Process consulting firm Kepner-Tregoe is practicing what it preaches. Not only is K-T helping other firms innovate, it’s making strides on its own to expand. One of the first ways recently named president and CEO Andrew Graham did that was appoint chief innovation officer Andrew Marshall. “He is now specifically tasked with gathering the new ideas around the organization and managing them,” says Graham, who recently spoke with Consulting about the very topic of innovation.

Consulting: Do some sectors foster innovation better than others?

Graham: Absolutely they do. A lot of the electronics manufacturers, [other] people who are making products, quite often can get into good innovation areas. The software houses [are] very, very innovative in their approach, and they’re kind of wired up from day one to have the right people and the right balance of resources. The mature organization—the old manufacturing sector, building-products companies and some of the consulting firms, don’t necessarily take such an innovative approach to their market.

Consulting: Where do most companies fail in innovation?

Graham: Obviously we have a bias on this, but it is probably in that area of not recognizing that behind that innovation, behind the creativity piece, there needs to be a very disciplined business process to actually manage the stage gates of each idea from a concept through to a finished service or product.

Consulting: Where does actual breakdown happen?

Graham: I think it starts very much in the C-suite. You’ve got to have that strategy clear to understand what are your core legacy areas of activity [and] what are the new areas that you want to explore? Then you’ve got to get your environmental survey in place—you’ve got to really understand what’s out there, what are the potential gaps that you think you could fill. I think it’s only when you’ve got those questions answered that you can legitimately go to the broader organization and say,  “Hey, there are some areas here where we think we could do better. What ideas can we put together to try to improve this business?”

Consulting: Can you train for innovation?

Graham: I think you can train for it. I think you do need to have an amount of talent. So if an organization is coming from a very conservative history and had not had a track record of innovation, I would be fairly skeptical that you could train the incumbents to start thinking out of the box and rethinking the business, unless you could get yourself facilitated, and obviously at the risk of a plug, this is where a consulting organization comes in, because quite often they can fulfill that role of stimulating the thinking of the organization. But my answer would be you probably need to see the group with some new talent especially talent with diverse backgrounds, and then you can start to work. But you can certainly give people techniques and tools to allow them to re-look at a product line or to re-look at a service offering and think about how they could do it differently.

And the other point that’s worth mentioning as well, there are different kinds of innovation. And I’ll give you an example of a client we worked with in Australia that is in the building products industry—[sheetrock] is not the most exciting product; [you’re] limited in what you can do with innovation, so the direction they took is they innovated themselves to become a much more significant employer in the area. Now when someone starts the company, they get a very prestigious pack with a DVD from the CEO with a history of the company. [The company starts] from day one to really build a franchise with their employees A. to get people to join the company in the first place because the market is tough in Australia at the moment, and B. to keep them engaged with what the company is about. So they are innovating their employee retention model, not their product.

Consulting: What do you say to the company where employees are afraid to suggest new ideas because it’s an environment where failure isn’t tolerated?

Graham: I would say to them that is a very fair question. I believe it is the responsibility of leadership at an organization to really set the boundaries as to what failure means because if you look back in history, anybody or any group that has pushed the boundary either with a new invention or a new technology or a new idea has generally met with resistance and has generally had failure along the way. A lot of organizations because of the economic impact creates a culture where failure is not OK, so the first thing you need to do with innovation is say hey we do expect an amount of failure, and we will celebrate it and learn from it and if you’re not going to do that at the simple human level, it’s going to be very, very hard to get people to release themselves to new ideas and new possibilities.

Consulting: How can you put more energy into the innovation process?

Graham: K-T [for example] is a 50-year-old company. More and more we’re being asked to do different things in the business. We have started down the path of developing alliances because we have certain gaps in our offerings, and your choice is either you can develop it yourself or you can partner with someone else.

Consulting: How does the philosophy of innovation differ between the U.S. and abroad?

Graham: The biggest distinction I would see based on my travels around the world and I’ll give you an area of sharp contrast. Innovation in Japan [is] a continuous process without end, and they are willing to keep going five to ten years to see the results. America with its high commercial background and its need for financial return and part of it is due to shareholder value and the generally short tenure of CEOs, the need for return is so fast in America that companies don’t tolerate the process long enough. I think innovation needs to be a medium-term game. To put it another way, innovation is a way of being, not a project.