More proof that innovation is a buzz word

The article How to Develop a Social Innovation Network, in my opinion, teaches you how not to purse innovation.

“Customers already use social technologies to wrest power away from large corporations. Now employees are adapting social technologies in pursuit of innovations to support these empowered customers; Forrester calls these employees HEROes (highly empowered and resourceful operatives)”

Innovation is not about buzz words (HEROes!) and definitely not about social networking.  We talked about innovative masses yesterday and realized that even if there are many end-users out there with some interesting ideas, filtering them for quality and adapting them to satisfy mass market quality is not normally cost effective.
Furthermore, sorting through ideas of varying maturity (from social media such as facebook) to identify innovation difficult at best and a complete waste of time at worst.  I remember holding an innovation challenge for employees of a large technology company.  Employees could win a prize by describe their innovative ideas in two or there sentences.  One employee suggested the company should turn trash into oil.  I asked how does one do that?  The employee said she was only going to give ideas, how to make them work was the company’s problem!  🙂

Tapping the Innovative Masses

MIT’s Technology Review has some interesting survey results in the article Tapping the Innovative Masses:

“We found that 6.2 percent—representing 2.9 million people, or two orders of magnitude more than are employed as product developers in the U.K.—created or modified consumer products over the past three years and spent 2.3 billion pounds per year, more than double what the U.K. firms spent on consumer-product R&D.”

A lot of this tinkering was quite sophisticated, such as adding new spin cycles to washing machines etc.  The question is how to tap into this huge volume of product ideas – some of them innovative.  In many cases, even if the ideas are not innovative, they can significantly cut down on development time.  However, the volume of ideas generated by such a process is so large, most companies will have trouble keeping up with them.  Also, since most tinkerers do not have quality control processes, building products on their developments is quite difficult as well.  Finally, as we have discussed in the past, collaborations with customers often tend to not be as value added as they could be.

Fortuitously, NY Times shares Microsoft’s approach to accessing innovations from the masses in the article Microsoft’s Effort to Build Apps and Reward Engineers:

“Because the platform is new, developers have to learn its ways before writing many of those apps. So to add them quickly, Microsoft has taken an unusual step. It has relaxed a strict rule and will let employees moonlight in their spare time and keep the resulting intellectual property and most of the revenue, as long as that second job is writing apps for Windows Phone 7-based devices.”

Clearly, Microsoft has not tapped the mass of people out there, but they are encouraging their employees to innovate and keep a larger fraction of the economic value they generate.  Their approach is quite attractive because:

  • Innovations are coming from employees, hence, Microsoft can have some confidence in the quality
  • Apps are separate from Microsoft products (Windows Phone 7), Microsoft has an easier time separating intellectual property and brand image
  • Revenues from the apps can be tracked separately, it is possible for Microsoft to compute economic value (MS offers 70% to employees and keeps 30%)
  • App development will help employees identify useful updates and upgrades to the OS, and guide innovation
However, some key concerns remain.  First is to maintain employee focus on jobs as opposed to moonlighting:

“Engineers work all hours; they don’t punch a 9-to-5 clock,” Professor Cusumano said. “Normally, you want your employees to pour their passions into their jobs. If they do something else on the side, you don’t cheer them on.”

The second being bandwidth.  If employees are developing the OS full-time as part of the job and then developing apps during their free time, will they have enough energy left to be creative and innovative?  How much work load is too much?

Necessity is the mother of Innovation (Continued)

A quick post about the article Can Medical Innovation in Developing Countries Disrupt the U.S. Healthcare System?:

While American and European healthcare are characterized by high costs and government regulations, the industry in Asia is booming and producing cost-effective equipment to serve millions.

Western firms have become somewhat complacent in their operating models:

Many U.S. companies have become comfortable operating in a system in which top-of-the-line technologies are reimbursed at premium prices and patients are accustomed to [receiving] “the best,” regardless of price,” the firm notes in its report, ‘Smaller, Faster, Cheaper: The Future of Medical Technology.’

The markets in developing countries are becoming large enough to support innovation:

According to The Economist, medical technology sales in China should reach US$43 billion by 2019, and over US$10 billion in India. And according to a report on global healthcare innovation by PricewaterhouseCoopers (PwC), China has shown the strongest improvement in innovative capacity in the last five years, and its healthcare industry will nearly reach parity with Europe by the end of the decade. 

Once they develop low cost innovative products, new players are likely to target western markets and compete for the business.

There is actually enormous amount of innovation at the bottom of the market,” Christensen says. The challenge that lies ahead is whether companies in developing countries can scale up their products to meet global demands.

Firms in developing nations have to be innovative out of necessity.  As we have discussed in the past (here and here), necessity is the mother of innovation.  Western R&D managers should be thinking about new challenges they can pose for their R&D teams so that they can also become innovative.

Some interesting examples of innovation in the paper…

A Quirky Way of Innovating

I have often written about accessing innovation from outside the organization (open innovation, borderless innovation, etc). HBR article A Quirky Way of Innovating describes an innovation model that takes things one step further:

Enter Quirky. Quirky’s mission is to crowd-source innovation and product design. They create consumer products by first setting up a competition for solicited but fairly rudimentary product ideas. People evaluate these and some are selected to obtain further refinement. Individuals suggest different features, designs and then even the product name and marketing slogans. Then, if enough people look like they actually want to buy the product, Quirky manufactures and sells it. All along the way, people earn ‘influence points.’ It is not just coming up with the initial idea that wins you points — offering other idea components and playing an active role in voting for different suggestions also contribute — and depending on how many points you have, you may be entitled to a share of the earnings.

The Quirky business model is applicable to not very complex products with direct applicability to end users.  However, the idea of incentivizing people to become part of innovation is quite interesting for all R&D managers.  May be need a way to source innovation across R&D teams of strategic partners?  For example, all companies involved in developing a cell phone together can set up a similar system to invigorate engineering teams?  Key concerns here are going to be IP ownership and ability to extract economic value from the innovation.  This might be difficult, but it should be possible, at least in theory, to pre-negotiate IP rights with strategic suppliers.  Furthermore, there is clear evidence that quality of innovation improves when suppliers are included.

Intel Spreads Its University Research Bets

NY Times had a brief article on open innovation in Intel Spreads Its University Research Bets.

So Intel, the chip giant, has decided to take a more distributed approach to financing university research. The company said this week that it would pour $100 million over the next five years into projects at universities. Each of the projects will involve a few Intel researchers, typically four, with far-flung teams of researchers from several universities.

One key lesson here is teaming between Intel and academic teams.  I think this is key to avoiding foreign body rejection in open innovation.  Some Intel team members will feel ownership is the accessed innovation and will probably be proponents to get the innovation integrated into internal R&D.  Another advantage here is that internal researchers remain “fresh” and involved in innovation.  I think this is a great idea.

Intel has been accessing innovations from universities just like other companies.  As the Intel press release points out, the old approach was to have collaboration centers near universities. The new approach is to set up innovation centers that are jointly run by the university and Intel.

Until now, Intel Labs ran open collaboration centers near research universities and a substantial portion of the company’s funding focused on operating, maintaining and staffing these facilities. The new centers will be Intel-funded and jointly led by Intel and university researchers. They are designed to providemore dollars in the hands of researchers, and to encourage tighter collaboration between academic thought leaders in essential technology areas such as visual computing, security and mobile computing.

This is an intriguing idea.  Clearly, having universities integrally involved in management will add to the innovative environment.  However, it will also reduce control and visibility because the environment will be less structured.  Another interesting idea is the focus of innovation.  As you can see above, Intel has already defined the areas in which it will access innovation.  This will hopefully help provide some structure to these centers.  They have even a tighter focus on the first center:

As an initial step, Intel Labs also announced that Stanford University will be the hub for the first center, which will focus on improving visual computing experiences for consumers and professionals. Researchers at Stanford will collaborate with a community of researchers from seven other universities. The recently introduced 2nd Generation Intel® Core™ processor with combined visual and 3-D graphics will be a key R&D platform for researchers to develop innovations which improve the quality and the way images are captured or created, manipulated or interpreted and ultimately displayed to the viewer.

I look forward to seeing how this experiment works out. Clearly, we can learn a lot from this.

A Bright Future Requires Bright Ideas from R&D

Another survey of executives and another validation that innovation (or any current hot buzz word) is key. This time from Corporate Executive Board in A Bright Future Requires Bright Ideas from R&D.  We now have a significant increase in number of executives wanting innovation…

From CEB: Number of executives wanting innovation drive growth

Really?  Is innovation driven growth better than any other growth? Here is the key message

The best way for R&D to help their companies is to focus on the beginning of the innovation process – the ‘front end’. This is the part of the process where concepts for new products and services are sourced or created. RTEC researchers found that firms that were best at sourcing big new commercially viable ideas were good at two things: Securing organizational buy-in for funding big growth bets. Ensuring that growth ideas are differentiated and connected to pressing market needs.

 I guess those are good qualities to have.  As we have discussed before, the key problem with open innovation is  inability to overcome foreign body rejection tendencies of R&D organizations…

McKinsey Survey on Innovation and commercialization 2010

Another survey on innovation with some interesting data (you will find many more here)

As companies begin to refocus on growth, innovation has once again become a priority: in a recent McKinsey Global Survey,1 84 percent of executives say innovation is extremely or very important to their companies’ growth strategy. The results also show that the approach companies use to generate good ideas and turn them into products and services has changed little since before the crisis, and not because executives thought what they were doing worked perfectly. 

Further, many of the challenges—finding the right talent, encouraging collaboration and risk taking, organizing the innovation process from beginning to end—are remarkably consistent. Indeed, surveys over the past few years suggest that the core barriers to successful innovation haven’t changed, and companies have made little progress in surmounting them.

So, we all agree that innovation is important and we recognize the challenges in becoming innovative.  BUT, we continue to use same old management processes and hoping that we will get new results!  Even more importantly, we continue to believe that we are good at innovation, but not really know why we are better than others…

Just over half of all respondents, 55 percent, say their companies are better than their peers at innovation, a figure that hasn’t budged since 2008. Another consistent pattern is that far fewer respondents say their companies are good at the specific processes and tactics frequently tied to successful innovation—such as generating breakthrough ideas, selecting the right ideas, prototyping, and developing business cases. Respondents say their companies are best at adapting once they’re in the market, with 58 percent claiming to be successful. As in the past, executives have the most difficulty stopping ideas at the right time, with only 26 percent of respondents to this survey saying they do this well.

The graph below says a lot:

Only 39 percent of respondents say their companies are good at commercializing new products or services. This overall assessment seems to have a few different sources (Exhibit 4). Commercialization was a serious concern in 2007 as well; in that year’s survey, nearly a third of senior leaders selected making handoffs from ideas to commercialization as one of their biggest challenges, and 43 percent said the top challenges included choosing which ideas to move forward.

Much more good info in the article…

The innovation machine

The Economist has an interesting article by Joseph Schumpeter  The innovation machine:

Hardly a week passes without someone publishing a book on the subject. Most are rubbish.

I tend to agree. There is so much hype around innovation, but no one really defines what they believe is innovation.  Even the Oslo Framework definition talks about new products and new methods.  What is the difference between invention and innovation?  All new product lines automatically become innovation?  I am thinking we should focus on R&D effectiveness and not really worry if it is innovation or not. Anyway, back to the article:

Last year Mr Govindarajan and Mr Trimble (hereafter: G&T) published a seminal article, with Jeff Immelt, the head of General Electric, on frugal innovation. In their new book they address two subjects that are usually given short shrift: established companies rather than start-ups and the implementation of new ideas rather than their generation.

I like frugal innovation as a concept because it focuses the R&D team and drives innovation.  The two new thrusts are:

The fashion these days is to focus on the supply side of innovation: for example, by encouraging everyone to think big thoughts. 3M, the maker of Post-it notes, expects its workers to spend 15% of their time on their own projects. Google expects them to spend 20%. This approach is attractively democratic: by giving everyone a chance to innovate, it makes everyone feel special. Or so the theory goes. G&T are ready with the cold water. The let-them-loose approach spreads resources thinly and indiscriminately. Companies dissolve into a thousand small initiatives rather than focusing on a few big problems. It also produces far too many ideas: managers have to spend weeks sorting through the chaff to find a few grains of wheat.

That is give people time to think of new things and innovation will happen. I agree that is a good idea. However, it is important to remember that R&D management becomes even more important when you are letting technologists roam free. One needs to guide and nurture right ideas and to do so requires a good evaluation scheme to identify those ideas that are worthwhile.

A second approach focuses on closing the loop between ideas and results. Nucor Corporation, a steelmaker, gives its workers bonuses if they can produce steel more efficiently. Deere & Company, a maker of farm machinery, has produced a detailed playbook on how to design new tractors. G&T concede that this approach is an excellent way of making incremental improvements to existing products and processes, but suggest that it has little chance of producing a big breakthrough.

Interesting debate! More on it below.  However, the authors insist that the only way (or the primary way) to drive innovation is to break out a group that can innovate.

G&T argue that companies need to build dedicated innovation machines. These machines need to be free to recruit people from outside (since big companies tend to attract company men rather than rule-breakers). They also need to be free from some of the measures that prevail in the rest of the company. But they must avoid becoming skunk works. They need to be integrated with the rest of the company—they must share some staff, for example, and they must tap into the wider company’s resources as they turn ideas into products. And they must be tightly managed according to customised rather than generic rules. For example, they should be held accountable for their ability to learn from mistakes rather than for their ability to hit their budgets.

I have seen many innovative ideas rejected because they were not invented by the team.  Setting up a separate organization just brings foreign body rejection a little bit less difficult.  More often than not, the innovation organization becomes an outcast and root cause of tremendous organizational conflict.  This has happened many times with the original Skunk Works (at Lockheed) it self.  Many people do not realize that Skunk Works was successful because they were paid by the government to do work.  They were a profit center.  Trying to replicate Skunk Works in non government area is going to be quite difficult.  More importantly, innovation to invention transition from Skunk Works has been far from effective.
So, what are my recommendations?  Effective R&D management, of course!  Only managers can provide challenges that help teams innovate, identify bright ideas and fund them so that they can be transitioned into inventions and products and avoid organizational conflict / foreign body rejection.  Much more stuff is here.

Nokia’s Bureaucracy Stifled Innovation

This New York Times article on Nokia’s Bureaucracy Stifled Innovation has several interesting lessons for R&D managers.  It appears that Nokia had a smart phone before others, but cancelled it:

A few years before Apple introduced the iPhone in early 2007, the prototype of an Internet-ready, touch-screen handset with a large display made the rounds among upper management at Nokia. The prototype developed by Nokia’s research centers in Finland was seen as a potential breakthrough by its engineers that would have given the world’s biggest maker of mobile phones a powerful advantage in the fast-growing smartphone market.

I am not sure that having a prototype in 2004 and choosing not to bring it to market was such a bad decision. Apple itself had a prototype for a smart phone working with a large consumer electronics company in 2004.  They too chose not to bring it to market.  I do not think technology existed to actually build successful smart phones in 2004 – that included fast enough processors, low power LED backlit screens and abundant DRAM/FLASH. R&D Managers need to make touch choices at times and they can all not be the right choices.  This one example does not directly prove that all decisions made at Nokia were bad – or that even this decision was a bad one.

On the other hand, the article mentions a couple of times that Nokia got complacent because of its own success:

… former employees depicted an organization so swollen by its early success that it grew complacent, slow and removed from consumer desires. As a result, they said, Nokia lost the lead in several crucial areas by failing to fast-track its designs for touch screens, software applications and 3-D interfaces.


“Nokia in a sense is a victim of its own success,” said Jyrki Ali-Yrkko, an economist at the private Research Institute of the Finnish Economy. “It stayed with its playbook too long and didn’t change with the times. Now it’s time to make changes.”
This is clearly a problem.  How do R&D mangers keep from falling into this trap?  I guess one has a better more formal portfolio balancing process that allows decisions to be based on qualitative and quantitative criteria that can be discussed rationally.  This was NOT the case at Nokia:

Juhani Risku, a manager who worked on user interface designs for Symbian from 2001 to 2009, said his team had offered 500 proposals to improve Symbian but could not get even one through.

“It was management by committee,” Mr. Risku said, comparing the company’s design approval processes to a “Soviet-style” bureaucracy. Ideas fell victim to fighting among managers with competing agendas, he said, or were rejected as too costly, risky or insignificant for a global market leader. Mr. Risku said he had left in frustration at its culture; he now designs environmentally sound buildings.

The key phrase in portfolio balancing is BOTH qualitative and quantitative criteria.  A strict focus on ROI will kill high-risk high-return innovative projects.  Fundamental technology development is also a difficult area to measure ROI because technology has impact on multiple products and ROI is impossible to compute (Symbian could be seen as a fundamental technology with impact on multiple product platforms):

Proposals were often rejected because their payoffs were seen as too small, he said. But “successful innovations often begin small and become very big.”

 In fact, R&D managers should set a portion of their budgets for innovation (10-20%).  These projects should not have any ROI requirements.  Another way to encourage manager risk taking is to reward failure.

NSF Innovation Survey

The National Science Foundation has released preliminary results of their innovation survey: – SRS NSF Releases New Statistics on Business Innovation – US National Science Foundation (NSF). Below are some important take aways:
Defintion of what is innovation:

In the Oslo framework, innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”[6] Further, “The minimum requirement for an innovation is that the product, process, marketing method or organizational method must be new (or significantly improved) to the firm. This includes products, processes, and methods that firms are the first to develop and those that have been adopted from other firms or organizations.

Lots of interesting data.  Definitely a source to get back to whenever you are trying to benchmark innovation.