Sunday, 24 February 2008

Developing capability in innovation / Reckitt Benckiser

There have been a couple of interesting articles in the traditional press recently on Reckitt Benckiser's success in innovation.

Despite its President's gaffe in passing off the company's success in generating innovations from 'simple and obvious ideas' as 'very stupid products' (which Management Today compared to Gerald Ratner's dismissal of his firm's jewellery products), Reckitt does seem to have found a way to make innovation work. In fact more than 80% of ts brand innovations succeed and more than £2bn of the company's £5.3bn revenues for 2007 come from products launched in the past three years. The company's share price has increased by 356% compared with a 13% decline in the FTSE 100 index.

Only a very few companies such as Whirlpool and 3M come anywhere close to this level of success through innovation.

So how does Reckitt do it? According to The Economist, Reckitt's President attributes his firm's success to its 'innovative and entrepreneurial culture'.

More importantly, for me, it's about making innovation an absolute top priority (an organisational capability) and then developing best fit HR and management processes around this focus.

For Reckitt, this includes:

  • Management processes that encourage controversy and avoid bureaucracy

  • Compensation practices that reward high performers (and innovators)

  • Recruitment and management for diversity ('the company's multinational staff come from very different backgrounds which creates "tension in the system").

Creating this sort of platform this doesn't come from measurement as much as it does a deep insight into the people in the organisation and what makes them tick.

An article in Business Week last year, Five Common Mistakes in Innovation, made the point well. Discussing Procter & Gamble's social networking inspired 'Connect and Develop' approach, the article explained:

"'Connect and Develop' is a wonderful strategy for P&G, because of who it is, the categories it plays in, and the structural systems and DNA of the company. Just because something is good for P&G doesn't mean it will be good for the rest of us.

Companies such as 3M are instead returning to what has made them great in the past. It's a generalized form of what organizational-change experts call Appreciative Inquiry: Search inside yourself for moments of greatness, determine which activities spurred these moments of greatness, and then figure out how to do more of that.

Virtually no companies in the Fortune 500 got where they are by accident. Savvy leaders capitalize on their organizations' strengths and capabilities to create sustainable approaches to growth appropriate to their inherent cultures."