BCG Innovation Study

The management consulting firm BCG has a very informative annual Innovation survey.  The results of the sixth survey were published recently.  The study provides very informative results and may help with benchmarking your organization.

The fraction of executives being satisfied with the return on their R&D investment went up from 43% in 2008 to 52% in 2009.  I wonder what has caused the change. May be because the budgets have been cut enough to drive the return or the executives are working harder to drive focus. 

Another interesting result is that everyone believes that innovation should be measured rigorously and less than 50% of the organizations actually do so. I have found that measuring innovation requires defining what is innovation.  Many of the companies I have worked with have no clear definition of what is innovation and how it is different from R&D in general.
What is your experience?

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2010 Global R&D funding forecast at greater than $1.1 Trillion

R&D magazine produces an annual Study on global R&D funding forecast that is full of great information.  In 2010 R&D spending is going to exceed $1.1T globally (flat from 2008).  US continues to lead at almost 35% of the global R&D budgets, but the share seems to be flat to declining.  Finland and Sweden lead the world in number of scientists/engineers per million people. 

Almost 75% of the organizations have changed R&D plans because of the recession and a similar fraction has actually reduced focus on R&D.

Lots of interesting data.  Check it out…

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Disruptive and sustaining innovation

Inder Sandhu, SVP of Strategy and Planning at Cisco has written an article in Forbes about new product platform development and product improvement.  The idea is that an organization needs to focus on developing new product platforms while generating revenues from incremental improvements to existing platforms.  He calls it Disruptive and Sustaining Innovation.

But doing both isn’t easy. Start-ups often prefer the dogged pursuit of the next big idea. And large companies are often reluctant to invest in disruptive innovation, feeling constricted by their commitments to existing customers, pressure from investors for short-term results or even fear of upsetting existing revenue streams.

But when companies do both, the payoff can be great. Two complementary options, in this case sustaining and disruptive innovation, can amplify one another many times over. When Cisco makes an advance in one form of innovation, it usually gains a benefit in the other. And that is the true power of doing both.

Clearly, author has a great point and R&D managers need to effectively balance R&D investments across disruptive and sustaining projects.  There are also other axes that  factor in: Early stage or mature, discriminating vs sustaining, skill-set enhancing vs. feature developing etc. However, the right balance is often difficult to find and tools to visualize and effectively guide the R&D portfolio are nonexistent.

I am not sure if I would necessarily call adding features to an existing product innovation.  However, definition of innovation it self is some what confusing.  Clearly, one can make disruptive innovations in production of an existing product and there by gaining a new advantage in the market place (see the earlier post about R&D at 3M).  However, calling all R&D innovation may hinder effective R&D portfolio balancing.

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Why are companies still struggling with cross functional core teams?

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R&D at 3M

WSJ has interviewed 3M CEO Mr. Buckley in the article At 3M, Innovation Comes in Tweaks and Snips. Even though the article title is about innovation, the actual interview has some excellent points about effective R&D management, skill-set management and motivation.
  • Senior leaders can reinvigorate an area just by making sure the team knows and feels that the area is important to them:

    “Mr. Buckley: I remember my meeting with Chris Holmes [who heads 3M’s abrasives business]. I had been in the company maybe a month. During a business review I said, ‘Tell me what is going on in abrasives. What innovations are we doing?’ Chris said we were doing this and that, but abrasives [were] not considered sexy. I said, ‘Why not? I think abrasives are sexy. Why can’t abrasives be sexy?’ I think it’s those simple comments to people who have been convinced over a period of years that they are unimportant. Chris was utterly inspired by that. 

  • Innovation and outside the box thinking is not cheap.  Creativity requires significant commitment of resources and recognition at C level

    WSJ: How else do you get your people to be creative? Mr. Buckley: Everybody wants to find out how to can creativity. You can’t. Creativity comes from freedom, not control. We let all the people in the R&D community spend 15% of their time researching whatever they like.

  • Innovation is not always targeted towards a brand new market.  It can be a new way to manufacture a product to give the company a competitive advantage.

    Mr. Buckley: It was finding ways to simplify how you make the lowest-cost high-performance respirator possible.
    We often think innovation is making a breakthrough at the top of the pyramid. That’s often not where the hardest challenges are. The hardest challenges are often: How do I make a breakthrough for next to nothing?

  • R&D management improvement is not conducive to Six Sigma like processes.  R&D is discontinuous and requires management insight

    I don’t know because it isn’t a process. [The quality-improvement process] Six Sigma’s worked wonderfully in our factories, but we tried it in our labs and it doesn’t work. It’s obvious why. The creative process, whether it is with me or anybody else,is a discontinuous process. You can’t say if I put more money in it I am going to get more out.

  • Hands-on senior management that walks the lab has enormous value -both in motivation and in efficiency/results.

    WSJ: How often do you go to the labs?
    Mr. Buckley: It’s dangerous when I go over. I’m told, “Every time George goes over to the labs he gets a new idea for a new product.” I probably go once every two weeks.

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Ideation Tools for Your Mobile

ZDNet has a list of ideation and idea management tools for different mobile tools. Some of them are even free.  I think it is great that we can capture ideas any where and queue them up for discussion.
The new clients all come as part of the innovation management platform provided by Spigit, Kindling, and just yesterday, Imaginatik, Each let’s you suggest and evaluate ideas, but in slightly different ways. 
…

Brightidea Mobile Back in February, BrightIdea announced it’s mobile client for the iPhone and iPad as well as Android devices. With BrightIdea Mobile, users can view, post, comment, vote, and share ideas. They can also  use Brightidea’s corporate micro-blogging feature  to post and follow activity within their innovation community.

I find interesting how Innovation has become a favorite buzz word.  The title of the article “4 Innovation Management Tools for Your Mobile.” I think there is a great deal of hard work between discussing ideas and developing innovative new products.  I guess in my book, innovation is 99% perspiration and 1% inspiration!

Frugal Engineering

In the same theme as Reverse Innovation and may be Borderless Innovation, Strategy + Business has an article on The Importance of Frugal Engineering.

The central tenet behind every frugal engineering decision is maximizing value to the customer while minimizing nonessential costs. The term frugal engineering was coined in 2006 by Renault Chief Executive Carlos Ghosn to describe the competency of Indian engineers in developing products like Tata Motors’ Nano, the pint-sized, low-cost automobile.

Typically, when a well-established automaker designs and builds an inexpensive car, the company’s thinking is biased by decades of practices and procedures, and by its relationships with employees, customers, and suppliers. The approach reuses existing designs and relies on existing components. In essence, these companies start with a more expensive car and focus on ways to make it cheaper. That may count as a form of cost cutting, but it is not frugal engineering.

Instead, frugal engineering is an overarching philosophy that enables a true “clean sheet” approach to product development. Cost discipline is an intrinsic part of the process, but rather than simply cutting existing costs, frugal engineering seeks to avoid needless costs in the first place. It recognizes that merely removing features from existing products to sell them cheaper in emerging markets is a losing game. That’s because emerging-market customers have unique needs that usually aren’t addressed by mature-market products, and because the cost base of developed world products, even when stripped down, remains too high to allow competitive prices and reasonable profits in the developing world.

Clearly, going after new markets and new customer demographic can be better achieved with a clean sheet approach.  Of course there is also a cost associated!  It is expensive to start with a clean sheet.  Each R&D organization will need to balance between disruptive and sustaining R&D.  The article suggests three main ingredients for disruptive projects:
  1. Cross-functional teams
  2. Non-traditional supply-chain
  3. Top-down support
I think I would add one of my own: Processes, tools and Metrics to ensure disruptive projects do not disrupt all the R&D.  What do you think

Akio Toyoda – Toyota’s plan to repair its public image – washingtonpost.com

In an article in the Washington Post,  Mr. Akio Toyoda laid out
Toyota’s plan to repair its public image.  Within this article, he lays out four steps to fix the R&D and quality processes (Review existing ops; Improve quality control; Listen to customers; Share data):
First, I have launched a top-to-bottom review of our global operations to ensure that problems of this magnitude do not happen again and that we not only meet but exceed the high safety standards that have defined our long history. As part of this, we will establish an Automotive Center of Quality Excellence in the United States, where a team of our top engineers will focus on strengthening our quality management and quality control across North America. 
Second, to ensure that our quality-control operations are in line with best industry practices, we will ask a blue-ribbon safety advisory group composed of respected outside experts in quality management to independently review our operations and make sure that we have eliminated any deficiencies in our processes. The findings of these experts will be made available to the public, as will Toyota’s responses to these findings. 
Third, we fully understand that we need to more aggressively investigate complaints we hear directly from consumers and move more quickly to address any safety issues we identify. That is what we are doing by addressing customer concerns about the Prius and Lexus HS250h anti-lock brake systems. 
We also are putting in place steps to do a better job within Toyota of sharing important quality and safety information across our global operations. This shortcoming contributed to the current situation. With respect to sticking accelerator pedals, we failed to connect the dots between problems in Europe and problems in the United States because the European situation related primarily to right-hand-drive vehicles

It is an interesting plan, however, I am not sure how easy it is to implement.  There are fundamental cultural traits that drive behavior (both R&D culture and national/ethnic culture).  I once consulted with a Japanese multinational with operations in the US.  There was significant conflict between the two operations and the engineers in the US felt powerless to do anything to customize products for local demand.  I have heard about how difficult it was for the Japanese to understand the US pick-up truck market.
Reviews are only useful if there is a concrete plan and metrics to implement the changes identified.  Quality control has to be tied to R&D in the first place to actually deliver.  In a multiorganizational complex automotive development, it is extremely difficult to get a handle on all the R&D and communicate it effectively to quality.  Finally, it is easy to say that we will share information, but very difficult to do.  More information is not necessarily better – one needs ability to drill down to the necessary information and context for what the information means.
How would you try to change R&D management to drive change?

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I think we need some clear solutions quickly because ccna security 210-260 pdf personally I will be very upset if I pass my 210-260 exam right now and it does not recertify my Cisco CCNA Security or give me a Cisco CCNA – Voice. In keeping with several pay-grade web sites, CCNP licensed users 300 101 dumps earned up to $eleven,000 greater than CCNP professionals in some areas. Should you have been trying to receive a Cisco CCNP certification, you’ll have to go for the CCNP Collaboration certification instead.
NetCom Learning gives ITIL V2 vs ITIL V3 itil v3 foundation Voice (Previously referred to as ITIL V2 vs ITIL V3) training utilizing Official Curriculum. I believe Cisco are mistaken to alter the title of cissp dumps cissp Voice it does not make sense cissp is established and other people know what it means, its hard sufficient to get non techies to understand what these acronyms stand for without changing their identify on a regular basis.
Not to point out that the average salary will 300 115 dumps increase by virtually $20,000 between a CCNP Switch Verison 2.0 licensed particular person. The CCNP exam expects that you just absolutely know, understand, comprehend, the exam targets and test prep are makes you able to ccna exam the Cisco Certified Voice Professional data. I have CCNA certification, now I wish to renew my CCNA certificate to CCNA Collaboration.
As we speak when to see my test historical past 210-260 dumps and discover out that I obtained (3) three of the take a look at beneath CCNA Security 210-260 Official Cert Guide Voice and the opposite (2) two test under CCNA Security, huh. This should have been left open until current CCVP’s where migrated to CCNP – Voice or till the twenty eighth Feb 2011 and then convert folks. On October 19, 2010, Learning@Cisco introduced 210 260 dumps the evolution of the CCNA Security certification, renaming it CCNA Security Voice.

Impact of IT on R&D management

MIT Sloan Review has an article on “The Four Ways IT Is Revolutionizing Innovation.”  The factors according to the article are:

Measurement, experimentation, sharing and replication.

Of these factors, sharing and replication are clearly universal drivers enabled by IT.  Most industries are benefiting from improved sharing and replication of information across R&D organizations.  The impact of other two is not universal.

The examples given in the article are mainly Internet and networking companies.  Clearly, they have the luxury of using IT for measurement and experimentation.  A lot of their data is easily available and IT can really support experimentation. 

In many other industries (high-tech, electronics, bio-tech, aerospace and automotive, etc.), IT does not actually measure R&D results or aid experimentation.  In fact, a lot of the challenges in managing R&D stem from the difficulty in measuring R&D results and finding ways to experiment with R&D processes/tools to improve efficiency.  Any thoughts?

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Making cost cuts stick

According to one recent study, 90% of the organizations fail to sustain cost savings beyond two years.  McKinsey quarterly has an interesting check-list to ensure cost cuts stick:

  • Assign accountability at the right level
  • Focus on how to cut, not just how much
  • Don’t let P&L accounting data get in the way of cost reduction
  • Clearly articulate the link between cost management and strategy
  • Treat cost management as an ongoing exercise

    • All very interesting points.  I think the first two are quite relevant in an R&D environment.  However, several are very difficult to implement in R&D.  I remember an old boss talking to me about his problems predicting R&D costs.  He remarked that when he went to get his car serviced, they had a pretty good handle on what different services would cost and how long they would take.  Why could we not do the same for R&D?

    Predictability normally comes with repeatability.  Unfortunately, finding repeatability in R&D is pretty tough – as R&D always involves developing something new.  In fact, it is more developing knowledge that can be used to produce that new item.  Without repeatability and associated cost data, it becomes very difficult to understand what things should cost to develop in the first place.  How do we define how much cost to save?  As we get to more and more complex devices, this will likely become even more difficult…

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