The power of strategy innovation

T H E P OWER

O F

S TRATEGY

I NNOVATION

A New Way of Linking Creativity and

Strategic Planning to Discover Great

Business Opportunities

Robert E. Johnston, Jr.

J. Douglas Bate

American Management Association

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Library of Congress Cataloging-in-Publication Data

Johnston, Robert E.

The power of strategy innovation : a new way of linking creativity and

strategic planning to discover great business opportunities/ Robert E.

Johnston, Jr., J. Douglas Bate.

p. cm.

Includes bibliographical references and index.

ISBN 0-8144-0768-4

1. Strategic planning. I. Bate, J. Douglas. II. Title.

HD30.28.J657 2003

658.4
012—dc21

2003004618

2003 Robert E. Johnston, Jr. and J. Douglas Bate.

All rights reserved.

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This publication may not be reproduced,

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a division of American Management Association,

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Dedicated to:

Danielle, Rob, and Em:

Your energy, humor, and love inspire me.

—Bob

Bradley and Jeffrey:

You can accomplish anything you commit to doing.

—Doug

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C ONTENTS

A vii

I ix

PART ONE

THE WHAT AND WHY OF STRATEGY INNOVATION 1

C 1

Strategy Meets Innovation 3

C 2

S I I M  F 13

C 3

S I I N S P 28

C 4

T D P 38

PART TWO

A GUIDE FOR IMPLEMENTATION 55

C 5

T D P: T M S 57

C 6

T D P: S P 71

v

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vi C

C 7

T D P: A P 106

C 8

T D P: E P 136

C 9

T D P: C P 185

C 10

T D P: M P 211

PART THREE

ADVANCED STRATEGY INNOVATION 227

C 11

M  D P 229

C 12

F  S I S 247

E

T F  S I 269

G 273

R R 279

I 283

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A CKNOWLEDGMENTS

This book is possible only because of the contribution of numerous

participants in strategy innovation initiatives across many different

industries and dozens of companies reaching back to 1983. How￾ever, we wish to acknowledge here the special contribution and

support of a few individuals who have helped us bring it to fruition.

We decided early on that the story was best told by some of the

many pioneers who have championed strategy innovation on behalf

of their companies. Individuals who contributed generously in

terms of personal time and support include Bob Galvin, Motorola;

Bill Coyne and Ron Baukol, 3M; Dieter Kurz and Marc Vogel, Carl

Zeiss; Craig Wynett, P&G; Bob LaPerle, Eastman Kodak; Bruce

Carbonari, Fortune Brands Home and Hardware; Maureen Wen￾mouth and Tim O’ Brien, Moen; Dan Buchner, Design Continuum;

Ken Cox, NASA; Gary Kaiser, Eli Lilly; Ray Siuta, Hewlett-Packard;

Terry Tallis, Essential Possibilities, and Dana Seccombe, both for￾merly with Hewlett-Packard; and Garrett Bouton, Barclays Global

Investors.

Although this book will highlight the stories of dozens of compa￾nies, we would like to express a special thanks to two companies:

Moen and McNeil Consumer and Specialty Pharmaceuticals. At

Moen, CEO Dick Posey, the executive staff, and the Periscope II

team have been extremely supportive of our efforts. At McNeil, we

would like to express our appreciation to CEO Bill McComb; Bob

Carpenter, vice president of marketing; Amy Weiseman, manager

of innovation and new product processes; and the entire Edison

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viii A

team for their commitment to the exploration of a role for strategy

innovation in their company.

We were warned that writing a book is one of life’s challenges that

will test our character, fortitude, and sense of humor. Thanks to the

wisdom and disciplined freedom afforded us by AMACOM’s edito￾rial director, Adrienne Hickey, the orchestration of associate editor

Mike Sivilli, and the experienced professionalism of Niels Buessem,

we found the process to be both enjoyable and fulfilling.

Published authors who provided seasoned support and encour￾agement include Chris Zook, Bain & Company; Sidney Parnes, Cre￾ative Education Foundation; Teresa Amabile, Harvard Business

School; Stan Gryskiewicz, Center for Creative Leadership; Jonathan

Low, Cap Gemini Ernst & Young; T. George Harris, University of

California, San Diego; Lynne Lesvesque, Harvard Business School;

and Brian Mattimore, consultant.

While the coauthors have collaborated for over fifteen years, any￾one who worked a day with IdeaScope Associates has made a con￾tribution to this emerging field of strategy innovation. Former

colleagues who have provided us with special support include Chris

Von Pichl, Meg Dunn, Maxine Teller, Amy Weiseman, and Harvey

Ehrlich. A special thanks to Stephen Cornell, who was an early con￾ceptual catalyst in the mountains west of Banff and provided im￾portant polish later on.

Individuals not already mentioned who provided us with valu￾able feedback for ways to strengthen our strategy innovation story

include Peter Carey, Worth and Louise Loomis, Dorie Shallcross,

Ted Colson, Jeneanne Rae, K.T. Conner, Burt Woolf, Will Clarkson,

David Arnold, Bella English, Maura Grogan-Cornell, and Melinda

Merino. A special thanks also to Paul Wentzell and Terry Tallis,

who provided us with timely graphics support.

Additionally, we would like to express our deep gratitude to

Chris von Pichl, Peter Carey, Deborah Frieze, Bruce Landay, and

Bruce Crocker for their helpful counsel in advancing the mission

and impact of The Visterra Group.

Finally, our wives, Ty Johnston and Anne Bate, carried the spe￾cial burden of living with first-time authors, and we are genuinely

grateful for their perseverance and care.

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I NTRODUCTION

We want you to use this book. Nothing would please us more than

knowing that leading-edge companies around the world are devel￾oping their own Discovery processes for the pursuit of strategy in￾novation.

Strategy innovation is not a fad. It is not the latest management￾program-of-the-month. It is a process of exploring your emerging

future, understanding the changing needs of your customers, and

using the insights gained in those explorations to identify new busi￾ness opportunities for your company. That’s it. Whereas many

management programs help you shrink your costs to grow your

bottom line, strategy innovation is aimed at growing your top line.

New business opportunities help drive new company strategies,

which drive future growth.

So, why aren’t more companies doing strategy innovation? Be￾cause they don’t have an internal structure or process to do it. Who

in your company is responsible for the future? Who is feeding your

strategic planning process with ideas that stretch your current strat￾egy and get you into new markets? How are you going about identi￾fying your next new business platform, the basis of your future

growth and success?

What we describe in this book is a phase-by-phase approach to

the process of strategy innovation, not step-by-step. We provide the

blueprint and encourage you to customize it for the specific needs

of your company and your industry. This blueprint has been evolv￾ing for more than a decade, based on our experiences in a wide

range of companies and industries. We will share with you some of

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the stories that helped to create this process of strategy innovation.

It is a process that works.

Creating a cross-functional process for strategy innovation in a

corporate setting is not as simple as it sounds. This is especially true

when the process ventures outside the current corporate strategy or

business model. Escaping your ‘‘corporate gravity’’ and then avoid￾ing your ‘‘corporate immune system’’ are two threats to the estab￾lishment of this process. We will point them out and help you

address them.

We will also share what we have learned about selecting and pre￾paring a ‘‘reconnaissance’’ team for this process. The alignment

with senior management on which strategic frontier to explore is a

critical consideration that will be explained in detail. We will show

you where value-based insights can be found on your strategic fron￾tier—with customers, with the emerging future, and with new busi￾ness models. Taking the insights and turning them into new

business opportunities is a crucial step, as is the creation of a strate￾gic road map for the future. All of these elements form the basis of

the five phases of the Discovery Process.

Through this book and the work of our consulting firm, The

Visterra Group, we hope to advance the awareness and use of strat￾egy innovation in corporations around the world. Whether you are

a multimega global corporation or a cheese shop in Zurich, you can

use this strategy innovation process to chart a future path of growth

for your business. The fact that you are reading this book says that

this is of interest to you. We hope to hear from you at www.the

visterragroup.com

The Organization of This Book

Section One (Chapters 1 through 4) of this book outlines what strat￾egy innovation is, what it is not, and how we propose that you inte￾grate it to your organization. This section will be particularly

important reading for senior management of a company or division.

Section Two provides specific guidance for implementing a strat￾egy innovation initiative, which we call the Discovery Process. We

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begin in Chapter 5 with a real example of how the Discovery Proc￾ess worked in a real company. Chapters 6 through 10 then provide

details for the implementation of the five phases of the Discovery

Process—Staging, Aligning, Exploring, Creating, and Mapping.

Stories and examples are woven throughout these chapters to add

a practical touch to the frameworks presented. Understand, how￾ever, that these stories focus primarily on the process of previous

initiatives, as we consider the content generated in them to be pro￾prietary information.

Section Three offers more in-depth discussion of the Discovery

Process and strategy innovation in a corporate setting. In Chapter

11, we answer questions and share some additional insights related

to the Discovery Process. Chapter 12 outlines the key considera￾tions in formalizing a strategy innovation process in a company,

moving the Discovery Process from an ad hoc initiative to an on￾going strategy innovation system. Finally, in the Epilogue, we chal￾lenge senior management in corporations everywhere as we share

some of our thoughts about the future of strategy innovation.

Scattered throughout this book are boxes titled ‘‘Process Tip.’’

They represent what we consider to be critical elements in the im￾plementation of the Discovery Process. They come from more than

a decade of experiences in the trenches and are things we would

emphasize if we were talking to you. We put them in boxes so you

wouldn’t miss them.

If you are curious about the history of strategy innovation in

corporations and its roots in the early work done in creativity and

brainstorming, we encourage you to read the remainder of this in￾troduction. It will provide a good context for understanding the

evolution of innovation as it makes its way to the corporate board￾room.

The Migration of Creativity to Strategy in

Corporations: Evolution to Revolution and

Beyond

Many writers, researchers, innovators and strategists have recog￾nized the value of an organization reaching beyond predictable, in-

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xii I

cremental growth to achieve greater profit in innovative ways. Gary

Hamel, C.K. Prahalad, Constantinos Markides, Jim Collins, and

Clayton Christensen all champion strategy innovation as a vehicle

for creating ‘‘new value’’ and spawning new wealth. And, while

most cite or imply the importance of a creative process in breaking

the bonds of incrementalism, none prescribe an explicit process to

do the job. As Hamel succinctly states, ‘‘No one seems to know

much about how to create strategy.’’1 To date, serendipity appears

to be the secret solution to strategy innovation. In this sense, the

relationship between strategy and creativity in the business litera￾ture is still somewhat remote. Few strategists have yet discovered or

shared the decades of research in creativity and innovation that can

be harvested for the purposes of creating new value and new

profitability in their businesses.

Applying Imagination as a Skill

An emphasis on creativity first entered the corporate world in the

1940s and 1950s. The groundbreaking work on the creative process

by Alex Osborn, cofounder of the advertising agency BBD& O, led

to his fathering the process known as ‘‘brainstorming.’’ His work

also led to one of the first creativity guidebooks, the classic Applied

Imagination.

2 While achieving legendary success with his creativity

techniques in the advertising world, Osborn and his colleague, Sid￾ney Parnes, recognized that every human being has the potential to

be creative, if given the opportunity and the right environment.

Their work was supported by the research efforts of J.P. Guilford,

Paul Torrance, Don MacKinnon, Calvin Taylor, and others, which

clearly proved that creativity is a developable skill inherent in every￾one, not just a genius elite.

Parnes’s research demonstrated, among other things, that cre￾ativity is a skill that can be strengthened with coaching and practice.

Routinely, students in his courses were able to increase their idea￾generating capacities by 100 percent or more. Of particular impor￾tance, Osborn and Parnes proved the value of a mental model for

creativity, where ‘‘divergent thinking’’ is used to expand one’s op-

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tions, and ‘‘convergent thinking’’ enables the focus on a preferred,

innovative choice. One believer, Robert Galvin, retired CEO and

chairman of Motorola, used his imagination and inspired others

to grow Motorola one-thousand-fold during his three decades of

leadership. Galvin sagely observed, ‘‘Some think of this work of

engaging the imagination to be the work of genius. Osborn demon￾strated how it could be developed as a vocational skill.’’ If creativity

is a skill that can be developed, it becomes a tool that corporations

can use for purposes of innovation.

Applying Imagination to Inventing

In the late 1950s, George Prince and William Gordon had the task

of delivering proprietary new inventions to the clients of Arthur D.

Little, Inc., in Cambridge, Massachusetts. As part of the R&D–

focused Invention Design Group, they had the task of focusing on

solving client problems in innovative, often patentable, ways. Dur￾ing many years of successful new product innovation, Prince and

Gordon analyzed their process to determine the most effective

thinking strategies for invention.

This research led to their founding in the 1960s of a new com￾pany they called Synectics, Inc. Synectics used the power of meta￾phor and analogy to spark creative thinking, leading to the

identification of new products. They gave creativity a process that

could be applied in corporations for the purpose of innovative in￾ventions. In a span of a few decades, creativity had gone from an

esoteric skill in an ad agency to the basis of a corporate process for

generating innovative product ideas. Creativity was making prog￾ress but was still under the radar for most corporate managers.

Applying Imagination to Management . . .

In the 1960s Edward DeBono, a British neurologist, introduced the

world to the concept of ‘‘lateral thinking,’’ a fresh way to think

about creativity. DeBono observed that in attempting to solve prob￾lems, most people think ‘‘vertically,’’ in a straight line, probing

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deeper and deeper until the solution eventually presents itself. In

problems involving a creative response, however, he noted that the

solution is typically not at the end of a linear thought process, dig￾ging the same hole deeper and deeper. Instead, it involves ‘‘lateral

thinking,’’ digging a new hole somewhere else. Shifting the frame￾work of the process often results in new and creative solutions.3

In thinking about thinking, DeBono believes that, between verti￾cal and lateral approaches to creative thinking, lateral thinking is

the more difficult to master but the more rewarding for innovation.

DeBono has spent decades teaching corporate executives around

the world the importance of ‘‘serious creativity’’ for inspiring inno￾vative opportunities. During that time, the creativity message

gained credibility with corporate managers as a tool for innovation.

In 1970, the Center for Creative Leadership in Greensboro,

North Carolina, was founded to teach courses for individuals and

teams to hone their creative talents. Stan Gryskiewicz—founding

member, senior fellow, and vice president—organized and still

leads a group called the Association for Managers of Innovation,

which provides a forum for showcasing and networking of innova￾tion practices across corporations. Corporate managers were begin￾ning to recognize the potential for creativity in their organizations.

Applying Imagination to Strategy

According to Henry Mintzberg, former president of the Strategic

Management Society, strategic planning is an oxymoron.4 In most

organizations it tends to neither provide a sufficient range of strate￾gic options to consider nor present an engaging road map of a com￾pelling future. This is not surprising since most strategic planning

processes are numbers-oriented, lacking a creativity component. As

a result, strategic planning in most companies is a process that

merely extends the previous strategy into the future. Even when

senior executives invite ‘‘out of the box’’ thinking, most managers

do not know how to go about exploring beyond the existing strate￾gic framework.

We had the opportunity, as a founding principal and associate at

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