Image credit: Yiorgos GR/ShutterstockInnovation needs to be part of every company's business plan, and it must be a process that's strategically followed over the long haul.
At the recent International M&A Partners (IMAP) Fall conference in Miami, the global financial audience learned about innovation and how disruption is impacting industries of all sizes and in all sectors. John Nottingham, a principal with Cleveland-based design consultancy Nottingham Spirk, offered a number of key ideas and best practices to foster disruptive innovation in any company.
While every business owner should be thinking about innovation, Nottingham has specialized in it for decades. He and his company have developed more than 1,200 U.S. and international patents, leading to more than $50 billion in sales for innovative consumer and medical products now sold by companies that include Procter & Gamble, Unilever, Kraft, GE, Philips, Black & Decker, Medtronic, Avon, and M&M Mars.
What products are we talking about? For one, Nottingham Spirk transformed the electric toothbrush business. Working with innovation partner company Dr. John's, Nottingham and his team manufactured an electric toothbrush that would retail for $5, opening up massive market opportunities. The result was Dr. John's SpinBrush, which was sold to Procter & Gamble for $475 million.
Here's another: Ever deal with a messy paint can while doing a home improvement project? You first pry the lid off with a screwdriver. Then you awkwardly tip and pour it while trying not to make a mess. And when you're done, you pound the top back on with a mallet (or use the end of a screwdriver, like me) before figuring out what do to about the paint that gets stuck in the lip of the can. Pretty archaic when you think about it, right? Dutch Boy and Nottingham Spirk created the Twist & Pour paint can with a built-in handle, screw-on lid and integrated spout. Dutch Boy paint sales tripled in the first six months, and the innovative cans are now available across the Sherwin-Williams family of brands.
And another: Where one person might see a molded plastic bedpan, another envisions a kid's toy wagon. RotaDyne was a rotational molding company known for making plastic medical supplies. It went from making boring (and icky) bedpans to molded plastic swings, cars, sandboxes and playhouses. If you have a child under 10 in your household, you are likely familiar with the brand now known as Little Tikes. The owners of the company went from manufacturing and selling bedpans to toy sales of more than $600 million, followed by an exit sale to MGA Entertainment.
Here are three key takeaways about innovation and disruption.
It's not just something you do on Thursday
Innovation is more process than bolt of lightning. Sure, great ideas hit all of us in the shower, but if a company truly wants to innovate, it has to create an innovation plan of action, execute on it and hold people accountable. According to Nottingham, most companies spend about 95 percent of their time on core innovation, 4 percent on adjacent innovation and 1 percent on disruptive innovation. The equation, Nottingham states, needs to be reworked as follows:
70% core innovation = 10% ROI
20% adjacent innovation = 20% ROI
10% disruptive innovation = 70% ROI
Here's why: The return on investment for disruptive innovation is far more compelling than that for core innovation. According to Nottingham, while critical, core innovation typically offers an ROI of 10 percent. Disruptive innovation, on the other hand, offers an ROI of 70 percent.
If you really want to change paradigms and shake up the known universe, focus on more disruption and less on adjacent or core innovation. And don't ask the team that's working on making iterative and core changes to also think about disruption, and vice versa. Silo your innovation teams, or outsource part of it, and put processes in place so that creativity flourishes across the innovation mission.
Workshopping and testing
We have all seen seemingly great ideas for products or services that never get traction. We are a nation of innovators, but only 5 percent of patents ever get commercialized, and 97 percent of those never make any money.
Why? Most entrepreneurs and companies falter at the point where they ask if their product can be manufactured and licensed at a competitive price. Before going into mass production and before making big financial commitments to manufacture, Nottingham advocates for workshopping and testing to determine the viability of the product in real time.
Going back to the Dutch Boy screw-top can, everyone thought they had a winner, but the company first tried it out in one market, which it was believed would make a good representative sample. After the product flew off the shelves in the test market, Sherwin Williams took the Pour & Twist can nationwide. Today, Amazon makes it easy to test market products online while securing detailed sales data and shopper feedback.
Innovation should be every CEO's focus
Time has proven that really big companies are better at buying innovation rather than doing it themselves. Lower to midmarket businesses have the advantage of being nimble and not bogged down in bureaucracy, and the big guys know this. About 20 years ago, Bill Gates was asked what he worried about at Microsoft, and he didn't say big competitors like Apple or Oracle. He said, "I worry about someone in a garage inventing something that I haven't thought of."
Innovation needs to be part of every company's business plan, and it must be a process that should be strategically followed over the long haul.
How does your business stack up? Are you ready to disrupt?
