Innovation strategies change

22 October 2010

NEW YORK: Major brand owners like General Motors, Novartis and Cisco are taking an increasingly nuanced approach to innovation.

Joe Jimenez, chief executive of pharma giant Novartis, has transformed the corporation's R&D strategy in the last two years, partly drawing on the experience he gained at FMCG specialist Heinz.

"Novartis is a science-based organisation with a long new product development timetable and a lot of analysis going into decision-making," Jimenez told KPMG.

"That is absolutely right for decisions about science. But we were applying the same analysis and timelines to decisions in sales, marketing and finance."

Web 2.0 has played a central role in encouraging a shift, with Novartis' in-house social network, Ideapharm, allowing staff to submit successful models which may prove useful to other departments.

"It gives an organisation of this size - we employ about 100,000 people globally - a mechanism for moving good ideas around the company far faster than we have been able to historically," said Jimenez.

"We have one of the best pipelines of products in the industry. And I'm maintaining my R&D spend at a time when many of my peers are cutting theirs because they're not getting value out of it."

Tata Consultancy Services, headquartered in India, has established a similar internal platform, IdeaMax, and is equally enthusiastic regarding the results.

"If I come up with an idea, whether incremental or disruptive, I need to know where to go with it," said K. Ananth Krishnan, its chief technology officer. "The wisdom of crowds works for us."

Search pioneer Google famously gives employees "20% time" to pursue pet projects, a figure often reaching 50% at Genentech, fuelling the discovery of bowel cancer drug Avastin, sales of which are set to hit $8.9bn by 2016.

"The best businesses encourage brainstorming first. Don't introduce cost too early, or ask your creative people to understand the cost of production," said Bernard Brown, KPMG's head of business services.

"All they will do is use their normal production processes - and not consider if there is a better way of doing it."

Another vital aspect of managing innovation is measurement, and electronics manufacturer Samsung focuses on metrics including price premiums, speed-to-market and customer satisfaction.

"Many firms fall into the trap of thinking things are improving - when in the end it doesn't work out that way," said Chu Woo-sik, senior vice-president, Samsung.

Consumer goods titan Procter & Gamble initially gave the Align probiotic range for irritable bowel syndrome a modest online launch in 2007, scaling this up two years later as it became clear the product should hold its own.

Elsewhere, a willingness to ignore category conventions helped gaming group Nintendo deliver the Wii, aimed at families and casual users, and selling 71m units in four years.

"We could have tried to improve the speed at which it displays stunning graphics, but how much impact would that really have had?" said Nintendo's Genyo Takeda.

Even more broadly, automaker GM has localised its innovation procedures, and recently started shipping the Chevrolet New Sail, created in China, to Latin America.

"The New Sail is the first locally developed and manufactured passenger car from an international brand to be exported," said Terry Johnsson, Shanghai GM vp, vehicle sales, service and marketing.

"It represents a breakthrough in our strategy to create products for China and other emerging markets."

Cisco, the networking company, has also committed to spend $1bn in Russia, $16bn in China and $17bn, adapting its tactics accordingly.

"There's not a ceo or government leader in this world that won't invest in new concepts that meet business needs," said ceo John Chambers.

Data sourced from KPMG; additional content by Warc staff