When Worlds Converge

In one of some 18,000 Kodak Image Magic Picture Maker walk-up kiosks worldwide, a customer can digitize a photo, then manipulate that image with software (including zoom and crop, color balance and contrast, red-eye reduction), add a border, and enlarge, and then print the new image, all in five minutes or less. Now a $200 million business for Eastman Kodak Co., Rochester, the kiosk popped out of Kodaks System Concepts Center, a corporate creativity center driving some of its most innovative new products. Now four years old, the System Concepts Center has a dedicated staff of a variety of talents, disciplines, and off-the-wall thinkers, whose mission is to move dramatically new product-concepts of converging technologies into the market at blitzkrieg speed. From the center have emerged new products in consumer, professional, and entertainment imaging, with eight significant products and services targeted for $2 billion revenue growth by the year 2000. Speed to market, converging technologies, nontraditional teams . . . these adjectives and catch phrases are becoming commonplace in describing the product-development function. Like never before, new products must gather their momentum quickly, as product life cycles are compressed by global competitive threats and the ever-fickle consumer, who wields his power over the marketplace, demanding products that add more features and benefits, as well as to be "wowed" by products he never even considered -- a photo-manipulating kiosk, for instance, or a Sony Walkman, or fuel-injected engines, for that matter. In fact, generation of new products has become so important to the livelihood of companies that without them they could barely survive. Eaton Corp., for instance, is swinging for many more home runs to drive its historical reliance on new-product contribution to annual sales from 10% to 35% by 2001. A paragon of innovation, 3M Co. has raised its goals from 25% of sales generated by products introduced in the last five years to 30% introduced in the last four years and 10% in the last year. At Rubbermaid Inc., a company that introduces 400 new products each year and enters a completely new market every 18 months, products introduced in the last five years account for 33% of sales. At Hewlett-Packard Co., products introduced in the last two years represent 60% of sales. The ever-mounting pressure to flow innovation into the marketplace is changing the way companies research their users, identify new-product opportunities, create and staff new-product-development teams, organize their functions to support new-product visions, and plan new products. In addition, executives are playing an ever-increasing role in illuminating the companies new-product direction, engaging the entire company, and establishing risk-taking -- and duly rewarded -- cultures. Significantly, new products themselves are more and more likely to emerge from a convergence or combination of technologies, forcing traditional companies to deal with the issue of absorbing new technologies and the new blood and personalities that come with them. Convergence Although new products historically have emerged from a companys traditional strengths, many new products today represent a convergence of technologies rather than those birthed from monodisciplinary pursuits. Examples are electronics and communications technologies in a host of products including cellular phones, cosmetics with pharmaceutical content such as anti-aging creams, genetics and agriculture producing high food-value and insect/herbicide resistant plants, increasing electronics in transportation products, and photography-software combinations. "I think convergence will be the source of many new products, across industry, as we move forward into the future," says Bob LaPerle, Kodaks vice president and director of digitization strategy for consumer imaging. "You have a technology base that sits fundamentally in one industry, and that base is beginning to bump into the technology bases in other industries. One of the reasons its tough to go through one of these technology transitions is that its not just a matter of hiring, or retraining people in the new disciplines -- the entire culture of the company has to change. You begin to compete on the ground rules that exist in the new industries and new technologies. "For instance, product life cycles are much shorter on [digital] products than traditional photographic products, so the development time has to be much shorter. We have to build products that are much more modular in approach so we can be more flexible in the marketplace, because it is not really clear which bundle of features the consumer will actually select." Convergence also brings with it a management challenge for engineering leadership. "In the old days, engineers in the locomotive business were guys who built engines, drives, brakes, and other mechanical systems," says Lewis Edelheit, vice president for corporate R&D at General Electric Co., Schenectady, N.Y. "All of that is now software controlled. In the past, you would find engineering leaders who had moved up the ranks designing an engine, turbine, or motor. In all that time, they worried about mechanical, metallurgical kinds of challenges. "Now in an engineering sense, managers have to get out of their technology comfort zones. They can no longer manage a project by being the best mechanical engineer, which theyve trained their whole life to be. . . . They have to deal with new engineering disciplines, software, and electronics as it ties into marketing and manufacturing. . . . So the engineering leaders today have to be much broader business leaders and have much broader skills than ever before." Trends Not only are companies exploiting converging technologies to form the basis of new products, they also are looking beyond simple product-oriented market research and are melding trends with technology to open new market opportunities. From General Motors Corp. to Rubbermaid to Nokia Corp., companies are straining to hear the voice of the customer. They are seeking to understand legal trends, government regulations, environmental trends, socioeconomic trends, demographics, entertainment, and retail trends -- anything to indicate where todays society is heading. The winners will correctly interpret the impact of these trends on potential new products and tailor specific products to exploit those opportunities. Nokia, the Finnish mobile-phone giant, for instance, is introducing a new product every 35 days, resulting from confluence of new technologies and worldwide research from a small group devoted to identification of consumer lifestyles. "We are dividing the market into finer and finer segments and addressing those segments with different products," says Yrj Neuvo, senior vice president for product creation. "The reason is that cellular phones are a very personal device, much more so than a watch. It is your human communication tool, and thats why understanding the customer needs is of utmost importance to us. So there has to be a strong connection between what technology allows us to do and features that support peoples lifestyles. It used to be this ordinary black product everyone was producing. Now we start to have fashion colors; a professional-use, data-reach product; and an economical, minimum-features phone." As companies look to create the future rather than just predict it, they are adding a good deal of nontraditional capability to design/development teams. Like Nokia, GM is slicing the market into finer segments, 30 at last count (for example, traditionally styled large car, midsize cockpit coupe), and is now evaluating hybrid vehicles that span segments. To help understand the needs that exist in these customer clusters, GM has hired physiologists and anthropologists to consider cultural themes and social and economic status. Like many other companies that market to consumers, GM has added culture-based, ethnographic research techniques to get new insights on customer needs. This can include a researcher actually living with and becoming an adjunct member of a family to understand articulated needs, identified by skillful questioning, and unarticulated needs that are uncovered by observation and noting compensatory behaviors. (Strapping cargo to the outside of a sport utility vehicle is an example of compensatory actions revealing needs that may not be verbalized.) "These nontraditional techniques add a lot of depth and precision to our understanding of customer needs, because we are able to get at basic issues of concern to customers in individual market segments," says Larry Faloon, director of strategic planning and resource management at GMs North American Operation design center, Warren, Mich. "As segments become finer and finer, it becomes even more important to focus the product attributes on specific customer issues. When everybody drove four-door sedans, it was a pretty general fit. But when you drive a compact, four-wheel-drive sport utility vehicle with a canvas roof, that is targeting a lifestyle. In order to do that we need to be very good at predicting the rise of interest in new activities, new segments. And the only way to do that is to work with current lifestyles and combine a wide variety of influences, do some creative manipulations of this raw data, and produce some alternatives. You can likewise create huge problems if you create futures and products to support those futures, if you are off the mark." In addition to analyzing trends and shifts in society to help guide product development, companies also are practicing scenario planning, that is, creating a series of potential futures, then working back to appraise the impact of those futures on how they develop new products. "We have created five different scenarios, five options of what the world is going to look like as a result of megatrends through the next 10 years," says Maurizio Arienzo, director of research programs, United Technologies Corp., Hartford. Conn. "We bounce them off the long-term plans of the business units, and then look at the competencies that are going to be necessary to fulfill the product scenarios that fall out." The five United Technologies scenarios include: the Netscape scenario of a highly networked, sedentary society; the Green scenario of an environmentally conscious world; the Bombay scenario -- a world of megacities; the Isolation scenario with countries isolated by trade barriers; and the Hertz scenario in which things are leased rather than sold. "We know the world will always be some combination of scenarios, but this exercise gives us a framework in which to prepare," continues Arienzo. "We like to come up with crazy products to meet some of the scenarios. For instance, three-dimensional people movers for a megacity scenario, where people not only move up and down, but laterally and between buildings. Then once you come up with some product scenarios you start to look at the technologies required to realize them." Motivation To reinforce the innovation mission many manufacturers are aligning some form of compensation or recognition to innovation. At Eaton, for instance, business managers receiving incentive compensation have a goal of 10% growth in sales and earnings resulting from introduction of new products, defined as incremental new sales rather than substitution sales. "In fact, 40% of incentive compensation is related to their achievement of growth goals," says Stan Jaskolski, chief technology officer. Four-year product-innovation plans are the ante for bonuses at Maytag Co., Newton, Iowa. And at 3M Corp., St. Paul, several employees each year win coveted innovator awards, and one of them is selected as the "ambassador of innovation," says Alex Cirillo, executive director of R&D for health-care, transportation, safety, and chemical markets. This top winner gets some financial compensation, but the real reward is the peer recognition. In addition, the ambassador gets to attend the conference of his or her choice anywhere in the world, and visits 3M laboratories worldwide spreading his or her methods and strategies for innovation.