Building an Innovation Culture

Feb. 11, 2010
For innovation to flourish, executives must be committed, patient and ready to lead by example.

Like many manufacturers, Eaton, Ohio-based Henny Penny Corp. was founded on innovation. Seeking a better way to cook chicken, restaurant owner Chester Wagner developed a deep-fat pressure fryer and filed for a patent in 1954. Three years later (patent in hand), Wagner formed Henny Penny to market his invention, which the company claims was the world's first commercial pressure fryer.

"Throughout the years, we've been a company that has relied on product innovation as a way to drive our business," says Jeff Kincer, Henny Penny's vice president of engineering.

Nowadays, innovation is just as much a survival strategy as it is a growth strategy for the company, whose customers include McDonald's, Wendy's and Kentucky Fried Chicken. Robust sales of Henny Penny's Evolution Elite open fryer platform -- launched in mid-2008 -- helped Henny Penny maintain relatively flat revenue numbers in 2009, while many of its competitors saw their sales drop 20% to 30%.

"The investment in that technology -- and the timing was fortunate as well -- really made up for the economic downturn for us," Kincer says.

According to Henny Penny, the Evolution Elite cooks the same amount of product with 40% less oil than the standard 50-pound-per-well fryer, and has sensors that continually monitor the oil level. Because the fryer uses "substantially less shortening" and features filtration technology that extends the life of the frying oil, "we really changed the economic equation for the operators," Kincer says.

While the R&D investment in the Evolution Elite seems like a no-brainer now, Kincer notes that the fryer "was an expensive product to bring to market" and required "an extended development time." The key to maintaining the company's focus on long-term innovation investments such as the Evolution Elite, Kincer asserts, is having a group of senior leaders who are willing to "stay the course, invest the dollars and create the priority within the organization."

"We have an enormous advantage in that we are a privately held company and we have ownership that has a very long-term perspective and is patient," Kincer says. "Sometimes public companies don't have that luxury. So that's been an important element of fueling the innovation that we've had in this organization for many years."

According to Kincer, Henny Penny's current strategic plan calls for the company to "really up the ante" with its innovation culture -- particularly when it comes to encouraging risk-taking, promoting unconventional thinking and pushing technical personnel to venture beyond their comfort zones. Company leaders know that they will play an important role in accomplishing those objectives.

"If [executives] aren't engaged and invested, and if we don't demonstrate through our own actions that taking risk is appropriate, and that stretching ourselves in an uncomfortable way is appropriate, and if we shut down every unconventional idea that comes in front of us, then people see that and they're going to behave the same way," Kincer explains. "So ultimately it's about how we behave. People are pretty sharp in that regard, and they're going to model our behaviors."

Charles Brinkman, vice president for the Electronic Systems sector and general manager of the Advanced Concepts & Technologies Division at Northrop Grumman Corp., says it can be a challenge to encourage risk-taking among engineers and other technical personnel, "who have been trained in following disciplined production processes all their careers" and "sometimes believe that change and experimentation and trial and error and new ideas are dangerous." That's why leadership buy-in is essential to building a culture of innovation, Brinkman says.

"In my experience, the culture is completely driven from the top-down, particularly when it comes to innovation," says Brinkman. "If the leader -- in our case, the [Electronic Systems sector] president, Jim Pitts -- isn't firmly behind the need to have a dynamic and creative environment that really fosters innovation, then it's not going to happen."

Brinkman credits Pitts for taking innovation efforts 'to another level' in Northrop Grumman's Electronic Systems sector, as evidenced by the new Northrop Grumman Innovation Institute in Linthicum, Md. Featuring "modular office concepts" and "innovative program strategy and planning areas," the 156,000-square-foot facility "was designed to help foster a collaborative employee work environment conducive to the timely development of innovative global defense electronics technologies," Pitts remarked when the institute opened in December.

"We wanted to create a visible symbol, and a working enterprise, that would let people know that we're serious about a new level of openness and creativity," Brinkman says, adding that when it comes to executive-level support of innovation, "the proof is in the pudding."

The 'I' in 'Innovation'

When Robert Brands was CEO of Airspray NV, a Dutch manufacturer credited with developing the first non-aerosol instant-foam dispensers now used by consumer product companies, his monthly visits to the company's headquarters in the Netherlands always included an afternoon set aside for discussing new product development.

While the meetings helped establish priorities and "marching orders" for everyone involved in the R&D process, Brands believes they served a larger purpose: His presence at the meetings showed how important innovation was to the company.

"If the CEO doesn't walk the talk, [innovation] is just window dressing, and people will say, 'This is the flavor of the month' and it will eventually go away," Brands explains.

Brands' commitment to innovation paid off, in more ways than just a string of new product introductions and patents: In 2006, London-based packaging manufacturer Rexam PLC acquired Airspray for 15 times Airspray's EBIT (earnings-before-interest-and-tax) value, according to Brands.

Brands, now a consultant in Coral Springs, Fla., recently co-authored "Robert's Rules of Innovation: A 10-Step Program for Corporate Survival." In the book, Brands presents 10 "imperatives" for building an innovation culture, all of which spell "innovation" when put together in order.

The first imperative -- "Inspire and Initiate" -- refers to the importance of executives being "regularly and personally involved [in innovation] so that everyone is on the same page."

"The CEO has to be committed, he has to walk the talk, and he, in effect, has to be the chief innovation officer," Brands says.

Some companies go as far as creating a separate C-level position for innovation. In a recent online survey of more than 630 U.S. and U.K. executives conducted by the consulting firm Accenture, more than 54% of the executives reported that their companies have a chief innovation officer or equivalent C-level position dedicated to innovation.

Adi Alon, North American managing director of Accenture's Innovation Performance Group, asserts that the role of a chief innovation officer is to "drive and monitor the metrics and the performance of the organization when it comes to innovation."

"The trap to watch out for is that it's not enough to nominate someone, give that person the title and assume good things will happen," Alon says. "You need for that job to have real responsibility, real ownership of the organizational agenda and some real resources behind it."

Henny Penny's Kincer notes that his company recently created a mid-level management position called "innovation leader." Each innovation leader -- there will be three initially -- will handle a specific product category, such as pressure fryers.

"It's a get-your-hands-dirty kind of job," Kincer says. "Their role will be to lead our efforts and to coordinate, quarterback, germinate ideas, develop product charters, build project teams and define deliverables."

While the innovation leaders will be responsible for driving product innovation efforts "from start to finish through this organization," Kincer acknowledges that he and other executives will play a key role.

"If I don't provide the kind of support that the innovation leaders are going to need to deliver, then it'll be a pretty hollow, see-through activity that ultimately won't be successful."

Pressing the Flesh

For RF Micro Devices Inc. (RFMD), a Greensboro, N.C.-based manufacturer of semiconductor components, the ability to "bring out innovative products at a fast pace" is essential to the company's success in the consumer electronics marketplace, explains Jerry Neal, executive vice president of marketing and strategic development and a co-founder of the company.

RFMD's senior leaders nurture an innovation culture in several ways, including their participation in a formal mentoring program. As part of the program, Neal and other senior executives -- both from the technical side and business side of the company -- meet with up-and-coming RFMD middle managers to discuss company objectives and challenges, identify career development and training needs, and share "what we have learned through our careers," according to Neal.

Senior leaders also help foster close ties with local colleges and universities. In addition to providing financial support for labs and research projects of "mutual interest" to RFMD and the educational institutions, many RFMD executives lecture at local colleges and universities. These relationships with the educational community, along with the company's summer internship program, help RFMD scout for top engineering and technical talent in the area.

Neal believes that company's commitment to an innovation culture bears fruit in more ways than just new products and technological enhancements.

"I think one of the key benefits to the company is that it allows you to retain very key talent; it's a rare case that we have any of our top talent leave," Neal says. "Whether it's an engineering or business person who's at the top of their game, just like in sports, where it's natural to want to be on a winning team, they get excited about innovation."

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