Optimizing for Innovation

SAN ANTONIO, TEXAS -- The theme of the 2008 SAS Global Forum held here this week was transformation -- companies have to shape the future, not just react to it. Transformational leadership is going to play a critical role as companies need to anticipate change, said Jim Davis, SAS Institute's senior vice president and chief marketing officer, in his opening address. This year's keynote speaker, Geoffrey Moore, managing director at TCG Advisors and a venture partner at MDV, reinforced the need for transformation -- a feat that can be achieved only when innovation and optimization are able to interact.

"It's the beginning of a challenging set of times," Moore said to the audience. "We're sailing into the wind, not with it." In his presentation, "Dealing with Darwin: Transforming Your Business to Compete in Tough Times," Moore described how companies can succeed on innovation, where they lose on innovation, and how optimization can help.

According to Moore, there are three overall business models -- what he called the "core" -- that enable companies to earn a return on innovation:

• Differentiation: Go beyond what the rest of the industry is doing -- create an offer categorically separate from others in the category;
  
• Neutralization: Stay out of the dead zone and make sure you're consistently in step with your competition. "Best-in-class is a sucker's bet," Moore said. Just be good enough, he said -- otherwise, you're going to trap yourself with very limited bargaining power; and
  
• Productivity: Be highly efficient -- companies often waste innovation budgets wavering between trying to differentiate and neutralize.

Companies need to identify which core they most identify with or are able to execute most successfully. Make a case of each, state the case, then play elimination until you get to a winner -- "Kind of like playoffs," Moore said. Each path is mutually exclusive, he added, such that if the borders are blurred, companies will find themselves either stagnant or inevitably falling behind. Similarly, Moore described how there are three key "zones" companies can place themselves in to break out of the pack:

• Product Leadership Zone;
  
• Customer Intimacy Zone; and
  
• Operational Excellence Zone.

Innovation may be key, but it's rare and challenging to get hold of, Moore said. Companies often find themselves losing money on innovation, especially when they don't align themselves with one central approach. First of all, companies lose simply because of failed attempts. Some companies venture forth but don't go far enough, uncomfortable being in the forefront -- and, as a result, back out. Others are eager for innovation and go in various directions until, eventually, chaos trumps progress and companies find their efforts canceling each other out.

Innovation and optimization were once thought of as separate processes. Now, however, business efforts need to make efficient use of all available resources to get the support and justification required for innovation. "This is the era of analytics," Moore said. It's like "finding coins in the couch," he said, adding that "a lot of money in an organization can be repurposed" by optimizing processes and determining where waste can be eliminated. But just finding loose change isn't enough; marketers need to define where the money is going to be invested before the funds can be absorbed by the chief financial officer. Once all your ducks are in a row, Moore said, the ultimate goal of innovation is to be "unmatchable by your competition, even when they see what you're doing."

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