11:10 am - 12:00 pm: In a panel discussion moderated by Mark Johnson of Innosight, Anand Pillai (HCL Technologies), Mary Kay Haben (Kraft), Daniel Scheinman (Cisco) and Sophie Vandebroek (Xerox, pictured at left) discussed how to hardwire innovation into the fabric of an organization. As they explain, it’s important to create a high-performance culture that inspires people to feel safe to take risks. At the same time, however, this culture needs to enforce a certain amount of rigor and structure. The bottom line: any organization must find the appropriate balance between left-brain thinking and right-brain thinking.

Mark Johnson led off with a quote from Peter Drucker: “Some theories of the business no longer work and become obsolete.” As proof, consider that the average lifetime of a company in the S&P 500 was 55 years in 1950; every decade since then, this lifespan has shrunk. According to the Economist Intelligence Unit, between 2005 and 2010, business model innovation will become even more important. Companies can no longer stay in place and hope to be successful.

Johnson then set up the debate of “core” versus “disruptive” innovation. In the core business, the “knowledge-to-assumption basis” is very high. As a result, you can be very deliberate in your innovation approach. But how does an organization innovate when the knowledge-to-assumption ratio is very low? It usually requires fundamentally turning the company on its head. You may need new metrics, such as “return on learning investment,” in order to get at disruptive innovation.

Johnson followed with another quote: “The test of an intelligent person is being able to hold two opposing ideas in your head at the same time and still function…” How do we do both? That is, how do we do both “Core” innovation and “Disruptive” innovation? How do you balance right-brain and left-brain thinking, while still meeting financial targets? More importantly, how do you manage shareholder expectations when things don’t work immediately as planned?

Question #1 to the panel from Mark Johnson: What are the innovation questions that are front and center in your respective organizations?

Anand Pillai: How can we sustain innovation over a long period of time instead of going in spurts?

Sophie at Xerox: Innovation = creativity + entrepreneurship. There are five principles to create an innovative environment: create an inclusive & diverse team; dream with the customer; open up your innovation process (reach out to millions of people); don’t be afraid (from Chinese proverb: “in crisis, there’s opportunity”); have fun.

Dan Scheinman: Innovation comes from community. In his time at the company, Cisco has done 30 M&A transactions. Great quote: “The road to truth is lined with annoying bastards”. Three simple observations; (1) Innovation is occurring within communities (Cisco learned this when it did the Linksys deal); (2) Innovators are much more likely to be fired than promoted (3) Innovation is being democratized.

Mary Kay Haben: After 25 years at Kraft, she is now the SVP of Open Innovation. The company has set up a website for innovators: InnovateWithKraft.com. The company has also established processes for hunting for specific ideas and has been thinking about how to move trademarks and patents to the outside. Question: How do you think about win-win partnerships (”something in it for everyone”)?

Question #2 to the panel: How do you harness these ideas of innovation?

HCL Technologies: Change the mindset of ownership from customer ownership to employee ownership; “passion is a disease” (you can spread the disease, which is a good thing); make sure there are innovation champions coming out of the process.

Kraft: Can one person do both core innovation and disruptive innovation? It’s very difficult, because the typical manager spends all of his/her time on core innovation; you probably need to “separate out” the disruptors to let them work in a new environment.

Sophie at Xerox: There are three types of innovation: sustainable in the core; disruption of the core; and moving into entirely new markets.

Scheinman at Cisco: It takes lots of courage to let disruption come from outside. The problem at the end of the day: HR promotes politicians, not disruptors. Organizations have a tough time finding innovators. Companies need to “fail a lot.” Just remember to “fail forward.” Failing once doesn’t teach you anything - you must fail several times to really learn.

Mary Kay Haben at Kraft: One brief example: Kraft organizes luncheons when employees discuss something that fails. The company can use this learning to turn failure into a success.

Cisco: John Doerr and Andy Grove were “branded by failure” — that’s what made them. If you don’t fail in horrible, colossal ways, you will never be great. Informally, Cisco embraces failure. Need to come up to these people and say, “You’re great. What did you learn? Let’s go forward.”

Question #3 to the panel: How do you find these innovators?

Sophie at Xerox: It’s tough to find them. Xerox is experimenting with an incubation fund and even taking steps like building a presence in Second Life. The company organizes annual research conferences and attempts to reach out & empower teams.

Anand at HCL: Once you find them, give them a different career path that is linked to innovation specifically. These people should be given the charter to drive new businesses.

Question #4 for the panel: What is the impact of “Antibodies” on the innovation process and how can individuals fix the process so that companies can focus on adaptability and flexibility?

Anand Pillai of HCL: The company has tried several approaches to innovation, such as the creation of the Chief Innovation Officer position and the creation of innovation champions. There is a better, third way, though.

Kraft: There are huge opportunities for “innovation incentives.” Remember - “the bottleneck is at the top of the bottle.” The organization struggles with the issue of how to get employees and managers to put enough “skin in the game” so that will be able to get resources allocated efficiently. Incentives need to be at the top, too, so that the innovation processes can be put into place.

Question #5 for the panel: How do you manage Wall Street expectations, when every company is under pressure to produce quarterly results?

Cisco: Do the best job possible, and set expectations as low as possible. (laughter) In the venture business, 15% pays for everything. One big home run pays for everything. So, don’t be afraid to fail, don’t be afraid to risk. You must scream about your successes. In the case of Cisco, these successes are Scientific Atlanta and Linksys.

Question #6 to the panel: Is it better to create a bottoms-up or a top-down innovation process? How much can you do without the CEO being fully on board?

HCL Technologies: CEO must be on board. The innovation process can not be fully top-down. The CEO must lead by example, though.

Xerox: The CEO must be on board. In the case of Xerox and CEO Anne Mulcahy, there was a headcount reduction, but the company didn’t touch R&D. This shows the company’s commitment to R&D and innovation.

Cisco: You need the CEO on board before the troops will embrace innovation.

2:20 pm - 2:40 pm: Eric Jackson, the VP of Innovation and Research at consulting firm Gap International, described how organizations can create an environment for innovation. Most organizations do not have an innovative mindset that pervades their culture and need help in creating the right environment for innovation. As Jackson pointed out, there are five key organizational characteristics that can be adjusted to promote creativity and innovation.

You need to create a “culture” where innovation flourishes. A good analogy involves seeds and soil. You need to get good seeds, but you also need the soil in which they are planted. An Environment for Innovation = seeds + soil. An organization needs to have two parallel missions: (1) Creating Innovation (2) Creating an Environment for Innovation. It’s possible to create an environment for innovation. First ask yourself, though: Where does an environment for innovation reside? The answer: In the minds of the workforce.

How can we get people throughout the organization to:

(1) Think something other than what they already think?
(2) See what they don’t normally see?
(3) Expand their thinking to include new possibilities that do not yet exist?

There are Five Factors for creating an environment for innovation. You can think of the following five factors as special elements for the soil:

(1) PURPOSE (= mission, what the organization is about);

(2) OWNERSHIP (= what’s yours in the organization?);

(3) INTERDEPENDENCE (= contributing to other projects);

(4) AFFINITY (interpersonal relationships, connections between people);

(5) RISK (= celebrate your failures).