Innovators
550
Innovation in the Midwest
A CONVERSATION
WITH
2012 Innovation Survey
Conducted by the accountants and consultants of Plante Moran
and the business educators of NewNorth Center
Thank you
Special thanks to:
David Curtis
President
Residential Home Health
Pedro Guillen
Managing Partner
Kinetik Partners
Jim Marcuccilli
President and CEO
Star Bank
Angela Nahikian
Director of Global
Environmental Sustainability
Steelcase Inc.
Molly Riley
Executive Director
Cystic Fibrosis Foundation,
Greater Illinois Chapter
Rick Rothwell
Vice President
Eureka! Ranch International
Mark Schroeder
CEO/Chairman of the Board
German American Bancorp
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Plante Moran
There was a brief period after the financial crisis and the housing market meltdown
when disbelief and uncertainty seemed to paralyze business leaders, but the results
of our 2012 Innovation Quotient Survey prove it didn’t take long for them to grasp the
impact of the situation and begin working toward answers that would sustain
their operations and prove the value of their organizations to customers.
Our data points out that leaders have always considered innovation essential
to the sustainability of their organizations, but the impact of the Great Recession
reawakened their innovative spirits. Through our process of discovery, it became clear
that many of our respondents have been implementing changes in strategy and organizational structure as well as developing new marketing concepts. At the same time
they were introducing new products, services, and processes.
Foreword
A self-improvement guide for innovators
An intense interest in innovation was clear. A participant from the healthcare industry
put it best when he said — “With or without legislation, we should continue to look for
innovations and efficiencies in health care because it is the right thing to do.”
Another respondent from the manufacturing sector said he is always looking and
listening for new ideas. There is a determination among top innovators to increase the
quality of their products and services and add value whenever possible.
Gordon Krater
Plante Moran
Managing Partner
This year, Plante Moran Partner Jeff Mengel led the team that analyzed the Innovation
Quotient Survey data. He has a well-established, national reputation for benchmarking
and his energy propelled his team to uncover the secrets of innovation and help all of
us use it more effectively. As you read through the report you will see that our team
uncovered four categories of innovators:
• Accidental innovators — those that jump from one good idea to the next
• Disciplined innovators — those that have a repeatable approach
• Top innovators — those that weave innovation into the fabric of their organization
• Superstars — those that develop an ecosystem of support allowing them
to go for breakthroughs
Our data shows that moving through these categories toward superstardom can mean
increased revenue. A superstar can double the return on his innovation efforts.
Thank you to all of you who took the time to share your information and thoughts on
innovation. We hope that you will profit from the insights in this report.
Regards,
Gordon E. Krater
2012 Innovation Quotient Survey results
3
About our participants
Defining our 550 innovators
More than 550 leaders in the private and public sectors participated in the 2012 Innovation Quotient
Survey. The survey was distributed by 24 organizations throughout Illinois, Indiana, Michigan, and
Ohio. It is an annual project by the accountants and consultants of Plante Moran and the business
educators of NewNorth Center to stimulate a conversation on innovation and to share best practices.
Industries represented
Roles of participants
Financial
institutions
Chairman,
CEO,
owner
18%
Manufacturing
Health care
19%
Business/
professional
services
10%
Notforprofit
2%
4%
Technology and
software companies
19%
27%
15%
Other
Construction
Director
4%
Government
6%
12%
Vice
president
Other
13%
15%
CFO
11%
3%
3% 4% 5%
Leader of an
innovation team CIO COO Member of an
innovation team
10%
Education
Revenue of organizations
Location
Michigan
< $10M
49%
39%
$11$25M
13%
> $500M
15%
$26-$50M
$101$51$500M $100M
10%
10%
12%
Other
Ohio
12%
3%
Illinois
21%
15%
Indiana
For the purpose of this survey, innovation is defined as new or significantly improved processes,
products, or services as well as changes that the organization has introduced at a strategic level.
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Plante Moran
Participants and collaborators
We would like to thank those who took their time to
share their insights and those organizations that helped
us distribute the survey. They include:
Chicagoland Chamber of Commerce
Columbus Chamber of Commerce
Community Bankers Association of Illinois
Cornerstone Chamber of Commerce
Detroit Regional Chamber
European-American Chamber of Commerce
Grand Rapids Area Chamber of Commerce
Greater Elkhart Chamber of Commerce
Holland Area Chamber of Commerce
Illinois Health Care Association
Illinois Manufacturers’ Association
Indiana Bankers Association
Kalamazoo Regional Chamber of Commerce
Lakeshore Advantage
Michigan Community College Association
Michigan Bankers Association
Michigan Council of Women in Technology
Midwest Technology Leaders Conference
Ohio Association of College and University Business Officials
Ohio Bankers League
Ohio Health Care Association
Ohio Manufacturers’ Association
PolymerOhio
The Right Place
2012 Innovation Quotient Survey results
5
Contents
Health care
Business/
professional
services
Not-for-profit
Takeaways:
Follow the best practices to a eureka moment p. 8
Innovation superstars see 100% better results p. 9
INSIGHT:
Healthcare providers link innovation and survival p. 12
Conversation: Affordable capital is available p. 14
INSIGHT:
Innovation is top of mind at organizations, and the business/
professional service sector is ready to help p. 15
Conversation: Create an innovation ecosystem p. 17
Commitment translates into breakthroughs p. 18
INSIGHT: Governments, K-12, higher education, and not-for-profits turn to innovation in their transformation efforts p. 20
Conversation: Venture philanthropy: A foundation’s pioneering approach to finding a cure p. 22
Building a culture that nurtures innovation p. 23
Fail fast/fail cheap: A proven process to speed innovation & decrease risks p. 25
INSIGHT:
Banking
Community banks know they must innovate, but . . . p. 26
Conversation: Customers are the source of our ideas p. 28
Conversation: Community banks need to share best practices to
survive this era of change p. 29
Manufacturing
INSIGHT:
Manufacturing is responding to the slow-growth economy with
a two-pronged approach to innovation p. 30
Conversation: Celebrating 100 years of innovation by planning for 100 more p. 32
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Plante Moran
Follow the best
practices to a
eureka moment
Innovation superstars
see 100%
better results
8
9
Commitment
translates into
breakthroughs
Building a culture
that
nurtures innovation
18
23
A proven process
to speed innovation
&
decrease risks
Celebrating
100 years of innovation
by planning for
100 more
25
32
2012 Innovation Quotient Survey results
7
Takeaways
Follow best practices to a eureka moment
Successful innovators are deliberate. That
was the message we heard last year. And
it was the resounding takeaway from our
analysis of data collected in the Innovation Quotient Survey this year.
Organize
In general, this year’s survey participants
expect innovation to help them meet
their revenue and cost cutting goals in
2013 and 2014, and their past history predicts they will be successful. As a group
they generated 16.1 percent of their
revenue from new products introduced in
the last three years.
• Create a commercialization process. Some great ideas
get lost because there is limited training, dollars, or
patience to bring the idea to market.
However, by using correlation and frequency charts our analysts were able to
determine that there is more potential if
organizations follow the best practices
uncovered in the survey. In fact if they
were able to replicate the techniques of
the innovation superstars we found, they
could improve their results by more than
100 percent.
These are best practices for incremental innovation,
but if you are looking for a breakthrough, learn from
the innovation superstars and develop an ecosystem of
research organizations.
We want to thank the 550 survey participants for sharing their thoughts. After
carefully aggregating the responses and
testing them, we offer you the following
recommendations to get more value from
your innovation efforts.
Develop a plan for innovation
Celebrate
• The innovation team should at a minimum be recognized and monetary rewards should be considered.
Include universities and government and private research
facilities in your innovation efforts and you are more apt
to have a eureka moment.
Depth of innovation
80%
70%
60%
50%
• Establish clear and measurable
expectations
40%
• Monitor progress toward those
expectations
20%
• Make alterations to the plan
when necessary
• Abandon a project if it is not
generating the expected results
Budget
• Fund your innovation objectives
• Expect a return on your innovation
investment
• Identify a process for getting resources
and support to innovation efforts
8
• Establish cross-functional teams with the goal
of developing proponents for innovation throughout
your organization
Plante Moran
30%
10%
0%
Variations on a
single theme
New but within
its traditional
markets
Breakthrough
in all ways
Accidental innovators
Top innovators
Disciplined innovators
Superstars
Innovation
superstars
see 100%
better
results
There is good news in the Midwest.
Economic activity continues to expand at
a moderate pace and according to this
year’s Innovation Quotient (IQ) Survey,
both the private sector and the public
sector are expecting new products and
improved ways of doing things to generate increased revenue and cost savings
through 2014.
Their bet on innovation is well founded.
IQ survey respondents reported an
average of 16.1 percent of revenue from
new products introduced in the last three
years. This is in keeping with recent
studies by Georgia Tech and The
National Center for the Middle Market
at The Ohio State University that
document the importance of innovation
in sustaining organizations and
growing their top lines. In fact successful
innovation is one of the distinguishing
characteristics of the National Center’s
“growth champions.”
The question
Using a scale of 1 to 10, please rank the
importance of revenue generating or cost
savings innovations to your organization in
the next two years
1
2
3
4
5
6
7
8
9
10
2012 Innovation Quotient Survey results
9
Successful
innovators
engage
in change
every year
impact of the resulting Dodd-Frank Act.
Looking for
solutions in
tough times
Tough times are often
the mother of innovation,
and the IQ survey results
indicate that is clearly the
case. Although the field of
respondents changed from
2011 to 2012, the strength
of response numbers from
sectors seemed to reflect
reactions to economic
factors. Last year manufacturing represented
36 percent of respondents
and financial institutions
came in second with
11 percent. This year
manufacturing went down
to 19 percent and financial
institutions went up to
18 percent.
This could be because
manufacturers were forced
to face a difficult economy
before other sectors and
are well on their way to
ramping up innovation.
On the other hand financial institutions are just
beginning to cope with
the financial crisis and the
Surfacing in creditable numbers for the
first time were not-for-profits including governments and education. As
expected, the effects of the financial crisis
and the housing market meltdown took
longer to affect them, but now they, too,
are turning to innovation to help sustain
their operations.
Innovation, finding new ways of doing
things and inventing new products,
processes, and services, is an obvious
response. But it is clear from the survey
results that organizations cannot turn into
effective innovators overnight. Successful
innovators engage in change every year.
Our analysts found there are different levels of innovation and decided advantages
to move from one tier to the next. We will
look at their findings and share the “best
practices” in hopes of bringing up the
level of innovation across the board and
maintaining the nation’s reputation for
being home to the world’s best innovators.
It is important to realize that almost one
out of three of the survey respondents
received no revenue from new products/
services during the last three years. We
encourage their interest, but studied only
those respondents who reported some
revenue from new products and services.
• Accidental innovators — 30.1 percent
of respondents are categorized as
accidental innovators. Accidental
Defining the categories by revenue from new products/services
10
All
respondents
Accidental
innovators
Disciplined
innovators
Top
innovators
Superstars
% of total
100.0%
30.1%
19.4%
20.8%
12.3%
New product
introduction % of
revenue
16.1%
11.1%
15.4%
21.0%
23.3%
Plante Moran
innovators reported 11.1 percent of
revenue from new products/services
over the last three years.
• Disciplined innovators — 19.4 percent
of respondents are categorized as
disciplined innovators. Disciplined innovators reported 15.4 percent of revenue
from new products/services over the
last three years.
• Top innovators — 20.8 percent of the
respondents are categorized as top
innovators. Top innovators reported
21 percent of revenue from new products/services over the last three years.
• Superstars — 12.3 percent of the
respondents are categorized as superstars. They reported 23.3 percent of
revenue from new products/services
over the last three years.
Is your organization an
accidental innovator?
A accidental innovator is a classic
entrepreneur that seizes opportunity — a
unique idea hits and a champion surfaces
to drag the idea through the steps to
completion and, when appropriate,
commercialization. The accidental
innovator initiates new products, services,
or processes in response to comments
from customers/constituents or a need
to improve quality.
Our survey data indicates that 30 percent
of organizations follow this approach and
generated 11.1 percent of their revenue
from products or services that they introduced in the last three years.
Learning from the disciplined innovator
The disciplined innovators identified in the survey were
able to improve revenue from innovation by 38.6 percent
over the accidental innovators. They showed
15.4 percent of revenue from new products in the last
three years, up from the 11.1 percent for the accidental
innovators.
What did they do differently? The disciplined innovators established systems such as cross-functional work
teams, budgets, work plans, and included innovation
in their strategic plans. In comparison to the accidental
innovators, their innovation ideas are more likely to be
driven by strategy, entering new markets, and increasing
operational flexibility and capacity.
Going for the gold: characteristics of top
tier innovators
The top tier innovators weave innovation into the fabric
of their organizations starting with the corporate strategy. Leadership is engaged, innovators are rewarded
both financially and non-financially, and special teams
may be created to lead the innovation process. These
organizations have a strong affinity for improving valueadded product/services.
Top tier organizations have more registered innovation
(trademarks, copyrights, and patents) and types of
innovation (product, process, and systems), as well as
many times the potential for a major breakthrough in
innovation.
This top tier group generated 21 percent of its revenue
from products or services that were introduced in the last
three years, an 88.1 percent improvement over the accidental innovator. Within this group, there are superstars
that generated 23.3 percent of revenue from products or
services that were introduced in the last three years — an
109 percent improvement over the accidental innovator.
To keep that success going, however,
they can learn from the even more
successful innovators that take an
intentional approach to innovation.
2012 Innovation Quotient Survey results
11
INSIGHT
Matt Weekley
Practice leader
Health Care
Healthcare
providers
link
innovation
and survival
Respondents to this year’s Innovation Quotient Survey
who are in the healthcare industry understand without
question that innovation is a key ingredient to their
sustainability. As one respondent commented, “We are
in one of the most dynamic times for health care of any
in U.S. history. Value-based purchasing and bundled
payments are just two examples of the kinds of changes
that are happening and will be expanded. To survive, we
must learn to adapt to the changing environment or we
will go the way of the dinosaur. Innovation is critical to
our survival.”
However, understanding this inevitability and acting are
two very different things. Although 76 percent of healthcare respondents said that legislative efforts to strike
down the Affordable Care Act would have no impact
on their innovation efforts, another 24 percent said they
would anticipate a reduction in innovation if the mandates did not exist. This second response would seem to
be tied to the ability to pay for innovation efforts rather
than the desire to implement them.
Respondents said improving quality, increasing value,
and customer demands are the top drivers of innovation
in their organizations. But the deterrents are numerous.
The cost of financing and of direct innovation efforts
received the highest overall responses by the healthcare
survey respondents when asked about the most significant constraints on their ability to innovate.
Data also indicates that healthcare respondents lag
the survey group in budgeting for innovation. As our
analysts looked at the numbers and compared the
innovation budgets of the top innovators and the superstars among them to the other respondents, it became
clear that the amount an organization budgets is not
as important as the fact that it budgets. Budgets bring
accountability.
Unfortunately, we also found that more than half of the
healthcare respondents are not aware of the Center for
Medicaid and Medicare Services (CMS) Innovation
Center and its Innovation Challenge grants, funding for
pilot programs, and cooperative agreements. Of those
who are aware of them, just under half had applied to
participate in the program.
One area of healthcare innovation that requires nearly
all providers to participate is electronic medical records
(EMR). When asked what percentage of implementation
their organizations had completed relative to EMR, only
26 percent indicated they were 100 percent complete
while 35 percent said their organizations were less than
50 percent complete.
Collaboration and integration across the healthcare
continuum are also something we see increasing exponentially as reimbursement models move to bundled
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Plante Moran
Innovation constraints
Organizational culture
Organizational leadership
Direct innovation costs too high
Cost of financing
Availability of financing
Lack of qualified personnel
Lack of information on technology
Lack of market information
0
2
4
6
Accidental innovators
8
Scale of 1-10
Top innovators
Disciplined innovators
Superstars
Healthcare
payments, value-based purchasing, and shared savings
programs. Fifty-five percent of our survey respondents
said their organization is considering a merger or an
acquisition.
While the ability to fund innovation is a real issue for
healthcare providers, perhaps another is just as
significant — leadership. When asked what internal
factors drive innovation in their organizations, healthcare
respondents said leadership is even more important
than organizational strategy or dedicated teams focused
on innovation. Our survey also found that the most
superstars reward their innovators with promotions
(32.4%) or in non-financial (63.2%) and financial (55.9%)
ways. Although healthcare providers come close to the
benchmark for non-financial rewards (57%), more than a
third of the healthcare respondents reported having no
rewards system.
If there is agreement that innovation in healthcare
delivery must include solutions that improve quality of
care as well as the efficiency of delivering
it, then the good news from our survey
is that the majority of respondents
(59 percent) said their organizations
have already implemented process
re-engineering initiatives and nearly half
(48 percent) are using cost accounting
to track profitability of service lines.
Unfortunately, reductions in staffing
(44 percent) and service lines (17 percent)
are also realities.
Perhaps this survey participant summed
it up best, “In the best interest of the
organization and those we care for, it’s
necessary to continue, if not even increase,
innovation efforts to be competitive and
meet the ever rising bar of expectations
of those we serve.”
2012 Innovation Quotient Survey results
13
Affordable capital is available
The following is a conversation with David Curtis, president of Residential Home Health, which
provides services in Michigan and Illinois.
Would you say having an aggressive
innovation program is critical to a
healthcare provider’s success today? If
so, why?
Curtis: Of course it is, because the
traditional ways of doing things are too
David Curtis
expensive, inefficient, and are not meeting the changing needs of patients and
providers. For example, our organization is wired from
end to end electronically. We’ve had EMRs for more
than seven years because patient status can change
quickly and the doctors, case managers, and nursing
homes that our professionals interface with want to
know what is happening with their patients. Any time
something hits our database as a clinical event, they get
notified via e-mail. They have info at their fingertips on
a tablet and know in real time what’s going on with a
patient. We have continuity of care across providers.
What has your organization done to generate innovations that will improve your business?
Curtis: We actively seek out the opinions and input of
others. We’ve invited customers to come in and review
how we deliver care. We bring our technology vendors in
to make sure we’re using the applications to their fullest
extent. Last year, I took a team of eight or nine people
to visit a company that does what we do in Texas. We
spent two days with them to learn best practices. We are
not committed to making sure all of the best ideas are
invented only within the metaphorical walls of our company. The assumption is that others are doing something
better that we should know about.
This year’s Innovation Quotient Survey indicates that
the respondents feel one of the biggest inhibitors
to innovation for healthcare providers is access to
capital. Would you agree?
Curtis: No. We just refinanced our debt and received
the best terms in the last several years. And I know that
if we needed mezzanine capital or equity capital, while
it may be more expensive, it’s also available. It may be
that some providers are still perceiving a barrier that isn’t
necessarily there anymore. If you have a good business
plan you can find capital at a reasonable cost.
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Plante Moran
When asked what internal factors
drive innovation in their organizations,
healthcare respondents said leadership
is even more important than organizational strategy or dedicated staff teams
focused on innovation. What do you
think?
Curtis: Leadership is important for business, period. It’s important to state that
the status quo is unacceptable and needs
to be constantly re-evaluated. In my case,
we’re dealing with reimbursement issues,
and so necessity is the mother of invention. I share info with my team and tell
them we will need to come up with creative ways to do things better in order to
grow. I’m transparent with our team about
results. That way they understand the
choices and tend to reach the same conclusions as I do – we‘ve got to change.
If I say to them, “We’re in a service business with a declining reimbursement
environment and at an operating cost
that is 65 to 70 percent payroll, the worst
way to deal with it is to give everyone a
pay cut. What else can we do?” That gets
them thinking.
How important is collaborating with
other providers in the healthcare
continuum for successful innovation
efforts? What has your own
experience been?
Curtis: We’ve had great partnership
experiences. We’re an independent provider so we’re not tied into an integrated
delivery network. We have to work with
the outside world and be flexible and
responsive. The answer is always “Yes.
Now, what’s your question?” We have to
have that mindset.
Analysis of the data indicates that 97 percent of the
respondents from the sector had undertaken some kind
of work to increase their knowledge for developing new
products, processes, or services. Manufacturing, usually
a leader in research and development, was at 92.
The sector was also most focused on innovation of any
of the sectors. On a scale of 1 to 10 with 10 indicating
the strongest, the business/professional services sector
ranked focus on innovation at 7.52, while health care
came in second at 7.2, and not-for-profit came in third
at 6.9.
Innovation is
top of
mind at
Chris Jones
organizations, Practice leader
Service Industry
and the
business/
professional
service sector
is ready
to help
INSIGHT
The number of respondents from the business/professional services sector quadrupled this year. Consulting
accounted for more than a third of the respondents in
this sector with advertising, marketing, and communications coming in a distant second.
Focus on innovation
7.6
7.4
7.2
Business/professional
services
7.0
Health care
6.8
Not-for-profit
6.6
6.4
Rewards innovation
Scale of 1-10
70%
60%
50%
This seems to imply that the business/professional
services sector is responding to clients who are placing
more emphasis on innovation for help sustaining and
growing their organizations. Certainly this sector ranks
well above the lower tier innovators when it comes to
listening to clients. The business/professional services
sector comes in at 8.25 compared to 6.7 for the accidental innovator and 7.6 for the disciplined innovator.
However, it does not reach the 8.7 and 8.8 ranking of the
top innovators and the superstars respectively.
The business services sector also finds itself better than
the lower tier innovators but not as generous as the top
innovators and superstars when it comes to rewarding
innovation. Forty-nine percent of the respondents in the
sector reported rewarding innovators in a non-financial
way. Forty-one percent rewarded innovators in financial
ways.
40%
30%
20%
10%
0%
Non-financial Financial Promotions There are
ways
ways
no rewards
Business/professional services
Accidental innovators
Disciplined innovators
Top innovators
Superstars
2012 Innovation Quotient Survey results
15
Further findings indicate that the business/professional
services sector is less worried about finding qualified
personnel than even the top innovators and superstars.
In fact, the respondents in this sector rivaled the top
innovators and superstars in several areas. They were
at least as satisfied with the information they have on
technology and markets. They, however, were more
concerned about the economic risks connected to
innovation and they were more apt to see availability of
financing as a constraint.
Innovation constraints
Organizational culture
Organizational leadership
Direct innovation costs too high
Cost of financing
Availability of financing
Lack of qualified personnel
Lack of information on technology
Lack of market information
0
2
4
Accidental innovators
Disciplined innovators
Top innovators
Superstars
Business/professional services
16
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6
8
Scale of 1-10
Create an innovation ecosystem
As an example of how a business services group can help with innovation, we had this
conversation with Pedro Guillen, managing partner at Kinetik Partners, a boutique
innovation consulting firm with offices in Detroit, Mich., and Barcelona, Spain.
When you talk about
a new frontier in
innovation, what do
you mean?
Guillen: I’m talking about
middle-market companies
Pedro Guillen developing and nurturing
an innovation ecosystem.
Because industries are
becoming more and more complex to
serve, it is becoming evident that no
one company can completely innovate
internally and provide long-term results.
The degree of know-how, expertise, and
investment required to develop new
products is not often found within
individual companies.
Do you mean joint ventures or new
approaches to technology licensing?
How do you create an ecosystem?
Guillen: I’m talking about innovation hubs
where research institutions, start-ups,
and commercial entities are codeveloping new products, generating know-how,
and designing transformational business
models. For instance, some competitors
are working to understand the basic and
applied science behind new products
or services. Taking it even further some
suppliers are codeveloping to reduce
time-to-market as well as mitigate the risk
and investment required. Codevelopment
is the norm in the European CORDIS Program and it’s also surfacing in the defense
industry in both the United States and
Europe.
the revolution taking place in the automotive advanced materials industry. They are
starting to link aerospace technologies,
materials development, and advanced
manufacturing to develop new lightweight, high-efficiency vehicles.
What kind of business models do these
ecosystems have?
Guillen: They are self-regulating and
they are adaptable. It is important for
each member of the ecosystem to have a
strong business model because once the
power of innovation is unleashed they will
need to harness it for strong returns and
increased value.
What’s one thing you’d add about
ecosystems for innovation that we have
failed to cover?
Guillen: They can be self-perpetuating. As
industries grow more complex the need
for innovation expands; an ecosystem
can adjust and expand to include the
members it needs, always generating
new solutions.
Is this just a factor for the
middle market, don’t big companies
continue to have big R&D operations?
Guillen: Actually this approach to external
or open innovation filtered down from the
big corporations like Siemens, Dow, and
Procter & Gamble. More than 10 years
ago, P&G decided on an open innovation model and now it requires its team
to identify or source 50 percent of its
products from the outside.
Can you give us an example of how to
create an ecosystem and how it works?
Guillen: It takes mapping, looking at
the current needs, and projecting future
needs. When you find gaps, then you
look for solutions. A perfect example is
2012 Innovation Quotient Survey results
17
Commitment
translates into
breakthroughs
Across the board, our data
indicates that top innovators
and the superstars among
them are more driven to
improve and invent by all
of the factors usually
considered as innovation
drivers. Their commitment
is superior to innovators in
other categories and may
reflect their comprehensive
attitude toward innovation
or as one participant
explained — ”We’re always
looking/always listening.”
Examining the data
indicates that top
innovators and the
superstars among them
put a top priority on:
“We’re always
looking/always
listening.”
• Customer demands
• Corporate strategy
• Improving quality
• Increasing value add
Emphasizing these areas
translates into:
• A greater frequency of
innovation
• More breakthroughs
• Stronger return on
innovation investment
18
Plante Moran
Ranking of factors contributing to innovation
Customer demands
Corporate strategy
Employees with ideas
Reducing cost per unit
provided or produced
Improving quality
Replacing outdated products,
services, or processes
Increasing range of
products and services
Entering new markets
Increasing market share
Increasing value added
Increasing flexibility for
producing products or services
Increasing capacity for
producing products or services
4
5
6
7
8
9
10
Scale of 1-10
Accidental innovators
Top innovators
Disciplined innovators
Superstars
2012 Innovation Quotient Survey results
19
INSIGHT
John Bebes
Practice leader
Not-for-profit
Beth Bialy
Practice leader
Government
Government,
K-12, higher
education,
and not-forprofits,
turn to
innovation
in their
transformation
efforts
Laura Claeys
Practice leader
K-12
Uncertain economic times are driving innovation among
not-for-profit organizations and the public sector, much
more so than in the private sector. In fact, not-for-profits
and the public sector including governments, K-12, and
higher education ranked the economy and finances as
the primary factors driving their innovation efforts. Those
two factors ranked near the bottom for the rest of the
survey group.
Up until recent years, governments in particular did not
focus on innovation because there was little incentive to
consider it. Revenue streams and resultant budgets were
extremely stable, leading to “business as usual.” Now
that the economy is requiring innovative solutions, many
governments are finding themselves ill equipped.
Our analysts found that not-for-profits and the public
sector rely heavily on leadership to instigate the innovation process. That adds another competing priority to
an already stressful situation and puts a heavy burden
on boards and councils. Following best practices and
spreading the responsibility for innovation by integrating
it into the organization’s fabric, however, could mitigate
this situation.
It is a given that the profit motive differentiates for-profit
organizations from not-for-profits and the public sector
but there are best practices that can be shared. Perhaps
the most relevant is that many successful companies
are driven to innovate because it supports their mission. (See Venture philanthropy, page 22, and Steelcase
celebrating 100 year of innovation, page 32.)
Vicki VanDenBerg
Practice leader
Higher education
Data indicates that not-for-profits and the public sector
are compensating for shrinking budgets by actively looking for opportunities to deliver programs and services in
better, faster, cheaper ways. More than 91 percent said
Innovation drivers
10
9
8
7
6
5
All respondents
Education
Government
Not-for-profit
4
3
2
1
0
The economy
20
Plante Moran
Finances
Scale of 1-10
Innovation constraints
Lack of market information
Lack of information on technology
Lack of qualified personnel
Availability of financing
All respondents
Education
Cost of financing
Government
Not-for-profit
Direct innovation costs too high
Economic risks
No process for new initiatives
Organizational leadership
Organizational culture
0
2
4
6
8
10
Scale of 1-10
they have re-evaluated the
necessity of the services
they offer, and more than
88 percent re-evaluated
the demand for the services they offer.
To save on costs and maintain or improve service,
not-for-profits and the
public sector are also looking for opportunities to
share. Eighty-six percent of
them are sharing services;
68 percent are sharing
facilities; and 56 percent
are sharing technology
with other organizations.
Technology is important to
these groups. Half of them
are using technology to improve efficiencies now and almost half of them said
they were looking to leverage technology
even more to improve efficiencies. They
also seemed somewhat interested in
leveraging technology for service delivery
and to engage their stakeholders.
Not-for-profits and the public sector
depend on technology to support their
efforts to contain costs, and at the same
time they find a lack of information on
technology a major constraint on their
innovation efforts. Perhaps a technology
assessment could help squeeze out more
value from existing systems and could
serve as a basis to develop a systematic
approach to upgrades that would ensure
a stronger return on their technology
investments.
Budgeting for innovation
is a best practice that notfor-profits and the public
sector might consider.
Despite tight budgets,
there are real benefits
from funding a line item
for innovation. Survey
results indicate that the
amount is not as important
as the fact that a budget
actually exists for innovation. Budgeting makes
the process of innovation
more accountable and
integrates it into the organization’s strategy, which
is a building block for an
innovation culture.
2012 Innovation Quotient Survey results
21
Venture philanthropy: A foundation’s
pioneering approach to finding a cure
The following is a conversation with Molly Riley, executive director, Greater Illinois
Chapter, Cystic Fibrosis Foundation.
The Cystic Fibrosis Foundation (CFF)
pioneered venture philanthropy.
Can you explain what that means?
Molly Riley
Riley: The Cystic Fibrosis (CF) Foundation
is proud to be a pioneer in the concept of
venture philanthropy and it evolved from
our mission to find new drugs to fight
cystic fibrosis. The foundation had been
funding academic and medical research
for decades, but there were still no drugs
to control CF. So in the late 1990s, our
President Robert Beall decided to try
a new approach. CFF would fund drug
development at for-profit pharmaceutical companies. It was a tough sell at
first because the companies knew there
would be a limited market. There are only
30,000 individuals in this country with CF,
70,000 globally. But the time was right.
Because of growing economic and regulatory hurdles, biotech companies began
reprioritizing their programs with smaller
targets. CFF was one of the first to invest
in for-profit drug development, but now
several rare-disease, non-profit healthcare organizations like the Michael J. Fox
Foundation and the Christopher Reeve
Foundation are following suit.
Has this been a successful approach?
Riley: Absolutely. You can go to our
website and see our pipeline of drugs
at various stages in development. The
pipeline is our report card to our donors
and they can see at any time where the
money we raise is being used. Just this
year, the FDA approved Kalydeco for
people with a certain kind of CF gene
mutation. It is the first drug to address the
underlying cause of CF and opens more
opportunities that may lead to a control
for all patients.
22
Plante Moran
This is very innovative at the national
level. Have you done anything at the
chapter level that you would consider
innovative?
Riley: We’ve opened opportunities
for more people to get involved. For
instance, we’ve started an annual fund
program for people who give between
$1 and $9,999. This is an intermediate step in giving for people who don’t
attend events and aren’t able to be part
of our major gifts program. We’ve gotten
a lot of new donors and reconnected with
lapsed donors with this program. It raised
$125,000 in the first year. Along the same
lines we are now looking at adding a
second more moderately priced golf outing as our current golf outing at Conway
Farms begins at $4,000 for a foursome.
Golf outings have been around for a
while, but it seems as if you have a creative approach to fundraising.
Riley: We try to keep up with trends. In
1996 we launched one of the first chef
galas. We believe we were ahead of the
times with that concept, and proud to
report that it is one of the longest running
chef events in Chicago. We were also an
early adopter of the stair climb as a
fundraiser, and right now there is a
national trend toward extreme hikes. We
plan on hosting our first one in 2013.
Have you made any recent changes in
the way your office works?
Riley: Ninety cents of every dollar we raise
goes to research, so we’re always looking
at better and more efficient ways of raising money. Recently we’ve reorganized
our staff by fundraising programs, allowing our directors to focus on their area of
expertise.
Building a
culture
that
nurtures
innovation
Having a line item for innovation doesn’t remedy all of
the constraints that organizations face when developing
a culture that stimulates change and improvement, but
it goes a long way. Data from organizations that budget
for innovation proved that they introduced more new
products in the last three years, integrated innovation into
their strategy, and rewarded innovators — most often in
non-financial ways.
Actually the importance of rewards became clear last
year when 35 percent of all respondents reported
rewarding their innovators. This year that is up to
40 percent for the private sector, but came in at only
12 percent for not-for-profits and the public sector.
The C-suite needs to become
better listeners
There is some indication that there is a disconnect
between the C-suite and offices down the hall when it
comes to innovation. In general, the role an individual
plays did not alter the responses, but data uncovered
communication gaps that are causing discontent. For
instance, the non-C-suite group reported more abandoned innovation projects than the C-suite respondents,
leading our analysts to conjecture that perhaps the
projects were never reported to the C-suite.
The two groups also had different concerns. The C-suite
is concerned about attracting key employees, training, and strategy, but in general see fewer constraints.
However, data indicates that in many cases, members of
the C-suite failed to assure their colleagues that innovation is integral to the organization. Respondents outside
of the C-suite group see leadership and culture as major
constraints on innovation.
“In general,
the role an
individual
plays did
not alter the
responses.”
You don’t need charismatic leaders to be
innovation superstars
Our data this year allowed us to look more closely at
the role of leadership in innovation. Last year’s data
indicated strong leadership support for innovation
was essential and that continues to be true when you
consider that leadership is responsible for developing
strategy, budgeting, and nurturing culture. But our current data allows us to take a closer look at the process of
innovation, and it is clear that a charismatic leader can
set the stage, but innovation bubbles up from the lower
ranks. This may be one reason why the savvy C-suite is
so concerned about attracting talent.
If our data is correct, they could use innovation as a tool
for attracting employees. In fact companies that develop
new products/services are more able to attract talent.
On the other hand companies, usually larger ones, with
2012 Innovation Quotient Survey results
23
longer running products, are concerned
more about attracting people with new
ideas.
teams in the ecosystem.
Data indicates that organizations, especially the
larger ones, are anxious
to put together diverse
teams and when they do
they see positive results
— an increased number
of innovations that can be
registered.
Where do innovators turn for
inspiration?
It is clear that organizations with all levels
of innovation turn to their suppliers, their
customers, and even their competitors
as resources for ideas. What sets the top
innovators and the superstars among
them apart is that they reach out to consultants, universities, and public research
groups.
It could be said that an
organization’s culture that
honors innovation also has
high expectations for innovation and wants to see
results. That could be why
the top innovators and the
superstars among them
see many more patents,
industrial designs, trademarks, and copyrights.
This is their way of setting up an ecosystem that supports innovation and they are
often rewarded with breakthroughs.
Diversity on your team will
facilitate collaboration
Data indicates the positive power of an
innovation ecosystem, but to maximize
that power an organization needs a team
that has diversity of age, gender, ethnicity,
and skills. That kind of team will be agile
enough to work with the many different
Resources for innovation
Government or public
research institutes
Universities or other higher
education institutions
Consultants, commercial labs,
or private R&D institutes
Competitors or other
organizations like yours
Clients or customers
Suppliers of equipment,
materials, services, or software
0
20%
40%
60%
Accidental innovators
Disciplined innovators
Top innovators
Superstars
24
Plante Moran
80% 100%
Rick Rothwell
Rick Rothwell is vice president of business
development at Eureka! Ranch, an
innovation systems company that provides
innovation training funded and supported
by the U.S. Department of Commerce and
delivered through Manufacturing
Extension Program (MEP) locations across
the country. For a list of MEP locations, see
http://www.nist.gov/mep/innovation.cfm.
Many organizations are betting on
innovation to help them increase
revenue. Is that realistic?
Rothwell: Absolutely. We like to say that
our innovation engineering management
system (IEMS) is the way to wealth. The
system that is offered through MEP was
designed by Doug Hall, noted for his
innovation success at Procter & Gamble
where he was able to bring nine new
products to market in 12 months. The
IEMS and its tools used to be available
only to big companies like Nike, Hewlett
Packard, Walt Disney, and Ford Motor
Company, but thanks to the U.S. Department of Commerce’s NIST/MEP network
it’s now available to all companies.
Doesn’t innovation call for a budget and
a dedicated staff for research?
Rothwell: The IEM system helps you find
meaningful, unique, patentable ideas that
you can sell on value not price and you
can do it with the talent you have. Also
the fail fast/fail cheap approach that is
part of the system increases the speed of
innovation by six times and decreases the
risk by 30 to 80 percent.
Can you explain how to assemble a team?
Rothwell: There are three key positions. You need the
buy-in of someone in a leadership position. You need
an innovation coach, someone who has gone through
extensive training. Coaches are available through the
MEP offices. For instance, there are four people at PolymerOhio who are in the final stages of training. When
they complete the training they will become Innovation
Engineering Black Belts and certified coaches. After you
decide on a project, you will also need a project manager or champion, a person within the company who is
passionate about the idea.
So I have the team, but how do we come up with
those unique ideas?
Rothwell: Your employees have the ideas you need.
Assemble a small, diverse group from finance, engineering, marketing, production, etc. Have them write down
their ideas. We also teach them how to use stimulus
mining to search the world for stimulus that may spark
ideas for the company. In the process of defining ideas,
you can separate the winners from the costly losers. This
is the time when you want to make sure that you are
solving a problem for your customers and that you can
follow through on your promises and deliver.
Fail fast/fail cheap
A proven
process to speed
innovation &
decrease risk
The key is to continue to grow the number of people in
your company who are innovating, so that every person
is coming up with innovative ideas every day. This will
give you the sustainable culture of innovation.
So let’s say we fully defined an idea, what is next?
Rothwell: You put the idea through rapid fire testing.
Your team voices concerns. Innovation Engineering
Black Belts then help you take your ideas through day
cycles of learning to determine if the idea can get past
the objections. This is the fail fast/fail cheap process and
an inexpensive way to mitigate the risk and minimize the
time spent. When the team feels confident an idea is
worth commercializing, there is still the question – will it
make money? To answer that question we do the math
game with IEMS proprietary software.
Our data indicates that innovation superstars abandon
projects more often than other less successful innovators. Can we assume that it is because they have a
system of discovery like you describe?
Rothwell: I say that is a well-founded assumption. But it
is important to remember that the goal is to develop a
culture of innovation, so abandoning a project doesn’t
mean innovation stops. The focus just turns to another
project. Sometimes killing a project early on (a smart kill)
can be the ‘big win.’
2012 Innovation Quotient Survey results
25
INSIGHT
Brian Pollice
Practice leader
Financial
Institutions
Community
banks know
they must
innovate,
but ...
“Even though all sectors rated innovation as an important factor in generating revenue and containing costs,
the sectors ranked their focus on innovation very differently. By and large financial institutions did not value
innovation highly compared to other sectors.” This is
quoted from the notes of the statistical analysts who
reviewed the results of the 2012 Innovation Quotient
Survey.
The survey results indicate that financial institutions,
in particular community banks, know they will have to
depend on innovation to sustain their operations in the
years to come, but they are unaccustomed to innovation
and are just beginning to lay the foundation for a culture
that is always looking for improvements and new ideas, a
process that can take time.
However, they need to be ever vigilant and deliberate in
their innovation efforts. With the growth of debit cards
among retailers like Kroger and Wal-Mart as well as government departments like state welfare offices, banks
are in danger of being squeezed out of the payment
processing business and a major part of their revenue.
How can they fight back? According to an independent
consultant who has worked for banks since the early ‘90s,
the response needs to begin with change at the top.
The results from the IQ survey indicate that a leader who
champions innovation is essential. It is the leader who
sets the tone, integrating innovation into the organization’s strategy, budgeting for it, and creating a culture
that values new ideas and improved ways of doing things.
Focus on innovation
Not-for-profit
Business services and
technology
Manufacturing
& distribution
Health care
Financial institutions
All data
4
5
6
7
8
Scale of 1-10
26
Plante Moran
Interestingly, the analysts found that innovation doesn’t
depend on a charismatic leader because innovation
most often bubbles up from the lower ranks, but it is the
leader who has to develop a culture where the employees feel empowered to bring new ideas to the table.
It seems as if bank leaders are facing an uphill battle
when it comes to creating an innovation culture because
they and their colleagues see so many constraints. For
instance, all respondents showed concerns about the
cost of innovation, but on a scale of one to 10, financial
institutions were a full point above the rest.
Perhaps that is because over the last three years, they’ve
seen dramatic increases in the cost of regulatory
compliance. More than half of the respondents saw a
25 to 50 percent increase in compliance costs and
looking ahead 48 percent estimated another 25 to
50 percent increase in the next three years.
To cope with increased regulations, more than 61 percent
of the respondents are using software for compliance
and 29 percent said they planned to begin soon. This is
a good first step, but technology experts indicate that
the banks often don’t take time to maximize the value of
the software they select.
Sharing the services of a skilled industry professional
such as a compliance officer is another way of dealing
with the increased costs of regulatory compliance.
Ten percent of respondents are already doing that, and
44 percent said they would consider sharing.
Service/product offerings
The question of how often to re-evaluate current
product/service offerings was also part of the bankers’
conversation on innovation. Forty-eight percent of
respondents said they re-evaluated annually; 23 percent
quarterly; and 8 percent monthly. Do they re-evaluate
or do they just look at pricing, an independent consultant challenged. The survey results indicate that
financial institutions are least likely to listen to customer
demands. The innovative ones, however, never miss
a chance to connect with their customers. Some have
begun Saturday workshops in branch offices to teach
customers about mobile banking. Others train their
employees to end every conversation with a question —
“Is there anything more we could help with?”
The conversation
on innovation
in the banking
community
continues with
Jim Marcuccilli
President and
CEO of Star Bank
see page 28
Mark Schroeder
CEO and chairman of
the board, German
American Bancorp
see page 29
This can be a catch-22, however, because as branches
close, there are fewer and fewer people to reach out.
There seems to be many hurdles for the banking
industry, but there are also opportunities. We asked two
bank presidents to share their views. See their reaction on
pages 24 and 25.
2012 Innovation Quotient Survey results
27
Customers are the source of our ideas
The following is a conversation with Jim Marcuccilli, president and CEO of Star Bank, which serves
northern Indiana.
Our survey data indicates
that banks don’t value
innovation as much as
other sectors. Do you
think that is true? And if
so, why?
Marcuccilli: I wouldn’t say
that banks value innovation any less than other
sectors, but I do believe
we face many challenges
that hinder our ability to
innovate at the pace we
would like. It is important
to realize that banks have
to be precise. They balance
their books every day, and
this kind of accuracy makes
it harder to implement
new ideas. At Star, we
foster innovation through
an emphasis on our backroom operations – and
that has been the case for
many years. In the 1960s
my father and his partners,
who were the principal
owners, centralized the
backroom operation by
creating a data service
center so when customers
came in we could bring up
all of their information on
a desktop computer. That
was more than 50 years
ago, but we still focus on
ensuring accuracy and
access today. It’s a different
sense of innovation garnered through efficiency
and service, with the
customer as a focal point.
Do you depend on your
employees for innovative
ideas?
Marcuccilli: We rely heavily
on our customers and
employees for innovative
ideas — their insights on
28
Plante Moran
consumer trends, purchasing behaviors,
and competitive technologies. We
certainly encourage the Star team to
implement changes and to introduce
innovative ideas, but as I mentioned,
accuracy is essential and we can’t forego
quality service.
Your website indicates Star Bank has a
very close connection to its customers.
How do you do that?
Marcuccilli: It starts with our community
focus. We’re still owned by two families
and we’ve been in this for three and four
generations. We have strong roots and
a very local approach. We have a system
to reach out to our customers each year
in a very personal way. At the beginning
of the year, the regional president, the
senior commercial lender, and the senior
retail officer in our locations map out
“touches” with their customers. It can be
lunch, taking them to an event. They listen and then they ask: “How can we help
you with that?”
How do you keep up with all of the
changes in technology and customers’
demands for new electronic services?
Marcuccilli: Our number one concern is
the security of our customers’ information. We aim to provide progressive
technologies through mobile, online
banking, and other channels, and as
I mentioned, we’re eager to obtain
feedback from our customer base on
new ways to enhance our products
and services. Additionally, we stay current on upcoming and existing trends
through webinars, seminars, and thirdparty relationships. However, at the end
of the day, the safety and soundness of
our customers and of the bank are top
of mind. Technology has allowed us to
become more efficient and competitive,
but fraud has picked up and we need
more resources to monitor and keep our
customers’ information safe.
We also do an annual review of our software and systems to make sure we have
the controls we need for
information security and
the resources we need
to offer the services our
customers expect.
We can’t end our
conversation without
talking about regulatory
compliance.
Marcuccilli: It is a neverending source of pressure
in the banking industry. For
example, the Dodd-Frank
Act has 200-plus new regulations, and people are
just now sitting down to
write them. It is complex
and burdensome to banks,
consumers, and the economy. I’m afraid that we’re
going to see a lot of banks
that say this is just too hard
and discontinue products
or services. Inevitably, the
consequence will result in
fewer banks and less competition — so we’ll have
fewer home mortgages,
for example, and higher
rates. Without question,
the cost of doing business
is rising. One of the biggest costs is training our
600 employees on the new
rules and regulations and
how to implement them.
Thanks for your time.
May we share your comments?
Marcuccilli: Absolutely.
I am the first vice chairman of the Indiana
Bankers Association. Star
Bank really believes that
strengthening the whole
banking industry is important. We can do that by
sharing information.
Community banks need to share best practices
to survive this era of change
The following is a conversation with Mark Schroeder, CEO and chairman of the board, German
American Bancorp.
Our survey data indicates
that banks don’t value
innovation as much as
other sectors. Do you
think that is true? And if
so, why?
Schroeder: Those figures
don’t surprise me. As an
industry, banking has seen
innovators pay the price
whether they were on the
cutting edge of expansion or lending. As they
say you can always tell the
pioneers by the arrows in
their backs. I’d say German
American is opportunistic.
We’re early adopters as
opposed to innovators
especially when it comes
to technology. The speed
of adoption, however,
has changed. It used to
be that the trends would
gradually filter in from the
coasts and we had time to
adjust, but now it is like a
tidal wave and we have to
be able to move quickly.
Customers hear of options
and they want them; we
have to be able to keep up
with them.
How do you keep up
with them?
Schroeder: Because of
our size, we can have an
individual whose sole job
is to manage the electronic process. He can
help us keep our finger on
the pulse. We know where
we want to be and he can
address what is coming
at us and get us where
we need to be. This is a cost conscience
approach. Too often when you spend the
money to be on the leading edge, by the
time the smoke has cleared, your customers are on to something else.
Are you concerned about the trends in
the payment card process?
Schroeder: We’re concerned about
the whole payment system, the whole
electronic system. On the deposit side,
adoption of mobile banking is accelerating. The million dollar question is what
should we invest in. We aren’t like the big
banks; we can’t develop our own core
systems. We have to buy off the shelf and
our vendors aren’t offering the products
we need. Vendors aren’t investing money
back into their operations and coming up
with new solutions. We’re forced to buy
a variety of products and then we have
interface problems.
Our data indicates that financial institutions are the least likely to listen to
their clients. Do you think that is true?
Do you have any solutions?
Schroeder: We are a relationship business
and it is true that because of electronic
banking we have fewer touch points, so
we need to work harder. We have a senior
vice president heading up a strategic
customer service plan. We ask customers to evaluate our onboard process
after they’ve opened an account or a
loan. We’re planning to do a customer
survey. Right now every issue that arises
is entered into the database. If we see
trends we know we have to address the
problem.
Because regulatory compliance has
become such an issue, we have to ask
you, how you are responding?
Schroeder: There has been an enormous
change. We’re on a three-year exam
cycle and during that time compliance
expectations went from
what I’d call loose to
zero tolerance. We’ve
responded with a new
three-stage process. We
have specialists check the
documents when a loan
request is opened and after
it is closed. We have compliance officers monitoring
the internal process, and
we have outside auditors
review our checks and
balances. We’ve more
than tripled the staff
devoted to compliance.
We really appreciate your
candor. Can we confirm
that we have your permission to share this
conversation?
Schroeder: Absolutely.
The more we can share,
the better chance we have
to see a healthy future for
community banks.
“We’re early
adopters as
opposed to
innovators
especially
when it
comes to
technology.”
2012 Innovation Quotient Survey results
29
INSIGHT
Jeff Mengel
Leader in the
manufacturing
group
Manufacturing
is responding
to the
slow-growth
economy
with a twopronged
approach to
innovation
Manufacturers responded to the financial crisis of 2008
by going into a cost-cutting mode. Focused on the
bottom line, their innovative energies went toward new
processes that would allow them to cut their way to
profitability. However, our data indicates a major change.
While continuing to pursue cost savings, manufacturers also are beginning to seek top line growth through
innovation.
More than 70 percent of the manufacturers reported
innovation within their traditional markets. As a group
this puts them right up there with the top innovators
and superstars analysts found in their benchmarking.
The same is true of innovation that was a variation on a
single theme. They did lag, however, the top innovators
in breakthrough innovation even though 50 percent of
the manufacturers reported registering for a patent or
trademark.
Although the size of an organization did not correlate
with innovation success, data did indicate that larger
organizations tend to have older products and are
milking them for revenue rather than developing new
products. In other words they are less hungry
for change.
Depth of innovation
80%
60%
70%
50%
60%
40%
50%
40%
30%
30%
20%
20%
10%
10%
0%
Variations on a
single theme
New but within Breakthrough in
its traditional
all ways
markets
Manufacturing
Accidental innovators
Disciplined innovators
Top innovators
Superstars
30
Registration of innovation
Plante Moran
0%
Applied for Registered Registered a Produced
a patent an industrial trademark
materials
design
eligible for
copyright
Manufacturing
Accidental innovators
Disciplined innovators
Top innovators
Superstars
Manufacturers need to add
services to their innovation mix
That said, it is surprising to see such a
penchant for change among manufactures because more than a quarter of
them were among the biggest companies
in our survey group. Yet they compare
favorably with our top innovators when it
comes to new products.
Their innovation efforts do drop off when
it comes to services. Perhaps they need
to be reminded of the “Power by the
Hour” from GE Aviation. The manufacturer of jet engines offers customers the
option of paying for the engine per
operating flight hour rather than paying
tens of millions of dollars upfront. The
company realizes that the lifetime profit
of the engine does not arise at the time
of initial purchase, but instead comes
from the spare parts, maintenance, and
servicing. When customers opt into
the Power by the Hour program, GE is
ensured of all after-sale service work on
the engines.
The big question
More fundamentally however, manufacturing needs to
investigate how to use rewards
for innovation as an effective
stimulus. Most manufacturers
already embrace and budget
for continuous improvement
which is a component of
innovation success, but in
general manufacturers fail to
reward innovation.
According to our data, rewarding innovation is one of the
major differentiators of the
top innovators that enjoy
more than five times more
breakthrough innovations than
accidental innovators. How
does a manufacturer, in an
environment where continuous
improvement is considered
a job requirement, promote
breakthrough innovation and
define the levels of progress
and success that warrant
a reward?
Types of innovation
120%
100%
80%
60%
40%
20%
0%
Introduced new
or improved
products
Introduced new
or improved
services
Introduced new
or improved
processes
Manufacturing
Accidental innovators
Disciplined innovators
Top innovators
Superstars
2012 Innovation Quotient Survey results
31
Mission: Sustainability
Celebrating
100 years
of innovation
by planning
for 100 more
When you’ve been true to your vision for
so long, and you’ve seen so much success, what do you do when you’re about
to turn 100? Steelcase, the world’s largest
office furniture maker, has embarked on a
journey of self-discovery.
Angela Nahikian
The company, based in Grand Rapids,
Mich., prides itself on being lean and
green. In fact sustainability seems to be
a significant part of its corporate DNA.
Driven by the vision of the company’s
founders, Steelcase focuses on:
•Designing products and processes
that minimize their impact on the
environment
•Empowering a worldwide supply base
to join the cause of sustainability
But what should the company do moving
into its second century? With customary
earnestness the company is looking inside
and out to better understand where it’s
been and where it’s going. The process
began three years ago and the findings
will guide the manufacturer as it develops
a strategy for its second century. Initial
results indicate that the company’s culture
of innovation is at the root of its longevity
and its survival.
“But we realize we need to reexamine
and perfect,” says Angela Nahikian,
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Plante Moran
To celebrate the process of re-evaluating its strategy, Steelcase commissioned a video
“100 Dreams, 100 Minds, 100 Years” for its website. The video follows children from
their kitchen tables, to their playgrounds, and to their schools in countries around the
world. The Indian boy who contributed this drawing dreamed of “buildings that grow
legs and fly high if a tsunami comes – so everyone can live.”
director of Global Environmental Sustainability. “So we’ve engaged three groups
of consultants. One will focus on our corporate sustainability report. The second
will help us with stakeholder research, and
the third will help us address end of use/
end of life issues.”
For the corporate sustainability report, a
consulting firm is helping Steelcase determine its strengths, where it needs work,
and market expectations on issues such
as pollution prevention, employee health
and well-being, and fair labor practices.
“Through a series of interviews, we’ve
been able to identify areas for opportunity that will help us orient ourselves more
toward a socially- and environmentallyminded system,” says Nahikian. “The
added benefit is that we will be able to
accurately report on this in our upcoming
corporate sustainability report.”
Working closely with another consulting
group, Steelcase has been surveying its
sales staff and customers to find out what
they think about sustainability in both
a personal and professional sense. “By
reaching out to them, we’ve been able
to gather valuable information on their
perceptions of sustainability. We are using
this information to develop messaging
and sales tools to correspond better with
the desires and expectations of our stakeholders,” Nahikian continues.
To round out Steelcase’s comprehensive
self-examination, the company is consulting with some outside groups to explore
end-of-use possibilities.
Soon the company will be pulling all this
information together, synthesizing it, and
developing a plan to leverage all of the
company’s assets to advance its social and
economic goals. That will be good for
Steelcase and good for its competitors.
“We celebrate each and every action that
promotes sustainability, including those of
our competitors,” Nahikian says with
conviction.
2012 Innovation Quotient Survey results
33
Webinars
Add your voice to the conversation
Our conversation on
innovation continues year
round. You can take the
survey at innovationquotient.plantemoran.com
and you will receive a
customized report ranking
your responses against the
categories —
The webinar schedule is:
Become an innovation superstar: double the
return on your investment
Friday, Sept. 21, 2-3 p.m. EDT
This webinar is designed to help leaders unravel the
mystique of innovation and understand how to develop
a philosophy or ecosystem that nurtures invention. We
will share the best practices of top innovators.
•Accidental innovators
•Disciplined innovators
Know you need to innovate, but don’t know
where to begin?
•Top innovators
Wednesday, Oct. 24, 2-3 p.m. EDT
•Superstars
If you know you need to innovate, but don’t know where
to begin, you are like most of the financial institutions
who responded to our 2012 Innovation Quotient Survey.
This webinar will help you understand what the best in
class innovators are doing to sustain their organizations
and keep their customers happy.
If you’ve already participated in the survey this
year, we invite you to take
it next year. Each year we
collect data between
May 15 and June 15 for
our report.
You also may be interested
in our webinars on innovation that are scheduled
this fall. If you are double
booked and can’t attend
the presentation, they will
be available three days
after the presentation at
plantemoran.com.
Innovate or die: A wake up call for
healthcare providers
Thursday, Nov. 1, 2-3 p.m. EDT
This year the Innovation Quotient Survey asked specific questions about the status of innovative practices
among healthcare providers. We will use the survey
findings as a jumping off point for discussion about the
urgent need for entrepreneurial mindsets in the industry
and how providers can create a culture of innovation,
nurture it, and ultimately benefit from it through reduced
costs, improved quality outcomes, and better consumer
experiences.
Using optimism and structure to drive innovation in a
service organization
Wednesday, Nov. 7, 10-11 a.m. EST
Services dominate the world’s established economies
and are becoming increasingly important in developing
economies. Leaders understand embracing innovation
is critical to capturing the increasing opportunities. Yet
they grapple with what to do to maintain
a competitive edge.
Register: webinars.plantemoran.com
All webinars are archived at plantemoran.com three days
after the presentation.
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Plante Moran
My team and I came away from this project realizing how important it
is to keep talking. In this era of electronic communication, it is easy to
dash off an e-mail or an instant message and feel like you are communicating. But we learned that it’s best to pick up the phone or better yet,
when possible, walk down the hall.
The give and take of a conversation can produce new ideas to pursue
and make every project richer. The research tools we used gave us
correlations and frequencies. But it was the write-in comments that
helped us put our data into context. And it was the people who went
on to share their stories that further inspired confidence in the health of
innovation in the Midwest.
For the Future
We should talk more
It used to seem that innovation was a lonely race conducted by scientists in guarded buildings. It was mysterious. But now we understand
that continuous improvement and even breakthrough innovation
depend on collaboration. The mystery has been solved and innovation
is open to all.
We hope to talk next year.
Jeff Mengel
Plante Moran
Partner
Jeff Mengel
The Innovation Quotient Survey report team included Diane Baumann, Amanda Dine,
Kim Greenspan, Alexandra Haller, Becky Killarney, Kari Laderach, Karen Pope, and
Donna Smith.
2012 Innovation Quotient Survey results
35