I am excited to participate in edifying conversations about innovation, and this interview looks ahead to how the innovation techniques and models are changing:
A Candid Interview with Cheryl Perkins
by Jackie Cooper, Management Roundtable
I had the pleasure this week of chatting with Cheryl Perkins, Founder and CEO of Innovationedge (Neenah, WI), an innovation consultancy that helps drive creativity and growth at companies around the world. Previously Senior Vice President and Chief Innovation Officer for Kimberly-Clark, she has particular expertise in the Consumer Packaged Goods (CPG), Food, and Healthcare industries. Cheryl is chairing the upcoming CoDev 2015 Conference, the leading forum on Open Innovation, this February in Scottsdale, Arizona.
In a nutshell, Cheryl is to Open Innovation what Vince Lombardi is to football. While she didn’t exactly invent the game, she has a distinct playbook and coaches teams to win. She advocates for openly innovating at the corporate strategic level — and makes a point to distinguish that OI is different than innovation in general.
Since the word ‘innovation’ is overused to the point of near meaninglessness, I wanted to know what about Open Innovation is important and different, and who in her opinion is doing it well. Our conversation ranged from business models to the best ways to gain customer acceptance and trust. On a practical implementation level, she shared advice about roles, responsibilities, and performance indicators/metrics.
Starting from the top:
JC: “Open Innovation” as originally defined by Henry Chesbrough (back in 2003), has clearly evolved and changed over the years. When you refer to OI, what is your definition?
CP: Early on Chesbrough’s definition was academic; it referred to the flow of knowledge, technology and IT. Now I see it as about capability: Knowledge, technology, marketing, business models, procurement, HR…Today, the critical capabilities to develop are beyond R&D. OI today involves a complete end-to-end business model with strategy, governance, culture, structure, process, enabling tools and a few of the right metrics.
JC: Who is doing the ‘new OI’ well, and what are the key success factors?
CP: Philips, Clorox, Lego, P&G and Pfizer come to mind. They are all doing a good job addressing multi-unit needs. The first four are somewhat higher up in their maturity* level as they have been at it longer (*see Innovationedge’s Maturity Model, below), but Pfizer is making fast steady progress. The key success factors as I see them are: 1. Alignment among leadership with a common definition of what open innovation is and what is to be achieved 2. Enablers – process pieces, strategy. Are you looking for new revenue in the same or new spaces? 3. Keeping the team small at first, business leader sponsorship, and early cross-functional involvement including R&D, Marketing, Supply Chain, Procurement and Legal and quick wins to create pull. 4. Having the right resources with the right skills in the right places. It is not just about technical skills and experiences. These resources need to be business savvy and have very good soft skills such as influence, persistence, curiosity, resilience and story-telling capability.
JC: You mentioned that OI now involves a complete end-to-end business model with the right KPIs and metrics. What are the right KPIs? Are they different than before?
CP: The top 3 are: 1) significant shift in portfolio from just internal programs to a blend of internal and external driven programs, 2) how many resources have been deployed to deliver OI, including numbers of executive sponsors involved, and 3) how much revenue is being generated from externally driven programs. Key Performance Indicators have also advanced from just financial to include behavioral metrics about how teams function. These metrics are increasingly important as OI relationships have expanded from single to multiple partnerships.
JC: All too often partnerships don’t live up to their promise and many fail altogether. With the added complexity of multiple partnerships and expanded ecosystems, what advice would you give? Are there red flags to look for early on?
CP: Go slow to go fast. Determine what each partner brings to the table and what each needs. Do it company by company…Company A owns this, needs this…Company B owns this, needs this…and so on. Then figure out who is bringing what and what they will own. You definitely need milestone checkpoints. One bright red flag is not taking into account the impact of culture. There are a lot of issues around acceptance, NIH, innovation fatigue. If culture isn’t ready, efforts will fail. Culture and leadership must be ready to take the risk.
JC: Speaking of acceptance and culture, wouldn’t that also apply externally to customers – not just internally and with partners? For example, when a large corporation partners with another company that has a unique or funky type of product with an intensely loyal customer base…how do you maintain customer trust while building a pipeline?
CP: Jackie, I think we will be seeing more and more acquisitions and even more competitors coming together (‘co-opetition’) to leverage their joint competencies and exploit new growth opportunities. Sometimes a separate JV even needs to be formed to make the model work. For example, Glad, a JV between P&G and Clorox, is extremely successful and is standing the test of time.
In all these situations, clearly defined strategy and frequent communications is essential. Knowing what to reveal, what not. You need to preserve the culture of the acquired company or companies that are partnering together but also create new equity for the new products that customers love – and you need early successes and early wins. Proof of concept is everything.
JC: What else about culture should leaders be aware of?
CP: The last piece about culture that is a big enabler is having facilitators / integrators with soft skills. The best leaders have a set of soft skills and can nurture relationships, not just the ability to scout. There needs to be a leader in each of the partnering companies, whether small or large, with these skills. Every organization also needs a Finder and a Catcher. The same person often can’t do both. The Finder is responsible for uncovering opportunities. The Catcher executes and runs with those opportunities to make them a reality.
JC: Overall what are the biggest trends you see — where is OI going?
CP: As for where OI is going — companies are spinning off, forming new JVs and focusing on their core. They are right-sizing their capabilities — knowing what they’re good at, what not. We’re seeing more Enterprise-wide OI where the Board and CEO are involved and openly innovating with their teams and external partners. These leaders are at Level 3 in the Maturity Model in terms of strategy, culture, processes and skills. We are at the start of a new era — expect to see more new business model creation as OI continues to evolve at the corporate level.
Cheryl Perkins is chair of CoDev 2015. Check out CoDev2015: Launching Products and Businesses with Partners, Customers & Ecosystems, to be held February 9 – 11, 2015 in Scottsdale, AZ.