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Ten Principles for Successful Innovation Management
-- One Company’s Experiences and Learnings --
Walter H. Zultowski, Ph.D.Senior Vice President – Research and Concept Development
LIMRA Strategic Marketing Issues CommitteeSeptember 24, 2009
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What is Innovation?
>Trap #1: Innovation vs. Product Development vs. Continuous Improvement
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Principle #1: Innovation needs to be viewed as independent
of ongoing product development efforts orcontinuous improvement initiatives
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What is Innovation? (cont’d)
>Trap #1: Innovation vs. Product Development vs. Continuous Improvement
>Trap #2: Innovation vs. innovation
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What is Innovation? (cont’d)
The Four Levels of Innovation
Level I: Existing Products/Services (revision, updates, reprices)
Level II: “Me too” or “New to your company” (fast followers)
Level III: “New to your market”
Level IV: “New to industry”
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What is Innovation? (cont’d)
“Something truly new (disruptive) that delivers against a business objective”
- Zultowski
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Principle #2: Need to define/set expectations as to whatinnovation means for your organization
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Principle #3: A culture of innovation is a necessary but not
a sufficient condition for success
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A Rich History of Innovation
>1896: Introduced the industry’s first cash value policies
>1906: Introduced the industry’s first correspondence training course for agents
>1912: First life company to use direct mail advertising
>1925: First company to selectively waive medical exams
>1933: Introduced a “planned estates” approach to life insurance sales
>1955: Pioneered lower life insurance premiums for women
>1965: Introduced the industry’s first computerized service system
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A Rich History of Innovation (cont’d)
>1967: First company to offer lower rates to non-smokers
>1968: First company to introduce video training for agents
>1971: The industry’s first toll-free call center
>1982: First U.S. company to introduce survivorship life
>1996: Creates a computer services company in India to address its Y2K challenges
>2001: Establishes the State Farm-Phoenix Alliance
>2005: First company to offer a GMWB “for two” Rider
>2006: First company to reduce life insurance premiums for maintaining a healthy weight
>2008: First company to offer stand alone living benefits on investment products
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Principle #4: Innovation is more often viewed as an artrather than a process to be managed.
To be successful, it needs to be viewed as a
bonafide organizational function, appropriately
staffed, managed, and positioned in the
organization
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Principle #5: Successful innovation management requiresfinding a balance on two dimensions
Genius
Formal Organization
Process
Informal Organization
The Evolution of Innovation Management at Phoenix
(2004 – 2008)
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Genius
Formal Organization
Process
Informal Organization
X
Model #1: The “Out of the Box” Thinker
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>Pros:Recognizes that innovation doesn’t happen by chance;it needs to be assigned to somebody
>Cons: Asks too much of one personIndividual easily divorced from the rest of the
organizationDoesn’t leverage knowledge/ideas from across the
organization
(Really not a viable model, listed here for purposes of completeness)
Model #1: The “Out of the Box” Thinker
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Genius
Formal Organization
Process
Informal Organization
X X
Model #2: The “Informal Idea Generation Group”
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Idea Generation and Management Process
>Example
>Literature places too much emphasis on “stage gate” models
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>Pros:Add process to the functionLeverages knowledge/ideas from across the
organization
>Cons: Can easily be divorced from the rest of the organization (Walt’s group)
Does not have analysis capability attached to itCan be a threat to existing functions in the organization
(demand “representation” on the group)
Model #2: The “Informal Idea Generation Group”
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A comment on managing the roles of both product development and the sales organization in the innovation management process
(Innovator’s Dilemma, Clayton Christiansen, Harvard Business School Press, 1997)
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Principle #6: Moving toward the formal organization alsoadds a bias toward incremental innovation
andaway from breakthrough innovation
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Model #2a Model #2b
Level I 3% 19%
Level II 31% 31%
Level III 14% 19%
Level IV 52% 31%
Total # of Ideas Vetted: 35 16
The “Informal Idea Generation Group” Model -- Results
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Genius
Formal Organization
Process
Informal Organization
X
Model #3: The “Idea Lab”
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The “Idea Lab” Model
>A formal organizational department
>Designed by a lean event
> Included the informal idea generation group
>Added a high-level analysis function
>Originally designed with a staff of 3 (but only 2 funded)
>Considered the creation of a physical space (ala Timberland)
> Implemented an electronic idea generation/vetting space (“Bright Ideas”)
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A Comment on Electronic Idea Generation/Vetting Systems
>Not a computerized suggestion box
>There is a methodology on how to utilize (i.e., campaigns)
>Generate a lot of ideas (+ / -)
> Involves people who shouldn’t be involved
>Letting “pet ideas” down easily
>East to get bogged down, lose interest/energy
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The “Idea Lab” Model -- Results
80 Ideas Generated/Vetted
10 Presented to Management70 Rejected
3 Rejected 7 Liked•1 Implemented
•4 “In Limbo”
•2 Rejected upon further analysis
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Principle #7: Innovation management is more than ideageneration, and must have a high-levelanalysis function attached to it to be
effective
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>Pros:Institutionalizes the innovation functionAdds a high-level analysis function to idea generation
Generates a lot of ideas
>Cons: Generates a lot of ideasSuccess too dependent on the head of the departmentDepartment too easily divorced form the rest of the
organization
Model #3: The “Idea Lab”
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Principle #8: The key success metric for innovation is notthe number of ideas generated, nor thenumber of ideas killed, but rather the ratio ofsuccessful ideas to the total number of ideasgenerated
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Genius
Formal Organization
Process
Informal Organization
X
Model #4: The “Right for Phoenix” Model
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The “Right for Phoenix” Model
>Leverages the idea of “idea campaigns”
>Customized idea generation groups for each campaign
> Involves executive management on their terms
–Selection of campaign topics
–Select involvement in brainstorming sessions
>Brainstorming sessions must be “seeded”
>Embraced and owned by the head of Product Development
>Embraces, but differentiates, incremental ideas (“Just-Do- Its”) from breakthrough ideas
>Places analysis responsibility with the appropriate area
>Relentless follow-up
>Process run by one person, part-time
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73 Ideas Generated/Discussed
35 Survived38 Rejected
•5 Implemented
•4 Under development/not yet implemented
• 6 Under analysis
•14 Deferred for future considerations
•6 Decision not to pursue after analysis
The “Right for Phoenix” Model -- Results
(total of 6 brainstorming sessions/campaigns held)
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Principle #9: The right innovation management model is the
model that’s right for one’s organization. The
challenge is in discovering it.
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Principle #10: You need to have confidence in innovation as
a strategy, and work at it relentlessly.
