Topping, Dick. "Innovation is the Growth Engine for Growth."
Appliance Engineer
July 1999

Page 67

What do Amazon.com, Nokia, Ritz Carlton, and Daimler-Chrylser have in common? Or how about Coke, Dell, and Hasbro? If you said innovation, you're right. These companies represent a wide range of industries and lines of business, but they are each industry leaders in the battle for market share and earnings. The tie that binds them is their ability to redefine their business models and processes to create breakthroughs. That's innovation. And, it leads to growth.

So where does the appliance industry place in the race for innovation?

Unfortunately, it doesn't, too well. Most OEMs are still locked in a struggle to compete on price with strategies focused on cost-reduction and quality improvement, rather than innovation. But the shortcomings of cost-reduction have begun to surface -- companies can't cut their way to growth. Wall Street recognizes the difference between incremental improvements from cost-cutting and the long-term promise of increased earnings from innovation. That recognition shows up in the form of premiums awarded in the market value of noted innovators.

One appliance producer seems committed to change, however. Boasting a 10-percent hike in share price and a 15-percent increase in appliance sales -- an all-time high for the company --- Maytag Corporation is growing its shareholder value through an innovation strategy. Known as Intelligent Innovation, Maytag's strategy connects its new technologies and new thinking to the whole idea of appliance design. Rather than competing on cost, Maytag actually charges more for its products because Intelligent Innovation improves the total product: service, functionality, interface, design, etc., and results in superior product performance. Intelligent Innovation is Maytag's game plan for success. It's how the company interacts with consumers, reinforces the strength of its premium brands, increases sales volume in upper price segments, and enhances profit margins. The share price indicates that the return on Maytag's investment is paying off.

In a recent global survey on innovation, 85 percent of senior executes surveyed cited innovation as one of the top five critical success factors to growth. Yet only 15 percent thought they did an adequate job of managing innovation. Simply choosing and stating a strategy does not ensure that it will take hold. Innovation as a strategy is hard to achieve. Barriers exist on both the technology and market/customer intelligence fronts. In technology-driven industries like appliances, there is often a technology-push mentality or a poor understanding of the link between technologies, products, and markets. There is also the frequent misconception that innovation is exclusively the responsibility of R&D. Maytag's got it right. Innovation is about everything a company does: products, processes, services, and performance, and everyone in the organization plays a part.

Although product innovations can rejuvenate a company, one of the more difficult tasks is changing an organization's mindset and culture -- linking operational excellence and product innovation through people. To develop and operate effective innovation processes such as idea generation and screening, information/intelligence gathering, and planning, an organization is challenged to work across functional and often business boundaries. To overcome this obstacle, an organization needs to make a conscious decision to not only change the overall corporation's vision and strategy, but also change the mindset and culture of the organization. The culture change at Maytag occurred by actually integrating the vision and strategy with the business plans. Maytag created an environment where people thought, "I'm playing in the innovation arena, but I'm also contributing because I'm making my operations better."

Innovation is also hard to achieve because it is easily confused with a short-term, one-time breakthrough, a creative line extension, or a new technology. However, companies who live innovation know that it can actually be measured and managed in a continuous, long-term process. Some characteristics to monitor include rapid learning, risk taking, recognition and rewards, consumer and customer insights, elevated R&D importance, innovation networks, and manufacturing and operations processes improvements.

As an organization that now shares technologies, ideas, and people, it is not afraid to try new ideas and challenge the status quo. Maytag's COO, Lloyd Ward said, "We're developing a new model where innovation is institutionalized in the culture to yield a consistent and powerful driver of growth and long-term competitive advantage."