Email Jim at jim.thompson@ipulpmedia.com

I can tell you if your innovation paid off--five years after you implemented it. Looking forward, innovation is tough to judge.

Looking forward, there are many things you do not know. Your imagination can play tricks on you. You don't know what the competition is doing. You don't know what the market will accept.

In our industry right now, Procter & Gamble has introduced the "Charmin Forever Roll" (trademarked, P & G I am sure). This toilet tissue roll contains 1,700 2-ply sheets and is expected to last a household of two for a month. The customer needs a "starter kit" with a stand that will hold the roll.

Has this been market tested? I am sure, P & G is famous for market testing. But P & G has had products in market testing in the past that have flopped when rolled out for the entire market. There is always a risk.

At one time, the CRB mill in Tama, Iowa reported to me (it was just decommissioned in the last year or so, I am talking about a long time ago). This mill, of course, had a coater. It also had a coating drying oven which was a Rube Goldberg device, gas fired up on the roof. Rethreading this monster was slow and a safety hazard. The mill manager had researched modern gas fired radiant dryers. We could replace the old oven with a three-foot radiant dryer. I went over the project very carefully with the mill manager. We agreed it was low risk and the way to go. My boss was nervous, because there was no going back if we were wrong. I gave him my personal assurance and the right to fire me without any fuss if it didn't work. It not only worked, but it also reduced our gas consumption and increased our through-put by 10%.

You just never know. Sometimes the right thing to do is to keep doing what you have been doing. Other times, it is "damn the torpedoes, full speed ahead."

Sorry I cannot give you more guidance than this. The risks are highest when your innovation is going to market, and you are depending on the buying public to affirm your decision. A famous failure from long ago was the Ford Edsel. If you are too young to know anything about this, it is worth half an hour on YouTube to understand it. Speaking of YouTube, who could have foreseen that it would be the success that it has been?

I can tell you this--if your objective is fame and fortune, you must be an innovator. Likewise, the bottom of the discard pile is littered with innovators who failed. Risk tolerance is the secret to reaching for the brass ring.

Be safe and we will talk next week.

For a deeper dive, go here.

Study Guide: Innovation Strategy and Risk Management

This study guide examines the complexities of innovation as presented in the article "When to innovate" by Jim Thompson. It explores the inherent risks of introducing new products and processes, the limitations of market testing, and the personal stakes involved in industrial modernization.

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Part 1: Short Answer Quiz

Instructions: Answer the following questions based on the provided text. Each response should be approximately two to three sentences.

1. According to the author, what is the primary timeline required to determine if an innovation was successful?
2. What are the three specific "unknowns" that make forward-looking innovation difficult to judge?
3. Describe the "Charmin Forever Roll" and the specific requirement for the consumer to use it.
4. Why does the author suggest that Procter & Gamble's market testing is not a guarantee of product success?
5. What was the specific mechanical problem with the coating drying oven at the Tama, Iowa mill?
6. What was the proposed solution to modernize the drying process at the CRB mill?
7. What personal guarantee did the author provide to his boss to secure approval for the mill project?
8. What were the two measurable operational improvements resulting from the installation of the radiant dryer?
9. Why are the risks considered highest when an innovation is specifically "going to market"?
10. According to the text, what is the "secret" to reaching for fame and fortune through innovation?

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Part 2: Quiz Answer Key

1. Success Timeline: The author states that he can only determine if an innovation truly paid off five years after it has been implemented. Looking forward, it is nearly impossible to judge accurately because the long-term results are not yet visible.
2. Forward-Looking Unknowns: When looking ahead, innovators struggle with their own imagination playing tricks on them and a lack of knowledge regarding the competition. Furthermore, they cannot certain how the market will ultimately accept the new offering.
3. Charmin Forever Roll: This product is a large toilet tissue roll containing 1,700 2-ply sheets, designed to last a two-person household for one month. To use it, customers must purchase a "starter kit" that includes a specialized stand to hold the oversized roll.
4. Market Testing Limitations: While P&G is famous for its rigorous testing, the author points out that many of their products have still failed after being rolled out to the entire market. There is always a residual risk that the test environment does not perfectly predict mass-market behavior.
5. The "Rube Goldberg" Device: The original drying oven was a gas-fired, overly complex "Rube Goldberg" device located on the roof of the mill. It was inefficient and rethreading it was both a slow process and a significant safety hazard for workers.
6. Modernization Proposal: The mill manager researched modern gas-fired radiant dryers as a replacement for the old roof-mounted oven. The plan was to replace the massive, hazardous device with a compact, three-foot radiant dryer.
7. Personal Stakes: Because the project was irreversible, the author gave his boss his personal assurance that the new system would work. He even granted his boss the right to fire him without any fuss if the innovation failed.
8. Operational Benefits: The implementation of the radiant dryer was a success, leading to a 10% increase in through-put for the mill. Additionally, the project succeeded in reducing the facility's overall gas consumption.
9. Market Dependence: Risks are highest when an innovation depends on the buying public to affirm a decision because public acceptance is unpredictable. Unlike internal process improvements, market-facing innovations are subject to the whims of consumer behavior, as seen with the Ford Edsel.
10. The Secret to Success: The author argues that if one's objective is fame and fortune, innovation is a requirement. However, the "secret" to actually succeeding in this endeavor is having a high level of risk tolerance.

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Part 3: Essay Questions

Instructions: Use the themes and examples from the source text to develop comprehensive responses to the following prompts.

1. The Hindsight Bias in Innovation: Analyze the author's argument that innovation can only be judged five years after implementation. Why is forward-looking judgment so unreliable compared to retrospective analysis?
2. Internal vs. External Innovation: Compare the risks and rewards of the Tama mill project (an internal process innovation) with the Charmin Forever Roll (a consumer market innovation). Which type of innovation does the author suggest is riskier, and why?
3. The Role of Leadership and Accountability: Discuss the author's decision to stake his career on the radiant dryer project. How does personal accountability influence the decision to innovate within a corporate structure?
4. Failure and Success in the Public Eye: Using the examples of the Ford Edsel and YouTube, discuss how the unpredictability of the market defines the legacy of an innovator.
5. The Paradox of Innovation: The text suggests that while innovation is the path to "fame and fortune," it is also the primary cause of the "discard pile" of failed businesses. Elaborate on this tension and the role of risk tolerance in navigating it.

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Part 4: Glossary of Key Terms

Term Definition

CRB Mill A type of paper mill (Coated Recycled Board) such as the one mentioned in Tama, Iowa, which utilizes coaters and drying ovens in its production process.

Charmin Forever Roll A trademarked Procter & Gamble innovation featuring a high-capacity toilet paper roll (1,700 sheets) intended to last a month.

Ford Edsel A historical example of a famous market failure, used to illustrate the high risk of introducing new products to the buying public.

Market Testing The process of vetting a product with a sample of the target audience before a full-scale rollout to mitigate risk.

Radiant Dryer A modern, gas-fired drying technology used in industrial coating processes that is more compact and efficient than traditional ovens.

Risk Tolerance The degree of uncertainty or potential for loss that an individual or organization is willing to withstand when pursuing a goal.

Rube Goldberg Device A term used to describe a machine or process that is excessively complicated and inefficient for the task it performs.

Through-put The amount of material or items passing through a system or process; a measure of production efficiency.

YouTube Cited by the author as an example of a massive success that few could have foreseen during its inception.

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