Corporate Executive Board has some interesting data on how the percentage of executives citing innovation-led growth has risen sharply in the past year in I Think Therefore I Can:
There take home message is to make sure innovative teams are cross-functional, they are staffed with “starters” not “enhancers,” and that the processes support innovation…
The article Effects of Supplier and Customer Integration on Product Innovation and Performance in the Journal of Product Innovation Management has some empirical evidence on impact of co-design and information sharing with suppliers and customers:
After surveying 251 manufacturers in Hong Kong, this study tested the relationships among information sharing, product codevelopment, product innovativeness, and performance with three control variables (i.e., company size, type of industry, and market certainty).
The findings seem to indicate a direct, positive relationship between supplier and customer integration and product performance. However, there are a couple of key learnings: For brand new product families (that have not yet percolated through the supply-chain), it is much more important to partner with the emerging customer to learn and perfect the product. On the other hand, for improving existing product lines, it pays to work with suppliers. Information sharing with existing customers is not that important, but customer intimacy is:
The empirical findings show that product codevelopment with suppliers improves performance, mediated by innovation. However, the sampled firms cannot improve their product innovation by sharing information with their current customers and suppliers as well as codeveloping new products with the customers. If the adoption of supplier and customer integration is not cost free, the findings of this study may suggest firms work on particular supplier and customer integration processes (i.e., product codevelopment with suppliers) to improve their product innovation. The study also suggests that companies codevelop new products only with new customers and lead users instead of current ones for product innovation.
Forbes.com had an article with three pointer towards how to drive innovation (How To Be An Innovative, Not Just Business, Leader):
Innovative thinking can be used to redefine, or reframe, a problem. This is not a cosmetic or semantic change; it is a process of reexamining the situation. … By reframing problems, you uncover new places to innovate, or new angles to take. To reframe your challenge, ask powerful questions, challenge assumptions and bring in multiple perspectives. … He reframed the challenge away from fixing a past problem and toward differentiating the product and the company for the future. That was a vision that could focus and motivate the whole team.
Here are a few more tips from another article in Forbes – Innovator’s Nirvana:
–Get strength at the top. “You can change business models,” said Miller, “but changing culture requires leadership.”
–Watch timing. The change may be great, but are all the support systems there? Remember what you innovate has to exist in an ecosystem to thrive.
–Communicate discovery for open innovation. The discoveries of Alcatel-Lucent’s scientists frequently end up in products far from their respective specialties.
–When ideas just keep failing despite tweaks to the prototype, have the guts to admit you were wrong. Just because it’s different, that doesn’t mean it was right. That judgment is more important. Plus admitting that and going on to try other new things can actually make you braver
The Businessweek Article Innovation’s Dirty Little Secret talks about how many organizations pay lip-service to Innovation:
Recently I spoke with a group of executives from a $3 billion division of a large industrial company. They were faced with a mandate from the chief executive to expand the firm’s service revenue from 20 percent to 33 percent. That’s almost $400 million in new revenue, yet when I asked how many people were on the team, the leader replied meekly: “Two.”
Some organizations like IBM clearly seem to invest a lot in Innovation and have found ways to make it successful (I am not sure what is innovation in a transformation from product to service business…)
Rosabeth Moss Kanter’s October 2009 Harvard Business School case study, ‘IBM in the 21st Century: The Coming of the Globally Integrated Enterprise,’ details many acts carried out by the leadership team during the company’s fabled transformation from a product to a service company. Executives were prepared to put big money where their mouths were when it came to supporting service-based ideas, such as ‘Innovation Jam,’ or such businesses as ‘On-Demand’ software, and strong messages about the importance of services were sent.
One last interesting learning from Kaiser – it is a great approach to make sure high risk high reward projects actually get implemented:
when a promising innovation project is about 50 percent complete, she brings together representatives from information technology, patient services, and facilities management to assess how to scale it across the company’s vast system. By evaluating the “O-Gap”—that is, the space between pilot and operations—this group takes into consideration everything from process realignment to environmental modifications, as well as the training requirements needed to foster wide adoption of the change.
The article Strategic Decision Making and the CFO has some interesting data about contribution of innovation to the bottom line.
As chart 1 shows, this provocation (which isn’t our word by the way – see below) is important. The data comes from the well-known book “Blue Ocean Strategy” and shows that new ideas only account for 14% of new business launches but deliver 61% of the profits.
Chart 1: Revenues and profits from innovative versus incremental new business launches
Definition of what is innovation will change the results significantly The results would be easily explained if one defines innovation as new product line introductions (as opposed to incremental releases to an existing product line). A relevant question to ask is how much of the R&D investment is spent on what is defined as innovation…
In a HBR blog post, Scott Anthony asks What’s Stopping Innovation? Of more interest is his attempt to define what is innovation:
When I use the word innovation, I think of three interlocking components:
* Insight or inspiration suggesting an opportunity to do something different to create value
* An idea or plan to build an offering based on that insight or inspiration
* The translation of that plan into a successful business (in simple terms, commercialization)
The senior leaders I talk to believe that the bulk of their innovation challenges lie in the first two components. I suspect this is because the third piece looks like execution, and of course, large organizations know all about execution. And yet, my field experience suggests that it’s this third component, not the first two, that actually blocks innovation
As we have noticed several times (Invention vs. Innovation, CEOs want more creativity, BCG Innovation Study and Ideation Tools), lack of clear innovation definition leads to many incorrect conclusions about how and when to drive innovation. Furthermore, a unclear definition also leads to indeterminate metrics for innovation. Without clear metrics, it becomes difficult to measure innovation.
The author is quite right about execution preventing realization of the benefits of innovation. There have been many articles about open innovation and reverse innovation. However, implementation of innovation from outside the R&D organization (even a sister division of the same company) is fraught with not-invented-here problems. R&D managers need to be quite clear in their plans on benefiting from access to outside innovation.
Another problem I have seen repeatedly is lack of funding for converting innovative ideas or plans into delivered products. Many innovative ideas come from research arms of R&D organizations. There is always a tension because of researcher ideas that might impact funding for or sales an existing product line. In many cases, the innovative ideas suffer because of inherent risk and the clout of product managers. What have you seen?
HBR lays out The Secret Reason Your Employees Won’t Innovate:
After surveying hundreds of employees ranging from managers to stock clerks, Feirong Yuan of the University of Kansas and Richard W. Woodman of Texas A&M found that worries about “image risks” (unfavorable social impressions) significantly diminish workers’ innovativeness. People whose roles don’t explicitly call for innovation believe that coworkers will think negatively of them if they try to come up with better ways of doing things. In some cases, they’re even afraid they’ll “provoke anger among others who are comfortable with the status quo,” Yuan says.
We have discussed some of the reasons why R&D team members are reluctant to put forward new ideas: Risk averseness and misaligned incentives. Clearly something R&D managers should be consciously changing:
But leaders can have a big impact on this problem, the researchers report in the Academy of Management Journal. Perceived organizational support for innovation significantly reduces workers’ view of the social riskiness. The key is to create a sense of psychological safety: Provide an environment in which differences are tolerated and people feel free to approach problems in new ways.
Here is a quick read on a new framework for innovation from business week: India’s Next Global Export: Innovation:
A Hindi slang word, jugaad (pronounced ‘joo-gaardh’) translates to an improvisational style of innovation that’s driven by scarce resources and attention to a customer’s immediate needs, not their lifestyle wants.
The concept is to get work done by improvising around constraints – the approach does not matter as long as goals are met. However, as we had discussed in assumptions that executives need to challenge, jugaad can have pretty negative implications:
Moreover, because jugaad essentially means inexpensive invention on the fly, it can imply cutting corners, disregarding safety, or providing shoddy service. ‘Jugaad means ‘Somehow, get it done,’ even if it involves corruption,’ cautions M.S. Krishnan, a Ross business school professor. ‘Companies have to be careful. They have to pursue jugaad with regulations and ethics in mind.
This might be a good idea to drive innovation in a culture that is overly burdened with bureaucracy. However, one must really ask the question about why there is bureaucracy in the first place. In fact, work getting done bypassing bureaucracies will reduce the need to remove inefficiencies…
Harvard Business Review has an interesting article about How Do Innovators Think? The entire article is a good read, but here is the list of capabilities/tendencies of innovative people:
We think there are far more discovery driven people in companies than anyone realizes. We’ve found that 15% of executives are deeply innovative, meaning they’ve invented a new product or started an innovative venture. But the problem is that even the most creative people are often careful about asking questions for fear of looking stupid, or because they know the organization won’t value it.
I guess the biggest challenge for R&D managers then is to develop an environment that encourages civil and constructive questioning.
Slate Magazine in an article titled How to make America more innovative: give scientists more incentives to innovat: shows that just opportunity and skills are not enough to drive innovation. Organizations need to align incentives with needed behavior to innovate successfully.
“Incentives matter for innovation, and it’s a critical lesson for the government bureaucrats set to disburse hundreds of billions of dollars through Obama’s national Innovation Strategy, which is supposed to return America to innovative pre-eminence. The way we spend those dollars will be at least as important as how much we spend, and if we want the next generation of ideas to be Made in America, Obama’s team had better get its incentives right.”
The authors point out that HHMI with guaranteed support for five years tends to have more publication than NSF/NIH funded project. I think that in many R&D organizations, guaranteed employment may not have exactly the same results – HHMI only allows people to work there for a few years. Employees have to find a permanent home someplace else at the end of their stay. This would probably drive some behavior. Also, amount of money being awarded may have some impact on results as well.
Unfortunately, no simple solutions / rules. Only thing for certain is that R&D managers have to keep incentives in mind when trying to drive innovation.
