Management Innovation

I have had quite a few posts about innovation management. However, this one is even better – Management Innovation – innovation in the management process. Prof. Birkinshaw, Prof. Gary Hamel et. al have written an interesting article on how innovation takes place in management:

Management innovation involves the introduction of novelty in an established organization, and as such it represents a particular form of organizational change. In its broadest sense, then, management innovation can be defined as a difference in the form, quality, or state over time of the management activities in an organization, where the change is a novel or unprecedented departure from the past

It is a great article with a history of research into management innovation. I plan to dig into some of this background in the near future and I will definitely post what I learn. In the meantime, there are some interesting concepts in this paper worth discussing.

The authors point out that according to prior research, there are four “perspectives” on how management innovation takes place:

Institutional Perspective: What institutional conditions give rise to the emergence and diffusion of management innovations?
Fashion Perspective: How do aspects of the supply of and demand for new management ideas affect their propagation?
Cultural Perspective: How do management innovations shape, and get shaped by, cultural conditions
inside an organization?
Rational Perspective: What is the role of managers in inventing and implementing new management
practices?

I think this is a very important concept. If we want to manage R&D into increasingly complex systems in increasingly diverse environment, we will need some strong management innovation. To achieve this leap in management processes, tools and metrics, we will probably need to encourage and nurture all four types of innovation.

The authors have also laid out this really cool figure outlining the R&D process and delineating where management innovation could take place:

I think we will probably need to examine processes and tools used for every step in the figure above and determine whether the existing processes are adequate or if we need to come up with something much better. For example, two organizations co-designing a product at motivation stage might actually see the development completely differently: One as a novel problem because they are developing a new technology (internal change) OR the other as a threat because a competitor is changing the playing-field (external change). R&D managers will need to bridge this gap and provide a process that lets both organizations work together and communicate effectively. Interesting times!

Industry Jolted by EV Engineer Shortage

Here is a short article describing of key skill-set shortages in hybrid / EV automobiles: Industry Jolted by EV Engineer Shortage. On one hand this is a new skill-set that was not really in existence a decade ago.

The already-tight market for mechatronics engineers just got more competitive with Thursday’s announcement of a proposed joint venture, led by Magna International Inc. founder Frank Stronach, to develop vehicle-electrification technology.

On the other hand, the industry has known about this trend for more than 10 years. They could have easily trained new engineers if strategic skill-set planning had been in place (or tools existed to forecast skill-set needs for long-term). As was pointed out in Toyota Way lost on the road to phenomenal worldwide growth, it takes years to get engineers trained to work effectively. That training and management is even more difficult when new disciplines or technologies are being introduced in the products. Even so, some people believe that market forces will take care of everything:

Veteran engineer Chris Theodore, whose fingerprints are on the Dodge Viper and Ford GT, also is unfazed.

“There is an imbalance,” Theodore says, referring to the dearth of mechatronics engineers. “There’s more knowledge required.”

But the shortage is temporary, and the impact of EVs on automotive engineering should not be exaggerated.

“The pendulum will swing the other way,” he tells Ward’s. “When all is said and done, we’re in a physical world.”

What do you think? Does your organization face similar problems?

Codesign – Another increase in R&D management complexity

An article in Nikkei Electronics Asia describes a new trend in consumer electronics: Codesign Begins with Product Implementation. Codesign is simultaneous development of different subsystems, features and manufacturing process of a product across suppliers leading to cost and performance optimization at a system level.

Digital consumer electronics manufacturers are beginning to adopt codesign in product implementation. They hope to achieve both improved performance and reduced cost by optimizing chips, packages and boards in toto. PC-class performance at the implementation cost of consumer electronics would mean competitiveness sufficient for the global marketplace. Codesign is being implemented full-scale in digital consumer electronics. Until now separate design tasks were optimized individually, but now codesign is being used to improve overall system optimization. This approach makes it possible to cut design margins to the limit and develop products delivering powerful functionality for minimal price.

With increasing complexity and somewhat nascent processes for cross-cultural cross-organizational R&D management, this can be a very challenging task for managers. Especially, the biggest bang-for-the-buck for codesign is if it is implemented during concept development phase. That means that all the different organizations have to align their processes, tools and metrics during the entire R&D pipeline.

Codesign can be applied to a wide range of design phases, but the most important one is concept design. The design enjoys the greatest freedom in the initial design phase, and as a result this is there the greatest optimization is possible. Codesign is entering use now in the conceptual design phase of digital consumer electronics.

Furthermore, communications between different organizations gets to be even more critical (and difficult). As the article explains with an example of consumer electronics design, not only does design / development need to be synchronized, but also the testing / evaluation as well. Reliability analysis & risk assessment can also become a nightmare.

There are two axes in codesign, the first of which is the target of the codesign process. There are three targets involved here, namely the chip design and package design (handled by the semiconductor manufacturer), and the board design (handled by the set manufacturer). The second axis is the set of indices used for design evaluation, such as signal integrity† and power integrity†. These indices are essential guides in avoiding product problems, and the goal in codesign is to satisfy all of the simultaneously.

However, this trend is likely to not be a passing fad. As competition becomes global and need to address developing market becomes even greater, innovation will likely move to system level from components.

Better Performance at Lower Cost Digital consumer electronics designers are being pressed to slash margins to the bone, delivering better performance than prior models at the same or lower cost. ‘It used to be that we could afford a little cost increase if the product was the smallest one in the world, for example, and we could utilize high-performance boards or components. Not any more. Even if we make the smallest one in the world, the key point now is how cheap the parts are,’ complains Makoto Suzuki, Chief Distinguished Engineer, General Manager, EDA Design Technology Solutions Dept., MONO-ZUKURI Technology Div., Production Group, Sony Corp. of Japan. In this situation, continuing the established approach of individual design optimization would result in excessively large margins, and a loss in product competitiveness.

Security and IP control in R&D outsourcing

Yale Global Online magazine has an interesting article that reinforces strong processes and security in R&D outsourcing: Google’s Lesson: Innovation Has to Be Accompanied by Reliability. The article distills lessons learned from the Google-China incident and points out that that manufacturing outsourcing will continue, but needs controls for IP:

Outsourcing of manufacturing will continue, but it must do so under much tighter monitoring of the transfer from intellectual property to production.

I was talking with a large US manufacturer moving production lines to China. Besides IP exposure, the company actually found that they needed new processes to link US R&D to manufacturing. When the manufacturing was in-house, R&D team members could walk over and see how manufacturing was doing of vice-versa. None of that was possible when manufacturing was in a different country.

Actually moving production and R&D, not just connecting them virtually, can have a negative impact on security.

Furthermore, R&D outsourcing is different from manufacturing and control of IP is much more difficult. R&D is essentially a process of manufacturing (creating) knowledge on how to manufacture widgets. Once the knowledge is with people, it is difficult to remove it. I have heard of Japanese strategy of keeping key component manufacturing in Japan and thereby protecting their IP. That will not be possible when R&D or parts of R&D are outsourced.

The lesson for the IT industry is that security has to be a primary concern in the next generation of innovation.

Strategic Skill-set management key to sustainable growth

Washington Post had an article about how growth caused skill-set imbalances at Toyota and may have lead to quality problems – Toyota Way’ was lost on road to phenomenal worldwide growth:

How did Toyota lose its way? The core reason, according to a number of auto-industry experts, is that the carmaker outgrew its human expertise. ‘Toyota cannot develop engineers as fast as they can proliferate new models,’ said Jeffrey Liker, a professor of engineering at the University of Michigan and author of five recent books on the virtues of the Toyota Way. ‘Each engineer is doing more and has more opportunity for error.’ Before the avalanche of growth, Toyota took about 10 years to train first-class engineers, Liker said. These engineers and senior managers had time to absorb company values that gave them an intuitive feel for weighing quality demands against cost concerns — and how to squeeze suppliers on cost without getting inferior parts, said Susan Helper, a professor of economics at Case Western University in Cleveland and an expert on global manufacturing.

As per the article, rapid growth prevented Toyota from allowing the 10 years required for training. The key question for R&D managers is not whether growth is good (it is required, necessary), nor is it if they can afford to spend 10 years to train engineers (they can not), but how do they use new R&D processes and tools to accelerate training and transfer more knowledge to engineers.

An added dimension is that of complexity – not just from increasing complexity of products but also from inclusion of new technology (electronics, computers etc):

As Toyota’s new cars became less mechanical and more dependent on electronics and computers, management’s intuitive feel for quality was further diluted, along with its expert understanding of how suppliers made parts, Helper said.

Clearly, traditional training regime will be challenged in this new world of doubling capabilities every 18 months. It is pretty well known how automotive companies have trouble synchronizing development with electronics such as GPS or entertainment systems.

To cut costs, Toyota “dramatically reduced” crash testing of new car models, according to Koji Endo, a longtime auto analyst and managing director of Advanced Research Japan, a corporate research firm in Tokyo.
“They do virtual testing using computer models, and it is expertly done,” Endo said. “But from time to time there are unexpected real-world problems that the computer models do not account for.”

This is the final challenge – integrating new and advanced R&D tools into management and making sure that processes to manage risks scale with R&D tools. As tools such as Finite Element Method (FEM) or Computational Fluid Dynamics (CFD) become even more capable / cheaper (due to computing enhancements), R&D managers will have even more pressure to use numerical models instead of physical.

Not only do managers have to evolve new processes and tools for skill-set management, but they have to align skill-sets with strategic needs. Exciting times!

Enemy Lurks in Briefings on Afghan War – PowerPoint

NY times had a quick little post on how PowerPoint can sometimes lead to meaningless briefings: Enemy Lurks in Briefings on Afghan War – PowerPoint:

“The slide has since bounced around the Internet as an example of a military tool that has spun out of control. Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan. – Sent using Google Toolbar”

Another place where I have found PowerPoint to cause problems is project reviews. Not only do R&D teams spend a significant amount of time developing review packages, but also the briefings tend to be so dense that it is rather difficult to identify and focus on issues of importance. I am sometimes amazed that reviews actually are useful. Templates can definitely help, but in the end, I am still looking for a meaningful solutions…

Need for cross-organization cross-cultural R&D management

A semiconductor industry focused article in Nikkei Electronics Asia (Semiconductors the Key to the “Green” Society : System-Level Optimization a Must) points out issues of increasing importance to R&D management: Cross-organizational Cross-Cultural R&D Management.

A number of environmentally sound products utilize devices such as solar cells, LED lighting and Li-ion rechargeable batteries, but these devices do not play the crucial roles. The electricity created by energy devices such as solar cells must be transmitted efficiently, and excess electricity stored in energy storage devices. Electricity must then be output from these storage devices without loss to energy-conserving devices for use. System-level performance optimization, linking all of these components without waste, is crucial.

R&D managers will face many new problems in this new environment where many of the “low-hanging fruits” have already been taken and innovation will move from component / process level to product / ecosystem level. Many of the tools necessary to manage R&D in this environment are not easy to find. Key challenges include:

Communicate across language and cultural boundaries
Align goals / objectives / requirements / risks (e.g. in an automotive environment, changing suspension requirements will impact tires and frames)
Bubble up risks and ensure they are addressed across vendors
Manage investments
Protect IP
Manage morale and reward innovation
Others…

Thoughts?

Alternate approach to aid brainstorming

HBR had an interesting article about brainstorming in My Eureka Moment With Strategy – Roger Martin:

Rather than have them talk about what they thought was true, ask them to specify what would have to be true for the option on the table to be a fantastic choice. It was magic. Clashing views turned into collaboration on really understanding the logic of the options.”
Why is it so important? The central reason is that it allows managers to step back from their beliefs and contemplate the possibility that they might not be entirely correct.

I really like this approach and am going to try it out in my next brainstorming meeting. What has your experience been?

If you think an idea is the wrong way to approach a problem and someone asks you if you think it’s the right way, you’ll reply “no” and defend that answer against all comers. But if someone asks you to figure out what would have to be true for that approach to work, your frame of thinking changes. No one is asking you to take a stand on the idea, just to focus on what would have to be true for that idea to work. This subtle shift gives people a way to back away from their beliefs and allow exploration by which they give themselves the opportunity to learn something new.

Tatas learn to innovate

I really enjoyed this article in the Business Standard on innovation management in India –Tatas learn to innovate:

While this is aimed to lift the inhibitions that failure can cause, TGIF realised that several employees are afraid to question conventional wisdom. Thus in the works is a series of seminars called Courage to be Curious and Question. “The Tata Management Training Centre is working on it. This is to tell people how to ask questions without being intrusive and offensive. We will do the pilot in the next two or three months,” says Gopalakrishnan.

I guess this is an important problem in most corporate cultures – lack of questioning or open debate. But I found India to have a tendency towards top-down management cultures. I do believe that the culture is changing. I talked with the CEO of a large Indian conglomerate and was very impressed with his approach to make sure decisions are as much bottom-up as top down. It will be interesting to see how Tata achieves the change in culture…

Below was another impressive paragraph. Tata attempted to define Innovation and baseline initial level of innovation before proceeding with change.

Before any effort to boost innovation, it is essential to know the state of innovation in the company. The treatment will emanate from this. After much deliberation, TGIF has adopted the Innometer developed by Julian Birkinshaw of the London Business School. It measures the innovation process and culture on a scale of zero to five, and can be run on the whole company, a unit or even a small team. So far, about ten Tata Group companies have gone through it. The scores, of course, are confidential. “We are medium to upper-medium. We are not on top. It’s a 5-point scale, and I haven’t seen a 4.9 score. But I have seen scores between 3.6 and 4.3,” says Gopalakrishnan.

This was another impressive paragraph. I am not familiar with the Innometer, but I hope to check it out soon and post about it. Unfortunately, Prof. Birkinshaw’s website does not appear to have any material on it.The only page with information I find is from Tata itself.

Another barrier to innovation was that the various Tata companies wouldn’t talk to each other. There was always scope for collaboration, but seldom was it exploited. This was because large group companies like Tata Steel, Tata Chemicals and Indian Hotels Company were run like independent fiefdoms. Ratan Tata, when he became chairman in the early 1990s, eased out powerful chieftains like Rusi Modi, Ajit Kerkar and Darbari Seth. A cohesive group identity was forged, but collaboration still did not happen. So, TGIF decided to set up InnoClusters — groups of companies that could work together in different areas. There are four such clusters: Nanotechnology, plastics & composites, information technology and water. At the moment, the biggest cluster, of ten companies, is around nanotechnology.

Finally, TGIF has setup an innovation market place and they seem to have a good plan for staged implementation…

TGIF has come out with a web-based open innovation initiative called InnoVerse. Employees can post a problem on the intranet, to which anybody can provide a solution. People can bet on ideas with the 1,000 karma points they get. If the idea is accepted, your pile of points goes up. More than that, this will show which solutions are popular. A pilot is being run at the moment. Can all 300,000-odd Tata Group employees access it? “Not all, but most can,” says Tata Quality Management Services Vice-president Ravi Arora. “You must remember that a large chunk of these employees (almost 40 per cent) are from TCS, who are all net-savvy.

Rewarding Failure

The Kellogg Insights from Kellogg School of Business has an article justifying Bonuses Despite Billion Dollar Bailouts:

Eisfeldt and Rampini’s research suggests that their function is less about the past than the future. Bonuses provide managers with an incentive to be honest about their own performance and about the firm’s prospects earlier rather than later, when shifting capital to more productive managers and more productive uses can have the greatest impact.

Clearly, large bonuses in failing financial institutions is a touchy subject and I would like to stay away from it. However, there is definitely a case for rewarding failure in R&D. If all R&D efforts are successful, than the organization is not taking large enough risks and would likely not be able to compete long-term. Managers need to drive a healthy risk appetite, while managing overall exposure. Furthermore, if failures are not exposed early, more money is normally wasted in keeping wasteful projects alive. It also means that the R&D culture is not accepting of failure and that is a dangerous path.

One effective approach to encouraging/managing risk is to tie some fraction of executive compensation to “Wasted Development Effort.” The idea here is to recognize that some R&D should fail and that the executives should be encouraged to talk about it. If the term wasted development effort does not sound appropriate, consider Technology Path Elimination. My boss a few years ago came up with this term and it sounds much better: Encouraging R&D organizations to eliminate technology paths that will eventually lead to failure. Thoughts?