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

before us.

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

enterprise.

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

frustration.

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

value-creation process.

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

value quickly.

3.) Innovation Champions: Be an innovation champion to drive the

value-creation process.

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

the curve.

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

approach?

4. How are these benefits per costs superior to the Competition’s and

the alternatives?

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

approach.

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

not alone."

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

visual experience.

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

elephant.

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

failed.

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

vexes you.

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.

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