"[SDM] provides the foundational thinking on the interaction of business and technology and gives you insight into dealing with large, complex systems—which I would argue are most systems today," said Smith, SDM '97, who gave the keynote address during SDM's spring "business trip," a week of activities that brought on-campus and distance SDM students together for lectures, workshops, and networking March 7-11 at MIT.
In his presentation, "Innovating and Competing in the Aerospace Industry," Smith provided a brief history of innovation in aviation—and noted its continued significance at Honeywell Aerospace, an $11 billion unit of the $35 billion multi-industry conglomerate. Smith told the SDM students that although Honeywell's legacy includes the first autopilot flight controller, the first flight management systems, the first business jet turbofan, and other firsts—the company doesn't rest on its laurels. "All of our customers pay us for innovation," he said. "Within the aerospace industry, you either innovate or you die."
Smith said Honeywell works hard to keep its product pipeline fresh by employing three types of innovation:
Product innovation—The simplest kind of innovation, Smith said, is making an existing product better. He used examples from other industries to illustrate his point and cited the Swiffer dust mop as a great one. "It's basically a paper towel on a stick, but it's a wonderful piece of innovation," he said, improving on the traditional mop by enhancing both its usability and convenience.
Market innovation—More sustainable than product innovation, this kind of innovation is about discovering and fulfilling needs the customer didn't even know he had, Smith said, calling Starbucks a case in point. "It really wasn't the coffee that brought everybody to Starbucks," Smith said."They are paying $4 for the experience—because they like the jazz and the café environment. Otherwise they're going to Dunkin' Donuts."
Business model innovation—This is the real game changer, Smith said, citing the iPod. "[Apple] didn't invent the mp3 player," Smith noted. "They changed the market distribution channel for legal and profitable digital music by inventing iTunes to go with the iPod."
How does one replicate such success? Smith suggested that cultivating diversity in your thinking—a skill SDM encourages—is critical. "The reason a lot of senior managers fail is that that they've succeeded by doing the same things in the same ways for a long time, and then a situation occurs in which that doesn't work," he said. "The multi-industry aspect of the SDM academic program is great because it helps highlight blind spots in your own industry" so you can avoid this trap.
Smith noted that when he was at SDM one of his fellow students worked at a camera and film company, and at the time the company was most concerned about the threat posed by other film companies. "We kept telling him, 'You need to be thinking about image [not film] as your business,'" but the student was convinced that film was king. "He was trapped within his own organization's thinking."
In contrast, Smith said Honeywell has continually profited by thinking about old products in new ways. The company currently has a high market share in inertial gyros because it has historically stayed on top of advances in measuring orientation. Similarly, the company's success in selling centrifugal compressors can be traced to past efforts to find new ways to apply that technology.
Smith urged SDM students to use the program fully to broaden their thinking. "Spending time with your [SDM] colleagues and understanding their business models, as well as the trends they have to address worldwide, is very important," Smith said.
Smith also praised SDM for offering invaluable skills in business analytics, giving him insight into the importance of systems interactions, and providing "inordinately helpful" lessons in organizational design. Organizing for innovation is challenging, he said, but Honeywell works hard to give employees a sense of ownership over their work and to provide a reward system that keeps people engaged.
"Ideation can be guided by models and methods, but inspiration, great ideas, and a great environment are essential," he said. "You have to organize around [innovation], reward people for it, and celebrate it when it's done well so that everybody understands why it's important."