Innovation leads to prosperity and a higher quality of life. It is the
basis for increased productivity, competitiveness, and national
wealth. And ultimately the major problems of our age – poverty,
health, and the environment – will only be addressed through our
collective ability to innovate. But an ability to innovate rapidly is
required if we are to identify and develop the abundance that is
The "Five Disciplines of Innovation" concept is a disciplined process
of innovation that is practically linked to the way things get done in
an enterprise. SRI propelled itself into double-digit growth by using
these ideas, at a time when economy was lumbering along at
single-digit rates. Our success has prompted leading organizations –
the BBC, Nippon Telephone, and Telegraph, the U.S. Department of
Homeland Security’s cyber team – to take our workshop and incorporate
the Five Disciplines of Innovation within their enterprise.
Innovation is not just the invention of some clever new gadget. It is
the successful creation and delivery of a new or improved product or
service in the marketplace. It is the process that turns an idea into
value for the customer and results in sustainable profit for the
Innovations can be incremental (a child’s new toy) or transformational
(the development of instant photography). In all cases innovations
deliver new customer value in the marketplace.
What we often find, though, is confusion about what innovation is and
how it is accomplished. Instead of focusing on creating new customer
value, we often find leadership in organizations trying to encourage
"creativity" with the hope of achieving greater success. They
sometimes even have large teams working to improve creativity
throughout the enterprise. But the real question is, "Creativity for
what?" Focusing just on creativity can lead to misplaced resources and
For example, people often claim that creative organizations cannot be
disciplined in their processes. We profoundly disagree. The most
creative individuals, teams, and organizations have a special kind of
discipline – one that unleashes creativity in the service of
developing important innovations.
Given the amount of misplaced effort we see in organizations, we are
not surprised by the high failure rates of many products and the
decreasing lifetimes of companies.
From 80 to 90 percent of new products and services fail after a year
or so, primarily because customers didn’t want them; the enterprise
did not understand its customers’ needs.
Many creative people have invented revolutionary new products but have
been unsuccessful at getting them into the enterprise. To take an
often-used example from Sarnoff, Philo Farnsworth invented television
in 1927, but it was David Sarnoff who created television broadcasting
to bring black-and-white television to the consumer in 1939. He
developed a successful business model that put together televisions,
cameras, broadcasting stations, program content, and advertising.
Farnsworth invented a device, while Sarnoff was the innovator who put
all the pieces together to create an industry.
An enterprise that focuses on the customer does better at creating
customer value. If you know how to create customer value, you have a
much greater chance to succeed and remain employable over your full
working years. Otherwise, you may become obsolete.
An enterprise that focuses on the customer has shared language and
tools for understanding customer value and has a systematic
Few companies have demonstrated the ability to innovate
systematically. Even fewer individuals have the innovation skills
needed to take control of their careers and make the impact they are
capable of in our hyper-competitive world.
The Five Disciplines of Innovation will give you a strategy and plan
to master innovation and move forward positively in our world of
abundance. They are:
1.) Important Needs: Work on important customer and market needs, not
just what is interesting to you.
2.) Value Creation: Use the tools of value creation to create customer
3.) Innovation Champions: Be an innovation champion to drive the
4.) Innovation Teams: Use a multidisciplinary, team-based approach to
innovation to create a collective, genius-level IQ.
5.) Organizational Alignment: Get your team and enterprise aligned to
systematically produce high-value innovations.
Even a small improvement in our ability to innovate can have a huge
impact. And unlike the exploitation of natural resources, there are no
limits to growth when it comes to innovation.
The disciplines of innovation do NOT include
A focus on teamwork, creativity, and culture, because they are not
business objectives. When an organization sends its executives down a
river in a raft to learn teamwork or has them building
brightly-colored paper airplanes to learn creativity, something is
profoundly wrong. And when a change agent announces a plan to redo
everyone’s "culture," is it surprising that the organization takes
offense and resists?
A focus on shareholder value. It puts the cart before the horse. It
doesn’t align the enterprise and tell each employee what to do. Create
shareholder value by focusing the entire organization on creating
compelling customer value.
A focus only on quality and cost. That does not fully equip us to
compete. Continuous Value Creation (CVC) is a natural extension of the
quality focus advocated by W. Edwards Deming and Henry Ford.
"Continuous" means that all aspects of the enterprise are focused on
creating the highest customer value. "Value Creation" means a process
can be learned and applied throughout the enterprise.
Rule 1: Meet Real Needs
Create commonly understood criteria for what constitutes "important"
customer and market needs.
Government agencies are notoriously poor at focusing on customer needs
that matter. The Federal Emergency Management Agency’s slow repose to
Hurricane Katrina in New Orleans is an example. On the trip to New
Orleans rescue workers had to stop for "sensitivity" training,
certainly an interesting thing to do when compared with the profoundly
more important task of saving lives.
In contrast, at the Defense Advanced Research Projects Agency (DARPA),
all grant-funded programs must create paradigm-shifting technical
capabilities that provide a significant impact for the Department of
Defense. For example, DARPA funded the work that linked computers in a
network, which led to the Internet. Its mission has propelled such
military innovations as the GPS systems, stealth aircraft, unmanned
combat air systems, autonomous robots, and the Saturn rocket.
Anticipate external changes such as rapid obsolescence. Aim ahead of
Ask if it is feasible. For years Thomas Edison did not work on the
light bulb; he knew that the technology needed to create the
infrastructure to distribute electricity was not practical. Once he
decided the infrastructure could be built, he put his prodigious
energy behind the task.
Rule 2: Focus On Customer Value
Focusing on customer value will create company value, shareholder
value, employee value, and public value.
You should be able to understand the value proposition easily. The
dot-com bubble of 1998-2001 was the result of companies being formed
without understanding the value proposition for customers. Asked how
they would make a profit, the dot-coms would say something like,
"We’ll figure that out later; our focus is on getting eyeballs looking
at our website." Eyeballs?
Eyeballs! By 2001 hundreds of companies, thousands of employees, and
tens of billions of dollars were gone.
To be effective, value propositions must be quantitative and easily
understood. If you can’t state your value proposition, you don’t
understand your job. Developing the a good value proposition is
extremely difficult, because it must answer all four "NABC" questions.
1. What is the important customer and market Need?
2. What is the Approach for addressing this need?
3. What are the specific Benefits per costs that result from this
4. How are these benefits per costs superior to the Competition’s and
Tool: Watering Holes
Begin the process of creating customer value for a new innovation by
rapid iteration with others to get the specific answers needed.
Iteration consists of (1.) writing down your initial NABC value
proposition, (2.) getting feedback on it and collecting more new
ideas, (3.) synthesizing the ideas collected and revising the value
proposition, and (4.) continuing this process over and over.
Instigate structured, recurring meetings, called Watering Holes. They
are not just brainstorming sessions but are structured around
answering specific questions.
A. Have a clearly articulated initial goal. Write it down. Susan
Gauff, who was head of human resources at Sarnoff and now runs her own
company, always said, "If it’s not written down, it’s not real." Keep
it short in the beginning, to avoid falling in love with your initial
B. Announce the schedule of the meetings and provide a formal agenda.
A great deal of work needs to be done before and after each meeting.
Store and share your achievements, either in a loose-leaf binder or on
a website with all the presentations and backup materials.
C. Make market analysis a regular presentation topic; keep building a
broader and deeper understanding of the market segment’s ecosystem.
D. Present your value proposition to experts, colleagues, and friends,
allowing them to help you add to and refine your ideas. Include
prospective partners – get their knowledge and buy-in. Ask informed
questions. Since almost no one else does, you will distinguish
yourself while gathering critical information. If you do not have deep
market knowledge, you need a Jungle Guide, a content or domain expert
to make the trip less risky and more fruitful.
Watering holes will reduce risk – market risk, technical risk, people
risk, financial risk, or business model risk.
Spend scarce resources only on those few elements of the plan that are
risky. Think of learning to play a musical instrument. Many musicians
fritter away their practice time rehearsing the parts they already
know. The people who rapidly improve are those who work on the parts
they can’t yet play.
Early failures cannot be avoided; don’t think that you will be the
exception who gets an easy ride. You don’t iterate once or twice, you
do it many times, improving at each stage. When a colleague of Thomas
Edison observed that he had again failed to find a filament that would
not burn out in a light bulb, Edison said, "I didn’t fail, I just
found something else that didn’t work." Eventually he succeeded.
Tool: Elevator Pitch
Develop a pithy summary of the value proposition that can be told in
one to two minutes. If your audience doesn’t understand, it’s your
fault. As Woodrow Wilson said, "If I am to speak 10 minutes, I need a
week for preparation. If an hour, I am ready now."
An Elevator Pitch has three parts: It has a hook to get interest, a
core composed of your quantitative value proposition to tell your
story and a close to ask for action to move to the next step.
Your Elevator Pitch must be repeatable by others. If executives,
venture capitalists, and leaders in government and universities cannot
walk out of the room and state simply and clearly why their company or
organization must move ahead with your project, you have failed.
Hooks inextricably link the listener with the value proposition to
follow. The hook can be a story, a metaphor, or humor. Failure stories
also resonate. For instance: "Are you having trouble hearing? You’re
When your value proposition is quantitative, it stands out from the
crowd. "Faster, cheaper, better," are not quantitative. If you don’t
know the specifics, tell the audience you don’t know and give your
best estimate. Don’t compound ignorance with ambiguity. When you are
forced to be absolutely clear about what you are offering, it will
stick better in the listener’s mind.
A good close accomplishes something: another meeting, funding,
additional partners or employees, a reference to another person. If
you don’t want a specific outcome, don’t waste anyone’s time.
Tool: Innovation Plan
The plan analyzes the need, the approach, the benefits, the
competition or alternative, and the next steps.
We learned the hard way how challenging it can be to develop an
acceptable business model when Sarnoff was trying to create digital
cinema. It is easy to show that digital cinema can have much higher
quality than that of today’s 35 mm film. We did side-by-side
comparisons for industry leaders, showing that quality improvements
were striking. Visually it was a slam dunk. Unfortunately, the current
35 mm film quality was, from an industry perspective, good enough.
The pain for the movie industry was in the cost of distribution and
the huge losses resulting from illegal copies being sold around the
world. We had the technology that would allow secure distribution of
digital movie copies by satellite, saving hundreds of millions of
dollars each year. But it turned out there was no viable business
model. The interlocking contractual relationships between the studios,
the distributors, and the exhibitors could not be changed.
Fortunately we didn’t spend much money to learn this hard-earned
lesson. But electronic cinema will happen. HDTV in the home will
eventually force the movie industry to provide a dramatically superior
Rule 3: Use Champions
Champions are builders who are passionate and committed. They stay
focused on a vision and inspire their team and partners to work
together. They persevere by taking full responsibility. Almost 100
percent of the people who make the commitment to be champions have
significant success. They have an urgent "Let’s do it" spirit as they
always fully involve others.
An enterprise full of champions exudes energy, optimism, and
excitement. You can feel the difference in someone saying, "I’m the
champion who helps teams stay on track," compared with "I’m in human
resources." Each new champion contributes to a positive compounding
spiral of possibilities where people succeed.
Companies that welcome not ideas for the value they create, but
because they come from someone with clout or a title, leave enormous
money on the table.
Champions who succeed always have at least one other person who helps
them launch their innovations. Champions are organizationally
responsible; they do not run amok. Every person on a team should be a
champion for his or her part.
A colleague at Sarnoff, Jeremy Pollack, is a role model for how to be
a champion. Pollack is a research assistant, five organizational
levels down from the CEO. But you would never know that. He is smart,
persuasive, and engaging. When Sarnoff has a really tough problem that
must be solved, Pollack asks for it, takes complete responsibility for
it, and gets it done.
When we were developing the U.S. HDTV standard, we would go to the
consumer electronics show in Las Vegas. Setting up experimental HDTV
equipment the size of three refrigerators in a piece of equipment
without a union member holding the plug is a challenge. Pollack was
never daunted, even when he had to work all night in an empty exhibit
hall to get the equipment to work. It always did.
Champions accrue many rewards. They get to make an impact because they
focus on important needs and create value for their customers, teams,
enterprise, and themselves. On the personal level, they get to learn
new skills and enhance their own professional development.
Champions experience the joy of working and sharing with others, since
their passion attracts other talented people who want to join them in
producing extraordinary results. Being a champion is simply more fun.
As a champion, when you look back on your career, you will likely
treasure most your terrific colleagues, remembering the excitement and
camaraderie generated by working on important projects together. When
one champion we know was asked what he liked best about his job, he
said, "I like helping others achieve their dreams."
Rule 4: Form a Team
Many people in organizations today find teams a drag rather than a
value builder. To leverage the genius of teams you must have a
disciplined process led by a champion. If you cannot list the
processes your teams use to leverage the unlocked genius of the team,
it will stay locked.
A general rule for new champions, which is only a slight exaggeration,
is that you should communicate with your team 10 times more than you
might have originally thought necessary. This is because team members,
like the proverbial blind men, are touching only a few parts of the
elephant at any one time. You need to keep describing the entire
The Three-Legged Stool of Collaboration. The HDTV team remains the
best example of managing an innovation at the prototype stage we have
seen. (See box page 13.)
Norm Goldsmith, Glenn Reitmeier, and Terry Smith were a perfect
example of the Three Legged Stool of Collaboration. If they had not
shared the same strategic vision, and ensured that team members had
unique, complementary skills, and shared the rewards, they would have
Under the extreme conditions of the HDTV project we tried to be sure
that all of the spouses and families understood our vision and the
exciting mission for which their loved ones were sacrificing. Whenever
a spouse or family member called an engineer on the project, we would
ask to speak with them – to say thank you for their sacrifice,
support, and understanding. The message sometimes wore a bit thin, but
we never stopped saying thank you.
On one occasion we arranged to have a wife fly in to spend a weekend
with her "estranged" husband. That expense wasn’t in our budget, and
it was against official company policy, but our terrific CEO at the
time, Jim Carnes, agreed, and we did the right thing. The project
fared far better than if our engineer had traveled home. The couple
remained happily married, and when we finally shipped our HDTV system,
we ordered 60 dozen red roses for all the spouses.
Trust issues arose many times in our HDTV project because almost
everyone got into trouble at some point. Trust is at the heart of
teamwork, a tremendous motivator. Trust is easy to break and hard to
build. Specific behaviors build trust: respect for others, integrity,
and generosity of spirit.
In every case on the HDTV project, the senior members of the team, who
knew everyone, reinforced the message that all members of the team
were valuable and reliable and could be trusted to deliver their part
of the project. Just as important, the team members were trusted to
know when to ask for help and trusted to accept help from other
members. When issues came up, they were addressed, and we succeeded.
Respect for others is also a requirement for meaningful, long-lasting
relationships with one’s customers. We have several colleagues from
India who always give excellent, professional presentations. After one
such presentation, we asked the presenter why this was so. He said,
"In India, a customer is like a guest in our house."
Integrity is contagious. The CEO at Sarnoff when HDTV was being
developed was Jim Carnes. Jim’s integrity permeated the organization
and was one of the keys to Sarnoff’s success. The HDTV innovation
would not have happened without the trust that Jim instilled
throughout our team and in our corporate partners.
Every business opportunity is filled with extraordinary highs and lows
and numerous opportunities to question the motives of others. It is
necessary to be constantly building your relationship "bank account"
so that when one of these difficult periods comes along, there is
"money" in the bank to draw on.
When working with someone on a team who is difficult, you must do one
of the following:
1. Talk with the team member and work out the concern.
2. Resolve it inside yourself, so that the other person no longer
3. Leave. You must not form coalitions, criticize others in their
absence, make end runs to the team member’s manager, or use power
plays. Work it out, let it go, or leave. If you need help to make this
happen, get help.
Rule 5: Align For Success
Failure to achieve alignment within the project, the team, and the
enterprise can lead to either costly delays or outright failure.
In the beginning, most members of your larger organization will likely
disregard you. When they see you having success, they may ask you to
modify your practices to better fit their agenda. We had a dramatic
example of this when we first started at Sarnoff. A vice president
told us that there was no future in what we were doing, and that he
was going to focus on other parts of the business. We said, "That’s
okay, thanks for telling us."
Over time, our group began growing twice as fast as the rest of the
enterprise. The same VP then showed up in our office, sat down, and
said, "I have no idea how you are folks are doing it. You keep on
talking about important problems, compelling customer value, and all
that other stuff. But if you would just lower your standards, there’s
a lot of good, average work out there that we could get to help grow
the business faster." He didn’t get what we were about.
We politely but firmly asked him to never talk to any member of our
team. Shortly after this meeting he became frustrated with his lack of
success and left.