Unrelenting Innovation: How to Create a Culture for Market Dominance

Praise for Unrelenting Innovation

"I would rate Unrelenting Innovation as one of the best business books I have read. All CEOs need to read it to avoid the incumbent′s curse. Unrelenting Innovation offers brilliant insights into the need for innovation and managing the risks of innovation."
Philip Kotler, author and S.C. Johnson & Son Professor of International Marketing, Kellogg School of Management, Northwestern University

"A brilliant tour de forceon how firms can overcome the incumbent′s curse and develop the culture to drive big innovations that will provide growth platforms and prevent irrelevance. Supported by case studies and a practical theory of how innovation–oriented culture is created, the book will be a classic."
David Aaker, author and vice chairman, Prophet

"A brilliant and thought–changing book on why many successful companies fail to innovate and how to overcome an internal culture of resistance. Tellis is a master storyteller!"
Jagdish Sheth, author, consultant, and Charles H. Kellstadt Professor of Marketing, Goizueta Business School, Emory University

"The risk of not carefully reading and implementing the lessons of Tellis′ relentless imagination will most surely increase the risk of organization?stagnation, if not failure."
Warren Bennis, author and Distinguished Professor, University of Southern California

"Very few people are better qualified than Tellis to write about innovation and market dominance. Drawing on over 20 years of rigorous, original research, Unrelenting Innovation is a truly comprehensive and deeply serious book about innovation. There is more insight and evidence here on one page than in many business books put together."
Jaideep Prabhu, author and Jawaharlal Nehru Professor, Judge Business School, Cambridge University

"Tellis makes a compelling case that firms with an unrelenting ability to keep innovating are sustained by their distinctive cultures. The payoff from sustaining a culture of organic growth through innovation is a rate of growth that competitors can′t match."
George Day, author and Geoffrey T. Boisi Professor, Wharton, University of Pennsylvania

Figures and Tables xi

Foreword xiii

1 Why Incumbents Fail 1

Why Incumbents Fail to Innovate Unrelentingly 3

The Preeminence of Culture 7

Culture as a Primary Explanation 15

Basis for the Book 17

Conclusion 19

2 Willingness to Cannibalize Successful Products 23

Why Incumbents Are Reluctant to Cannibalize Products 24

Why Willingness to Cannibalize Is Important 28

Understanding Technological Evolution 33

Blinded to an Opportunity: Microsoft Keywords? 39

Crippled by Fear of Piracy: Sony MP3 Player 41

Decline of an Innovator: Eastman Kodak 45

A Cycle of Cannibalization: Gillette′s Innovations in Wet Shaving 49

Late Move: HP Tablet 53

Conclusion 54

3 Embracing Risk 59

Sources of Risk: Innovation s High Failure Rate 59

The Reflection Effect: Asymmetry in Perceived Risk 63

The Hot–Stove Effect: Learning from Failure 65

The Expectations Effect: Hope Versus Reality 68

Innovation s Gain–Loss Function: Type 1 and 2 Errors 69

Case Histories 75

Gambling on an Embryonic Market: Toyota s Prius 75

Gambling on Growth: Amazon.com 84

Gambling on Vision: Facebook 90

Gambling on Scale: Federal Express 103

Conclusion 106

4 Focusing on the Future 109

Why Future Focus Is Tough 111

Availability Bias 114

Paradigmatic Bias 116

Commitment Bias 119

Planning for the Future 121

Predicting and Managing Takeoff 122

Targeting Future Mass Markets 126

Predicting Technological Evolution 129

Analyzing Emergent Consumers 134

Conclusion 138

5 Incentives for Enterprise 141

Traditional Incentives: Winning Loyalty 142

Asymmetric Incentives: Turning Failure into Success 143

Making Incentives Work: Economics and Psychology of Incentives 148

Power of Incentives: IBM′s Transformation 155

Incentives for Enterprise: Google 157

Incentives for Loyalty: General Motors 163

Incentives for Innovation: 3M 168

Structuring Team Incentives: IBM′s Learning from Online Gamers 171

Conclusion 173

6 Fostering Internal Markets 177

Characteristics of Markets 181

Implementing Internal Markets 192

Managing Internal Markets 199

Conclusion 203

7 Empowering Innovation Champions 205

Luck Versus Innovation Champions 206

Characteristics of Champions 208

Testing Luck 210

Champions Versus Teams 212

Champions at the Top Versus the Bottom 214

Distributed Champions: Google s "Young Turks" Program 216

Serial Champion: Roger Newton 218

Championing Mass Market of the Future: Tata Nano 222

Championing a Music Revolution: Apple iPod 227

Mobilizing an Organization for Innovation: Sony Walkman 231

Steps in Empowering Champions 235

Conclusion 236

8 Culture Versus Alternate Theories: Arguments and Evidence 237

Micro–Theories 238

Macro–Theories 250

Conclusion 260

Notes 263

Bibliography 289

Acknowledgments 307

The Author 309

Index 311

Gerard J. Tellis is a professor of marketing, management, and organization, Neely Chair of American Enterprise, and director of the Center for Global Innovation, at the University of Southern California Marshall School of Business. Dr. Tellis is an expert in innovation, advertising, global market entry, new product growth, quality, and pricing. His book, Will and Vision, was cited as one of the top 10 books in business by the Harvard Business Review and was the winner of the American Marketing Association Berry Award for the best book in marketing over the last three years.