Manjari Raman: Cashing in on innovation

OUT OF THE BOX/ Managing the costs of innovation also requires creative solutions

Six months ago, when Staples needed a hot-selling product, it turned for help "" to its customers. Based in Boston, Staples sells office products, ranging from supplies, technology and furniture to business services.

Its office superstores allowed it to rack up sales of more than $13 billion last year. But it needs a steady stream of innovations to keep those stores filled with customers.

Staples' InventionQuest contest drew an overwhelming response. More than 8,000 suggestions for new office products poured in. There was the Peanut Eater, a device that would make it easier to clean up the plastic "peanuts" used in packaging, so that they could be reused or disposed off.

Then there was the Pop Envelope, a shipping envelope that would expand to accommodate larger items. The winning idea came from Todd Basche, an amateur inventor in California, who proposed the WordLock "" a combination lock that uses easy-to-remember words instead of numbers.

Incidentally, why was Staples so confident that the WordLock would be a hot seller? Because the 1,47,000 votes cast online by consumers helped select the winner from 12 finalists. However, Staples knows that customer participation in new-product development cannot guarantee success. Basche's prize includes royalties "" but if and only if Staples decides to make the product.

Innovation is that kind of fickle mistress.

The findings of a recent Boston Consulting Group survey highlight its maverick hold on companies. Companies swore by innovation: 69 per cent of the respondents ranked innovation as one of the top three priorities for their company.

Business swore at innovation: 57 per cent of the respondents carped that they weren't satisfied with the financial returns on innovation spending. Yet an overwhelming 95 per cent insisted that they would increase their spending on innovation in 2004, or at least keep it at the 2003 level.

Clearly, companies are under pressure to come up with innovative solutions for, well, managing innovation. One obvious starting point is to look for imaginative ways of trimming the costs of innovation. Staples simply outsourced (that word again!) the innovation process by handing over the execution of the InventionQuest search to the Big Idea Group.

The New Hampshire-based company, which began operations in 2000, uses idea hunts, idea contests, and internal innovation searches to gather thousands of ideas from independent inventors and smart consumers. It then feeds them to companies like Gillette, Hasbro and Toys "R" Us that are hungry for a steady diet of innovations.

A second option is to amortise the innovation development costs over a wider portfolio of applications. Sometimes, that can mean taking the innovation out of the company and handing it over to the competition.

A recent article in Fortune (May 31) discusses the example of P&G, which auctioned its patented adhesive film technology that it uses in its Crest teeth-whitening strips to arch-rival Clorox. Together, the two companies co-developed plastic bags with the same technology, so that consumers could press and re-seal them.

Third, companies can make the whole process of innovation more smooth by taking the kinks out of it "" even if the kink happens to be the innovating company itself. Take the case of International Flavors & Fragrances, which is always on the look-out for new sensory delights for consumers.

It's the kind of place which tracks that yuzu, a sour Japanese citrus fruit, is edging out old favourites like lime and lemon. Or that aloe vera is brilliantly breaking into the food and beverages business.

Stefan Thomke, professor at Harvard Business School and Eric von Hippel professor at the Massachusetts Institute of Technology, found that International Flavors had discovered a unique way of using customers to improve it's returns on innovation.

When the company realised that it was wasting precious time and resources pandering to clients' fudgy demands for "a leathery smell" or "a nutmegy taste", it decided to shift part of the innovation process to customer sites.

By linking automated machines at manufacturing plants to Internet-based tools, the company allowed customers to play around with a database of flavours so that they could come up with perfect "chargrilled" or "tangy" tastes.

The cheapest solution, of course, is imitation. 3M, the innovation powerhouse, doesn't hesitate to borrow ideas. For example, the US disinfectant market has been in ferment in recent months, with brands like Windex, Clorox and Lysol racing to launch a new product extension: disposable sanitising wipes that disinfect household surfaces without bottles, sponges or paper rolls.

Then, a few weeks ago, 3M launched its own variation of a disposable wipe: the Scotchgard instant shoeshine leather wipe. Not only is the product convenient, it gives the term "shoeshine on the go" a whole new meaning.

My point is, to get the idea, all someone at 3M had to do was to walk down the aisle in a grocery store. That's the best part of cost-effective innovation: cheap thrills.

(Manjari Raman is a Boston-based management writer. Her email is manjariraman@yahoo.com)