Innovation consulting firm Innosight has been at the forefront of helping large, established competitors understand the impact of disruptive technologies on their industries and markets. Building on the disruptive innovation framework developed by Clayton Christensen, Innosight’s approach and proprietary tools facilitate the discovery of new, high-growth markets and the rapid creation of breakthrough products and services. With less than a month to go before the start of the FORTUNE Innovation Forum in New York City, Innosight co-founder and president Mark Johnson joins the Business Innovation Insider for a special Q&A on innovation. At the FORTUNE Innovation Forum, Mark Johnson will be moderating a panel discussion on Hardwiring Innovation and Creating a High-Performance Culture.

Q: Who should be responsible for innovation inside of a large corporation? Why?

Mark Johnson: It really depends. For innovations that sustain the core business, innovation responsibility should reside with the general manager who leads the unit but working closely with key people that allow different kinds of innovation to happen such as Product development for product service innovations and marketing for customer experience and channel innovations. For disruptive innovations that are intended to create whole new markets, responsibility should be separated out and a project manager who leads an autonomous should be put in charge.

Q: What is the most important thing that needs to happen before innovation inside a company can occur?

Mark Johnson: At Innosight, we believe the most important piece that needs to be in place is having a common language and a common way to frame innovation. That allows groups to collaborate in a way that allow innovation to happen given that they think about it in the same way. All too often different groups speak a different language of innovation. When that happens there’s what’s called an absorptive capacity issue – knowledge transfer which is so important for innovation to take place doesn’t happen because the fundamental language is so different between units.

Q: Is there an innovation success story within your business that you are most proud of?

Mark Johnson: As a consulting firm our success stories are with our clients. We have enjoyed working with companies to create numerous product successes which we cannot disclose given client confidentiality. Our most successful innovation stories come from the Consumer Packaged Goods (CPG) industry.

Q: Is there a formal process for tapping into the knowledge of your workforce?

Mark Johnson: We have formal processes for doing this but they’re not mechanistic. That said, we tap into the knowledge of our professional staff by having bi-weekly “brown bag” lunch meetings. We also transfer people around, working in different team compositions to transfer ideas and insights to new groups. We also have formal training events where we expect each person of our professional organization to have a teaching role at some point throughout the year. Finally, we leverage knowledge through an on-line management system, enhanced by an individual at our company who works half her time “pushing” the system out to our employees.

Q: How much do you rely on research and analysis to guide the development of new innovative services and products?

Mark Johnson: Again, this depends if we’re talking about a sustaining, in market development effort or an effort to create a new market opportunity through a disruptive approach. If it’s sustaining we help clients by often conducting a lot of market and other forms of research. If it’s disruptive into a new market, we will do some research to understand the basic “jobs” consumers might have but it’s more of an empirical effort where learning takes place by “doing”, implementing in the market. Further, typical disruptive opportunities utilize existing, often simple technologies so technical research and analysis is often minimal, although not always in these kinds of innovations.

Q: What innovative companies do you most admire?

Mark Johnson: P&G, J&J, Cisco, Toyota

Q: Does the importance of innovation to your organization vary depending on where you are in the business cycle?

Mark Johnson: It’s an important point about innovation. The time to pursue innovations that really transform the company to the next level should take place when the core business is healthy and not financially challenged. When financial challenges happen, innovation takes a hit except for those innovations that can help wring out costs or seem good routes to gain market share. Again as a consulting firm, we can only advise here and our suggestion is start before you need to in focusing on innovations that help you to create new growth.

Q: Can you innovate without having access to large amounts of capital? If so, how?

Mark Johnson: Yes, the disruptive approach is all about this kind of innovation approach. It’s about spending a little to learn a lot in the marketplace before pouring too much money into a venture. The key is to manage risk in going into new growth areas and this is best done by keeping the “experiment” well bounded with a niche, foothold market and then trying to prove a viable business model through proving profitability. By keeping the investment low clarity remains on whether the business is structured right to turn a profit

Q: How can failure lead to innovative breakthroughs in business?

Mark Johnson: Failure is really a key to breakthrough because said another way, failure means learning of which adjustments are made. On the other hand, a mistake is doing the same failure twice because learning didn’t take place. For creating new growth in new markets, outside the core of a company the only option is to fail. In fact, 90% of successful ventures make significant changes to their strategy 4 times before getting it right. So failure is part of coming up with a business breakthrough for a new market. The key to failure means learning from the market and the learning is then transferred to making adjustments to get the overall business model right.

Information Week examines last month’s patent spat between IBM and Amazon, viewing it as symptomatic of the broader flaws within the U.S. patent process. Critics maintain that the convoluted and murky patent process inevitably leads to a situation in which companies like IBM must apply a double standard when it comes to the protection of their intellectual property:

“Almost two years ago, IBM donated 500 software patents to the open source community, with a pledge that it would not enforce its license rights to the technologies. But the company remains fiercely protective of its vast portfolio of intellectual property, as Amazon.com learned when IBM filed a patent-infringement suit claiming the Internet retailer built its business using IBM-developed technology and processes. Welcome to the tortuous world of technology patents and intellectual property, where community-minded vendors share original ideas manifest as software code one day — then bring the hammer down on suspected scofflaws the next.”

Even IBM seems to be a bit bemused by its waffling on the intellectual property issue:

“IBM’s top attorney for intellectual property rights acknowledges his company’s position can seem contradictory and confusing. “We’ve referred to our patent policy as apparent schizophrenia,” David Kappos says. Yet he maintains that “on a deeper level, our actions are consistent.”

Apparently, IBM’s patents include things like “storing data in an interactive network,” “ordering items using an electronic catalog” and “presenting advertising in an interactive service.” As The Guardian (U.K.) notes, attempting to defend these patents - all of which are fundamental to online commerce - is like imposing a hidden tax on online shopping.

[image: Thomas Edison’s patent application for the light bulb]