Economy

‘Innovation crucial for long-term sustainability’

NS Vageesh Mumbai | Updated on January 23, 2018

Professor Stefan Thomke, William Barclay Harding Professor of Business Administration, Harvard Business School



Professor Stefan Thomke, William Barclay Harding Professor of Business Administration, Harvard Business School, is an Indophile – he has been travelling to India regularly from his student days when he roughed it out on a backpack and an Indrail pass. Years later, as part of the Harvard Business School faculty, Prof Thomke returns frequently to teach at the HBS executive education program at Mumbai.  His knowledge of the city’s geography, its lifelines, quirks and customs would make a local proud.

That depth is explained partly by his professional interest in the city - he authored a popular case study on the Mumbai Dabbawallahs.

In this interview, conducted recently when he was in Mumbai to teach a program on innovation, Prof Thomke throws some light on some of his recent research work as well as on his famous Dabbawallah case. He defines innovation as something that is novel and has value and urges companies to be innovative as part of a drive towards long-term sustainability.  Edited excerpts:

How did you get interested in the subject of innovation?

 I am a trained electrical engineer, originally from Germany and then moved to US, did a PHD in electrical engineering, worked with Mckinsey & Co. and then joined the HBS twenty years ago.  Given my engineering background, it is not surprising that I was interested in product development, R&D management, manufacturing productivity, improving factory output and so on. When you are in a place like HBS and interact with leaders, you tend to get broader in your scope of work.

For a growth market such as India, when is the best time for them to innovate?

 My answer is all the time. Of course, when the market is growing and core businesses are doing well, they are distracted and there is no time. When times are bad, companies feel they have no money for it.   One of the companies that I worked with addressed this issue during the global crisis in 2008-09.  When everybody else applied the brakes, the CEO of this firm increased spending (even though the board was opposed to it) and put money into projects and product development.  When the business revived and customers started placing orders, he was the only game in town.

When you take that path, isn’t it a gamble with the result being uncertain?

 Innovation is not something you can activate and hope it will happen the very next week. It may take years. So you have to do it all the time. And you must do it when the end result is not clear.  When you look at it closely, it is not that risky. I deal with these issues in a case study on Lego. This is something I divide into four periods. In the first period, founders build a great brand. In the second phase, they look around, see other great brands such as Disney/Coke and feel that they are too small relative to the significance of their brand. So, they engage in what is called brand stretching and get into all kinds of businesses – watches, amusement parks etc. It doesn’t work. In phase three, they bring in a turnaround specialist to save the company. He does a lot of things by the book and ends up bringing the company to the edge of bankruptcy. So in the fourth phase, a new CEO is appointed, 35-years-old, does one of the most amazing transformations in the last decade and turns around the fortunes of the company.

What did this CEO do?

He cut the complexity that had accumulated in product development under the earlier CEO.  He managed innovation in an interesting way.  There were two groups – one for breakthrough innovation and one for incremental innovation.  If you give both to one group, they will struggle.  So the incremental innovation group was told that most of what they do will go to market and they were not to take too many risks and just extend the product line. The other group was told that most of what they brought out would not go to market. Responsibilities and resources were assigned accordingly. Then he went out and courted retailers. This wasn’t being done earlier, because they were not considered important.

Tell us about your case on Mumbai Dabbawallahs.

It is a case about getting the most out of people. Almost any manager has this issue: this year you have met your goals but your boss will tell you that next year he wants more. Now, the problem is you have to do it with the same people. We are all ordinary, so how do you extract more from the same? Then I introduce Dabbawallahs. If you take any objective measure — whether it is education, resources, diversity or other accomplishments — we would agree they are less than ordinary.  But what they do is extra-ordinary. The answer to how they do it is that you need a system.  This is an example of an organisation that has done it.

Published on August 21, 2015

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