Don Sull's blog

Companies like Merck, Bosch or Microsoft that rely on a technology-push approach to innovation can systematize their corporate R&D processes to increase productivity. Customer-pull innovations, in contrast, generally come from elements of the business model that surround the core product technology, including manufacturing, logistics, distribution and finance. They are more difficult to standardize. Difficult, but not impossible. Top executives pursuing a customer-pull approach to innovation can follow a more systematic approach by stimulating experimentation across all components of the business model, selecting the most promising innovations, and disseminating them quickly and broadly.

CEMEX has tackled these challenges systematically. Although its core product technology has gone centuries without a major shift, CEMEX has systematically pursued innovation in other aspects of its business model. In 2000, the company’s Mexican unit instituted an innovation committee to stimulate creativity across all aspects of the business. The committee, which included three vice-presidents, three directors, and one outside consultant, had a broad mandate to foster innovation throughout CEMEX. Rather than simply exhorting employees to be more creative and hoping for the best, the innovation committee followed a structured approach:

The committee began by defining a small set of innovation themes for each year. These themes- called platforms – provided direction to innovation efforts and ensured alignment with corporate priorities. Examples of platforms included manufacturing breakthroughs, integrated construction solutions for affordable housing, promoting regional development, and making it easier for customers to do business with CEMEX. Note that CEMEX was not trying to revolutionize the product or discover a breakthrough technology. Rather, the themes are chosen to stimulate creative thinking in the other elements of the business model.

The committee then selected four to six teams each year to identify three significant opportunities consistent with one of the themes. Across all teams, the goal was to generate 12 to 18 potential big innovations annually. The teams of eight to ten people devoted approximately one-quarter of their time to the project for three or four months. The exposure to top executives attract employees throughout the company to apply for the positions. Team members are often asked to implement promising ideas they develop, and these professional opportunities add further incentive for ambitious employees to participate in the innovation program. Knowing that they might be selected to implement an innovation also increases their motivation to work on feasible projects and develop a realistic implementation plan.

The committee structured the innovation process to increase efficiency. Standardized processes helped team members identify market gaps, generate creative solutions, and develop actionable implementation plans. The company has developed a set of proprietary tools for stimulating creativity. One example, called “ping-pong” splits the team into two groups. One sub-group proposes an idea, the second improves on the idea, the first further refines it, and so forth. The two groups bounce the idea back and forth until they can envision no further improvements. The teams structure their final proposals to the innovation committee using a pre-set template that clearly articulates the targeted segment, spells out the practical and psychological benefits (recall the “patrimonio” example from my last post), and quantifies the bottom-line impact through lower costs or higher revenue.