The Innovation Factor

Innovative companies encourage employees to look to the future for ideas. Yet those ideas must produce plans that can go into development today. How do such businesses maintain their head-in-the-clouds-feet-on-the-ground equilibrium?

Said Hilal, CEO of Applied Medical Resources, manages by subjecting futuristic visioning to business-school rigor. Twice a year, employees at the $50-million medical-device company, based in Rancho Santa Margarita, Calif., participate in a "time travel case study" as part of an off-site meeting. Hilal and other senior executives prepare the cases by identifying a problem that could trouble the company several years out. They then concoct a fictional scenario in which that problem goes unaddressed. About 40 employees who have been nominated by senior staff split into teams, brainstorm for a few hours, and then suggest ways to turn those potentially dark horizons rosy.

Time travel differs from garden-variety strategic planning in purpose as well as methodology, Hilal explains. The company's futuristic exercises, paradoxically, are designed to educate staff about present conditions so as to provide a context for creative thinking. "We believe creative people don't like to be arbitrary," says Hilal. "We find they're more creative if they understand the needs of the company."

"The trigger mechanism" for a time-travel session, says Hilal, "is the question, Does the organization understand what this issue means?" The case-study creators begin by identifying how market conditions have changed during the past six months. What acquisitions or sales have competitors made? What new products or companies have debuted? Who has hired a new CEO? Next, they assess changes at Applied Medical. Have margins slipped? Has the company expanded in a particular area? The executives then talk informally with their teams to nail down "where the understanding of issues and concerns is foggy, or where the direction and priorities of management seem arbitrary," says Hilal. Finally, they compose a scenario that clarifies issues by positing possible outcomes. For example, the time-travel exercise might flash forward five years to a time when Applied Medical, having grown complacent about its technological edge, is outstripped by the competition. The subsequent conversation might focus on the rate at which the company should release new generations of products.

Futurist Peter Schwartz, author of The Art of the Long View and chairman of Global Business Network, a scenario-planning consultancy in Emeryville, Calif., agrees that time-travel scenarios can spark innovative thinking. "You understand why and how the world might be changing, and it forces you to challenge your assumptions," he says.

If your company is planning its own trip through the calendar, here are some things you should know:

How far into the future should you travel?

Hilal wants his team to respond to this question: What should we be doing during the next 12 to 18 months to prepare for anticipated change or to cause favorable change? "For that," he says, "we really do not see a need to take the group beyond the three-to-five-year period."

What kinds of problems are best suited for time travel?

The more functions that are touched by an issue, the broader the employees' engagement should be in the exercise. Applied Medical concentrates on what it calls "integrated cases" that embrace multiple departments. For example, a case study might describe the loss of a competitive advantage and trace it to a slowdown in research and development, which in turn resulted from a decrease in funding because of a rise in manufacturing costs. Such a scenario would help employees who are responsible for manufacturing costs to see how their decisions affect the company's ability to quickly develop new products.

How do you make the case study seem as though it's taking place in the future?

There's no need to resort to the fantastic. Hilal recommends writing a short, simple scenario and peppering it with believable financial details and the names of present-day competitors. His opening paragraph might read "It is November 2005, and Applied is facing ..." and be followed by a description of some crisis. After the introduction would come a paragraph fleshing out the genesis of the problem: "Back in 2002 things looked different...." Next, the scenario would explain what actions brought about the current crisis: "Upon further examination, Applied took for granted its ability to out-innovate competitors. As a result, it did not listen carefully to the customer." Finally, the case study would ask, "What should Applied have done back in 2003 to maintain its edge in innovation?" That question would launch the brainstorming.

That simple exercise, Hilal says, "immerses the team in the future to a surprising degree. No flying taxis are necessary."

Ilan Mochari is a staff writer at Inc.

Inc's The Innovation Factor series continues with:

September: Innovation and Leadership
In this issue we will look at innovation through the eyes -- and brains -- of CEOs. What sort of people truly deserve to be called "innovators"? How do they operate? Where do they get their ideas? Do you have what it takes to be a member of this exclusive club?

October: Innovation and Markets
This issue will examine how economic and political issues of the moment will affect small companies' ability both to innovate and to profit from their innovations. And what does the history of innovation reveal about how great ideas zigzag their way into general acceptance?

The Innovation Factor

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