429: Innovation practices of the best companies – with Sally Kay

Lessons for product managers from PDMA’s Outstanding Corporate Innovators Award

Every year the Product Management and Development Association (PDMA) recognizes an organization with the Outstanding Corporate Innovators Award (OCI). Hershey, the chocolate maker, was the last winner, in 2022.

The winners of the award can teach us valuable lessons about innovation. To help us learn some of those lessons, Sally Kay is with us. She has served on PDMA’s OCI Committee for several years. Sally spent 36 years with The Dow Chemical Company and GlaxoSmithKline Consumer Healthcare. After working in R&D, Finance, Sales, and Marketing she focused her career on various areas of innovation and new product development. Since retiring, Sally has started her own consulting business, Strategic Product Development, which focuses on the front end of the innovation process. 

Summary of some concepts discussed for product managers [3:04] Why was the OCI award created?

OCI was created as a learning vehicle for PDMA. When a company achieves a sustained and quantifiable innovation success, PDMA will give them an award if the company will present their lessons learned at the annual conference. The OCI committee uses a rigorous process to evaluate candidates, focusing on identifying unique practices that will provide valuable learning opportunities for others trying to improve their innovation practices. We look under the hood of these companies to learn how they are sustaining innovation success.

[5:05] What is required to compete for the OCI award?

There are three primary criteria:

1. Sustained success launching significant new products or services
2. Significant quantifiable business results delivered by those new products or services
3. Consistent use of disciplined product development practices that the company is willing to share with others

We provide detailed feedback to companies that don’t win the award. Many companies find this valuable, and some later win the award after adapting their practices to reflect what they learned from us.

[9:40] What are key innovation practices that winners have in common?

The award started in 1988, and in 2004 the OCI committee was asked to write a chapter for the PDMA Handbook of New Product Development about the OCI award. We found consistency in the winners’ practices that others competing did not have. Even though these companies were diverse in industry, size, and geography, their practices were consistent. How they executed those practices depended on their industry and culture. We conducted two more retrospective analyses covering 2004-2013 and 2014-2021. We saw an evolution of the practices that separated the winners, but we still saw that consistency of practices across the winners. We learned that achieving innovation success has not gotten easier over the 35 years of the OCI award.

From 1988-2004, winners were early adopters of Stage-Gate, cross-functional teams, and voice-of-the-customer. Today, the practices that differentiate OCI winners are much more complex and involve:

• innovation strategy that defines where the company is going to play and how they are going to win
• intense focus on the front end of the innovation process
• portfolio optimization
• external collaboration and open innovation
• culture that supports bold thinking, risk-taking, and failure
• Lean and Agile practices
• metrics to measure effectiveness of the innovation process
• strong corporate commitment to innovation

[18:07] Do you have any favorite innovation practices you’d like to talk more about?

Innovation strategy is critical. The company Corning was once very dependent on the telecom industry. In the early 2000’s, that industry started to decline, and Corning almost shut its doors. Instead, their management decided to totally change their approach to innovation and make sure they were never dependent on just one industry again. One of their key tactics was to develop an innovation strategy. They call it their innovation recipe. It clearly defines the key elements of achieving successful innovation. One of those elements is solving a significant customer problem. When I visited Corning, it didn’t matter whether we were visiting engineering, marketing, or sales—everybody could quote the innovation strategy. They all knew that was critical to their success.

Intense front-end focus is also important. We look for companies that are really digging deep at the front end of the innovation process and getting as many inputs as they can to make a decision on where they’re going to innovate. The company Church & Dwight showed us a funnel where they determine their “drill sites”—where to focus their innovation efforts. The funnel has 25 different inputs to determine where the big opportunities are. That’s intense front-end focus, and it tends to be skipped sometimes.

[21:48] How do winners resource front-end innovation?

Corning has a discovery process called Magellan. It starts with workshops, and they bring in people from all kinds of industries—energy, economy, etc.—who share what trends are going on now. Marketing and technical people sit in on those workshops, which happen every two years or so. The technical and marketing teams come up with insights from those meetings that might be new opportunities for the company. They have a process for putting a business case together, evaluating it, and moving forward.

Another example is Novazymes, a biotech company, which created their own crowdsourcing platform for their employees. When an employee put out an idea, other people could jump in on the internet and contribute ideas. They had tremendous success. It was voluntary, but people really wanted to participate.

Some companies also collaborate with external sources to solve problems.

[26:33] How do winners manage portfolio optimization?

Companies are becoming more disciplined in portfolio optimization. They don’t have enough resources for all the projects and really have to prioritize. Winners come up with tools to evaluate projects based on critical criteria. They bring in diverse perspectives from manufacturing, sales, and marketing, and consider those perspectives against established criteria like time to market or significance of the problem being solved.

Winners talk about the need to balance between incremental, adjacent, and disruptive projects. Incremental projects take the fewest resources and least time, but the disruptive projects lead transformation in the industry. You can’t neglect disruptive projects.

When the company BD won, we were impressed that they had been in the same business for years then suddenly realized they should be looking at new opportunities. They started going outside their core business. First they put together a strategy for going outside the core and determined how to resource those projects.

It’s important to talk to the customer. A gentleman from 3M told us the customer has become the force majeure more today than ever before. Customer dynamics have been changing rapidly, so it’s critical that you talk to your customer constantly.

Action Guide: Put the information Sally shared into action now. Click here to download the Action Guide.

Useful links:

• Watch the PDMA Webcast: Lessons Learned from Outstanding Corporate Innovators
• Learn more about the OCI Award
• Listen to the 2021 and 2010 Lessons Learned from OCI
• Check out The PDMA Handbook of New Product Development 2nd or 3rd edition
• PDMA Handbook, 3rd ed: https://www.amazon.com/PDMA-Handbook-New-Product-Development/dp/0470648201
• PDMA Handbook, 2nd ed: https://www.amazon.com/PDMA-Handbook-Product-Development-Second/dp/B003RCNWK8
• Connect with Sally Kay on LinkedIn

Innovation Quote

“Our company moved from an NIH (Not Invented Here) philosophy to a PFE (Proudly Found Elsewhere) philosophy for innovation.” – from a DSM Executive describing their commitment to open innovation 

Thanks!

Thank you for taking the journey to product mastery and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it using the social media buttons you see below.