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Innovation has become a fixture of the C-suite agenda as stories of innovation labs, digital disruption and failure funerals become commonplace. But the dirty little secret about innovation is this: Cultural transformation -- from business-as-usual to something much more experimental -- can take years, if it happens at all.
In some cases, established organizations are hiring executives to lead the innovation charge. These chiefs of innovation are often tasked with shaking up the culture by ushering out the old way of doing things and introducing new processes, products and business models. They aren't, in other words, getting their hands dirty with legacy technology or information management systems, but they are taking on what many executives -- IT leaders included -- consider to be a tough assignment: change management.
Jeff Semenchuk of Hyatt Hotels, Srikant Gopal formerly of Nestlé Purina and Cathryn Gunther of Merck are three examples of innovation leaders. Each is working to build an innovation culture within well-established companies in an effort to combat the Ubers of their industries and remain competitive. And they've learned a thing or two along the way, like this little nugget for the innovation uninitiated: Innovation is a spectrum that ranges from incremental improvements for established products or processes, to complete transformation or disruption of a business model.
At December's Chief Innovation Officer Summit in New York City, each of these leaders shared insights on how they are injecting innovation into their workplaces.
Hyatt embraces version 0.5
Hyatt Hotels Corp. was the epitome of an innovation culture when it opened its first hotel in 1957 and over the next decade or so became the nation's fastest-growing hotel chain. As the Chicago-based hotel chain grew its operations from local to global, the culture also shifted from "wild startup" to "serious corporation," according to Jeff Semenchuk, chief innovation officer at Hyatt.
Becoming a "serious corporation" included introducing scalable, repeatable standard operating procedures, a few of which have only recently been retired. "Up until last year in most of our hotels around the world, during check in, the front desk agent would need to call you by Ms. or Mrs. or Mr. and your last name three times," Semenchuk said.
Today, Semenchuk, who has been with Hyatt for about three years, is focused on shifting the culture again from delivering cookie-cutter customer experience to delivering service that's highly personalized. Getting there isn't always about innovation; sometimes it's about elimination such as ridding the company of dated practices and cultural hurdles that prevent creative thinking and experimentation. "That's turning out to be a hard shift," Semenchuk said. "Even for some of the older guard who want to do this, it's been a difficult transition to make."
Luckily for Semenchuk, CEO Mark Hoplamazian is supportive of the effort. He recently reminded Semenchuk that a structured culture 20 years in the making is going to take time to reform. He's openly discussed the innovation team's successes -- and failures. And he's even helped introduce "new bits of language," a cost-effective method to aid cultural transformation. "When you're prototyping, [Hoplamazian] says version 0.5 is better than version 1," Semenchuk said. "What we've learned in our culture is that we take too long -- sometimes years and sometimes millions of dollars -- to try our first concept and make it perfect. You don't learn a lot from that."
Version 0.5 signals that experimentation is not only encouraged but expected, and the term has caught on, Semenchuk said.
At Merck, failure celebrated for what it can teach
It's no secret that the healthcare industry is riddled with inefficiency. "One out of every three dollars spent on healthcare in the U.S. market is avoidable spending -- it's wasted spending," said Cathryn Gunther, vice president of strategy and commercial model innovation at Merck & Co. Inc. in Kenilworth, N.J.
When considering a statistic like this, healthcare seems ripe for transformation. But it's the necessary byproduct of innovation -- failure, that is -- that can make it such a hard sell for highly regulated, highly risk-averse industries. The problem is, "If you're not failing at some things, you're not truly innovating," she said.
Gunther's coupling of failure and innovation is not a figure of speech but an expectation for Gunther and her team of 30. They're currently looking at ways to improve customer engagement through technology. "We have a number of different projects in parallel chasing after the same problem. Some will be more successful than others," she said. "But if we get one or two wins out of four or five efforts, that could be significant to improving population health." The failures don't disappear into the ether only to be forgotten. Part of the celebration includes figuring out where things went wrong. "And we share those learnings," Gunther said, so that they can be applied to the next experiment.
To build a culture where failure is considered a success, advocates at the very top of the organization have to be willing to fund and resource it, and the innovators have to be willing to live out the practice day-to-day. "It's important to recognize that not everyone is an innovator. At Merck, we try to create a dynamic network of people, who have a proclivity toward innovation, and bring them in to advocate for creating a safe place to test out new ideas, and where proof of concept is positive, move it forward," she said.
Nor should everyone be an innovator. Businesses also need builders who can take an idea, turn it into a prototype and scale it out, Gunther said. "If you've got all innovators trying to do that, you're going to have mayhem."
Nestlé Purina's two-pronged approach to change management
Nestlé Purina Petcare, headquartered in St. Louis, Mo., is an almost 125-year-old company that Srikant Gopal, former vice president of global innovation, described as "successful and relatively conservative."
For sustaining and progressing innovations, having the tried-and-true New Product Development & Introduction or NPDI process in place has paid off, said Gopal, who left Nestlé Purina in January. But oftentimes, breaking the boundaries of the policy is necessary for breakthroughs "or what we call the B3: bigger, bolder, better innovations," he said.
For innovation leaders, it's important to have a keen understanding of the culture they're working in, which can help determine when to rely on precedent and when to veer from the path. Or it can provide insight into how to get buy in (and from whom) to make a new, innovative process or product stick. "The way I look at it is, we can get some of the key stakeholders on board and get enough of them to neutralize the hopefully small minority of naysayers," Gopal said. "In a large company, that's probably the most realistic outcome."
Enter Gopal's two-pronged push-pull approach to building critical mass. "I start with a pull strategy first," he said. He acts as advocate, evangelist and consensus builder to generate interest. "But, inevitably, you'll come to a point when not everyone will get on board, and then I shift into more of a push approach," he said. At that point, he identifies key senior leaders and allies who will help market the product.
"It's 60% to 70% pull and maybe 20% to 30% push, at the right time," he said.
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