In one 30-second TV spot last year, former Ford Motor (F) Chairman and Chief Executive Bill Ford used the word "innovation" nearly once every eight seconds. "If you look at the Ford Motor Co., innovation has driven everything we've done," he began. The repetitions felt like a mantra by the time Ford concluded: "Innovation will be the compass that guides this company going forward."
That campaign has by now been abandoned--perhaps because by the end of 2006, Ford was awash in red ink. Only a year after it heralded innovation as a core value with the launch of those ads, the auto giant posted an unprecedented loss of $12.7 billion, surpassing its previous record loss of $7.39 billion set in 1992. The ill-timed TV spot illustrates how companies are flying the innovation banner, hoping if they simply shout the magic word loudly enough, consumers will buy their products. Ford's experience shows that people want the real thing.
A backlash against "innovation" (and "design") is now under way. The constant incantation of the I-word in advertising, marketing, and conferences threatens to undermine a key business movement. Yet it is important to distinguish real innovation from the fad. Kevin McCullagh, author of a provocative essay, "Beware the Backlash: A rising tide of disaffection towards design," that appears on the Web site Core77, says of innovation, "The term has been overused and abused of much of its meaning, with every lame brand-tweak and extension being hailed as a 'innovation.'" Yet McCullagh, director of London-based consulting firm Plan, adds: "I don't think there is much evidence of consumers getting tired of innovation. Look at the widespread hunger for a better cell-phone experience that the iPhone is tapping into."
A wave of other articles, books, and studies from major consulting firms, business school professors, and design experts have appeared. They aim to get beyond the craze.
The flaws in the innovation mantra recently were exposed when Ford topped the list of a leading survey, Smart Spenders: The Global Innovation 1,000. At the same time, this latest Booz Allen Hamilton report on research and development spending concluded that throwing billions of dollars at R&D to produce more patents doesn't always translate into innovations that help a company's bottom line. iPod creator Apple (AAPL), for instance, has one of the lowest ratios of R&D spending to revenues.
In "Innovation: The Classic Traps," published in the Harvard Business Review, professor Rosabeth Moss Kanter of the Harvard Business School says the most common mistake companies make is to apply traditional corporate processes to new projects. Truly innovative pursuits are hard to forecast or measure in traditional ways. A company can't measure the success of a cutting-edge product using the metrics it applies to its existing goods.
Companies pursuing innovation strategies must be flexible, according to Kanter. "Applying one-size-fits-all thinking to new ideas is a big mistake," she writes in an e-mail. Managers should keep communication open between people working on traditional products and teams looking at new ideas. That "ensures that when it is time to fold the innovation into the flow of the mainstream business, people understand it and are ready for it."
In Payback, published by the Harvard Business School Press, authors James Andrew and Harold Sirkin of the Boston Consulting Group emphasize the obvious: The "only worthwhile innovation is profitable innovation." They advise ditching unprofitable ideas early even if they are brilliant and revolutionary—think Motorola's (MOT) Iridium satellite phone initiative—and moving on. Sirkin urges executives to focus instead on the return on their innovation investments (ROI). "There's a belief that innovation is about great ideas," he says. "But it's about bringing a great idea to market, and maximizing the payback on the investment made in the idea."
The message from all the backlash? Innovative products, services, and experiences drive profits—but only if pursued with return on investment, rather than marketing, in mind.
By Reena Jana