November 2017Strategy

Mastering — and Managing — Innovation

Mastering — and Managing — Innovation

There’s a popular myth in business that says game-changing, profitable innovations spring only from genius “light bulb moments” and hefty R&D budgets. “You don’t need to increase your R&D budget or hire more creative talent to get profitable innovation,” says Wharton professor Christian Terwiesch. “Just get better at systematically, reliably, and efficiently identifying great ideas.”

Based on over a decade of research, entrepreneurial experience, and consulting work with organizations ranging from professional sports teams to banks, hospitals to furniture manufacturers, Terwiesch and fellow Wharton professor Karl Ulrich developed a science-based model that’s outlined in their book Innovation Tournaments. The model is based on a surprising premise: while innovation is largely a creative endeavor, it can and should be rigorously managed.

Terwiesch and Ulrich now teach their approach to executives in Wharton’s Mastering Innovation: From Idea to Value Creation. The program introduces participants to the Innovation Tournament model by immersing them in it even before the week on campus begins. Each executive pitches a business idea to the others through online videos, which are then evaluated by the group.

Working in teams during the program, they brainstorm concepts for the most promising ideas, perform market analyses, and in some cases even develop prototypes. “The real-time tournament brings academic concepts to life,” says Terwiesch. “They learn our ‘architecture’ for innovation, and can see how the process should be designed and managed.”

 Participants also learn that successful tournaments don’t happen by themselves. “The way they are managed can make them a success or failure,” he explains. “First, you are looking for more and better ideas. That means encouraging people both in and outside the company to thinking creatively and submit multiple ideas.”

A common trap, says Terwiesch, is that people typically prefer new ideas that are similar to old ones. “We’re always anchored on what we know and what we’ve done before. But the more diversity you can build into the idea collection phase, the more likely you are to get a great idea.”

That advice was put to the test recently when Fernando Jimenez, a recent participant in the program, met with his team. The Air Rewards Manager for Club Premier/Aeromexico says they were discussing how they could disrupt the domestic market with a unique value proposition. “Most of the time when you ask people to think about a new idea, they say it can’t be done because of current policies, systems, the way we are set up to do business today.”

To counter that thinking, Jimenez says he started the idea generation process by making it clear that there are no mental or technical boundaries. Everything is on the table, even if might mean a significant change or investment. “When you erase your boundaries, you can start from scratch. For us, that means thinking like a program member: how do they want to be rewarded? What does the market really want? Is it lounge access, free baggage check, upgrades?”

Jimenez says Mastering Innovation showed him how to take a “quantum leap” to differentiate his organization in the market. “As a frequent flyer program, we are competing with several other programs from major airlines as well as lower cost airlines. But participating in the program is helping me develop new, more innovative services and product offers to enhance the value proposition we provide to both our current and prospective members.”