different approaches to dealing with these realities.
Banker A works in an engineering culture. His bank creates and introduces discrete products and features which they believe will appeal to customers, differentiate their offering and build loyalty over time. These features include an ever broadening line of products and services with varied pricing, rewards and incentives. The banking services his bank introduces are developed in a methodical, process-intensive approach which is well-documented and includes numerous checks along the way.
Banker B works in a marketing culture. His bank seems to embrace the commoditization of banking services and seeks instead to create stronger bonds with customers by creating a branded experience built on emotional drivers. The components of this emotionality include beautifully designed banking locations, hotel-trained service staff, and ties to the local community. When asked about process, he states that every employee at his bank is encouraged to participate in the innovation process and that customers themselves are the source of inspiration and ideas.
On its own, neither the marketing or engineering approach can work. Companies that want to effectively innovate need to engage and deploy both mindsets. Notably few do. And yet every significant example of successful innovation is a fusion of both.
Bringing it Together
Cultural change is notoriously difficult. The specifics of how you can go about breaking down unnecessary barriers within your organization will depend largely on the realities that you face. Of course, the first step is making an honest assessment of which mindset prevails in your organization and how this reflects that processes and power dynamics at play. This bit shouldn't be too hard to do. But then what? The following five principles can provide some guidance on how to start.
1. Weighing dictatorship and anarchy. As usual, the single most important factor will be leadership. Depending on the management situation within your organization, leadership can mean one of two things: centralizing control or unleashing revolutionary zeal.
The dictatorship solution is in many ways the easier route, but of course you need the dictator. If you happen to have a charismatic despot on hand—a Steve Jobs, let's say—tyranny is wonderful. Once your dictator mandates that the engineers and marketers find a way to get along, you simply wait for everyone to step into line and—voila!—you are winning awards, appearing on magazine covers and delivering keynotes.
The second solution—anarchy—is a bit tougher; however for most of us, it's the only alternative. The rift between marketing and engineering is largely a manifestation of organizational realities. The goal is to encourage collaboration by breaking down the organizational traps which restrict it. All of the talk about "intrapreneurship" and encouraging failures as well as successes is basically about embracing a bit of anarchy and letting it work its magic.
2. Publish your drafts. One of the most interesting developments in the new product landscape is the increasingly temporal nature of products. Product lifecycles seem to be getting shorter every day and the result is a desperate need to shorten development times.
A few years ago Google introduced a novel, and I believe, revolutionary new approach to this need to get products to markets more quickly—they started to publish nearly finished drafts. Granted software developers had always put betas into the market for testing, but none had done so on the scale of Google Labs.
Software companies, and particularly providers like Google who deliver their product over the Internet, are in a particularly good position to release products in a nearly complete form. However, technology has made this more and more possible for all companies—including those who sell tangible products. The time and cost of it takes to develop working prototypes is at an all time low and getting lower all the time. Similarly, the ability to get working models in the hands of customers and to get feedback from these customers is easier than ever.
This ability to "fail fast" is fertile ground for uniting the marketing and engineering mindsets. By the very nature of working in this way, marketers and engineers will move beyond the staged processes and hand-offs of the past.
3. Hire and promote oddballs We live in the age of the creative generalist. The most visionary business innovators of our time are people who combine deep technical knowledge and creativity born out of market insights.
However in most organizations, people who don't neatly fit into organizational roles get lost in the shuffle. This is less of a problem as careers advance, but these "square pegs" generally have a difficult time finding their way into organizations to begin with. While your organization will always need highly skilled specialists, individual who themselves bridge the marketing/engineering gap can have a disproportionate impact on your efforts at cultural change.
4. Forget about advertising. The biggest mystery in the world of marketing surrounds the future of advertising. With the seismic shifts in the media landscape, everyone is watching for the corresponding shift in the advertising model. The only thing that is certain is that no one knows where it will go.
In this context the biggest mistake that you could make is to try and buy your way out of the marketing and engineering duality. The old saw about 50 percent of your advertising budget being wasted might fall far short of the true mark.
Royal Philips Electronics has become a product design and innovation powerhouse, but has struggled to get credit in the marketplace for its innovations. It seems that the company's solution for this situation is a multimillion dollar brand-building campaign built around the theme of "sense and simplicity" and highlighting some of the company's truly innovative products. Advertising will always have its place, but Philips is wasting its time trying to buy recognition of it efforts. The company would be far better promoting the individual products in its portfolio rather than trying to use them to build its corporate brand.
5. Principles not process. The product innovation dialogue is filled with intricate and focused discussions of processes and metrics. In large sprawling organizations the control represented by these methods is clearly an essential part of understanding how innovation work is going. However, frequently these processes are too rigid and strictly ordained steps for getting to an end is the worst possible way to get there.
Innovation giant Procter & Gamble has spent the past few years loosening up its approach to product development. Rather than a rigid focus on internal R&D, the company has started to embrace a much more open concept of innovation; looking for technological and product breakthroughs from both within and without. This sort of openness would have been unthinkable even a decade ago, but even with a $2 billion R&D budget, P&G has realized that it simply cannot go it alone. The company's strategy has been enormously successful and it estimates that 35 percent of its product innovations now originate outside of their own labs.
This sort of openness to new ideas and the ability to challenge long-held assumptions is one of the key outcomes of a fusion of the marketing and engineering mindsets. In today's interconnected world, the "not-invented-here" mindset is a recipe for failure.
The next time you are in a meeting, identify the Gilligans and the Professors in the group. What are the power dynamics between the two? Are the two working together or is their an implied hierarchy within the relationship? Who is calling the shots?
Your ability to get these groups working together will go a long way towards ensuring the success of your efforts.
Sidebar: Handcuffed by Legacy? IBM: A Case Study
Why is this so difficult for companies to pull off? Most are stuck with organizational or cultural realities which may have made sense in the past but seem arcane today. Historically engineers were responsible for designing and building products and then passing these on to marketing communications peers who in turn had the responsibility of selling the products to customers. Today this manufacturing model informs the organizational structure and approach of companies that may have nothing to do with manufacturing.
So what has changed? A state of perpetual revolution in technology has re-written the rules about how products are developed, how they are promoted and how they are consumed. Granted, if you are in the business of building jet engines, the manufacturing model outlined above remains relevant. However, for the rest of us, the changes being wrought in the digital world demand a new approach to developing and selling products and services; an approach which is a fusion of marketing and engineering.
In the mid-1990s, IBM was in the process of re-inventing itself by moving to an emphasis on services. This shift is held up as one of the great business transformations of all time. Considering the state of Big Blue beforehand, it is also credited with the company's survival. However, there is another factor that gets far less attention. At the same time as IBM moved to focus on services, the company became a marketing powerhouse. As the world's largest patent-holder, IBM is an extraordinary engineering company. However over the course of the past decade, it has become as extraordinary a marketing company.
IBM's transformation came in two stages. The first was the reconfiguration of the company’s marketing organization—both internally and externally. The goal was to re-create the IBM brand and promote the vision of its new business model. This initial stage was largely about marketing communications and the e-Business campaign in its varied manifestations.
The second stage, however, is one that is still in progress. This is the cultural shift that has brought the discipline of marketing into the product and service development process. The new IBM has been able to respond to customer needs with an agility rare for a company of its size. It has been able to anticipate market-changing realities, such as the rise of open-source software in general and Linux in particular, and influence the way that these innovations are unfolding: both at IBM and in the market at large. The company's ability to innovate and to keep ahead of the market has been a direct result of its ability to bridge the gap that once existed between marketing and engineering.
Michael Megalli is a partner at Group 1066, a strategic marketing firm. Before forming Group 1066, he was a senior cConsultant at the strategic branding firm Siegel & Gale where he was responsible for the creation and implementation of branding and Internet strategies.
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