Innovation is widely defined as something new. Open Innovation occurs when a corporation combines external and internal ideas to advance its aims. Radical Innovation is a new idea, service or method that significantly disrupts a market and the financial performance of companies in that market.
Frito-Lay’s CEO had a big problem in the snack market. It was the late 1990s. The $13 billion unit of PepsiCo was failing miserably at appealing to the growing U.S. Latinx population. The CEO’s boss was not happy. Shareholders were not happy. Market research revealed that poor performance resulted from bland-tasting chips and a weak connection to the Hispanic market, 63% of whom were born in Mexico. Unsure of how it would ultimately work out, the CEO formed an internal network of Latinx employees to tailor the taste of its products, packaging, distribution, even the music in TV ads. After three years…
I’ll share what happened in a moment, but the innovative step that Frito-Lay’s CEO took wasn’t a leap of faith. Almost 20 years after his decision was made, we now know that to help ensure success in diversity and inclusion initiatives, there are certain questions executives can ask, such as:
1. What are our company’s short- and long-term business goals?
2. What are our specific short- and long-term diversity and/or inclusion objectives, (diversity is different from inclusion)? In answering this question, executives should determine the precise aspects of diversity and inclusion they want to change. For example, representative hiring (diversity) versus engaging (inclusion).
3. How will the company use diversity and/or inclusion to help achieve its business aims using key performance indicators?
Once you’ve reflected on steps 1–3, and are committed to being deliberate, taking action and dedicating an appropriate budget, you can then determine the subtype of innovation to best to pursue. There are generally three subtypes of innovation (these can sometimes overlap): product, process and people. Frito-Lay combined people with cultural expertise to execute open innovation.
While Frito-Lay is a prime example, hiring and including highly qualified employees of color can lead to innovation in all industries. For example, Lonnie Johnson is an inventor and engineer with more than 80 patents and is best known for inventing the Super Soaker water gun, which ranks among the world’s top 20 best-selling toys. Such innovation in people can take place in the C-suite and at the board level as well, as evidenced by CEO Robert F. Smith, who the New York Times describes as a “disrupter.” Shortly after joining the board of Carnegie Hall, he became its chairman. Taping into innovative “people,” or genius, facilitates a greater likelihood of achieving desired business outcomes.
Regardless of the type of initiative you’re going to pursue — such as recruiting innovative people of color — you’ll likely need a new or significantly improved process that can be, and should be, consistently applied, even when the company’s financial performance is down — which is precisely when the innovative process should be executed or even double downed on — to demonstrate to all employees your level of commitment to the initiative — as well as gain the most from the initiative and from human capital. When financial seas get choppy, CEOs don’t abandon ship on sound and lucrative business initiatives they’re committed to, they stay the course or double down. D&I initiatives are no different. Another area for this type of effort is in corporate venture. This division inside a company is ripe for diversity, inclusion and innovation.
To help ensure smooth sailing of process innovation, consider:
· What the strategy and implementation paradigms are based on: Why were they chosen — as opposed to other paradigms that have been successfully used for similar D&I initiatives? What was used for past initiatives may not be appropriate now. The standard for the paradigms should include the same rigor, the same level of quality management, the same expectation of success─the same standard of excellence should be applied to these paradigms as it is for any other corporate initiative.
· When are you going to implement the initiative?
· Who will manage the initiative and why? Are the managers imaginative enough to push the envelope? Are they strong enough fight to retain the budget — even when others are arguing for the initiative’s budget to be cut?
· Do the managers know that a company can get the most out of D&I relationships and resources precisely when a company’s financial performance is down?
· What metrics will be used to evaluate the performance of the managers responsible for the tactical execution of the initiative? Will performance metrics be tied to salary and/or bonus? If no, why not?
· What metrics will be used to measure the overall success of the initiative?
· What are the time parameters of the initiative and why have they been selected?
· Does the company have the “connections” to leverage and engage externally, beyond 1–2 people? Understanding and tapping into the vast diversity ecosystem the right way is a critical ingredient for success.
Process innovation can also include hiring people with expertise in improving existing business processes or creating new business processes. A company is doing itself a disservice to be diverse and not inclusive. Process innovation don’t need to be complex. A company simply needs to hack the way its been doing things to produce new insights and outcomes. Adding people with different perspectives, networks and insights is valuable in today’s global business marketplace.
So now, for example, let’s say you have a new process for hiring extraordinary innovative people of color, how does that impact the many forms of product innovation. It can include acquiring inventions, patents or technologies owned by inventors of color. Before becoming CEO of CEEK Virtual Reality, Mary Spio developed four patents for movie distribution via satellites, the ground-breaking patent for real-time streaming over satellite, and she helped Boeing pioneer the digital cinema technology used by Lucas Films (for Star Wars, Episode 2), which today is the industry standard. Product innovation can also include mergers and acquisitions, investing in or acquiring innovative companies founded by women and people of color. Often, companies don’t know where to look for this talent, which is what I call the “connectedness curve.”
Other diversity and innovation initiatives include diversity on corporate boards, in corporate ventures, corporate social responsibility, and corporate development. If you are seeking distruption or looking to refresh your company business model to include experts in tech, digital, cyber and related, add the diversity piece and you’ve achieved two goals at once.
And what happened to Frito-Lay? It helped start a trend. Open innovation became a gateway to achieving improved financial performance and reaching untapped markets. It’s now quite common for companies to consider open innovation labs enabling external and internal experts to collaborate. After three years Frito-Lay’s sales of its chips grew by 32% in Latino communities. And its new guacamole-flavored chip went on to become a $100 million product.