Originally Published January 2001
Stacey L. Bell
Far more than the latest passing management fad, innovation is a concept that, if used properly, will propel medical device companies and their shareholders to a higher level of profitability. This article lays out the steps for establishing an "innovation culture" within a company to help reduce operational costs and increase market revenue.
DEFINING THE CONCEPT
People often use the words creativity and innovation interchangeably; however, there is a distinction. "Creativity is the process of developing new or interesting ideas, and innovation is implementing those ideas into valuable or profitable solutions," says Gerald Haman, founder of SolutionPeople (Chicago). Haman adds, "Innovation is how firms profit, gain value, or make money from creativity."
"Innovation as a concept has always been around," says Ruth Ann Hattori, vice president of marketing for Innovation Network (Denver), "but it's been associated with new inventions. These days, innovation is a broader term that encompasses not just new products and new applications, but new business models and concepts."
"Businesses and industries as a whole are latching onto the notion of innovation as the next technique to move them into the future—just as they did with total quality management (TQM) and other management techniques of the past," says Hattori. She points out that the fundamental difference between innovation and TQM is that the concept of innovation is centered on creating new streams of revenue and reducing costs, while TQM only focuses on the latter.
QUESTIONING CURRENT PRACTICES
Many medical device companies may think that their current management practices encourage creativity and imagination, but that may not be the case. In order for a company to survive and thrive in the future, Hattori suggests that market leaders must ask themselves several questions to help imagine the future and determine a new way to fit into the world. Her questions include:
- What will the future look like in not 5, not 10, but 20 years?
- How will people live then?
- How does our company fit into that picture?
- Will our current business model and products take us there?
Even in an industry such as medical device manufacturing, which is well known for technological innovation, there are compelling reasons to reevaluate a company's innovation practices, says Haman. As one example, he notes that "product innovation is the easiest type of innovation to steal. Other types of innovation— process innovation, the way people are managed and the resulting culture, and marketing innovation—are more difficult for other companies to borrow."
ESTABLISH AN INNOVATION CULTURE
"When companies launch a new initiative, they often expect to see a turnaround in six months," says Andrea Woodward, vice president of sales for Innovation Network. "But that's not a reasonable time frame for reshaping a company's culture and making it more amenable to innovation. Those kind of changes could take two years to show real results."
The first place to start to foster an innovative workplace is with top managers. Tom Kelley, general manager of IDEO (Palo Alto, CA), whose firm has worked with clients to invent and refine insulin pens and blood analyzers, says, "Companies must let employees know the value placed on innovation, and then evaluate employees' contributions in this area during performance reviews." Also essential to creating a climate that allows innovation to happen are being open and listening to new ideas, tolerating risk taking, and fostering trust and respect for others in the workplace.
Innovation is nourished by both the social and physical environments in the workplace. "Innovation is a team sport," says Hattori. "A great idea contributed by an individual can be improved by the thinking and contributions of a group. But for ideas to be shared, people need to know they'll be heard and respected."
Physical environment plays a part as well. Haman warns of "cubicle creativity"—where employees are stuck in small, sterile spaces—which constricts their capacity for innovation. Ideally, individual offices would be clustered in neighborhoods surrounding a team meeting room or table.
Haman, a former recruiter for Procter & Gamble and Arthur Andersen, relates that "innovation can also help companies recruit better people and increase their employee retention rate. People don't leave their organizations necessarily for greater compensation or managerial reasons; they leave because they want an environment that lets their creativity and imagination soar."
TOOLS AND TECHNIQUES
Once a culture that encourages innovation has been set, it's time to add tools and techniques (see "Tools of the Trade") that can help the process. The THINKubator, KnowBrainer, Diamond Solution Process, Technology Box, Innovation University, and Technovation Room may sound like fanciful diversions, but these are just some of the tools and techniques that could help companies earn and save millions.
Brainstorming. One of the most common techniques for sparking creativity is brainstorming. "Everybody thinks they brainstorm," reports Kelley. "A survey of Fortune 500 companies a few years ago asked people, 'Do you brainstorm?' Eighty-five percent of the responses were 'Yes.' The follow-up question asked how often they brainstorm: 'once a day,' 'once a week,' 'once a month,' etc. The average response was 'once a quarter.' If you're brainstorming 'once a quarter,' you're not a brainstormer."
"At IDEO, we practice brainstorming as a religion," says Kelley. "We've stenciled 'rules of brainstorming' in six-inch-tall letters on signs that are posted throughout our meeting room." The rules include:
- Defer judgment.
- Build on the ideas of others.
- Work with one person at a time.
- Go for quantity. (The IDEO goal is 150 ideas within 30 to 45 minutes.)
- Encourage wild ideas.
- Stay focused on the topic.
Customer versus User Feedback. Once ideas are gathered, IDEO focuses on prototyping and collecting customer feedback, with the mantra "more is better." Kelley adds, "We believe every product can be made better—even the one we just shipped. Our goal is to make as many prototypes as we can before we ship a product out the door. You'll learn something from each one."
In regards to medical device companies, Kelley says that the biggest mistake made in the product development process is in turning to customers for product reviews. "That's not their forté. For successful product testing, you need real users who are unassisted. Give them a product and see what they do with it. Watch what they puzzle over, and that's what you need to fix."
IDEO specializes in making products user-friendly. The company worked with Heartstream, now part of Agilent, to bring to market a defibrillator that could be used by anyone, anywhere. Hattori says, "In the past, companies focused on creating the next generation of a product. Now the focus is on the medical problem and the patient, and 'Is this current product the best solution, and is it being delivered in the best way?'"
The project team brainstormed on the topic of helping patients who suffered cardiac arrest, and ended up creating a user interface for defibrillators that features audio instructions, a red-and-green off-and-on button, large numbers on buttons that correspond with the order in which they should be pushed, and a screen that provides text instructions. "The ultimate test was when I took it home to my then-6-year-old daughter and asked her to take a look," says Kelley. "Without any instructions or assistance, she was able to move through all the steps, which proved how easy to use the product was."
Hattori adds, "By coming up with the concept of making this technology available to everyone, they created a value stream and source of new revenues that didn't exist before."
Turn to Other Industries. Spending time with people in other professions can increase the number and quality of ideas. Haman explains, "One of the greatest breakthrough medical products we've helped a company develop was originally the idea of an artist who knew nothing about the medical device industry."
In an October 1999 survey of 500 CEOs, the American Management Association found that CEOs' number-one answer to the question "What must companies do to survive in the twenty-first century?" was "practice creativity and innovation." Only 6% felt their companies were doing a good job in that area. Additionally, a 1998 study showed that the 25% of Fortune 500 firms with the highest growth rates focused on innovation as a guiding principle. Approximately 52% of all organizations with more than 100 employees will offer creativity training during 2001 to promote growth through the practice of innovation, according to a Training magazine report.
Two years ago, Andrea Hunt, vice president of shared values for Baxter Healthcare Corp. (Deerfield, IL), attended Innovation Network's Innovation University as a sponsor of the program. "We, like many companies, focused on operational excellence through the 1980s and early 1990s." Says Hunt, "We tried to become the most efficient, lowest-cost producer. But in the mid-1990s, we saw we needed to move out of that phase and into one of growth and innovation. It takes much longer to implement an innovation mentality throughout a large organization than you might think. The behaviors that earn you operational excellence are different from the skills you need to excel in innovative thinking."
Hunt found the time spent at Innovation University useful in her quest to help shape Baxter's future. "The beauty of the Innovation University program was the interaction with people outside of the medical device industry," says Hunt. "You're exposed to other industries, technologies, and ways of thinking that can have a dramatic impact in your own company."
Hunt and her team are working to integrate innovation more thoroughly into Baxter's culture through a variety of projects. "We're implementing processes to launch nontraditional innovative ideas—that is, those ideas that in the past may have been rejected for very good reasons will instead be pursued in incubator environments where we'll be able to decide more quickly if they are, in fact, viable. We're also studying ideas that are outside of our traditional lines of business," says Hunt.
"Secondly, people will be held more accountable for being innovative," says Hunt. "We've had goals in the past that X% of new products should account for X% of sales. We're now increasing that number and focusing more on everyone's contribution to the innovation process. And we're encouraging people to look at projects and technologies that aren't related to what they're currently working on. In some parts of the company, employees spend up to 10% of their time learning about new technologies through seminars, conversations with peers in other industries, etc."
Perhaps the most visible symbol of Baxter's continued commitment to innovation is the creation of a Technovation Room intended for team meetings in the renal division. "It's filled with fun stuff—lava lamps, toys, nontraditional furniture—to inspire fresh thinking," reports Hunt. "Innovation allows people to be much more creative and empowered—to take ideas to the next level."
This critical progression is especially important for medical device companies. Haman agrees that medical device firms are highly creative, but he notes that they "aren't always as innovative as they could be—bringing products to market quickly or turning them into truly profitable solutions. It's innovation that will allow them to stay ahead of the competition, that will take them to the next level, and solidify their leadership in tomorrow's marketplace."
Stacey L. Bell is a freelance writer and editor based in Tampa, FL.
Illustration by David Tillinghast/SIS
To the MDDI January 2001 table of contents | To the MDDI home page