In the battle to create, market, and sell the most innovative, irresistible product, is it better to be a David or a Goliath? Small, nimble companies are often considered the most fertile breeding ground for the next great thing. Yet larger organizations have the backing of fat research budgets and experienced marketing teams.
At a panel discussion at the HBS Marketing Conference on April 9, representatives of campanies ranging from a start-up funded on a credit card to the world's largest marketer of consumer goods discussed the pros and cons of a company's size relative to its powers to innovate. HBS professor Das Narayandas moderated.
| We need to be an elephant that can dance. |
| —Karl Ronn, Procter & Gamble |
"Obviously the big guys can do anything they want—they have all the money and the resources," said Rhonda Kallman (OPM 28, 1999), founder and CEO of New Century Brewing Company (NCBC). Even so, Kallman made the case that innovation is at its finest when it originates in small, entrepreneurial companies.
"If you're a multi-billion dollar company, you have multi-billion dollar brands that you need to watch every second," she said. "If you switch your attention to R&D, it's a little bit of a crap shoot."
According to Kallman, a larger company is best served by finding a small venture (such as her own) and funding it off-line.
Defining innovation
"I work for one of those large companies," said Manuel Rosso, director of marketing in Dell's U.S. Consumer Systems Group. While he admitted that Dell isn't often considered the most innovative company around, Rosso suggested that it depends on how you define innovation. Innovation as a production process is very much alive at Dell. In the world of product innovation, he added, the word "commodity" is often considered an evil to be avoided at all costs. Not at Dell. "We welcome the commodity hell," said Rosso. "It's what we do."
"We need to be an elephant that can dance," said Karl Ronn of Procter & Gamble. As vice president of Home Care R&D and Global Surface Care, Ronn proposed a three-pronged approach to innovation: Maintain an external focus; change the rules of the game, re-evaluating every eighteen months; and maintain a culture of innovation, not just a culture of production. "Nurture the new thing rather than judge it too soon," he said.
P & G's rule-changing strategy led it to ask a fundamentally different question, said Ronn. Instead of formulating more chemistry-based, liquid products, the company began to explore the potential of physics in creating new cleaning products. One result of this shift in perspective was the hugely successful Swiffer.
Consistency is a key factor in Quiznos Sub's approach to innovation, said Chief Marketing Officer Trey Hall. "We throw everything against that brand architecture. If it doesn't stick, we don't do it."
Relevance is another part of the equation: "We do a ton of research, both quantitative and qualitative, to create something the consumer actually wants."
Finally, there's the quality of unexpectedness, or as Hall described it, "zigging when others are zagging."
The power of different
Diversity, or "cognitive variety," is essential to innovation, said Dan Buchner, vice president of innovation and design at Design Continuum, an industrial design firm. Many of the employees in Buchner's firm have followed a nontraditional career path or have dual degrees in disparate areas, such as archaeology and mechanical engineering.
| It's a prerequisite that if you're going to fail, you have to fail forward. |
| —Trey Hall, Quiznos Sub |
"We know that the right and left brain are firing inside that person's head," he remarked. "One of the problems of a big company is that they tend to hire to a template."
One audience member wondered how to deal with the natural aversion to risk that can exist in a large company. Doesn't a certain sense of self-preservation prevent a manager from backing an employee with a new proposal that may fail—and sink them both?
"Some of the CEOs I've worked with at larger companies have taken a portfolio approach to managing resources for new products," said Buchner. "A lot of it comes down to character and courage."
"In a smaller company like ours, it's a prerequisite that if you're going to fail, you have to fail forward," said Quiznos' Trey Hall. "I have failed a few times with no concern at all that I would lose my job," he added, referring to the Quiznos "sponge monkey" ad campaign. The bizarre little animated creatures received mixed reviews but generated extensive news coverage that added up to loads of free PR. In the end, however, they failed to move the sales needle forward. "If your sales don't go up—it's a failure," said Hall. "Even if it's really cool, even if it's on VH-1—it doesn't matter."
Another attendee wondered how panelists sell management on new products. What's the best way to ensure one's innovation doesn't languish on a higher-up's desk?
"The most effective way is to create a prototype, to make your idea somehow real," said Ronn. Once you do that you're telling a story, and human beings know how to respond to stories. If it's a dead memo—don't waste your time."
"I believe innovation comes from two sources: technology and the consumer," said Buchner. Create a prototype, he agreed, and get the consumer's emotional response to it in the context of his or her home. "It's less about process and more about people—don't look at the numbers. Get out in the world." 