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There's a great deal of talk now about the need for companies to innovate through the recession and to be able to transform themselves in order to continue to grow. But are “transformation” and “innovation” interchangeable concepts? We don't think so. As Scott Anthony writes in this week's feature, mastering transformation requires mastering innovation. Innovation fuels the engine of transformation. And in these difficult times, companies can't afford to cut back on fuel. Read more, including results from our annual transformation survey, here, but meanwhile, here's an excerpt:

A growing realism is setting into corporations around the world. Times aren't getting better any time soon. Times aren't getting more stable any time soon. So the question turns from, “When will things return to normal?” to “What do we do now in the face of the ‘new normal' of constant change?” Charles Darwin serves as a useful guide in today's tough times. Darwin noted that the species that survived weren't necessarily the strongest or the smartest, but the ones that are most adaptable to change. Similarly, a recent annual survey Innosight conducted in conjunction with Forbes magazine highlighted how managers increasingly recognize the new corporate imperative: transformation. A huge majority – almost 80 percent of respondents – said that their organizations recognized the need to transform. Close to 70 percent of survey-takers reported their companies had already committed to transformation. Today's tough economic climate hasn't dampened the desire for transformation; both figures were virtually unchanged from the last annual survey Innosight administered in 2007. Further, close to 80 percent of this year's respondents reported that today's economic environment has increased the need for transformation.

In Innovators' Insight: Thinking Outside the Box — of Wine, Taylor Owings asks, what causes roadblocks in the up-market march of disruptive innovations like boxed wine? An excerpt:

In a down economy and in the midst of a “green” movement, there is good news for oenophiles: high-quality boxed wines are on the rise. Both cheaper and more environmentally friendly, wines packaged in cardboard instead of glass make perfect sense for people who are willing to give up the elegance of the bottle. Boxed wines have had great success disrupting the low end of the wine market, and are now beginning to make the march upward. The question is, will this march continue until the entire wine market has been transformed?

In the January 14 issue of Strategy & Innovation, we offer up our annual Year in Preview story (free reg. reqd.) by Scott D. Anthony. This year we've added a new feature to this feature — we asked Innosight partners to write short industry specific predictions of the industries in which they have expertise.

Some overall themes:

• The darkening economic climate is good news for innovation — after all, abundance is at the root of many corporate struggles with innovation.
• It has never been easier to develop and scale an idea. Innovators can draw on high-quality, low-cost tools to develop, test, and begin to commercialize ideas without tens of millions of dollars of investment.
• Innovation has never been more important. Success in what we are calling the Great Disruption requires mastering perpetual transformation.
• Companies that are partially disrupted (such as print media) and those that are innovation novices will have a tougher go of it, as the current economic climate isn't favorable for their challenges.
• On-the-brink disruptive attackers and companies that have progressed in their efforts to make innovation systematic will be more likely to find their efforts paying off.
• Companies that demonstrate an ability to love the low end will find that strategy effective if they are able to master business model innovation and gain a deep understanding of how the low-end consumer measures value and develop unique offerings tailored to key value drivers.

Those industries for which uncertainty in the markets and uncertainty regarding potential governmental policy and regulations changes will struggle this year until the economy settles down and the policies of the new U.S. presidential administration begin to take shape. Finance and healthcare are two such industries.

Here are some of our partners' industry-specific predictions:

• Media: A strong likelihood of continued bankruptcies among media companies.
• Defense: A push toward decentralization and away from aircraft- and ship-specific platforms.
• Manufacturing: A shift toward innovation and away from strict reliance upon Six Sigma and cost-cutting.
• Automotive: No automakers will fold, but we will see consolidation of vehicle models in the saturated marketplace as a better linkage develops between customer requirements and available models.
• Retail: Growth among retailers targeting the low-end as well as those that can add high-level services that high-end consumers will pay for.
• Consumer products: CPG companies that do well will be those that strive to push the boundaries of their innovations, looking beyond just new products to new categories, new business models, and new channels.
• Finance: Reduced scope and size among financial global financial services firms, and an opportunity for low-cost tools and data providers.
• Healthcare: Widespread implementation of Electronic Medical Records, as proposed in the forthcoming economic stimulus package, could radically shift the balance of power between physicians, healthcare provider organizations, and insurers. 

The holidays are here. Get within 500 feet of a mall and you will be bombarded with sales signs, overwhelmed with Christmas carols, and swallowed by crowds of seasonal shoppers. While all of this may be overwhelming, there is one very good thing that comes with the hustle and bustle of the holidays – cookies.

I love cookies and there is no time of year more cookie-centric than the holidays. I have many fond memories of baking cookies with my mom, gleefully squishing Hershey’s kisses into the center of peanut-butter cookies and carefully painting icing on sugar cookies. This is why I was so fascinated by Arrowhead Mills’ “Bake with Me,” a line of baking mixes designed to encourage interaction between children and their caregivers. In addition to the baking mix, each box contains a promotional item, such as a cookie cutter or decorating stencil, to carry the interactive element from the box to the baking sheet.

Like most other baking products, there are sumptuous shots of sugar cookies, brownies, or cupcakes on the packaging, but what makes this packaging stand out on the shelf is that it also features a photo of a child in a chef’s hat happily mixing a bowl of batter. “The idea behind the package design was to develop a look that would really stand out on shelf to deliver the unique proposition; a fun activity for mom to do with their kids...,” explains Martha Seidner, a vice president at Smith Design, the agency responsible for design of the “Bake with Me” packaging.

All baking companies target functional jobs around taste, attractiveness of the food, nutritional value, and preparation time required. Arrowhead Mills has nailed the emotional jobs of parents, such as:

• Feel like a good parent
• Establish/reinforce my relationship with my kids
• Create lifelong memories with my kids

By targeting emotional jobs, “Bake with Me” effectively overcomes traditional resistance to baking mixes as less authentic (and lower quality) than baking from scratch by satisfying other (and arguably more important) jobs related to the parent-child relationship.

Well done! Now, let’s gather the family and friends and start baking some cookies.

If any of you are going to be at the Front End of Innovation conference this week, stop by the Innosight booth on Tuesday. I'll be there, and would love to meet any of my readers!

Also, on Wednesday morning I'll be doing the "Q" part of a Q&A with Procter & Gamble CEO A.G. Lafley about "The Art and Science of Game-Changing Innovation." The discussion will focus on some of the key messages in his recently released book. I'd love to have one of the questions come from you, so suggest a question, and I'll try to pick one or two of the best ones (and of course let you know what A.G. has to say).

Feel free to add a question in the comments here or on my Harvard Management blog (link below).

Thanks!

Cross-posted from Scott's Harvard Management blog, Innovation Insights