Business Opportunities: On-Line Articles - Innovation Is an Important Driver at Many Companies

Innovation Is an Important Driver at Many Companies

Litle & Co., a Lowell, Mass.-based transaction processing firm that services direct commerce merchants, landed at the top of the Inc. 500 list of the country's fastest-growing private companies last year. It got there on the strength of a three-year growth rate exceeding 5,600%. Chris Long, Litle's chief marketing officer, has a simple explanation for the company's success: innovation.

Since its 2001 launch by direct-marketing pioneer Thomas "Tim" Litle, the company has prospered on the strength of a three-pronged strategy. It focuses on a single market segment (direct commerce merchants, consisting of "non-face-to-face" merchants such as catalogers, e-tailers and direct response TV); it provides the highest possible quality of service to its customers; and it has established an advantage over its competition through the application of leading-edge technology.

It's in that last area where innovation plays a critical role for Litle, and it flows from the company's choice to approach a critical part of its business in a way that is very different from what most of its competitors do.

"We have built and operate our own financial services software platform in-house for basic and advanced processing of payments for us and our customers," Long explains. "What has allowed us to go from nothing to being a significant player in the industry in a very short time is our ability to write software - fast. That's what lets us compete against the big boys. Innovative speed is the key to our success."

Litle's approach to writing software is radically different from the industry norm. While most companies rely on individual programmers working alone to write code for software, Litle's programmers work in pairs.

"People's first reaction is usually that it must be terribly expensive, even wasteful," he says. "But it's not, because the quality and quantity of code that gets written in this manner is incredible. We don't end up with throwaway code."

Litle has created an environment of continuous innovation in its core competency.

The company's software teams use an approach called Agile Software Development. "It's a technique that is well defined, but few companies of any size in this country are doing it," Long says. However, by embracing this approach, Litle has been able to create an environment of continuous innovation in its critical core competency.

"It's not unusual for software development projects to be done on 12- to 18-month schedules," he says. "We've put something new into play every single month for 90 straight months - one step at a time, with excellent quality and excellent quantity."

An added bonus of the company's innovative approach to writing code is that it helps attract some of the best programmers in the business. Long says the rule of thumb in software development is that an "A" programmer costs about 20% more than a "B" programmer but is five times more productive.

PERFECT FIT

"We attract the kind of person who wants their work to matter," he says. "People who have doubts about their own ability don't go to work at a company where what they do is examined every month. It's a perfect fit; it's gets us from 0 to 60 in the shortest time possible."

Litle's experience illustrates an important element of leveraging innovation to achieve business success. In order to do it effectively, companies must infuse the process into their corporate DNA, says Panos Kouvelis, a professor of operations and manufacturing management at Washington University's Olin School of Business.

"It's important for Western companies to compete on innovation since they can't successfully compete with the East on price," Kouvelis says. "The best way to infuse innovation into your company is to manage it in a systematic way to get employees to think outside the box."

Innovation comes in many different forms, from big ideas to small changes. Some innovations are dramatically evident to everyone interacting with the company; others are strictly internal and may be barely noticeable even to those who work there.

"We use both types at Cedar Fair," says Monty Jasper, corporate vice president of safety and engineering at Cedar Fair Entertainment Co., parent of Cedar Point amusement park and resort in Sandusky, Ohio. He cites the park's Millennium Force ride, installed in 2000, as an example of the former. Its groundbreaking cable lift system raises each car to 310 feet at a 45-degree angle.

In order innovate effectively, you must infuse the process into your corporate DNA.

Minor innovations include small modifications made over the last five seasons to make the park's Top Thrill Dragster run more efficiently, Jasper says. No matter what kind of innovation is being considered, however, it is preceded by testing and risk assessment. "We check out new ideas before we put them into widespread use. Sometimes, that testing highlights problems or adjustments that need to be resolved before we proceed," he says.

The most common areas where companies pursue innovation are in products and services/customer experiences, according to a survey by Boston Consulting Group, and Cedar Point's efforts are right in line with that trend.

Other companies pursue innovation in less visible areas, often dictated by the nature of their business. That's been the case for Westport Tax Management, a Brewster, N.Y.-based recruiting firm that specializes in the procurement of tax executives for corporations and public accounting firms.

"We've seen a lot of changes over our 27 years in business, most of which are probably invisible to the casual observer," says Gerard Murray, Westport's president. "Significant ones include greatly increased mobility in the career field, more demand for temporary and intermediate-term assignments, and the desire for more flexible work arrangements on the part of some very talented people in the career pool."

EXPANDED SERVICES

Murray has responded by expanding the array of services Westport offers, with the changes intended to meet the needs of both prospective employees and the firms looking to hire them.

"We continue to offer permanent placement positions focused on the needs of the client, and we have added a program designed to transition employees from temporary to permanent placement," he says. "Other innovations we've rolled out include prescreening to eliminate unqualified candidates and on-site consultation with clients to get first-hand knowledge of their operations and a better understanding of their needs."

Many companies have taken a cautious approach toward innovation over the past several years, focusing mostly on cost-reduction issues. Now, however, innovation is back in style, says Tom Davenport, who holds the President's Chair in Information Technology and Management at Babson College.

"There is ample evidence of this increased focus on innovation," he says. "For example, 87% of senior executives in a recent survey said that generating organic growth through innovation is necessary for success in their industries, and 74% planned to increase spending on innovation."

However, Davenport stresses, the mere desire for more innovation is not enough to make it happen, and many businesses take a poorly-managed approach to innovation. "In particular, they take too narrow a focus, addressing only the product innovation domain," he says. As a result, less than half the executives in the survey cited above were satisfied with the financial returns their investments in innovation achieved.

Innovation almost always requires a "leap of faith" at some point in the process.

In order to construct and manage an innovation portfolio, organizations must identify the types of innovation that are important to them, key steps in the innovation process and primary responsibilities for managing it, Davenport adds. Following that strategy makes it possible to create a more formal approach for managing a broader, more comprehensive innovation portfolio.

In the end, innovation almost always requires a "leap of faith" at some point in the process, says Felix Janszen, author of "The Age of Innovation: Making Business Creativity a Competence, Not a Coincidence." But it's a leap that just about every business has to be willing to take if it wants to remain successful in today's competitive, global economy.