When it comes to innovation, there are significant distinctions between startups and large enterprises. Startups have the advantage of agility and ability to rapidly change directions because they are not encumbered with legacy systems and organizational constraints. Large enterprises have access to greater resources and an established brand but also have erected barriers to innovation over time and inertia to change has set in. Such enterprises often reach a point where they realize that their existing culture, processes, and structure have limited their innovation to the point of harming the organization. I frequently have conversations with leaders of companies about these very issues.

What should large companies do that wish to be more innovative? A place to start is benchmarking the actions Caterpillar is taking to overcome innovation barriers they created over many years and turn the organization into an innovation machine. To explore their actions, I had the sincere pleasure of talking with Ken Gray, Caterpillar’s global Director of Innovation. Ken has worn many hats at Caterpillar, including mechanical engineer, product manager, global product manager, and leader. He is well suited for the Innovation role.

Practices and Ideas for Product Managers, Developers, and Innovators

Summary of questions discussed:

• When did you start your career at Caterpillar? Ken has worked for Caterpillar for 33 years. He made the decision in second grade, telling his mom he was going to become an engineer and work for Caterpillar when he grew up.

• You have been an engineer, project manager, product manager, program manager, and in other management and leadership roles.  What principles guide your leadership philosophy? Ken uses the “kitchen table” approach to managing his team. The term comes from his experiences growing up in his home where dinner time at the kitchen table was used to explore any topic – nothing was off-limits. It was the time to bring up tough subjects and hone listening skills. At Caterpillar, his teams are rankless and anyone can share anything. People are encouraged to be brave. When difficult topics need to be discussed, his team members preface the conversation with “we need kitchen table time.” Organizations need to practice open communication regularly so when the tough issues arise, people are willing to share them with leaders. Listening is an active process that requires empathetic and attentive listening while asking clarifying questions as well as questions that help team members learn.

• The role you are in now is new to the organization, the Caterpillar Director of Innovation. How did this role and the associated Analytics and Innovation Division come into existence? Given the large size of the organization (global operations with 110,000 employees), Caterpillar has found pockets of innovation in the company but topline performance of the business has been essentially flat since 2009. Executive leadership recognized the organization must be more innovative to continue growing the top line. This resulted in the creation of the Analytics and Innovation Division. The analytics dimension results from the large amount of data collected from machines Caterpillar makes. It is this data that, coupled with ideas from any other sources, helps to drive innovations. Consequently, the analytics group and innovation group needed to be as close as possible, resulting in a single division.

• How is your role structured related to increasing innovation at Caterpillar? Ken is trying to create new viable businesses for Caterpillar. While the group will continue looking at innovations related to existing machines, the goal is new business development. Ken structures his work into three innovation categories:
  • Core – doing what Caterpillar already does but doing it better. This is supported by fostering innovation culture, refining processes, and providing the right tools.
  • Adjacent – finding opportunities that are logical extensions of what Caterpillar does today or can be created by spanning business units. The Innovation Division’s responsibility is to be the connector and accelerator.
  • Transformation – entirely new places for Caterpillar to go that you would not expect to be part of their business, similar to the purpose of Google-X for Google. Ken’s group is identifying potential opportunities that Caterpillar is not in and the opportunities for monetization.

Ken thinks about each of these areas in terms of portfolio management with core receiving about 70% of his group’s attention, adjacent about 20%, transformation about 10%.

• How much of your role is about connecting resources across the organization? With such a large organization, it is important to understand what the current activities are, where expertise exists, what experiments are being run, and how the practitioners are interacting with each other. Ken’s group seeks to improve connections across the organization to promote innovation and not control it. Each division in Caterpillar now has an Innovation Champion to make innovation efforts visible and connect resources.

• Many organizations are considering creating an innovation group. What advice would you share? Don’t make it top-down but provide top-level support for innovators. Identify the walls in the organization that are stifling innovation and remove the barriers. As an innovation group, don’t take over the role of innovation for the company but be a catalyst for innovation across the company. Flip the organizational chart upside down, with senior leadership supporting rest of the organization in their innovation efforts. The most important recommendation is to… get started. A good place to get started is in culture by establishing mutual trust between leaders and their teams – providing employees freedom to work on new ideas.

 

Useful links:

• Caterpillar Worldwide
• Caterpillar Innovation

Innovation Quote

“Anything that won’t sell, I don’t want to invent.  Its sale is proof of utility, and utility is success.” -Thomas A. Edison

 

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