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Friday, February 08, 2008

Innovating to stay in the fast lane

How are big, monolith companies gearing up for life in the corporate fast lane? Companies like P&G, Toyota, Dell and Apple are either innovating and fast at that or just stagnating and losing pole position to their closest rivals - like Ford, which has been overtaken by Toyota in the US because it's not giving customers what they want, while Toyota is doing just that.

At Procter & Gamble, innovation is a bit of an obsession and Larry Houston is the man in charge. As Vice President of Innovation, he was in charge of generating ideas outside the company. A testimony to how well he does his job, P&G has been called the 'World's No.1 Brand Company'.

Then there is Travelocity that has revolutionised the travel industry. Terry Jones is the man behind the success of this travel portal. He's worked with American Airlines and then moved to American Airlines-owned Sabre - the world's first computerised reservation system. From there, he launched Travelocity - the world's first consumer direct travel services. Today, he gives his expertise to other companies making their transition to the digital economy.

Jones says that there were a lot of obstacles, in terms of inertia that needed to be overcome and there were people getting in the way. So, he told CNBC's Maria Bartiromo, "It's was really important that I was high up in the organisation, who had some clout, who reported to the CEO, so we were able to move them out of the headquarters and move them somewhere else."

Houston recalls that P&G's CEO AG Lafley told him to get innovative ideas from outside the company because most companies try to invent everything themselves, when there is tremendous talent all over the world. What's more is that P&G is willing to put money where the idea is.

But most large businesses seem stymied by the New Age technology revolution and can not seem to put their businesses on the fast-track to growth, despite being in the forefront. And that's partly because of traditions, which, the CEO of Socratic Arts, Robert Schank, feels is a not a good thing because then a company feels bound by its rules and traditions.

Traditionally, the big three car companies in the US have been General Motors, DaimlerChrysler and Ford. But now, Japanese carmaker Toyota has zoomed past Ford and is snapping at General Motors' heels. This year, almost 70 million cars, SUVs and trucks are going to be built around the world - almost 8,000 every hour - and Toyota is expected to build the most.

The secret to Toyota's success is its production system, which is also called TPS. It was created decades ago, and calls for constan improvement from planning, to assembling to sales. What they have going for them is that they are very creative, they also have a very educated workforce and great engineers.

Other companies who are learning from Toyota are Boeing, Ford, Caterpillar and even Nike. Consultant, Bill Schwartz says, "The real success of the Toyota production success is that it can be applied to any company because at its core, it's about eliminating waste. Eliminating waste in production or business process."

One of the latest innovations in the Toyota production system is that, at the end of the assembly line, when all the cars are built, they are taken to a sound booth so that the cars actually 'sound' the way they are supposed to!

Experts in the know, feel that even established companies can innovate if they get their hide-bound processes and decisions out of the way and became agile and nimble. But a leading expert in business strategy, Gary Hamel feels that large corporations do not have the "innovation DNA" but they can be taught the skills - the way Apple or Dell does it. Seconding him, Schank says that, CEOs don't have the motivation to innovate and don't want to innovate.

Hamel adds, "One of the things we know about innovators is that they are contrarians - that's the reason why so often the industry gets changed by outsiders. The real thing that inhibits innovation is the top management's prejudices, biases and assumptions about how to run the business."

"Innovation is like everything else in business - you have to be able to do it efficiently and cheaply - and that means borrowing ideas from outside." He does feel that old dogs can be taught new tricks, if they are willing to learn from their mistakes and make the necessary changes required.

Written for moneycontrol.com

Read more stories in the series here:
Do you have to fail to innovate

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