Building Your Company's Innovation Strategy
Kenneth (Hap) Klopp, Founder and Principal, HK Consulting
Let’s get the facts straight first (we can distort them later):
- The rate of new product introduction in consumer goods increases exponentially year over year – 95 percent of all technology ever invented was invented in the last five years.
- Of the one hundred largest companies in the U.S. in 1917, only seventeen survive today.
During the twenty years I was CEO of The North Face (from its inception onward), we were driven by the above realities which dictated an overwhelming need for a commitment to innovation and an innovation strategy. Our commitment required a significantly higher-than-industry norm of investment in research and development (R&D). Fortunately and, perhaps, predictably it also manifested itself in terms of greater growth than our competitors and a brand image that was clearly one of the industry leaders. As someone once told me, sometimes cheap is expensive and expensive is cheap.
Here are two examples of what this commitment brought about for The North Face in terms of products included:
- Introduction of the first geodesic tent for backpacking: we worked with R. Buckminster Fuller to invent these products which revolutionized the backpacking tent market and generated a huge sales boost for the entire industry.
- Collaboration with GORE-TEX for the introduction of waterproof, breathable clothing: through this collaboration with W.L. Gore, the entire concept of clothing as a protective device for multiple weather conditions was pioneered and the market exploded.
An innovation strategy doesn’t just happen. It has to be planned. It has to be part of the corporate culture. And it has to be explained to the market place. At The North Face we accomplished this by five relatively simple steps -- simple conceptually but in reality much more difficult to adhere to during the month-to-month and year-to-year ups and downs of the external market. Here’s a step-by-step story of how we drove our innovation strategy at The North Face.
Step 1: We held long-range planning sessions every two years.
These sessions, which included the top 10 percent of personnel in our company, looked forward five or more years. Visioning at least five years in the future was essential since true R& D is revolutionary and has a long gestation period. Companies driven by short-term results will inevitably be diverted to evolutionary “me too” technologies. This restricts investment in the essential activity of innovation to look good in the short run, but at the expense of the long run. Those companies focused only on the short term are eating the seed corn of their business.
Step 2: We created a culture that rewarded risk taking.
True innovation requires risk of failure. By rewarding people for their risk taking rather than penalizing them for their failures, we liberated our team to truly innovate. We described this process as “failing forward.”
Step 3: We housed R&D and marketing in adjacent quarters.
This interaction ensured the development of products and technologies which met real needs in the market. Importantly, in our time of increasing importance of “speed to market,” this interaction allowed us to commence marketing and communication programs before the products were actually completed, thereby telescoping the time needed for us to successfully get to market.
Step 4: We established a corporate mantra -- Strive for Differentiation.
We committed to “Research and Design” and eschewed the more common “Ripoff and Deliver” strategy of many of our competitors. We made an internal vow that we would never market products which were copies of our competitors.
Step 5: We committed to establishing strategic partnerships with key suppliers and outside sources.
Besides giving us access to a much wider array of expertise and knowledge, strategic partnerships allowed us to speed up our introductions and eradicated the insidious negative impacts of the traditional “Not made Here” attitude often found in business.
We constantly reminded each other that success was going to the Urban Guerillas – those people who were faster, hungrier, more creative, and more innovative. So that attitude became a daily goal for our team.
Like most industries, our industry was faced with consistent downward pressure on prices and margins due to globalization, expanded information via the Internet, and increased competition. Fortunately, by committing to innovation and constantly reinventing ourselves (both products and processes), we were able to not only preserve but, in fact, increase our margins. And, we did this while we were exponentially building our global brand. Innovation, as a strategy, was our primary tool. And it made our business a lot of fun.
© 2006 Kenneth Klopp. All rights reserved.