Book Review:The Game Changer

This was originaly published in the SCMS Journal Of Indian Management, Oct-Dec 2008 Issue.
Author : Alan G.Lafley & Ram Charan
Publisher : Crown Business
Year :2008
Pages : 336
Price : Rs.852

This new book written jointly by Alan G.Lafley and Ram Charan describes in great detail as to how innovation can help change the game-to produce quantum increments in business results. The authors , one of them a practitioner being the CEO of P&G with 23 billion dollar plus brands and the other a thinker who counts on innovation as the key answer to growth questions in future, narrate how customer-oriented innovation has enabled companies like P&G, GE, Nokia, Dupont, 3M, Lego Group etc. The examples are narrated in such great detail to enable even a layman to gain clarity on how innovation can work in reality. They force readers to think differently from the conventional thinking that any innovation arises from a “Eureka” incident or happen serendipitously. They make readers to believe that innovation is a disciplined process and practice, which every organization and leaders therein can achieve.
According to the authors, innovation is an integrated management process-integrated into how you run your business; its overall purpose, goals and strategies, structure and systems, leadership and culture. According to them, eight drivers depicted below must work together for game-changing customer-centric innovation to happen.
Inspiring Leadership
Motivating Purpose & Values
Stretching Goals
Choiceful Strategies
Unique Core Strengths
Enabling Structures
Consistent& Reliable Systems
Courageous & connected Culture
The guiding principle for game-changing innovations that delivers sustained organizational growth and profits irrespective of what business they are in is placing the customer at the centre of this framework. While many companies claim that they are customer-centric, very few actually put the customer at the centre of the innovation process. Achieving organic growth and differentiation from competition through innovation will happen only when all the eight drivers are seamlessly working together. The leadership for innovation needs to be passionate about knowing the customer, immersing themselves into finding insights about customer needs. And over time, they learn & develop confidence about how to deal with risk and failure inherent in innovation. Also, they have to appreciate that the most important part of the system is what appears in the centre: the customer. Everything begins and ends with the customer. If one keeps the customer at the centre of all his decisions, actions and behaviours, the chances of being wrong is reduced. The authors clearly delineate innovation from invention. While an invention is a new idea that is often turned into a tangible outcome, such as a product or system, an innovation is the conversion of new ideas into revenues and profits. Hence, an idea that looks great in the laboratory and fails in the market is not an innovation. They quote Jeff Immelt, CEO of GE in support of this: “Innovation without a customer is non-sense; it is not even innovation”. Invention is needed for innovation to take place. But invention is not innovation. Until people are willing to buy your product, pay for it, and then buy again, there is no innovation. A gee-whiz product that does not deliver value to the customer and provide financial benefit to the company is not an innovation. Innovation is not complete until it shows up in the financial results.

Without innovation, a company’s products would be threatened by commoditization and commoditization would drive down prices but differentiation that comes from innovation carries an economic premium. Innovation helps companies to conceive previously unimagined strategic options. For example, innovation enables you to look at acquisitions through a different lens, not only just from a cost perspective but also as a means of accelerating profitable top-line growth and enhancing capabilities. It also helps companies to be on the offensive. It puts them on the growth path. They quote the example of how Nokia became the number one in India through innovation to create 200 million customers. Nokia observed the unique needs of Indian customers, especially in rural areas, segmented them in new ways and put new features relevant to their unique needs on handsets. In the process, it created an entirely new value chain at price points that give the company its desired gross margins.
The authors also try to list out and advise us to eliminate the myths of innovation. One major myth is that innovation is all about new products. They say that when innovation is at the centre of a company’s way of doing things, it finds ways to innovate not just in products, but also in functions, logistics, business models and processes.
Another myth is that innovation is for lone geniuses and hence it happens in R&D labs. Innovation can happen anywhere and out of many people collaborating. What is important is whether the ideas generated can be converted into a respectable process and turn inspiration into financial performance. They stress on the necessity of collaboration as innovation according to them is a social process. And they also bust the myth that size matters in innovation; innovation can happen in big companies as well as small.
Everything about innovation starts with the customer. For example, P&G considers customer the boss and have created a “consumer closeness program” known as Living It which enables P&G people to get literally close to the consumer and in which P&G employees live for several days with consumers in their homes, eat meals with family, and go along on the shopping trip. Through this, employees get first hand these consumers’ demands for their time and their money, the way they interact with their social networks, what is most important to them, and which products they buy, how they use the products, and how the brands and products fit into their lives. Another programme, Working It provides employees with the opportunity to work behind the counter of a small shop. This gives them insights about why shoppers buy or do not buy a product in a store. For P&G, innovation is how they turn consumer understanding into profit.
The authors also narrate how to get customers actually involved in the cocreation and codesign process of innovation with the examples of Lego, a Danish toy company. Lego has three levels of customer involvement: first , testing a product; second, cocreating a product and third , designing customer versions. This way, Lego has become a facilitator of consumer innovation.
Innovation must focus not just on the benefits a product provides but also the total consumer experience- from purchase to usage.
Co-author Lafley says that design thinking which is abductive(imagining what could be possible) compared to the inductive thinking(based on directly observable facts) and deductive thinking (logic & analysis, based on past evidence) is which can be more appropriate for innovation.
The authors explain with the help of P&G examples how the process of innovation can be implemented. They also take pains to explain how to kill ideas if they prove unworthy to pursue as we proceed. Not all ideas will succeed. And, quickly cutting off projects that will not succeed in the marketplace helps to process time and energy and frees up scarce resources for those that have a better chance. Leaders of innovation must have discipline, judgment and courage to being decisive and killing those destined for failure. They have to ensure that “killer” issues are identified as early as possible and then dealt with.
Authors also discuss at length how a pipeline of innovation leaders can be created. For the purpose of innovation to be sustainable, it is essential to have a systematic methodology for developing innovation leaders as a continuous process. In order to encourage this to happen, innovation shall be brought in as an essential element in performance evaluation. A systematic approach to identify, develop and reward & recognize innovation leaders will enable organizations to take the process forward and sustainable.
The book concludes with a case study of how Jeffrey Immelt made innovation a way of life at GE.
About Authors
Alan George Lafley is the Chairman & CEO of Proctor & Gamble.In his early years he worked with US Navy , where he oversaw retail & service business at a US air base in Japan.Post his naval experience, he studied business at Harvard Business School and on graduation in 1977, he joined P&G, where he continued till date. He rose through the ranks and became President & CEO of P&G in 2000.He became Chairman & CEO in 2002.Under Lafley’s leadership, P&G nearly doubled revenues- from $39 billion to $76 billion.He expanded the market presence of P&G with the acquisition of Gillette in 2005. Lafley was selected as the CEO of the year in 2006 by Chief Executive magazine and was identified as one of America’s Best Leaders by US News & World Report in the same year.
Dr. Ram Charan is a highly sought after advisor to businesses and many chief executives and a prolific writer on business and an award-winning teacher. He has helped boards and top executives of a number of companies like GE, Novartis, Dupont, Honeywell, Bank Of America, Home Depot etc on strategy sessions, successions, self-evaluations, and CEO compensation. He has co-hosted the Fortune Boardroom Forums and has served on the National Association of Corporate Directors’(NACD) Blue Ribbon Commission on Corporate Governance. He is a director on the boards of Austin Industries, Tyco Electronics, and Emaar Manufacturing in India. He has won a number of Best Teacher awards from many institutions like Northwestern & GE’s Crottonville Institute. He was rated as one of the top ten resources for in-house executive development programmes by Business Week. Dr.Charan has written a number of best-selling books like What The CEO Wants You To Know, Boards At Work, Profitable Growth Is Everyone’s Business, What The Customer Wanst You To Know, Leaders At All Levels etc and co-authored Every Business Is A Growth Business(with Noel Tichy and Charles Burck), Execution(with Larry Bossidy) and Confronting Reality(also with Larry Bossidy)..He lives in Dallas, Texas.