South-Western - Management  
For Now, the Focus is More on the Innovation than on the Budget Cuts
Topic Technology, Innovation, and Change
Key Words Innovation, just-in-time inventory, cost-saving measures
News Story

At John Deere, CEO Robert Lane believes that the company’s ability to innovate by inventing new products that are useful to customers is key to the company’s growth. While cost-cutting and manufacturing efficiency are prime concerns, the research budget at the company has remained untouched.

For years, large companies have focused on reining in costs. With everyone up to speed on just-in-time inventory practices and outsourcing, it has become more difficult to stand out from the competition. Innovation has become the key for companies who want to stay creative and get ahead.

The trend toward encouraging innovation can be seen at many of America’s biggest companies. At General Electric, CEO Jeffrey Immelt encourages managers to innovate to reach the company’s ambitious 8% organic growth goal. Proctor & Gamble employs a Vice President of Design and Innovation, a title that didn’t exist before 2001.

At John Deere, innovation is backed by clear goals. Whatever devices and services Deere develops, they must help the average operator become more productive and efficient. As examples, Deere’s newest tractors and equipment are “computerized factories on wheels,” according to Lane. Forestry equipment developed by the company allows operators to select and cut trees in a way that encourages re-growth. The tractors also use less fuel than before.

Innovation does not come without its challenges. Half of Deere’s salaried employees are engineers, but they will need hundreds more to stay on the cutting edge of technology. This means Deere is competing with higher profile and high-tech companies for talent. Another challenge is determining how much to invest in technology that will take years to develop.


Why are companies like John Deere and Proctor & Gamble putting their company’s money and time behind innovation?


Research innovation in your textbook. What can managers do to manage innovation during times of incremental change?


What are some concrete examples of how managers can encourage innovation in the workplace?


How is innovation discouraged?

Source “For Now, the Focus is More on the Innovation than on the Budget Cuts,” Wall Street Journal, July 17, 2006, page B1.
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