One of the most inspirational thinkers about innovation over recent decades is Vijay Govindarajan, known as VG. He is a professor at the Tuck School of Business at Dartmouth College, and received the 2011 Thinkers50 Breakthrough Idea Award for his idea for designing a $300 house.
“Innovation to me is adapting to change,” he summarized when we met at one of London’s best Indian restaurants. Our follow up question was to identify the principles that allow large organizations to really deliver on innovation. “I think the principles are very easy. There are three of them. However, even though they are easy to say, they are difficult to do,” said VG. “Principle number one: if you want innovation, you have to create a dedicated team that is separate from the core. Principle number two: the dedicated team, while separate, cannot be isolated. It needs to work in partnership with the performance engine of the company, its core competencies. The third principle is that innovation, by definition, is an experiment and experiments have unknown outcomes; therefore, don’t judge the innovation team based on its results, judge it based on its ability to learn.”
Brilliance takes more than one person – usually.
Ferran Adrià the creator of the El Bulli restaurant admits that his success derives from having a top-notch team. He explains that “to lead a team, it is most important that your team believes in you. In order for it to do so, you must first set an example — first, a human example, but also an example of seriousness in your work that earns their admiration in the end.”
It is interesting that when it comes to exemplars of teamworking our natural inclination is not to look to big corporations. Few successfully embed teamworking in their DNA. All would like to.
One frequently cited role model is the design company IDEO. Central to its culture is the concept of the studio. The IDEO-style studio is not a production line with an all-knowing, all-seeing font of creativity standing at one end. The star designer does not breeze in and out while a tribe of assistants labors over his latest creation. Most design companies are based on a single individual and fail when that individual moves on. Others are based on confrontation. IDEO works through open critiques of people’s work. Its belief is that part of being a studio is defending what you believe to be true.
The makeup of IDEO’s staff has subtly evolved, particularly over recent years. The power of IDEO was to take what otherwise might have been quite a “siloed” situation—designers don’t talk to engineers, and neither group will talk to human factors people—and create a culture in which team members respect one another.
In many ways, the design studio, as practiced at IDEO, is an organizational model that is in tune with our times. For one thing, it is small and creative. It is also low on hierarchy and big on communication, and it requires a minimal amount of ego. IDEO’s designers may take the starring role in a particular project and then find themselves back in the chorus on the next project.
Sustaining this culture requires dedication rather than innovative wackiness. It starts in the recruitment process. Compared to those of many other organizations, IDEO’s recruitment process is long and drawn out. There are three or four interviews. Applicants then show their work and discuss it with a group of IDEO people. Then they get to meet everyone and look at the projects that are underway to see how they interact. This is time-consuming, but essential, says IDEO. It wants to know how well people will fit. The teams have a say.
The rigor that IDEO brings to recruitment is increasingly matched by the attention it pays to evaluating performance. It has annual formal reviews based on a matrix of five elements: content, culture (team working and team leadership), client, commerce, and mentoring and leadership.
The reality is that though innovation is still often associated with the lone creator working late at night in search of inspiration, contemporary innovation is a team sport. And it is not only about teamwork at the execution stage. Among the leading intellectual players in establishing this was Coimbatore Krishnarao Prahalad, better known as C. K. Prahalad. Prahalad (1941–2010) was the Paul and Ruth McCracken Distinguished University Professor of Corporate Strategy at the Ross School of Business at the University of Michigan. In the 2007 and 2009 Thinkers50, he was ranked number one—a position he retained until his untimely death in 2010.
In The Future of Competition (subtitled Co-creating Unique Value with Customers), written with Venkat Ramaswamy, he introduced the notion of co-creation. Prahalad and Ramaswamy assert: “We are moving to a new form of value creation, where value is not created by the firm and exchanged with customers, but where value is co-created by the consumers and the company.”
Prahalad and Ramaswamy explained what they believed was a fundamental shift: “Business competition used to be a lot like traditional theater: On stage, the actors had clearly defined roles, and the customers paid for their tickets, sat back, and watched passively. In business, companies, distributors, and suppliers understood and adhered to their well-defined roles in a corporate relationship. Now the scene has changed, and business competition seems more like the experimental theater of the 1960s and 1970s; everyone and anyone can be part of the action.”
The big change heralded by Prahalad and Ramaswamy was the growing importance of co-creation with customers.
“The changing dynamics of business has been the focus of managerial debate the past few years. Practitioners and scholars talk about companies ‘competing as a family.’ They talk about alliances, networks, and collaboration among companies. But managers and researchers have largely ignored the consumer, the agent that is most dramatically transforming the industrial system as we know it,” Prahalad and Ramaswamy note.
It was the changing role of customers in the innovation process that co-creation championed. The active participation of customers in the creation of new products and services—enabled by the Internet in particular—is transforming how value is created and innovation occurs.
“Co-creation is an important idea,” CK told us when we talked. “What it says is that we need two joint problem solvers, not a single problem solver. In the traditional industrial system, the firm was the center of the universe, but when you move to the new information age, consumers have the opportunity to engage in a dialogue and be active, and therefore, they can shape their own personal experiences. So, with co-creation, consumers can personalize their own experiences and the firm can benefit. And this is becoming much more common and possible today.”
As an example , CK pointed to Google: “If I look at Google, it does not tell me how to use the system. I can personalize my own page; I can create iGoogle. I decide what I want. Google is an experience platform. Google understands that it may have a hundred million consumers, but each one can do what he or she wants with its platform. That is an extreme case of personalized, co-created value. Our shorthand for that is “N = 1.”
“On the other hand, Google does not produce the content at all. The content comes from a large number of people around the world—institutions and individuals. Google aggregates it and makes it available to me. That is the spirit of co-creation, which says that even if you have a hundred million consumers, each consumer experience is different because it is co-created by that consumer and the organization, in this case Google. So resources are not contained within the firm, but accessed from a wide variety of institutions; therefore, resources are global. Our shorthand for that is “R = G,” because resources are now coming from more than one institution. So, N = 1 and R = G are going to be the pattern for the future.
So how can companies develop the competencies to co-create with their customers? Prahalad and Ramaswamy identified four new imperatives:
- Encouraging active, explicit, and ongoing dialogue
- Mobilizing customer communities
- Managing customer diversity
- Co-creating personal experiences.
Sound familiar? These are all types of co-creation. But the idea extends far beyond the software industry. In particular, Prahalad saw an increasing role for consumers in shaping and creating their own value in areas such as healthcare. As he presciently observed:
“The availability of medical information on the internet and elsewhere is helping more and more patients enter into a dialog with their doctors. The more knowledgeable they become, the more likely these customers are to shape their healthcare regimen. Doctors may resent the consumer’s exercise of his or her knowledge, but they would do well to learn how to co-opt it.
Prahalad was also prescient about the growing availability of personal data. He believed that, as customers and patients, we would soon be able to co-create a personal health profile with our healthcare providers. He believed that at some point, it would be possible for someone with diabetes, for example, to collaborate with a doctor and receive a personalized warning if his or her blood sugar had dropped to a dangerously low level. Such a co-created health innovation would save many lives.
Co-creation is a reality — though that is not to suggest it is easy. There appears a genuine and reassuring tendency for big corporations to open their doors and their eyes.
Nilofer Merchant, author of Onlyness, provided an example when we asked her about the relationship between big corporations and innovation. “What I will say is that traditional organizations will have a very different basis. Let me give you an example. Years ago, IBM started doing something that I found truly profound, especially when I compared it to other companies like HP that didn’t do it. IBM started saying our expertise isn’t just what we ship, it isn’t just what we build, it isn’t just what we create all by ourselves. We could actually allow other people to shape that,” she said before going on to finish the story: “IBM’s Smarter Planet initiative started off as an effort to say ‘we should do something in the green space but we don’t know what’. They asked the questions to participants really broadly, drawing on talent that was outside the firm. They were eliminating the perimeter of the firm, not trying to help with an existing problem that was defined, but saying what problems should we solve?
“So they changed their perspective — the parameter of the question was open, and who could participate in solving that problem was also open. And with that Smarter Planet is now making a pretty sizeable contribution to the business. Now, is that enough to sustain an entire business? No, but I think it’s indicative of how social can work to fuel new innovations.”
All of this suggests that for one person to shoulder responsibility for generating and delivering innovation is an impossible task. Technology is wonderful, but at its core is its enabling of people to work together to create a better future. Innovation really is a team game.
CK Prahalad and Venkat Ramaswamy, The Future of Competition: Co-creating Unique Value with Customers, Harvard Business School Press, 2004
This was originally published in What we mean when we talk about innovation by Stuart Crainer and Des Dearlove (Infinite Ideas, 2016).