What is the innovation secret of Apple, Google and Zappos? Gerard Tellis tells us...

Gerard Tellis, professor of marketing, Neely Chair of American Enterprise, and director of the Center for Global Innovation at the Marshall School of Business, the University of Southern California, Los Angeles was the guest of honor at TechSparks 2013.

Tellis a well-known expert on innovation, advertising, and global markets, spoke about his new book ‘Unrelenting Innovation’. Tellis’ previous book 'Will and Vision: How Latecomers Grow to Dominate Markets’ is a New York Times and Wall Street Journal bestseller. Philip Kotler, one of the world’s best known management and marketing gurus and S.C. Johnson & Son Professor of International Marketing, Kellogg School of Management, Northwestern University says this about Tellis’ latest book: "I would rate Unrelenting Innovation as one of the best business books I have read. All CEOs need to read it to avoid the incumbent's curse. Unrelenting Innovation offers brilliant insights into the need for innovation and managing the risks of innovation." The book is based on a study of 770 companies across 15 countries, the origin of 90 radical innovations spanning over 100 years, and the evolution of 66 markets spanning over a 100 years.

Tellis’ talk centred around answering the questions why wildly successful companies fail, why culture is at the heart of fostering innovation and how can companies inject innovation into their DNA.

Incumbent’s Curse – cursed by one’s own success

Tellis started with how almost all the most successful companies in the world fail because they don’t nurture a culture of unrelenting innovation. He gave the examples of Sony and Kodak, which were once super-successful, but were felled by smaller companies because they did not have the right culture. Kodak was not only the leader in photography but also held the most number of patents for digital photography, yet the advent of digital cameras, that included mobile phones, drove the company to bankruptcy. Speaking about Sony he said, “Before the iPod was released, Sony was three times the size of Apple, but after three years Apple became double the size of Sony.” The reason? Apple had out innovated Sony, even though the Japanese company had invented the world’s first portable music player - the Walkman.

How to avoid the trap of becoming a innovation laggard?

Tellis stresses that companies need to adopt three best practices. “The three things they need to incorporate into their culture are - embracing risk, focusing on future, and cannibalizing successful products,” said Tellis. He gave an example of how Gillette creates a successful product, then kills it off at its peak by introducing other more innovative products. Big companies have a tougher time innovating because of an ingrained culture that doesn’t spur innovation, a built-in bloat of bureaucracy, and is generally slow to react. While changing culture is difficult, Tellis says that its not impossible, “Yes, its tough but look at how IBM changed their culture through Louis Gerstner.”

How to avoid failure by ingraining innovation into the organization’s culture?

Tellis has spoke about three corporate practices that can help companies foster innovation inside their organizations.

1) Incentives for enterprises

Many companies, he said, incentivise experienced people who have seniority and age. This only fosters loyalty but not innovation.

Failure in most countries is considered a shame. This is counterproductive and what is needed instead is strong rewards for success and weak penalties for failure. In Germany, it is difficult to startup after you have declared bankruptcy, and in Japan, if you go bankrupt it is almost impossible to start again. That’s different in the US, in Silicon Valley for example, bankruptcy is a badge of honor.

He quoted former IBM executive Tom Watson, who said, “If you want to increase your success rate, double your failure rate.”

2) Increasing internal competition

This can be done through idea fairs, funding contests, prototype races and competing commercialisation. In this atmosphere, employees generate ideas, peers judge the and managers facilitate their execution.

3) Empowering innovation champions:

Every employer is an innovator when bottom-up innovation is encouraged. Innovation has come from deep in the bowels of an organisation. The danger of not recognizing, motivating and rewarding top innovators is that they will leave in frustration.