Nicolas Nova of the Pasta and Vinegar blog points to a recent piece in the Financial Times (“When the Cutting Edge Frightens the Customers”) about the various factors influencing innovation by Korean cellphone manufacturers (i.e. Samsung, LG Electronics). What’s interesting, says Nova, is that innovation is becoming a tough issue for these companies: they want to be on the cutting edge of technology, but they also want to avoid alienating their customers who may not be early-adopters. Here’s an extended quote from the FT piece:

Both companies are now at a critical juncture as they face a fundamental contradiction: they are concentrating on high-end products, particularly in mobile phones, but ever-smarter gadgets are becoming more intimidating and difficult to use for the average customer. These markets are also becoming saturated and new growth is to be found at the low end. So how do Samsung and LG, number three and five respectively in the global handset market, avoid a Sony-style post-Walkman product crisis?

“Sometimes it’s difficult to do market research because often consumers don’t know what they want,” says Lee Hee-gook, chief technology officer at LG Electronics.

No product exemplifies this dilemma better than the mobile phone, analysts say. “They are developing these all-seeing, all-doing handsets that can do everything but shine your shoes, but does the phone-using public really want that level of capability?” asks Mr Morris. “And more importantly, will they pay for it?”

“At any point you have to get realistic and check that what you’re doing makes sense.”

The IKEA of carmaking

At a time when U.S. automakers like Ford and GM are grappling with a dicey future, it looks like Eastern European automaker Skoda - the world’s third-oldest car manufacturer - has everything figured out. Strategy + Business takes a closer look at how “a Communist car monopoly turned Volkswagen subsidiary is now becoming an entrepreneurial global enterprise.” It’s a pretty impressive tale of being able to tap into new markets and adapt to the realities of global capitalism:

The company is presently negotiating to sell Skoda designs to Chinese carmakers, while pushing deeper into the Indian car market and preparing for entrance into Iranian and Arab markets. Meanwhile, Skoda (pronounced “shkoda”) has carved out significant market share in Britain, Germany, and Scandinavia. It is growing in Italy and France, and continues to be one of the dominant carmakers in the former Communist bloc. Its strategy — to become “the Ikea of carmaking,” as one Skoda executive puts it — builds on its existing post–Cold War reputation as a maker of inexpensive but strikingly functional small cars.

Oh, and in case you’re wondering - Skoda automobiles are not sold in either the USA or Canada.

The Fortune Innovation Forum, which will take place in New York on November 30 - December 1, will feature speakers from some of the most recognizable and well-respected companies in America - FedEx, IBM, Xerox, Starbucks, HBO and HP - in addition to other guest speakers like venture capitalists, design experts and entrepreneurs. Basically, the same types of individuals and companies that appear in each edition of Fortune magazine. A preview of the upcoming edition of Fortune just landed on my desk, and it looks like it has a number of articles of potential interest to anyone who is passionate about innovation:

Rupert Murdoch catches Internet fever and decides to rebuild a media empire

BitTorrent as the “Great Disrupter”

Steve Jobs on “What’s Next for Apple?”

How Mercedes re-energized a fading brand

Why AOL is suddenly hot, all over again

The New York Times peeks inside Ford Motor Company to see what CEO William Clay Ford Jr. might have on tap for the struggling automaker when he announces a new plan to turn around the company later this week. To be sure, Ford is not in the same desperate straits as GM, which has already posted a whopping $4 billion in losses in 2005. However, as the New York Times points out, the writing is already on the wall for Ford:

Both companies are overly dependent on sales of pickups and big sport utility vehicles. Both are suffering steep losses in their crucial domestic automotive operations as fuel prices rise and consumers turn away from gas guzzlers. And both companies are heavily burdened by high labor costs and the obligation to support hundreds of thousands of retirees and their families, the so-called legacy costs that have put much of the domestic auto industry at risk.

According to one Wall Street analyst interviewed for the piece, Ford has no choice other than innovate its way out of trouble:

Detroit is at a tipping point… Like steel, textiles, airlines and other American industries that have undergone radical restructurings, we expect an increasingly volatile and difficult environment for the companies involved and for their shareholders.

(photo credit: New York Times/Getty Images)

Michael Hammer, the co-author of the best-selling Reengineering the Corporation: A Manifesto for Business Revolution, uses a Harvard Business School case study on Schneider National, a Wisconsin-based transportation and logistics firm, to highlight the six steps to operational innovation. According to Hammer, “focusing on just the right capabilities can lead to greater success than ongoing internal innovation.” Instead of relying on incremental innovation across the entire enrerprise, the first step should be identifying a particular process to improve - and then deploying the necessary resources to fix that process.

In the case of Schneider National, the company realized that serving customers better than the competition was the fundamental key to success. As a result, “stretch goals were set for customer satisfaction, and a project was begun to tackle and improve one aspect of the company’s interactions with customers, namely how it prepared and delivered responses to customer requests for proposals (RFPs).” By focusing on this one key aspect - responding to customer RFPs - the company was able to shrink the response time from 30-45 days to 1-2 days. The results were astounding:

“By getting back to customers so much faster than its competitors, Schneider was able to shape the terms of competition. The result was a rise of some 70 percent in the percentage of bids that Schneider won, which translated into sales increases of hundreds of millions of dollars annually.”

One of the ideas that I’d like to develop here on the Fortune innovation blog is a discussion of how different cultures generate and implement ideas within large organizations. Apparently, there’s a formal name for this process in Japan: kaizen teian. (Not to be confused with Kaizer Soze) On the STUFBangkok site, there’s a great explanation of what kaizen teian is all about:

Kaizen Teian is a system for generating and implementing employee ideas. Japanese suggestion schemes have helped companies to improve quality and productivity, and reduced prices to increase market share. They concentrate on participation and the rate of implementation, rather than on the quality or value of the suggestions. The emphasis is on encouraging everyone to make improvements.

Kaizen Teian suggestions are usually small-scale ones, in the worker’s own area, and are easy and cheap to implement. Key points are that the rewards given are small, and implementation is rapid, which results in many small improvements that accumulate to massive total savings and improvements.

(Hat tip: Innovation Weblog)

How Caterpillar recombined its organizational DNA

In the current issue of strategy + business, there’s a fascinating story of how Caterpillar, the world’s largest heavy equipment manufacturer, rebuilt its organizational DNA to favor a healthier and more profitable business. According to strategy + business, there are four key building blocks to keep in mind when thinking about organizational DNA: decision rights (who makes which decisions and when?), information, motivators (i.e. incentives), and organizational structure (i.e. reporting relationships). A company that understands how each of these building blocks impact organizational DNA can create a more dynamic organization. That’s exactly what happened at Caterpillar:

The company reshaped its DNA on all four levels in a way that permanently changed the culture and capabilities of the enterprise. “This was a revolution that became a renaissance,” says Chairman and CEO James (Jim) Owens, who was a midlevel manager at Caterpillar when the story began. “It was a spectacular transformation of a kind of sluggish company into one that actually has entrepreneurial zeal.”

(photo credit: s + b)