Goodyear's Keegan keys on innovation
Goodyear Tire & Rubber Co. Chairman, CEO and President Robert Keegan was the keynote speaker at the 2009 Meeting and Conference on Tire Science and Technology.
The 28th annual event, hosted by The Tire Society, was held at the Akron City Centre Hotel in Akron, Ohio, Sept. 15-16.
Keegan spoke on day one of the conference. Here is his speech, following an introduction from Tire Society President Bob Wheeler.
"I’m very pleased to be here with all of you, who -- like us at Goodyear -- have gone through a very tough period of challenging business conditions.
"I’d like to thank Bob, Tire Society vice president Dale Mosely and program chair, Ed Terrill, for inviting me to participate today. I’d also like to acknowledge the audience members as participants, and empathetic parties, to the trials and tribulations of the tire industry throughout perhaps the most difficult market challenges any of our companies have faced.
"To steal a quick line from the late humorist Kin Hubbard, we’ve recently been through a period of time where truly, "The safest way to double your money is to fold it over once and put it in your pocket." Those words, spoken first by Hubbard back in the U.S. depression era, ring true today.
"As we have faced these economic challenges of the past 18 months globally, we’ve seen and heard a multitude of theories and suggestions about the formula for succeeding in the current environment. Let’s agree that we must accept that the impact of the recent downturn is a lasting one, and therefore whatever our expectations were for growth entering the crisis have been reset to reflect the new economic realities.
"Those of us in this room representing the tire companies have a healthy respect for each other as honorable competitors. But in addition to competing with each other, we are also working within new economic parameters that call for a recalibration of everything from costs and investments to processes, operations and leadership capabilities.
"As I see it, there are several key elements to success in the likely new business environment. We can all create our own lists, but I’d like to comment on the list that we believe is critical to Goodyear.
"Number one is leadership. Fear and uncertainty are common by-products of a volatile climate, and strong leadership is the first step in addressing those symptoms. Anyone can lead when the wind is at your back and the markets are healthy. Great leadership is needed most when people are filled with doubt. That is when they seek, value and follow great leaders. At Goodyear, we value leadership because, quite frankly, without outstanding leadership, the right strategy -- and execution against that strategy -- is impossible.
"The recession has tested my leadership team and they get an “A” grade from me. Today, they are taking a proven set of strategies to yet another level.
"Number two is productivity, and by this I’m referring to productivity in every function in our company, from manufacturing to forecasting. The global marketplace and the increasing number and quality of tire competitors have left no room for inefficient processes.
"Number three is a relentless focus on cash. This one’s a pretty simple focus area during a recession, whether you are overseeing a company or your own household. But cash generation will remain a critical focus for us when the world’s macroeconomies rebound.
"And, number four is innovation. Defined as the 'introduction of something new,' innovation isn’t simply novelty. Innovation has become table stakes in the tire industry. We see it as required for entry and credibility in everything from automotive to high tech, in service industries, and in entertainment.
"As a result, I’ll spend the majority of my remarks this morning on innovation.
"I don’t believe any of us would say that innovation is secondary or unnecessary. It represents progress, is a result of creativity and forges new paths to success. Clearly, meaningful innovation is a competitive advantage.
"But that doesn’t mean that innovation -- or even the process that leads to innovation -- is easy. If it were, it would be even harder than it is already to differentiate our companies and our product streams.
"Like many efforts that have the potential to yield high returns, innovation involves risk. And whether you acknowledge that risk candidly or let it cloud your thinking as an unspoken influence, risk can be a formidable barrier.
"Any time someone creates a new idea, a new approach, the easiest and most comfortable answer is 'no, it won’t work.' That’s because when the answer is 'no,' the conversation ends. There’s nothing visibly at stake. It’s the easiest and the least risky response.
"If you want to find risk or weakness in something that is new and different -- a little out of your comfort zone -- there are plenty of places to find it and many voices to support your position.
"But when you say 'yes,' you’re on the hook. You’ve accepted the risk and you’ve made a commitment. So if a new idea falls short, you fail right along with it. Not everyone has the courage or the stomach for that kind of pressure.
"In an industry as complex, uncertain and competitive as ours, we have the tendency to look for as much certainty as we can. We look for absolutes -- even if we can’t find them -- in forecasts, sales figures, and advertising responses. 'How did that new TV ad test? Will it generate more sales? How much more? At what price?'
"You probably won’t find a lot of certainty in the search for innovation. It’s pretty easy to withhold support and patience for projects that 'might' yield a great result, or products that 'could' change the industry. We all love an innovation, until the time comes to place the bet. In our industry, that aversion to accepting the innovative approach certainly will not lead to success.
"You can’t have innovation without a certain degree of failed efforts. In the world of medicine, there is a prevailing attitude of 'forgive and remember,' to learn from mistakes, use them constructively going forward. We’ve brought that attitude to Goodyear.
"I suspect that the reluctance to tolerate constructive failure -- that is, errors in the aggressive pursuit of a breakthrough as opposed to errors of carelessness or omission -- may be part of a company’s history or culture. "Many behavioral scientists have suggested that in most organizations, you’ll get what you expect you’ll get. In this case, if you don’t expect innovation and your culture doesn’t support it, you won’t get it.
"I’ll admit that one significant exception occurs if your company is fighting for its survival. No matter what kind of behavior your culture supports, if you have to change to survive, you will change, you will innovate. When you’re just trying to get to tomorrow, you don’t have an option. The adage that goes all the way back to the schoolyard rings true: The individual who is the most dangerous is the one who has nothing to lose.
"The final risk I’d like you to consider, I would suspect, has applied to all of us at one time or another. It’s a cousin to the risk associated with saying 'yes,' and that’s the risk that comes with asking questions. Many of us are leaders at our companies. It’s our job to know our business, to have the right information at our fingertips. Asking questions -- admitting that we don’t have every answer -- reveals a vulnerability that can be uncomfortable. It’s a risky position for us to accept and willingly embrace with humility. However, it’s critical to deep and impactful innovation.
"So, innovation can’t happen without risk. It can’t happen without a certain degree of discomfort.
"Yet all these elements of risk give innovation its worth. They leave innovation for the bold decision makers, the confident leaders and the relentless trail blazers. Scarcity gives real innovation real value, profound value.
"I will focus the balance of my remarks today on how we at Goodyear have embraced innovation, and expanded its significance from mere table stakes to our 'all in' commitment. In the mid-1990s, someone coined the phrase 'innovate or die.' We’ve all been through times and conditions when we’ve had to make significant changes to survive. Innovation is critical to survival. But at Goodyear, we now prefer to believe that we 'innovate and prosper.'
"In many industries, innovation is usually associated with products, but we’ve innovated with processes and people as well. We’ve innovated in everything from R&D, supply chain and business continuity to recruiting and developing our associates. We established a VEBA trust in our 2006 labor negotiations with the United Steelworkers, an innovative way to handle retiree medical costs that has since proved to be a new model for many major corporations.
"Since this is a meeting of the Tire Society, I’ll use one of our newest North American consumer tires, Assurance Fuel Max, as an illustration of how we bring many areas of innovation together -- not simply to stay in the game -- but to prosper.
"The groundwork for Fuel Max, which we introduced at our dealer conference in February of this year, was really laid back in 2002. At that time, we had not introduced a high-impact, successful new consumer tire in North America in quite a while. We had little in the development pipeline. Our relationship with our dealers was terrible. Our financial picture was, shall we say, uninspiring.
We clearly needed a new tire. What we created was a new company.
"Within a year’s time -- a pace unprecedented in our industry -- we designed, developed and introduced the Assurance TripleTred and Assurance ComforTred tires, which went on to become the most successful new products in Goodyear’s history. We did it by innovating every step of the way, beginning by working from the consumer market-back, to engineering, compounding, manufacturing and marketing.
"Back in 2002, we found ourselves in one of those times I mentioned earlier when we had to change simply to survive. But as we did that, we also changed the way we worked. There was no looking back. We began thinking less like a traditional, manufacturing-based company and more like a fast moving, consumer products company.
"More importantly, we began acting like an innovative company!
"That new behavior was illustrated again at the beginning of 2008, when we introduced a mid-tier Assurance product in February but were already working on a new incarnation -- a successor -- to that very tire. Just 12 months later, we introduced Assurance Fuel Max. That’s the story I’d like to share with you today.
"With that need identified by consumers, we then turned to our R&D group, and we tapped into our resources at Sandia National Labs who worked in concert with Goodyear engineers in both Akron and Luxembourg. Acting with a sense of urgency, our technology team delivered a totally committed, cross-functional effort.
"Every aspect of the proposed product -- from fundamental technology to product development, from quality and manufacturing through the supply chain -- was addressed concurrently. The result: exponential acceleration of time to market, a critical factor in driving prosperous innovation. Leveraging our open innovation model with our partners delivered key product breakthroughs in minimal time.
"While the compound, construction and tread design were being developed, our sales and marketing associates were listening to retailers and consumers to determine the most effective way to talk about the product... to determine the value proposition for both those who would sell the product and those who would buy it.
"Of course, we also recognized that during weak economic times, pricing and positioning strategies would be critical.
"We arrived at a position that would be both believable and motivating. Seven months ago, we introduced the Assurance Fuel Max -- a passenger tire delivering improved fuel efficiency without sacrificing outstanding traction and tread wear -- to 2,000 of our dealers gathered in Washington, DC. The Fuel Max tire is positioned in what we call the mid-tier, a segment of affordably priced tires that still feature the benefits of new, relevant technology; it’s the segment where most consumers have been buying tires. And we launched it in nearly 30 sizes, covering 80% of the segment.
"I chose this tire as an illustration of 'innovate and prosper' for a specific reason. The Assurance Fuel Max has been selected as the exclusive OE tire for the much-anticipated Chevy Volt, and we are on track to sell one million units of Fuel Max faster than any other consumer tire in our history. To do that in the worst economy in 70 years is the best example of 'innovating to prosper' that I can give to you this morning.
"So, what are the lessons learned? What are the ingredients to prosperous innovation?
1) "Respond to a market need, where the addressable market is significant. Be specific and be clear on your purpose. Don’t confuse innovation with novelty.
2) "Work with speed and a sense of urgency. To do that, you need genuine, cross-functional teamwork. One of our engineers said to me that their team was now 'addicted to speed.' I love it.
3) "And, finally, make the commitment. Those with total commitment have the best chance of winning.
"These three are only possible with a leadership team passionately committed to innovation.
"I’ve often said that new products are the life-blood of Goodyear. While that’s still true, the heart that pumps the blood is innovation. It’s the identity of the new Goodyear.
"Many of you know that our technical centers in Akron and Luxembourg have been renamed and are now the Goodyear Innovation Centers. We’ve even petitioned the City of Akron to change a street name so that our new World and North American headquarters in Akron will be located on 'Innovation Way.' We are 100% committed to the innovation that is now part of our DNA.
"You’ll see Goodyear innovation in other ways -- in relationships with our customers and our suppliers... in the continuing relationship with Sandia National Labs... in the development of Goodyear’s leaders across the globe... in our investment to take advantage of growing customer segments and regions around the world... and in a continuing commitment to provide our customers with new tools to grow their businesses.
"Over the past few months, I have given a lot of thought to identifying leadership lessons from this period of economic instability -- or collapse. I believe it’s safe to say that only after the recession has ended worldwide will we be able to look back and clearly understand all of the leadership lessons learned.
"While I believe that to be true, it also is apparent that, through our actions and decisions, we’re creating those lessons right now.
"Many of the changes we have made at Goodyear to cope with today’s economic uncertainty -- such as contingency and scenario planning, increased flexibility in our operating plan, and intense focus on top line, cost and cash -- were born from the 2003 strategy that fueled our financial turnaround.
"Those strategies -- infused with innovation at every step -- were responsible for creating the 'new' Goodyear.
"Today, we have followed that proven strategic path created back in 2003 to not only weather the economic crisis, but to position us for the rebound of the tire markets. We didn’t know it at the time, but our efforts in 2003 were really a dress rehearsal for 2008 and 2009. In the same way, I expect that much of what we are learning now will be refined in the future.
"This isn’t to say that we have all the answers; we don’t. Nor do we suggest that we’ve done everything right. But we believe in the path we’ve chosen. We are fully committed to the power of innovation and the success we believe it will bring. May your conference generate a host of innovative ideas."
(The Tire Society Inc. is an Ohio not-for-profit corporation with worldwide membership whose charter is to increase and disseminate knowledge as it pertains to the science, and technology of tires. Its two-day Meeting and Conference in Akron, Ohio every year includes the presentation of 20 to 30 original papers as well as a plenary lecture by a leader in tire mechanics. In addition, it edits and distributes a critically reviewed, authoritative journal, "Tire Science and Technology on a Quarterly Basis." For more information, visit www.tiresociety.org.)