Gary Hamel’s keynote speech at the FORTUNE Innovation Forum last week continues to draw mad props from participants of the event. In one noteworthy posting (“The Upside and the Downside of Innovation”), Yvonne DiVita of the Lipsticking blog has pulled together a number of observations and commentary about Gary Hamel’s views on management innovation.

Yvonne explores the link between management and innovation, explains why innovators must be “nimble” and “romantics,” analyzes the Hierarchy of Needs within organizations, and riffs on Gary’s comments about building a vibrant, resilient organization: “So, how do you build and manage a vibrant, resilient organization? By teaching the employees to be activists: find out what causes they support. Utilize the ever-present chance of surprise! Learn from positive deviants. Be experimental.”

Look for more postings from Yvonne on innovation in December - every Wednesday, she will be sharing her thoughts on innovation and providing some additional commentary about some of the more interesting speakers and workshop leaders at the FORTUNE Innovation Forum.

MarketWatch has named Robert Iger of Disney as the CEO of the Year for 2006, thanks in part to his commitment to innovation within the entertainment industry:

“With a blend of bold strokes and olive branches, in contrast to his predecessor’s iron boot, Robert Iger has re-imagineered the Walt Disney Co.’s culture and reanimated its stock. Disney’s $7 billion buyout of Pixar was just one of many moves in the past year that won plaudits for Iger. The company, formerly bogged down by board and shareholder discord, has emerged as an example of good corporate governance.”

According to MarketWatch, the willingness to do the $7 billion Pixar deal was especially noteworthy and forward-looking:

“It may seem like an obvious, logical move now, but even those who work for Walt Disney Co. Chief Executive Robert Iger initially thought buying Pixar Animation Studios was a big gamble. When Iger pulled the trigger earlier this year on the $7.4 billion transaction, many in the entertainment industry questioned the wisdom of shelling out that much money for a company that puts out a single product once a year. Sure, Pixar had been wildly successful, scoring more than $3.6 billion in worldwide receipts, but it faces rising competition from other Hollywood studios.

Yet the move accomplished several tasks for Iger and Disney. It mended fences with Pixar chief Steve Jobs, who had grown weary of the mercurial Michael Eisner, Iger’s predecessor. It also put in Disney’s camp the animation specialist that had trumped its once-dominant position in the market. And it represented a symbolic but critical return to Disney’s roots, seeming to quickly heal the deep divisions that ailed the entertainment giant.”

[image: Disney CEO Robert Iger]

Without a doubt, magic is cool these days. In just the past six months, we’ve been treated to Hollywood films like The Illusionist, The Prestige and Woody Allen’s Scoop, all of them with magic as a central part of the plot line. (The films also feature big-name actors and actresses like Scarlett Johansson, Edward Norton, Hugh Jackman, Christian Bale and Paul Giamatti.)

With that in mind, perhaps, the New York Times has called Andy Cohen’s new book Follow the Other Hand - which combines a behind-the-scenes look at the world of magic along with insights about innovation and business strategy - a potential bestselling business book for 2007. The Business Innovation Insider reviewed the book back in September, intrigued by the premise that corporations can become more innovative by learning to think like magicians. Paul S. Brown of the New York Times agrees, suggesting that the book will teach you how to “create ideas out of nothing, solve impossible problems, and make it all seem effortless.”

If you’re like most people, you’ve probably seen the movie The Blues Brothers a half-dozen times and thought to yourself at one time or another, “Hey, I’d like to do what Belushi and Aykroyd did up there on stage.” That’s just what a number of participants of the FORTUNE Innovation Forum were able to do last week at the Rose Theater in New York. Paul Kwiecinski of Face The Music led a grand music finale that featured his band and two groups of innovation conference attendees singing original blues songs live on stage. (A big hat tip to “Slim Sigma,” who had the full house clapping along to his inspired singing).

Over at Business Blogging Boot Camp, conference attendee Tom Collins has provided a live account of the blues performance as well as some context about the artistic workshops at the event:

“The last session of the Forum “Lessons from the Innovator’s Studio” gathered the creative talents from the four ongoing workshops exploring the innovation value of play, painting and sculpture, story-telling, and music. The session was capped by blues band perfomances from Face the Music (listen to samples here) and two groups of Forum attendees who had created original blues songs around the innovation experiences at their companies during the workshops…

Paul Kwiecinski noted that writing and singing “blues songs are not about whining and complaining (that’s country!), but about expressing the truth of a situation.” He asked, “How true do you want it?” I’m hoping Fortune can find a way to get at least the audio files from the songs performed at the forum posted on their Business Innovation Insider blog.”

We’re working on getting the audio and video from the blues performance, but in the meantime, check out the following classic clips featuring Joliet Jake and Elwood Blues from YouTube.com: Soul Man, Everybody Needs Somebody and Minnie the Moocher.

[image: Paul Kwiecinski and Face the Music live on stage]

11:20 am - 12:15 pm: Beth Comstock (NBC Universal, pictured at left), John Jacobs (NASDAQ), Sean Maloney (Intel) and Deborah Senior (Lexus) joined moderator Jeffrey Rayport of Marketspace for an engaging look at innovative customer experiences. They discussed the types of experiences they are providing consumers and analyzed how they are changing in real-time to respond to new tastes and shorter attention spans.

The traditional 3-6-1 model (three months to create the idea and bring it to market, six months to harvest premium margins associated with the product, etc.) is forever changing. Look at fashion-forward retailer Zara, which now has 26 seasons, instead of 4 seasons like most traditional fashion retailers.

With that in mind, what is your company doing to change customer experiences?

Deb Senior (Lexus): We are a company that pursues perfection. With the GS hybrid, we brought something new to the hybrid proposition — an incredible engine and world-class driving performance at the same time. On the go-to-market side, we are involving the customer in more ways than ever before (e.g. a giant car image in Times Square that was really a mosaic of photographs sent in by drivers)

Intel: It is a race to the infinitesimal (i.e. Moore’s Law). The question facing Intel: what will people use incredibly faster microprocessors for?

NASDAQ: The term “extreme users” has meaning. Look at the world of electronic trading. There are three dozen order types, not just “market” or “limit” orders. We have to build to those people. The 3-6-1 model still applies, but in terms of “days,” not “months” or “weeks.”

Beth Comstock: We are thinking in terms of innovation around experiences. Rapid change and innovation go hand-in-hand. Video proliferation is an example - users are now watching TV in many different ways (e.g. TV screen on a belt buckle). Consumers are more in control than ever. Consumers are saying: “I want to be part of the storytelling.” With technology and different platforms — how can we connect them to change the storytelling process?

When the book The Experience Economy first appeared (in 1999), it raised a lot of different questions. How are companies grappling with the notion of “open-source experiences”?

Beth: You have to give up control to your customers. It is very scary - you don’t know where it will go. When we were not innovative enough, it’s because we didn’t give up enough control.

NASDAQ: The customer is designing your services, products and even platforms. The fear is that of missing the accidental innovation. The notion of, “Oh, it has applications somewhere else?” We are trying to nurture this mindset within the culture.

Intel: We’re getting ready for an avalanche of user-generated high-definition content. Tens or hundreds of millions of people shooting high-def video and then uploading or downloading them to the Internet.

In terms of high-tech commodities like the silicon chip. Where does the notion of customers experiences fit into this?

Intel: I have trouble with the premise. If commoditization is something that happens because you’re 24 hours late, then let’s be 24 hours early. You move faster. There’s much more money around for the winners.

If the consumers are in control, how does that get designed into the process?

Lexus: It’s important. We now sponsor events for consumers to drive Lexus cars. We make competitor’s cars available as well (BMW, Mercedes-Benz). This makes the shopping process better for the consumer.

Let me shift gears… Events, online communities, communities of extreme expertise. What is the orchestration process. How do you take all those elements and create an organization? How do you put all that together?

Lexus: It’s the responsibility of all the associates, and your business partner’s associates. The “Brand Promise” is very important. In order to great insights on how to meet customer needs, you need to get connections to customers. One example involves Lexus and the US Open. We had on-site activities and displays that were intended to “surprise and delight” our consumers. We must work to exceed expectations. We sponsored VIP parking for Lexus vehicles, for example, that was free for consumers of our $80,000 luxury cars.

The desire to experience. It’s very clear at Lexus, Is it as clear at other businesses?

Beth Comstock: We have gone from one-to-many to one-to-one. What are the different types of experiences? Maybe they are new storylines that are only going to live here. Media is forcing us to get better at connectivity and insights. You start with the consumer: What’s the experience? It all falls into place.

NASDAQ: The brand has to be personal to people working there. It was one-to-many, now it’s many-to-many. The brand has to say the same thing to all people. Execution has to be customer-driven. Our role in marketing: be right in there with the customer. The way we reach an alpha user is different from the way we reach the CEO of Intel.

How do you reach folks like leading-edge nerds?

Intel: Ultimately, the target audience is not the leading-edge. Organize yourself into campaigns and a blend of various media, with a call to action on the Web. If you want to reach people across the world, you still end up using TV. But will that be the case in three years? No - money will be shifted into other directions. TV is no longer about getting the leads, but about creating emotional touch points.

NASDAQ: Alpha traders have no emotions. You can’t reach them via TV.

Beth: We won’t give up on TV. It’s all about mix. Immersing yourself in digital. It’s all about different segments of behavior. Who would curl up and watch a 30-minute show on a tiny screen? TV will never do what online will do.

NASDAQ: Emotional “hits” are online or at events - there are more opportunities to connect there rather than via TV.

One of the most compelling media is video. What does video look like in 2-3 years?

Intel: There is no substitute for professional production. Eventually, you will be able to put a YouTube video up on your flat screen TV. This is a technology enabler that has a certain amount of inevitability around it.

What about involving people in the “show”? Technology is creating the experiences. Customer experiences are created by devices. What’s the future of technology?

Beth Comstock: Some things don’t change. It’s the behavior that comes out of the technology. For example, the video as a belt buckle. The behavior changes, not the technology.

NASDAQ: Consumers are a lot like kids: “I want it now.” We can actually do it now.

Lexus: We have to be ready to listen to consumers.

Intel: As the tech junkie here (on the panel)… Consider the example of SecondLife and virtual experiences. In North Asia, there are tens of millions of people online. Hundreds of people are in room, playing these games. In a virtual world, I once died hundreds and hundreds of times… Enormous amount of kids who spend more time in virtual world than real world.

The MarketSite location in Times Square is really an advertisement for NASDAQ, since no trading takes place there. You can think of Lexus as “a leather room with cool media.” Are we all competitors at the end of the day?

Beth: It gives us a chance to be partners.

Lexus: A consumer wants an overall experience. If you can partner, everyone can win.

NASDAQ: Prior to the market crash of 1987, our role was to get small companies ready to go public. Then we let them go to the NYSE. After the market crash, there was a fundamental shift, and that led to the creation of a new brand. The marketsite in Times Square - it’s the face of the market - no trading takes place there. Media and finance meet in Times Square. It’s a collision that’s never going away.

Intel: The easiest way 10 years ago to establish a brand or new product offering was via TV. With fragmentation, it becomes harder to get unified experiences.

Beth: There are very specific behaviors, which have nothing to do with age or gender.

NASDAQ: It was easier to build a brand in the 1980s. Now, it’s harder to get share with fragmentation.

Beth: Fragmentation gives you different types of touch. You need to view it as an opportunity.

Lexus: The Scion brand took advantage of fragmentation, and took TV out of the advertising mix. Consumers were communicating our message. Since people put stake in what they hear from people they respect, this was important. That’s the best advocacy you could ask for. Scion moved out of Toyota HQ. The Scion created enormous buzz for people new to the Toyota family. Toyota made an effort to bring in younger buyers with Scion: trendsetters and innovators who like to accessorize their cars, as well as creative and artistic people. Marketing must match with the overall brand proposition.

At the FORTUNE Innovation Forum in New York, Home Depot CEO Bob Nardelli explained how the company is experimenting with a new innovation program called Orange Works that will create new high-design products for the home-improvement retailer. In 2007, the company expects this new line of products to generate sales of $250 million - a significant amount, to be sure, but still less than 1% of total sales of $90 billion projected for next year. Products such as a fire extinguisher “with the smooth lines of a martini shaker” are already turning the heads of design fans and generating buzz about innovation and design at Home Depot. The Orange Works initiative was unveiled on November 29, with new products slated to begin appearing in stores in fall 2007. As the Wall Street Journal explains, the Orange Works project is a collaboration between the retailer and Arnell Group, a New York marketing and design company with links to Target designer Michael Graves:

“Such private-label products have become a retailing trend, helping to differentiate what might otherwise be commoditized goods. They also typically carry fatter profit margins… Home Depot’s push resembles a similar effort by Target, which hired designer Michael Graves to design stylish home furnishings that have become one of the discounter’s signatures. The idea for Orange Works was brought to Home Depot by Peter Arnell, Arnell Group’s founder and an architect who started his career working for Mr. Graves.”

For more on Peter Arnell and his vision for Home Depot, check out the following:

Product Guru Peter Arnell to Co-Create Retail Businesses [AdAge.com]
The Home Depot announces Orange Works Innovation Partnership [PSFK]
Sleek gear to be sold at Home Depot [Austin American Statesman]