Kellogg innovation summit advances top-level discourse

Two-day ‘dialogue’ brings together senior executives, academics to explore new ways of driving creativity and global leadership

By Matt Golosinski

November 12, 2007 - Relentless market pressures mean that companies must continually rejuvenate themselves, their offerings and how they do business, said participants at a Kellogg School innovation gathering held November 6-7 at the James L. Allen Center. Experts there outlined a number of keys to successful innovation, including bold thinking, strategic clarity and an organizational culture that embraces fresh ideas and challenges conventional wisdom.

“Innovation is absolutely critical in today’s environment,” said Betsy Holden ’82, senior adviser to McKinsey & Co., during a panel discussion with CEOs on November 6. But innovation means more than just new products and services. It also includes thinking about business systems and leadership in new ways — precisely the point of the two-day Kellogg event, which included workshops, lectures, breakout sessions, networking opportunities and even a concert violinist whose performance was intended to get participants thinking about the boundaries between art, science and technology.

The summit was organized by the Kellogg Center for Research in Technology and Innovation as another in a series of ambitious initiatives produced by the Kellogg Innovation Network (KIN), a forum created in 2003 by faculty members Robert C. Wolcott and Mohanbir Sawhney to provide a way for select executives and innovation managers to discuss industry-wide challenges, business growth and strategy. KIN Dialogue 2007 considered the theme “Leadership, Innovation and the Global Firm” and attracted an array of professionals whose mission includes driving business success through new ideas.

Miles White, chairman and CEO of Abbott Laboratories, was among those on the CEO panel moderated by Holden.

“Innovation is about not accepting convention and not playing the game like everybody else,” said White, chief executive of the 120-year-old diversified pharmaceutical and healthcare company. A firm living up to this definition requires a culture that encourages ideas from throughout the company, he said. It also demands the right incentives to ensure people feel comfortable in bringing ideas forward. “Fear stifles innovation,” said White. “If you punish failures and don’t invite ideas … that will kill innovation.”

One challenge for Abbott’s leadership is managing both short- and longer-term growth while keeping pace with constant changes in medical science and healthcare. The company is “intentionally diverse,” spread among pharmaceuticals, medical devices, and nutritional and diagnostic products. As a result, White said the company has “many R&D and innovation models,” a fact that he said serves to keep Abbott looking forward for new opportunities.

“Not only can’t you not fear change,” he said, “but you have to manage it and expect it everywhere.” Everyone in the company must embrace change, White added.

Fellow panelist and Kellogg Dean’s Advisory Board member Carol Bernick agreed. The executive chairman of Alberto-Culver, a $1.4 billion manufacturer and marketer of beauty and personal care products, Bernick said that creativity and excitement should suffuse the organization. To make that happen, she said that a company must “incent for it, measure it and hold leaders accountable to be innovative.”

Alberto-Culver, which Bernick said has enjoyed 10 percent annual compound growth over the last decade, is a firm she described as thriving on and requiring innovation to remain competitive with larger companies like Unilever. Bernick said her firm’s success derives in part from its leadership being “innovation nuts.”

But it takes more than a few top people thinking outside the box, she noted. “Innovation is what we’re about,” said Bernick. “If our people on the shop floor don’t know that, we’re not going to go anywhere.”

Innovation challenges for a company like Illinois Tool Works include finding a focus, said the firm’s former chairman and CEO, W. James Farrell, another member of the panel discussion. With some 55,000 people spread across 750 business units, ITW’s diversification offers it strength but also means that the organization must pay attention to customer demand to determine where the company should put its resources. “There’s never one right way to approach innovation,” said Farrell, a member of the Kellogg Dean’s Advisory Board. “There are always different approaches. As long as you have the numbers to put up, your approach is right.”

Helping ITW achieve focus is its “80/20 Process,” said Farrell, who served at the company’s CEO from 1995 until 2005. This approach is designed to help management identify the core customers who drive 80 percent of the company’s sales. By focusing on the most valuable 20 percent of clients, Farrell said that ITW can allocate resources accordingly, while still maintaining relationships with lower-volume customers through different programs and strategies, including outsourcing.

A point that emerged during the KIN dialogue was how firms can pursue necessary changes while still managing existing success. For Miles White, the answer involves “living in two worlds” — the 90-day business cycle and the 10-year business cycle.

“We don’t spend a lot of time living in the present,” said the Abbott CEO. “The truth is, you’ve got to live way out from where you are now, in the future 10 or 15 years. You have to plan the changes you’re going to need.” He estimated that he spends 75 percent of his time considering the long view.

But White also acknowledged that failure is part of the innovation game — and is acceptable so long as the organization learns from its mistakes and adapts to changing market conditions. In fact, he said that a business that looks the same as it did 10 or 15 years ago is “probably behind” the competition today. One of the potential hurdles that can result in failure is complexity, he said: Too often companies forget how to “make more with less” and focus exclusively on the product while forgetting to refine their processes to make them adaptable and robust.

“When we let complexity confound our business, that kills our business,” said White.

But simplicity doesn’t come easy. “The toughest thing in the world is to make things simple,” said Farrell.

The KIN Dialogue, which was spearheaded by Wolcott, offered potential success strategies even while illustrating the challenges presented by aiming for the next big thing. Most participants agreed that innovation is difficult, particularly for companies whose R&D cycle is 5-10 years, but whose investors demand satisfaction each fiscal quarter.

“This innovation stuff is hard,” said Barry Merkin, clinical professor of entrepreneurship. “What we heard at the KIN event was great minds at great companies struggling with it. They are excited about innovation, but they also know that it’s imperative for their survival. In the U.S., we’ve got to get better at our core competencies — innovation and entrepreneurship — or else risk losing in the global market.”