Innovation vs. Group Think

Here is a really cool article from the Knowledge @ Wharton. It deals with one of the major problems with any brainstorming event – Group Think. They propose a new concept called Hybrid Brainstorming:
The key with innovation is not to get as many ideas as possible, but to get some exceptional ideas that can be game changers. Any process that equalizes all the ideas contributed by everyone will be counter to the objectives of the brainstorming. So the goal is to strike this delicate balance between being inclusive and looking for exceptional ideas. Check out the article. It has some interesting thoughts.

Terwiesch, Ulrich and co-author Karan Girotra, a professor of technology and operations management at INSEAD, found that a hybrid process — in which people are given time to brainstorm on their own before discussing ideas with their peers — resulted in more and better quality ideas than a purely team-oriented process. More importantly for companies striving for innovation, however, the trio says the absolute best idea in a hybrid process topped the Number One suggestion in a traditional model.

Necessity is the mother of – Innovation

A couple of articles on driving innovation through Reverse Innovation. One is from Wharton School of Business and another from Forbes. The article suggests that historically innovation happened in the rich countries and moved to poor countries and now it needs to start in the emerging countries.

Vijay Govindarajan, professor of international business at the Tuck School of Business at Dartmouth College, who spent the last two years as a GE professor in residence and chief innovation consultant, calls the company’s strategy “reverse innovation”. “Historically, innovations have always happened in rich countries,” he points out, “But in the future, innovations will have to take place in countries like India and China, because this is where the bulk of the customers are. The needs are more pressing here and the sheer volumes will justify the investments that will be required for developing the appropriate products.”

The reality is that the emerging market is becoming more attractive and the need to drive down costs to meet the economical realities of that market is driving innovation at GE. The reduced costs then have a great positive impact on other markets as well. Similarly, there is a need for products of all sorts – such as cell phones – that need to fit the budgets of a whole new population.

One lesson I am learning from this is that R&D managers need to create situations where the technologists are challenged to generate new solutions. Innovation is not just about people sitting around and free thinking in a cool room filled with new toys. I am wondering if there is a structured way for managers to come up with challenges that get the same result without “Reverse Innovation.”

In any case, we can now safely modify Plato’s quote to say that “Necessity is the mother of Innovation.”

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Great list of innovation management tools

Blogging Innovation blog has a great list of tools to manage innovation and ideas. Tools to manage ideation are important and the author has put in quite a bit of work to generate a pretty comprehensive list. Please also check out his word document on desired functionality.

In my experience, idea management tools are a subset of processes, tools and metrics needed to ensure that innovation pays off. Managers need to find ways to quickly evaluate, develop and monitor innovative ideas. There also needs to be an efficient approach to kill innovation projects that do not pan out.

One of the companies I worked at had a great innovation generation machine. They gave out $20-50k for small projects that looked outlandish enough. However, there existed no way to catch all this innovation and develop it further into delivered products.

What is your experience? How is innovation management working in your organization.

CEOs really want more creativity?

Here is an interesting article in Business Week penned by a Senior Vice President from IBM. The article claims that CEO priorities are changing fundamentally:

There is compelling new evidence that CEOs’ priorities in this area are changing in important ways. According to a new survey of 1,500 chief executives conducted by IBM’s Institute for Business Value (IBM), CEOs identify “creativity” as the most important leadership competency for the successful enterprise of the future.

There are a couple of key take aways in the article.

CEOs have started valuing creativity and continuous innovation.
CEOs want to be disruptive: “Disrupt status quo, disrupt business models and disrupt organizational paralysis.”

Clearly, all these things are very important to do – in any company, in any economy. What the article does not explain is why the CEOs did not value creativity earlier! Did they really believe that it was better to be unoriginal? Did they actually want organizational paralysis?

The take aways are also very difficult to realize. For one to disrupt status quo, one needs to understand what needs to be disrupted and what the desired end state should be. To do that, an organization needs a good evaluation of its processes or a way to get that evaluation in the first place. If you have that capability, then you probably do not have organizational paralysis to start with. Driving innovation has always been a big challenge.

What do you think? What are some examples of organizational paralysis that you have seen? Are then any stories or challenges that you would like to share?

R&D spending does not guarantee profits

In an article that corroborates TI’s findings, here is a 2005 article in Management Issues suggesting that higher R&D spending does not necessarily result in better profits. In some ways the material is still relevant, especially if one wants to find savings in R&D budgets.

Companies which invest heavily in research and development may be wasting their money. According to a new study, there is no direct relationship between R&D investment and significant measures of corporate performance such as growth, profitability, and shareholder return.

The article has some useful data about the R&D spending on the top 1,000 global players:

According to consultants Booz Allen Hamilton, who analyzed the world’s top 1,000 corporate research and development spenders, innovation spending is still a growth business. This 2004 Global Innovation 1,000 spent $384 billion on R&D in 2004, representing 6.5 per cent annual growth since 1999.
And the pace is accelerating. Measured from 2002, the annual growth rate jumps to 11.0 per cent.
While the top 1,000 corporate R&D spenders invested $384 billion in 2004, the second 1,000 spent only $26 billion – only an additional 6.8 per cent beyond the top 1,000 spenders.

This article points out the need for coordinated processes R&D planning, project portfolio management and R&D investment management: “How you spend is more important than how much you spend.”
However, getting coordinated processes in place for planning, portfolio management and investment management is rather difficult. Add to it the complexity of aligning investments with changing market needs and project progress/delays, and the real task of guiding R&D and invention becomes rather difficult.

In other words, the study argues, it is the process, not the pocketbook that counts. For example, Apple’s 2004 R&D-to-sales ratio of 5.9 per cent trails the computer industry average of 7.6 per cent, while its $489 million spend is a fraction of its larger competitors.

What do you think? Do you have any stories to share about success or failure around project portfolio management? Or are there any challenges that you face that you would like to discuss?

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