MANAGERS AT WORK

Marc H. Meyer, Tucker J. Marion, and Frederick G. Crane

SELLING INNOVATION TO THE C-SUITE

Marc H. Meyer is the Matthews Distinguished University Professor and the Robert Shillman Professor of Entrepreneurship at Northeastern University. The author of The Fast Path to Enterprise Growth (Oxford University Press, 1997) and The Power of Product Platforms (Free Press, 2007), he is currently working on a new book, Venturing: an Innovator's Guide to Entrepreneurship. He holds an A.B. from Harvard and an M.Sc. and Ph.D. from MIT, where he is presently a Visiting Scientist. Dr. Meyer was awarded the IRI's Maurice Holland Award in 2002. mhm@neu.edu

Tucker J. Marion is an Assistant Professor in Northeastern's College of Business and School of Technological Entrepreneurship. Dr. Marion's research focuses on product development, innovation, and entrepreneurship. He holds a mechanical engineering degree from Bucknell University, a Masters in technology management from the University of Pennsylvania, and a Ph.D. in industrial engineering from Penn State. He has held management positions at Ford Motor Company and Visteon Corporation and consults to industry on new product design and engineering. t.marion@neu.edu

Frederick G. Crane is Executive Professor of Entrepreneurship & Innovation at the College of Business at Northeastern University and editor of the Journal of the Academy of Business Education. His current research stream intersects the domains of entrepreneurship, marketing, corporate venturing, and innovation. Dr. Crane's academic research activities have resulted in more than 100 publications, including twelve books, the most recent Marketing for Entrepreneurs (Sage Publications, 2010). Dr. Crane has been an active innovation consultant. f.crane@neu.edu

¹ The initial results of the study will be detailed in “Innovating for Effectiveness: Lessons from Design Firms,” slated to appear in a forthcoming issue of Research-Technology Management. To conduct the study, we developed a partnership with the Industrial Designers Society of America (IDSA). IDSA's mission is to advance the quality and impact of design; it is the largest organization of its kind, linking industry and academia (http://www.idsa.org). Forty-four IDSA members, including the largest and most successful design firms currently operating, participated in this study.

Most organizations now place a major emphasis on innovation as a pathway to corporate growth. The R&D manager is a central player in that effort, and not just to supervise the development of new products; increasingly, he or she is expected to help direct the role technology plays in enabling new services or business models and building closer integration with channel partners. With this broader mandate, the R&D manager must become an effective champion, educator, and salesperson for innovation within the corporation. To develop these internal marketing skills, R&D managers can look to successful independent innovation companies—design firms—for lessons on how they engage client C-suite members to get more deeply involved in innovation initiatives. Here, we take a look at the practices of these design firms in the hope of better equipping the R&D manager to bring innovation into his or her own C-suite.

The Challenge of Selling Innovation to C-Suite

Design firms such as IDEO, Continuum, and frog design—and the hundreds more actively supporting the innovation efforts of corporations both large and small—offer a unique perspective on the process of selling innovation. In a comprehensive study of best practices of design firms conducted in 2009¹, we investigated how the most successful firms sold innovation to various stakeholders in client organizations. These firms have a reputation for excelling in innovation both incremental (such as a new type of packaging design) and radical (such as a new business model that can disrupt an industry). To survive as businesses, they have to be masters at selling innovation initiatives to senior management.

That selling effort has traditionally been focused primarily on R&D managers. However, over recent years, as C-suite executives have become more interested in how innovation can fuel business transformation, design firms have found themselves directing their selling efforts as much to line-of-business executives and marketing VPs as to R&D departments. At the same time, many of these executives still have to be “sold” on innovation, especially higher-risk proposals. In the words of one design executive, “A more disruptive innovation is a nice thing to talk about once a year at an executive retreat, but few executives outside of R&D want to take the risk of actually pushing their companies into creating and testing disruptive solutions.”

Many executives now expect their R&D managers to be able to offer innovation solutions beyond narrowly defined notions of new products and services. In other words, executives want R&D managers to be involved in all aspects of innovation within their organizations. This push for innovation, coupled with skepticism about specific innovations, puts the R&D manager in the same boat as the design firm. What lessons can R&D managers adapt from design firms to play a more effective role in corporate growth?

Five Lessons for Selling Innovation

Our research with leading design firms has unearthed five key lessons for selling innovation that R&D managers can apply within their own organizations. The most successful design firms sell innovation across the organization by:

• Building innovation insight in executives,
• Understanding the competitive context,
• Modeling the business value of innovation,
• Framing innovation as more than just product or process, and
• Managing stakeholders across the corporation.

These firms have developed specific tools for accomplishing these goals, tools that R&D managers can use to similar effect.

Building innovation insight in executives

Design firms constantly seek ways to educate client executives to establish the foundation for significant innovation. They use a number of methods to make innovation and innovation thinking more accessible for their client executives. One of the primary tools is off-site business visioning sessions designed to train executive teams to think beyond current product, service, and business model paradigms. According to one design firm executive:

We ask executives to hang up their titles at the door. We like shocking them to see our insights. This is powerful in convincing the C-suite people to reinvent their business. For selling the C-suite, there is no good way to sell innovation if there is no spark, and to help foster that spark, we use provocation techniques.

The process is designed to change the mind-set of executives—to get them to view innovation in a broader and more robust manner. This often requires an “awakening process” that is most easily engaged in an experiential context.

This is a classic design practice: to have innovators experience the lifestyle and frustrations of the target user at the point of use. As one interviewee said, “PowerPoint just doesn’t cut it. Business executives need to live the life of the intended user to understand the power of design innovation.” Another design firm told us the story of a team tasked with redesigning dormitory furniture for a large, mature manufacturer. To achieve alignment, the team got the client's executives to spend a night in a college dormitory. In this case, the executives-turned-college students not only had a little bit of fun, but also saw just how out of touch their current designs were with the attitudes, preferences, and behaviors of end users. The design firm then had the executives spend an additional evening in a dormitory facility mocked up with new furniture concepts designed in a way that “added to space and structured space” rather than taking away space. Back at the office, the executive team approved the production of these new concepts, in part because they had acquired an intimate understanding of users’ contexts and needs.

The most successful design firms in our study make executive immersion a systematic practice. When an immersion experience is not possible, nearly all the design firms we studied spend considerable effort making highly authentic videos of the user experience in an effort to give client executives an empathic feel for the customer and the opportunities for innovation.

Innovation teams within mature companies can practice executive immersion and achieve equally positive results. Intense, well-planned immersions can help break through organizational inertia. For example, the product planning team for a new automobile concept had its senior management spend a weekend on a California beach to “live the life” of the team's target users—in this case, young, active males (Meyer 2007). This process provided insight into the activities, interests, and opinions of the users, including what they were looking for in a new vehicle. As a result of the experience, the company's executives supported a bold new design that fit the lifestyle of target users. Today, this vehicle—the Honda Element— stands out for its versatility and styling.

Understanding competitive context

Successful design firms assess the competitive position and culture of a client company before even starting an innovation initiative. As one firm leader said:

For us, the corporate sell is dependent on the mindset and lifecycle of the firm or the business unit within the firm.… We also use a graphic to position our communications to business executives [see Figure 1]. Companies or business units on the backside of the innovation and growth curve are the most difficult to sell innovation thinking, even though they need it the most. Those on the upside are the most receptive to new ways of thinking about products and strategy.

Within a single major corporation, there may well be divisions on both sides of the curve. The design firm tries to identify those groups that are on a high-growth trajectory and already producing strong revenues for the corporation. Not only is there an appetite for innovation among the executives running these businesses, but achieving success with them establishes credibility with less-innovative executives running other businesses.

R&D managers seeking to kick-start an innovation initiative can benefit from a similar assessment of their own organization. A C-suite's receptivity to different types of innovation can be assessed through some simple financial benchmarking of the corporation against competitors, using publicly available data (unless of course, your competitors include privately held companies). Those firms with strong sales growth and operating margins are much more receptive to an “innovation for growth” message; those with low growth and poor margins want to hear an “innovation for productivity” message. The R&D director fully understands the lesson of design firm's graph; when times are good for the corporation, a request for significant funds for an exciting new product line will be viewed more positively by the C-suite.

Figure 1.—One design firm's approach to selling innovation in major corporations. Business units that are in a high-growth trajectory (on the left side of the curve, headed up) and are already delivering revenue to the corporation are more open to major innovations. Even though business units on the right side of the curve may need design-inspired innovation to survive, these executives typically prove resistant to change.

Based on the company's competitive position, the R&D manager can predict beforehand the issues most relevant to the executive team. In the present economy, for instance, where sales growth is often single digit at best and operating margins are preserved only by cutting costs, attention has turned sharply to process improvements and programs to maximize the utilization of fixed and working capital. Proposals for efficiency-focused R&D projects—those that promise to reduce costs or improve efficiency—are most welcome. We have seen more than a few colleagues leverage the current climate by encouraging their companies to undertake platform initiatives aimed at standardizing common components and creating common, flexible production processes to reduce costs and improve efficiencies. While such platform work tends to be outside the focus of most design firms, it is arguably as innovative and challenging as any activity within R&D. And it may be welcomed by a company with strong growth rates but weak operating margins.

Modeling the business value of innovation

Design firms are now reaching beyond R&D-centered innovation to focus on expanding and transforming the corporation's business through innovation. The interviewees in our study noted a radical change from the times when a design firm could get the order simply by showing up to a client meeting with an appealing new product or service concept. Now, design firm leaders collectively agreed, showing the client value for innovation has become an essential part of the argument. In other words, they have to make the business case for innovation.

Although not all design firms have embraced this reality, the most successful firms now create business cases for new designs as part of standard operating practice in client engagement. This includes not only revenue projections, but also COGS analyses and profitability projections. For manufactured products, a number of design firms have staff members who understand new tooling requirements, capital plans, and supply chain integration. All of this helps produce rich business cases that concretely link specific ideas to measurable business growth. As one of our interviewees stated, “Most people come to us with a business problem, not just a product problem. In order to solve these types of issues, we find out the context of the problem and we create plans that make sense for the business, not just the R&D director.”

While the need for business planning around innovation is well recognized, it is yet to be widely practiced in R&D management because these skills remain outside the comfort zone of most engineers and scientists. Moreover, while it might be relatively easy for a team to model the cash flows and capital associated with a traditional product-line extension, it is much more difficult to determine how to model innovation proposals focused on entirely new product lines, types of services, or even more dramatically, types of businesses. “If it's not our current business, we don’t have confidence in how to model it as a new business,” noted a colleague in industry.

However, with both on-site and online learning opportunities in managerial and entrepreneurial finance now readily available, R&D teams can investigate how other industries make their business cases and applying that learning to their own innovations. By adding these skills to their portfolios, R&D managers can be much better equipped to sell innovation solutions that go beyond the traditional R&D repertoire.

Framing innovation as more than just product or process

The largest design firms have expanded their consultancies to encompass a much broader scope of innovation. They no longer have a tool kit restricted to new products or new packages. We spoke with several firms whose project portfolios included almost as many new services design projects as more traditional product designs. One design firm now specializes in innovations to improve the bottom-line performance of an organization, such as value engineering and process innovation, before it even attempts to enhance top-line performance. This firm discovered that clients were demanding innovation that worked both sides of the fence and developed expertise to satisfy this need. Larger design firms have launched business consultancy arms that explore how clients can reposition and rejuvenate themselves in an evolving market.

This is in keeping with the evolving business needs of their clients. A decade ago, IBM was primarily a hardware company; today only a quarter of its revenues come from hardware products, another quarter from software, and half from different types of services. Design firms and R&D managers alike need to adapt to the realities of business growth. Channel innovation, branding innovation, bundled solutions, business model innovation that might include new services, and value-chain migration are all fair game.

Still, the design firms told us that many of their client executives were having difficulty thinking of innovation as more than just new products. In fact, in a complementary research project, we found that most executives tend to define innovation very narrowly, as new-product innovation only (Crane and Meyer 2009). All of the successful design firms in our study recognized this as a challenge in selling innovation to their clients. In response, most have gone to great lengths to enlarge their clients’ constrained perspectives on innovation. Design firm leaders have even gone so far as to write entire books on the subject (see, for example, Richardson 2010 and Kelley 2005). Another firm is trying to change client culture by offering innovation workshops focused on user-centered design for innovation in products and services.

This lesson is one that R&D managers are well advised to consider. Selling innovation solutions to the C-suite will be problematic if executives myopically view innovation as developing incremental extensions to current product lines. Accordingly, selling innovation requires a conscious effort to lay the pipe, so to speak, and educate executives about the folly of such a position. Gradually and persistently introducing the broader innovation lexicon into executive briefings with a project or two every year can help push the boundaries. Here, the R&D manager can borrow practices used by design firms, such as publishing short white papers focused on specific types of innovation that can transform the business, speaking at executive retreats dedicated to high-opportunity technologies or disruptive threats, sponsoring in-house innovation competitions that get business executives to interact with corporate innovators, and introducing best-in-class examples from other companies during strategy retreats.

Managing stakeholders across the corporation

The last striking element of the innovation selling processes of design firms is stakeholder management. The most successful firms work hard to sell innovation across client corporations. Even when a firm has been brought in by the CEO, design leaders find themselves in a constant, ongoing selling process to build support for the CEO's vision and their own innovative ideas. The best firms go to great lengths to secure buy-in from all stakeholders and do so with engagement, dialogue, and a collaborative learning model.

Figure 2.—A call sheet that links organizational position with the focus and purpose of the innovation initiative, focusing attention on building support for a project at critical junctures.

The process is systematic. For example, one design consulting team leader makes a list of key managers within R&D and across all major functions of a client company, both at corporate and within specific business units affected by the scope of the innovation project. Then, through conversations with his key contact in R&D, he learns about the major concerns and initiatives currently on the plate of each stakeholder. This serves as the basis of a “call sheet” (Figure 2), a tool adapted from those used by enterprise-level sales professionals to help organize the stakeholder management process.

Person by person, the design team leader makes a point of securing face-to-face meetings with each individual on the call sheet. In these meetings, he seeks each contact's ideas, perspectives, and concerns for the initiative at hand. In large corporations, this process might take a month or more, but it is as important as the actual design work. Given the phase-review gating processes imposed by most major corporations, many of these stakeholders will hold veto power as an innovation initiative works its way through the system; their support will be critical. “There have been too many times when our team has developed wonderful concepts for our clients, only to see these killed in the development funnel because executives outside of R&D didn’t understand the concept or felt uncomfortable that the concept was outside an established product line,” sighed one design firm interviewee. “Innovators like to surprise people with the brilliance of their ideas,” said another, “but surprise for a line executive is rarely a good thing.”

A series of calls and in-person engagements can help avoid surprises and win support ahead of the formal review process. On the other hand, design leaders noted times when they walked away from a conversation with a VP of Sales or Finance with pure gold, be it an insight into how to excite a channel or a way to improve margins not obvious to an outsider. These ideas can make all the difference in the business planning surrounding a new product or service concept. A systematic call-sheet approach can mean the difference between success and failure for an innovation effort.

Conclusion

The design consultants we spoke to frequently expressed a wish that their R&D executive clients had a more expansive charter for innovation and greater authority to at least test market new concepts. “The charter of R&D in many of our clients is limited to line extensions and a few experimental technology projects. We try to breathe new life into tired product lines. We can do it, but the reality is that it is hard to truly innovate within such constraints,” said one interviewee. In turn, the R&D manager is placed in the position of selling to the C-suite small components of a larger growth initiative, rather than a more comprehensive strategy for growth.

The R&D executive can—and should—be an empowered corporate intrapreneur, chartered and resourced to leverage the company's technologies into new product lines or services, and even into new business units. In such a role, the R&D executive, along with committed C-suite partners, can sell new business ideas and entire innovation solutions, of which products and services are only one part. This is a much more exciting and potentially powerful innovation proposition, and it is one R&D managers can deliver, if they learn from the lessons offered by the firms whose entire business is innovation.

References

Crane, F. G., and Meyer, M. H. 2009. Testing the innovation literature with executive ethnography: The challenges of innovation in mature companies. Working paper, Northeastern University. Contact the corresponding author via email for a copy of this working paper.

Meyer, M. H. 2007. The Fast Path to Corporate Growth: Leveraging Knowledge and Technologies to New Market Applications. New York: Oxford University Press.

Kelley, T. 2005. The Ten Faces of Innovation. New York: Doubleday.

Richardson, A. 2010. Innovation X. New York: Jossey-Bass.

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THE ART OF TECHNOLOGY MANAGEMENT

Forty-nine selection from our “Managers at Work” department of RESEARCH • TECHNOLOGY MANAGEMENT, covering the subjects listed below, are now available in paperback. To order, see inside back cover.

Leading and Motivating Technical Professionals

Stimulating Innovation

Getting to Market

Managing Projects

Managing Careers

Selling Yourself and Your Ideas

The Bigger Picture

A Lighter Note