Innovation Beyond The Four Walls

Innovation Beyond
the Four Walls

Breaking down innovation barriers
IN ASSOCIATION WITH
| COGNIZANT BUSINESS CONSULTING

April 2012 COGNIZANT 1
Be Global Table of Contents
3.
3.
4.
5.
Executive Summary
Key Findings
Methodology
The Starting Point: Internal Collaboration
6. Bayer: All Aboard
7. Juniper Networks: Formalizing Disruption
7. Hybrid Approach to Innovation Resources
9. Getting the Structure Right
11. E*TRADE: Engaging Customers
11. Inside the Toolbox
12. Use of Social Media to Foster Innovation
13. So Where’s the Return?
14. Facing Up to the Challenges
15. Conclusions
16. Appendix One
17. Appendix Two
19. Appendix Three
21. Appendix Four
BRUCE ROGERS BRENNA SNIDERMAN CHRISTIAAN RIZY KASIA MORENO NIGEL ADAM
CHIEF INSIGHTS OFFICER SENIOR DIRECTOR DIRECTOR EDITORIAL DIRECTOR REPORT AUTHOR
2 COGNIZANT April 2012
Executive Summary
As companies face relentless pressure to innovate in their de-
velopment of products and services, they are seeking new strat-
egies and techniques to gain and retain a leading edge. With
the proliferation of social media platforms and virtual commu-
nication, forward-looking companies are increasingly looking
outside the four walls of their organizations and tapping into
customers and partners to find inspiration and the innovation
to compete and excel in the ever-changing business
environment. The objective: to take innovation beyond Having embraced the new
game-changing products and services and create more tactics and tools, such as social
effective and efficient operational processes, as well media platforms and virtual
as more profitable and productive ways of promoting communication, companies now face
and creating market opportunities. The obstacles are the challenge of integrating them
numerous and often deep and wide. As a result, imple- into an organizational structure.
menting and sustaining innovation across these dimen-
sions is exceedingly difficult and not for the faint of heart.
This report explores the collaboration efforts and tools em-

braced to foster and expand innovation outside the traditional
organization’s four walls. It finds that organizations strongly
believe in open environments for innovation and a vast ma-
jority of them are using virtual tools for internal and external
collaboration. Yet, having embraced the new tactics and tools,
companies now face the challenge of integrating them into an
organizational structure that will unlock the value of open in-
novation, drive superior business performance and build com-
petitive advantage vis-à-vis key rivals, near and far.
Key findings include:
• Internal collaboration systems that allow all employees

to share their ideas are the most popular open tactic used
by companies to foster innovation. They are, however, often
just the first step. Other tactics — such as platforms to elicit
and share ideas with consumers, other companies (including
competitors) or crowd sourcing — are next in line.

• The emerging trend of balancing the use of internal versus
external resources for creating and implementing innova-
tive ideas results in hybrid innovation models — or compa-
nies that leverage both internal and external resources. They
are already more common than companies that rely mostly on
internal resources for innovation.
• Among these hybrids, internal company teams combined

with customers are among the top performers. They have
much higher satisfaction levels than all other organizational
structures, on average, in terms of six performance bench-
marks, including refreshing the portfolio of prod-
Breaking down ucts and services or being consistent in innovation
innovation barriers means performance. They also lead all other organization-
integrating customers, al structures on average in terms of employment of
open innovation tactics and virtual tools.
partners and outside
influencers in the process. To remain competitive, or extend their advantage,
organizations must continue to seek new and bet-
ter ways to innovate. The integration of customers, partners
and outside influencers beyond the traditional organizational
structure will continue to evolve as the adoption and prolifera-
tion of virtual tools and social technologies expand.
Methodology
This report is based on a survey of 311 executives. Almost half of the executives
(153) came from the United States, and the rest were from Europe. They represent-
ed all major industries, including manufacturing (62), technology (49), professional
services (28) and financial services (21). The respondents’ companies’ had at least
$1 billion in revenues, with roughly a third with revenues between $1 billion and $5
billion, a third with revenues of $5 billion to $10 billion, and the rest with revenues
over $10 billion.
Two-thirds of the respondents were C-level executives, including 57 chief execu-

tives, presidents or managing directors. The largest group (136 executives) had
roles in the IT departments, followed by executives from operations and production
(61), general management (53), and research and development (24).

The starting point: Internal collaboration systems
Organizations have an abundance of resources for innovation at their disposal, but
perhaps the most important and at the same time the most challenging to organize
and manage are the employees within the corporation. A company’s own human
capital is an invaluable asset to corporate innovation in terms of the employees’
knowledge of internal processes and resources, competitive pressures, product de-
velopment and the needs of customers.
But there are also challenges to harnessing the potential of innovative
talent from various parts and functional areas of the company. Innova- A company’s own human
tive teams may be intermingled with product development and ongo-
ing operations, which can blur lines of responsibility and the feeling of capital is invaluable
ownership of new ideas. Retaining the most innovative talent is crucial
to maintaining a competitive edge, and balancing the implementation of and challenging at the
ideas versus quantifiable ROI is a delicate management concern. How-
ever, when innovation teams function separately, company-wide input
same time.
and feasibility testing may be less forthcoming.
With companies spread across many continents and employing multinational work-
forces, leveraging internal resources is an effort that extends far beyond the four
walls of any one geographical or functional unit, and requires complex organiza-
tional skills and sophisticated communication systems.
Companies have embraced the potential of their human capital to foster innova-
tion. As of today, the use of internal collaboration systems that allow all employees
to share their ideas is the most commonly applied tactic to foster innovation (Fig-
ure 1).
FIGURE 1: Does your company use any of the following

tactics to gather information and ideas for innovation?
Internal collaboration system
Yes 65%
No, but are considering* 20%
No 12%
Don’t know 3%
Encourage customer’s input
Yes 60%
No 15%
Don’t know 3%
Social media
Yes 54%
No 15%
Don’t know 5%
Exchange ideas with other companies
Yes 50%
No 21%
Don’t know 3%
Crowd sourcing
Yes 47%
No 22%
Don’t know 4%
0% 10% 20% 30% 40% 50% 60% 70%
*For use in the next two years.

Internal collaboration systems take on different forms at different companies,
depending on corporate culture, industry, number of projects, types of challenges and
participants. They can be formalized, ongoing models, such as at Juniper Networks,
a network solutions provider. The company recently formalized a unit known as the
incubation lab, aimed at fostering innovation (see sidebar page 7). They can also be
an initiative open to all employees in conjunction with focused campaigns, as is the
case at chemical and pharmaceutical firm Bayer AG (see sidebar below).
On the other hand, E*TRADE Financial, the online brokerage firm, reaches out to
its employees with specific challenges; it plans to launch what it terms Innovation
Unleashed, a team-based competition that encourages employees to submit a
proposal that solves a particular investing problem. The competition’s pilot will
focus on the topic of retirement. “It’s not hard to motivate people here, because
innovation is part of E*TRADE’s DNA,” says Amy Radin, Chief Innovation Officer,
referring to the company’s pioneering efforts in online trading.
Paris-based drinks giant Pernod Ricard takes a less formal and more social
approach to innovation. The company runs what Adrian Keogh, Marketing Director,
Innovation, terms “creative sessions” to collect ideas from employees; these can
last two hours or two days, with a view to turning the best ideas into full innovation
projects. He points out that while virtual networks work well internally, leveraging
personal relationships is also important.
BAYER: All aboard

“Keep it simple Germany’s chemical and pharmaceutical giant Bayer AG runs a
and accessible to global initiative known as Triple-I (Inspiration, Ideas, Innovation). All
employees worldwide have direct and easy access to a central intranet
everyone, seize platform on which ideas can be submitted, as well as local contact
persons for employees in their countries who also are involved in local
the diversity innovation initiatives.
by providing There are focused campaigns within the initiative. During these
Idea Campaigns, all employees can participate in a four- to six-
appropriate net- month brainstorming session focused on a special business topic,
e.g., new offers in women’s healthcare. Facilitating the interaction
working tools, and of different people with various backgrounds to foster innovation
is key. For example, in local brainstorming workshops, materials
focus on business science and animal health experts conceived new device ideas, and
then transferred this to the global platform, where ideas can be
relevant topics,” shared, discussed and voted upon. On the other hand, someone who
is an expert in polymer applications can take an unbiased consumer
says Alexander view on healthcare topics. Awards are given for those ideas that are
positively evaluated by a business unit; to qualify, the concept has to
Moscho, Head of trigger additional follow-up activities or contribute new, significant
input to an already ongoing project. During the idea campaigns, the
Corporate focus is on specific innovation questions relevant to the company’s
business, so there always is a “pull” to implement ideas. According
Development, to Alexander Moscho, Head of Corporate Development, who is
responsible for corporate strategy and portfolio management at
Bayer AG. Bayer, more than 30 concepts are currently in development within
subgroups of the company.

JUNIPER: Formalizing disruption
Juniper Networks, a network solutions provider, recently formalized
a unit known as the incubation lab, which reports to Pradeep
Sindhu, Vice Chairman, Chief Technology Officer and founder of
the company. Small teams, mainly but not exclusively made up of
engineers, work to come up with ideas that are narrowed down in
number to those with potential for major returns in areas where,
as Sindhu puts it, architectural disruptions are happening in the
networking industry.
The idea is incubated in the lab for a period lasting three months to a
year. “If the concept is not going to work, we want to fast-fail it,” says
Sindhu. “If it moves forward, it may be absorbed into one of our existing
businesses as something new but aligned with what that business
is doing. Alternatively, we may create an entirely new business unit
within Juniper if the idea is geared towards disruptive innovation.”
Now that the incubation process is a formal one, Sindhu would like to
scale it up to enable it to manage four or five projects in parallel, not
just one or two. At the same time, he points out that incremental (rather
than disruptive) innovation is being carried out on a day-to-day basis
within business units and within the company’s two main divisions.
Hybrid approach to innovation resources

While reaching in-house for innovation ideas is the most popular tactic, it is
just one facet of the innovation spectrum, and it is fast becoming intermingled
with and supplemented by external resources. There is a sense of urgency in
utilizing the resources outside the four walls, as over the next two years more
executives surveyed for this study anticipate opening up innovation platforms to
communicate and cooperate with external resources than with internal resources
(Figure 1, page 5).
The smooth and productive functioning of such channels requires a

thoughtful choice of external innovation partners as well as establishing
secure and efficient lines and platforms of communications, which
Owens Corning’s use
may include crowd sourcing, sharing ideas with other companies or
gathering input from consumers.
of external resources is
Although it is complex to achieve, such a hybrid approach—where biased 75% toward
companies rely almost equally on internal versus external resources—is
a predominant form of resource usage, with almost half of executives implementation and
surveyed for this report saying their companies are hybrids (Figures 2
and 3). Hybrids are defined as companies that use the 40/60 to 60/40 25% toward ideas.
ratio of internal versus external resources for innovation.
Internalists are companies that rely mostly on internal resources for innovation,
as the ratio of internal versus external resources ranges from 90/10 to 70/30.
Externalists are companies that rely mostly on external resources for innovation,
applying the ratio of 30/70 to 10/90 of internal versus external resources for
innovation.
In terms of creating and implementing innovation, the majority of companies, 45%

and 46% respectively, define themselves as hybrids (Figures 2 and 3).

FIGURE 2: How does your company FIGURE 3: How does your company
leverage internal versus external leverage internal resources versus external
resources for creating ideas? resources for implementing ideas?
N/A N/A
4% 4%
EXTERNALISTS EXTERNALISTS
11% 12%
HYBRIDS HYBRIDS
45% 46%
INTERNALISTS
INTERNALISTS
38%
40%
Hybrids: Companies that use Internalists: Companies that Externalists: Companies that
from 60/40 to 40/60 ratio use from 90/10 to 70/30 ratio use from 30/70 to 10/90 ratio
of internal versus external of internal versus external of internal versus external
resources for innovation resources for innovation resources for innovation
There are many types of external resources that companies can tap into—from other
companies, including competitors, to academic institutions or customers. External
and internal resources can also be combined in many ways, with innumerable
variations as to which resources to rely on predominantly and what tasks they may
be expected to solve.
Building materials and glass-fiber maker Owens Corning relies on combining internal
resources, spread throughout all of the company’s divisions, with corporate partners
and customers. John Hillenbrand, Chief Innovation Officer at Owens Corning, says
the dominant model is to have dedicated R&D and marketing personnel in each
of the three main businesses—composites, roofing and insulation—working with
customers: “We have a very talented R&D group, in which we continue to invest,
and for implementation, we have had considerable success in complementing our
internal team by leveraging external talent and resources.”
Hillenbrand estimates that the company’s use of external resources is biased 75%
toward implementation and 25% toward ideas. “We embrace the notion of open
innovation as a means of tapping outside parties in order to bring new solutions
to market faster than would otherwise be possible,” he says, speaking in particular
about the recent launch of the company’s new EcoTouch™ insulation product.
The company partnered with Cargill to produce what it termed the reinvention of
fiberglass, since EcoTouch™ contains more than 99% natural ingredients, including
plant-based materials, and is free of formaldehyde.
“A key part of our innovation initiative, in addition to partnerships like this, lies
with customers,” continues Hillenbrand. “Very early on, and throughout the
development of EcoTouch, we engaged a panel of several key customers to serve
as a sounding board and to ensure we fully understood their expectations of our
new product platform. Innovation can’t just be defined as R&D. We interpret it as
turning knowledge into value, for our customers and for Owens Corning. That’s

why their insight is vital; customers can often see around corners when others
can’t.”
Juniper Networks runs a venture capital fund, the Junos Innovation Fund, which
plans to invest up to $50 million in start-up companies. “We have defined application
programming interfaces (APIs) to our software, and we are looking for companies that
could add value to these APIs,” says Juniper’s Sindhu. The cooperation between the
internal incubation lab and the outside partners is an example of a hybrid approach—
mixing of internal and external resources. “We have built a good working relationship
between our incubation lab and these smaller companies,” says Sindhu.
He continues: “We use the fund to augment Junos OS and extend it to our ecosystem,
which currently extends to more than 100 companies. We do a lot of work looking
at technologies that complement our existing ones. Juniper engineers and the
business units are involved with these companies, looking at how we can solve
tough technical and business issues. An example is T-Mobile. We worked closely
with them and eventually acquired their security systems for smartphones, tablets
and endpoints and integrated these with our Junos Pulse endpoint platform.
“While most investments will not turn into acquisitions, all investments need to
be good business deals and provide some combination of lower costs, incremental
revenue and improved customer experience.”
Getting the structure right

Among the many external resources that can foster innovation, corporations
recognize their customers as crucial. As a result, they have been quick to adopt
new innovation structures that involve their customers in their innovation efforts
by establishing internal company teams combined with customers (Figure 4).
In fact, this organizational structure to foster innovation has by now become the
second most popular structure quoted by the respondents to the survey, just one
percentage point in terms of usage behind the more traditional central innovation
teams at the corporate level (Figure 4).
FIGURE 4: How is your company structured to foster innovation?
Central innovation team at the corporate level 42%

Internal teams combined with customers 41%
Central innovation teams at the division or regional level 38%
Virtual team across company division/business units 33%
Outsourced innovation teams 30%
Co-located or globally composed innovation teams 29%
External business development organization 27%
“Offshore” innovation teams in lower cost countries 21%
None 5%
Other 1%
0% 10% 20% 30% 40% 50%

This trend is likely to continue; survey respondents from companies that have
internal teams combined with customers report higher satisfaction levels with their
innovation efforts than the average for companies with all other structures, as
measured by six different benchmarks (Figure 5).
There are significant regional differences in the types of structures companies

employ for innovation. While Europeans also lean toward a centralized function,
they make far less use of the virtual team structure and have fewer company teams
working with customers. Outsourced innovation teams are less common in Europe
as well (Appendix 2, Figure 1).
There are also differences in terms of structures that correspond to the innovation
strategy adopted. Companies that depend more on external resources for innovation
rely to a noticeably greater extent on the company/customer arrangement. They
also make greater use of co-located or globally composed innovation teams and
external business development organizations that support open innovation
partners. Hybrids are less inclined to adopt the central team structure (Appendix
1, Figure 1).
The most noticeable difference shows in satisfaction regarding the company’s

performance in the area of developing a pipeline of innovation initiatives. Higher
satisfaction levels are also evident in the areas of being consistent in innovation
performance, refreshing the portfolio of products and services, and measuring the
value of innovation initiatives. E*TRADE Financial’s Radin is a strong proponent of
relying on customer input for innovation (see sidebar page 11).
FIGURE 5: How satisfied are you with your company’s performance

in the following innovation areas?
Developing a pipeline of innovation initiatives
Internal company teams combined with customers 85%
All other organizations 74%
Being consistent in our innovation performance

Measuring the value of innovation initiatives

Refreshing the portfolio of products and services

Realizing or implementing innovative concepts/ideas

Availability of relevant skill sets

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Percent satisfied or very satisfied

E*TRADE: Engaging customers
Amy Radin, at E*TRADE Financial, the online brokerage firm, does not hesitate when asked about the use of internal
and external resources to foster innovation. “We are a hybrid. It’s not a question of drawing solely on one or the other.
A lot of power resides in tapping into the creativity of our employees through the idea workshop process and through
insights into how people’s attitudes and behavior are changing with respect to their money, and the role money plays
in their lives. But it’s very risky not to have customers directly engaged. Never confuse what a subject matter expert
says with what the customer really needs, especially in our industry, where so much is changing rapidly.”
Radin says the firm’s customers (and potential customers) are its biggest external resource. E*TRADE uses tools
from the field of cultural anthropology, including in-home interviews with individual retail investors, to ascertain
their financial needs and aspirations. It has also set up a virtual 24/7 community, known as the Co-Creation
Lab, where investors can initiate a dialogue or respond to suggestions from E*TRADE. “Typically it’s hard to get
genuine feedback on financial issues because individuals are reluctant to open up,” says Radin. “This is a good
way to start a dialogue.”
She continues: “Traditional focus groups, where you are essentially thrown into an unfamiliar room with a group
of strangers for two hours at the end of a busy day, is not the best venue for people to open up about a topic
as personal to them as their money. We are getting to a much deeper level of insight about people’s thoughts,
attitudes and behaviors toward their money by connecting with them in more relevant ways.”
Inside the toolbox

New technologies are constantly opening up avenues for communication and
interconnectivity that can foster innovation, with both internal and external
resources. The existence of virtual and social media often requires creating new
communication platforms for innovation, as well as evaluating and choosing which
of the tools are indeed productive and how and where they should be deployed.
The range of tools available to companies for fostering innovation and collaboration
is wide. Videoconferencing is most popular, but virtual meetings and brainstorming
sessions in a virtual town hall format are becoming more commonplace, as are
social media platforms such as Facebook, Twitter and LinkedIn (Figure 6).
FIGURE 6: Virtual tools used
Videoconferencing 55% 50%

Virtual meetings 45% 40%
Instant messaging applications 42% 36%
Brainstorming in virtual town hall 41% 30%
“Expert” communities 39% 35%
External social media platforms 35% 35%
Enterprise microblogging 30%
Internal
Enterprise social network 29%
External
Enterprise wiki 28%
None 4% 8% External is NA for
microblogging, enterprise
0% 20% 40% 60% 80% 100% 120% network and wiki.

Major companies with a global reach typically take virtual meetings for granted.
“They are standard practice here,” says Owens Corning’s Hillenbrand. “We reach
across time zones to ensure that milestones are, first, customer-driven and,
second, achieved on schedule. Our objective is to have a common language across
the company so that projects are compared on an apples-to-apples basis, and we
can be sure that investments are made where the best returns are.”
By industry, a majority of financial sector executives use virtual meetings and

instant messaging applications as an internal tool (Appendix 4, Figure 1). On the
subject of social media, those in the millennial generation are substantially higher
users than “boomers” and members of Generation X (Appendix 3, Figure 2).
A minority of executives encourage employee use of social media during work hours,
although more allow use only for business purposes. Concerns about security are
the main barrier, and reduced employee productivity is also a worry. Fewer boomers
encourage use of social media, and they are more likely to block employee access to
social media sites from office computers and phones than millennials (Appendix 3).
Corporate focus:
Use of social media to foster innovation
Depending on the nature of their industry, executives interviewed by Forbes Insights for this report had
different views on the merits and applications of social media as a driver of innovation.
Juniper Networks’ Pradeep Sindhu says his company makes quite heavy use of social media internally
to foster innovation. Juniper has developed its own internal collaboration site named Matrix that cuts
across the company, enabling its engineers to communicate among themselves to exchange ideas
and get updates on the status of projects. Every quarter Juniper also organizes events (more “social”
than “media”) known as Big Bang days, in effect a two-day innovation marathon when engineers are
encouraged to produce new ideas.
On the other hand, Pernod Ricard and Bayer use social media to foster innovation in conjunction with
marketing efforts.
Pernod Ricard has used social media as a major vehicle for launching (rather than developing) new
products. In 2010, as part of its “Plan B” campaign to promote Ballantine’s whisky in the Spanish market,
the company created a virtual music site where disc jockey Carlos Jean invited consumers to submit
basic compositions they shared on Facebook. The more promising submissions were refined by the disc
jockey into full-scale music tracks, and two songs have since topped the Spanish hit parade, according to
Adrian Keogh, Marketing Director, Innovation.
Bayer seeks dialogue with potential employees and customers through its home page on Facebook,
which displays a video message from Marijn Dekkers, the company’s CEO, welcoming users and inviting
them to click the “Like” button. “Dr. Dekkers is the first CEO of a DAX (German stock index) corporation
to seek a dialogue with Facebook users,” says Alexander Moscho, Head of Corporate Development. “The
German-language careers platform Karrierebibel.de recently rated Bayer’s careers page on Facebook
among the five best of its kind.”
But at Owens Corning, the use of social media has not yielded results: “We have experimented with
this and met limited success,” says John Hillenbrand. “We have not yet found the sweet spot where we
could leverage platforms such as Facebook or Twitter in a powerful way, and I believe that’s true of many
manufacturers. We are more of a B2B company, whereas those in the software or consumer sectors
probably make more use of these media.”

So where’s the return?
Understanding which tactics, models and structures to implement for innovation,
and which tools to apply in order to provide smooth communication strategies, is
at the core of building a productive, corporation- and industry-specific, innovation
process. Such a well-designed and targeted innovation process is a prerequisite to
achieving desired outcomes.
Though results may vary by industry and geography, the ROI in innovation projects is
the primary factor considered when a concept is moved to the implementation stage
(Figure 7). The ability to enter new markets is also important, although in Europe
executives give almost equal preference to both factors (Appendix 2, Figure 2). By
industry, many healthcare executives point to ROI as key, and a large proportion of
executives in finance give preference to it, also ranking entry to new markets highly
(Appendix 4, Figure 2).
FIGURE 7: What are the primary factors that your company considers when
moving from an idea or concept to a commercial product or service?
Return on investment 32%

Ability to enter new markets 24%
Add value to a current product 23%
Ability to increase share in established markets 21%
Time to market 16%
Grow the number of complementary products 16%
Introduce a new product category 16%
Desire to refresh product portfolio 16%
Need to protect current market share 13%

Don’t know 2%
0% 10% 20% 30% 40%
The difficulty lies in measuring the return. “There are many unknowns as to whether
or when you might get a payoff from innovation initiatives,” notes E*TRADE’s
Radin. “That can be problematic, especially for a publicly traded company that has
to report earnings each quarter. Innovation is part of serving the customer, but at
the same time you have to maintain a healthy business.”
E*TRADE resolves this dilemma by applying a “spend a little to learn a lot” mindset,
pushing small, continuous and iterative learning steps as opposed to a “big bang”
approach. “If you are doing something truly innovative, odds are high that forecasting
with any level of precision is simply unrealistic. You have to expose people to your
product or service, see how they engage with it, and apply those lessons to initial
assumptions about financial potential, both revenue and expense,” says Radin.
Owens Corning takes a similar approach. “To use a baseball analogy, I am a big
believer in going for singles and doubles rather than swinging for the fences with
innovation projects,” says Hillenbrand. “A string of smaller initiatives can create a
lot of momentum and can eventually become big. As for metrics, we try to keep it

in simple business terms by looking at the revenue impact of a new product such
as EcoTouch and measuring profitability as well. We can drill down on individual
products and measure the results in granular detail.”
Juniper’s Sindhu is also conscious of the more elusive nature of long-horizon

projects. “ROI is a very important metric when you consider the aggregate
expenditure of a company’s R&D,” he says. “The further out in time the project
stretches and the more specific it is, the greater the difficulty in gauging the return.
If it involves entering a new market, you can only apply a gut feel. Our rule of thumb
is to examine ROI very carefully on short- to medium-term projects and to be a bit
more relaxed when it comes to long-term ones.”
CEO backing helps

Fostering innovation is a complex process, which has moved beyond the four walls
and engages internal and external resources worldwide, often utilizing the newest
technologies. Notwithstanding how well conceived and designed the innovation
process may be, to succeed fully innovation efforts need a strong leader. As with
most corporate projects, the focus and backing of the CEO is a huge plus.
The survey shows that innovation is getting attention from the top, as it is the CEO
who is most often primarily responsible for fostering innovation. Almost a third of
the survey respondents pointed to the CEO as fulfilling that role, more than pointed
to the Chief Innovation Officer. This may be due to the high priority of innovation,
but also because some corporations may not have the position of a
Chief Innovation Officer or may assign the innovation portfolio to
In the manufacturing executives with varying responsibilities or rank.
industry more executives E*TRADE’s Radin points out that full backing for innovation projects
by the CEO is critical when returns are hard to determine. “My team
point to the CEO as is fortunate in having that support,” she says, noting she is located
just a few doors down from the office of CEO Steven Freiberg, who
taking a leadership role in interacts frequently with the executive team on the company’s
innovation. In healthcare innovation initiatives.
On the issue of who drives or executes innovation, many cite the

fewer do the same. office of the CEO as taking a leadership role, rather than simply
being highly or somewhat involved. Among other departments, R&D
is sometimes assigned that role. In the manufacturing industry more executives
point to the CEO, whereas in healthcare fewer do the same (Appendix 4, Figure 3).
The proportion indicating CEO leadership is higher in the U.S. than in Europe, but more
European executives mention the Chief Innovation Officer (or someone with a similar
title) rather than the CEO, a reversal of the U.S. situation (Appendix 2, Figure 3).
Facing up to the challenges

The success of the innovation process depends on the functioning of the applied
models and structures, with the most crucial part being the people involved and their
capacity to create and implement ideas. Innovation also has to fulfill a myriad of market
and regulatory requirements, which add to the complexity of evaluating the risks and
benefits of investment in innovation.
Finding and keeping qualified talent is the largest barrier to innovation. The commercial
viability of ideas is also an obstacle, although among European executives that position
was reversed. Financial industry respondents pointed to risk management practices

inhibiting innovation as the biggest barrier, followed by a long regulatory approval
process. Generation X was especially concerned about exposure of intellectual capital.
What kind of talent is most sought after? “People who really add value are those able
to think with both the left and right sides of their brain, so to speak,” says E*TRADE’s
Radin. “They may be subject matter experts, but they can think across silos and see the
benefits of people working together on innovation projects.”
Searching for top talent in a globally competitive environment is a continual challenge,

but it is far from the only challenge when it comes to implementing innovation. At
Bayer, Moscho lists acceptance by the public of new technologies as one of his greatest
challenges. “In many areas where we are developing innovative solutions, the issues
surrounding public and political attitudes to new technologies play a key role. In
particular, technology acceptance in the biotech sector (green biotech) is a hurdle to
fostering innovation there, especially within Europe.”
Doers or thinkers?
With talent looming as the biggest challenge to becoming, or remaining, an innovative company, the survey examined
the types of employees—doers versus thinkers, or fast followers versus leaders of innovation—that executives think
of as being most beneficial to their ranks.
Most executives feel that being a fast follower, and not leading innovation, is more effective for their company. Most
also agree that doers should have more influence than thinkers in the innovation process.
The data cannot be taken literally, however, as in practice companies often need equal input from both kinds of
employees. “If you are primarily a doer or a thinker, you will not be as successful at innovation as the person who
combines the best elements of both,” says Juniper’s Sindhu. “The ability to reflect on ideas should go hand in hand
with the ability to communicate and execute them.”
Conclusions
As the pace of innovation continues to accelerate, this study offers meaningful clues to
the likely shape of things to come:
• The emerging hybrid organization with its integrated approach – by design and intent
– will include a broad ecosystem beyond an organization itself. Organizations will need
to adapt by leveraging new technologies like social media or virtual tools. They must
also ensure that processes, structure and infrastructure facilitate and embrace the
inputs beyond just the organization itself.
• The return on investment clearly matters, and quantifying the ROI is difficult.
Organizations should, at minimum, conduct a pilot that leverages tools and resources
beyond their own environments to demonstrate value or risk falling behind more
aggressive and innovative companies.
• Thinking “beyond four walls” will be the norm sooner as virtual tools and social media
break down innovation’s barriers and enable subject matter experts to collaborate the
world over. This way of thinking, while difficult for many companies to embrace due to
fears over leakage of proprietary information, will enable even the most risk averse
company to convert more transparent and focused forms of ideation and knowledge
sharing into tangible innovations that drive business performance over the long term.

Appendix One:
Differences in approach to innovation by the ratio
of internal versus external resources applied
Central innovation team at the corporate level

Internalists 52%
Externalists 42%
Hybrids 30%
Central innovation teams at the division or regional level
Internalists 46%
Externalists 42%
Hybrids 30%
Internal company teams combined with customers
Internalists 39%
Externalists 58%
Hybrids 37%
Virtual teams across company divisions
Internalists 35%
Externalists 25%
Hybrids 28%
Co-located or globally composed innovation teams
Internalists 29%
Externalists 42%
Hybrids 27%
Outsourced innovation teams

Internalists 23%
Externalists 50%
Hybrids 36%
Offshore innovation teams in lower cost countries
Internalists 22%
Externalists 42%
Hybrids 15%
External business development organizations
Internalists 19%
Externalists 67%
Hybrids 28%
None
Internalists 3.5%
Externalists 0%
Hybrids 6.2%
Other
Internalists 1.2%
Externalists 0%
Hybrids 0%
0% 10% 20% 30% 40% 50% 60% 70%

Appendix Two:
Differences in approach to innovation by geography

Central innovation team at the corporate level
U.S. 52%
Europe 32%
Internal company teams combined with customers

U.S. 52%
Europe 32%
Central innovation teams at the division or regional level

U.S. 46%
Europe 30%
Virtual teams across company divisions

U.S. 41%
Europe 25%
Co-located or globally composed innovation teams

U.S. 35%
Europe 24%
External business development organizations

U.S. 34%
Europe 20%
Outsourced innovation teams

U.S. 33%
Europe 27%
Offshore innovation teams in lower cost countries

U.S. 25%
Europe 18%
None
U.S. 6%
Europe 3%
Other
U.S. 1%
Europe 0%
0% 10% 20% 30% 40% 50% 60%

Appendix Two (continued):
Differences in approach to innovation by geography
FIGURE 2: What are the primary factors that your company considers when
moving from an idea or concept to a commercial product or service?
U.S.
Time to market 16%

Don’t know 2%
0% 10% 20% 30% 40%
Europe
Time to market 16%

Don’t know 3%
0% 10% 20% 30% 40%

FIGURE 3: Who is responsible primarily for fostering innovation within your company?
CEO
U.S. 37%
Europe 20%
Chief Innovation Officer (or similar title)

U.S. 16%
Europe 32%
Other C-level executive

U.S. 9%
Europe 22%
Other senior executive (non C-level)

U.S. 2%
Europe 9%
Multiple executives
U.S. 31%
Europe 16%
0% 10% 20% 30% 40%
Appendix Three:
Differences in approach to innovation by generations
FIGURE 1: Which of the following best describes your company’s policy toward employee
use of social media such as Facebook, Linkedin or Twitter?
We allow employees to access social media
only for business purposes during work hours
Boomers 45%
Gen X 52%
Millennials 42%
We block employee access to social media

sites from office computers and phones
Boomers 37%
Gen X 15%
Millennials 16%
We encourage employee use of

social media during work hours
Boomers 18%
Gen X 33%
Millennials 42%
0% 10% 20% 30% 40% 50% 60%

Appendix Three (continued):
Differences in approach to innovation by generations
FIGURE 2: Which of the following tools does your company use internally to foster
innovation and collaboration within your organization?
Videoconferencing
Boomers 58%
Gen X 53%
Millennials 57%
Virtual meetings
Boomers 48%
Gen X 43%
Millennials 47%
Brainstorming sessions in a virtual town hall format
Boomers 41%
Gen X 42%
Millennials 38%
Instant messaging applications
Boomers 40%
Gen X 42%
Millennials 42%
“Expert” communities where employees can post and answer questions
Boomers 38%
Gen X 40%
Millennials 36%
External social media platforms

Boomers 32%
Gen X 30%
Millennials 46%
Enterprise wiki
Boomers 22%
Gen X 27%
Millennials 36%
Enterprise social network
Boomers 21%
Gen X 29%
Millennials 37%
Enterprise microblogging
Boomers 19%
Gen X 31%
Millennials 37%
None
Boomers 8%
Gen X 2%
Millennials 4%
Other
Boomers 1%
Gen X 0%
Millennials 1%
0% 10% 20% 30% 40% 50% 60%

Appendix Four:
Differences in approach to innovation by industry
FIGURE 1: Which of the following tools does your company use internally to foster
innovation and collaboration within your organization?
Videoconferencing
Manufacturing 66%
Technology 65%
Finance 49%
Healthcare 67%
Brainstorming sessions in a virtual town hall format
Manufacturing 58%
Technology 41%
Finance 32%
Healthcare 41%
Virtual meetings
Manufacturing 52%
Technology 39%
Finance 59%
Healthcare 44%
Enterprise social network
Manufacturing 47%
Technology 29%
Finance 22%
Healthcare 26%
Instant messaging applications
Manufacturing 47%
Technology 45%
Finance 59%
Healthcare 48%
“Expert” communities where employees can post and answer questions
Manufacturing 45%
Technology 37%
Finance 30%
Healthcare 48%
Enterprise wiki
Manufacturing 42%
Technology 33%
Finance 27%
Healthcare 33%
Enterprise microblogging
Manufacturing 42%
Technology 31%
Finance 35%
Healthcare 26%
None
Manufacturing 2%
Technology 0%
Finance 0%
Healthcare 4%
Other
Manufacturing 0%
Technology 0%
Finance 0%
Healthcare 4%
0% 10% 20% 30% 40% 50% 60% 70%

Appendix Four (continued):
FIGURE 2: What are the primary factors that your company considers when moving
from an idea or concept to a commercial product or service?
Manufacturing
Time to market 16%
Don’t know 2%
0% 10% 20% 30% 40% 50%
Technology
Time to market 20%
0% 10% 20% 30% 40% 50%
Finance
Time to market 11%
0% 10% 20% 30% 40% 50%

Appendix Four (continued):
Healthcare
Time to market 15%
0% 10% 20% 30% 40% 50%
FIGURE 3: Who is responsible primarily for fostering innovation within your company?
CEO
Manufacturing 53%
Technology 16%
Finance 24%
Healthcare 19%
Chief Innovation Officer (or similar title):
Manufacturing 21%
Technology 33%
Finance 22%
Healthcare 26%
Other C-level executive

Manufacturing 5%
Technology 24%
Finance 32%
Healthcare 7%
Other senior executive (non C-level)
Manufacturing 8%
Technology 6%
Finance 8%
Healthcare 4%
Multiple executives
Manufacturing 13%
Technology 16%
Finance 14%
Healthcare 44%
0% 10% 20% 30% 40% 50% 60%

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Innovation Beyond

the Four Walls

| COGNIZANT BUSINESS CONSULTING

The Starting Point: Internal Collaboration

6. Bayer: All Aboard

7. Juniper Networks: Formalizing Disruption

7. Hybrid Approach to Innovation Resources

9. Getting the Structure Right

11. E*TRADE: Engaging Customers

11. Inside the Toolbox

12. Use of Social Media to Foster Innovation

13. So Where’s the Return?

14. Facing Up to the Challenges

16. Appendix One

17. Appendix Two

19. Appendix Three

21. Appendix Four

This report explores the collaboration efforts and tools em-

Key ﬁndings include:

• Internal collaboration systems that allow all employees

April 2012 COGNIZANT 3

• Among these hybrids, internal company teams combined

Two-thirds of the respondents were C-level executives, including 57 chief execu-

4 COGNIZANT April 2012

FIGURE 1: Does your company use any of the following

April 2012 COGNIZANT 5

BAYER: All aboard

6 COGNIZANT April 2012

Hybrid approach to innovation resources

The smooth and productive functioning of such channels requires a

In terms of creating and implementing innovation, the majority of companies, 45%

April 2012 COGNIZANT 7

8 COGNIZANT April 2012

Getting the structure right

FIGURE 4: How is your company structured to foster innovation?

Central innovation team at the corporate level 42%

0% 10% 20% 30% 40% 50%

April 2012 COGNIZANT 9

There are signiﬁcant regional differences in the types of structures companies

The most noticeable difference shows in satisfaction regarding the company’s

FIGURE 5: How satisﬁed are you with your company’s performance

Being consistent in our innovation performance

Measuring the value of innovation initiatives

Refreshing the portfolio of products and services

Realizing or implementing innovative concepts/ideas

Availability of relevant skill sets

10 COGNIZANT April 2012

Inside the toolbox

FIGURE 6: Virtual tools used

Videoconferencing 55% 50%

April 2012 COGNIZANT 11

By industry, a majority of ﬁnancial sector executives use virtual meetings and

12 COGNIZANT April 2012

Return on investment 32%

Need to protect current market share 13%

0% 10% 20% 30% 40%

April 2012 COGNIZANT 13

Juniper’s Sindhu is also conscious of the more elusive nature of long-horizon

CEO backing helps