Building focused R&D commuities

As organizations grow larger in size, it becomes more and more difficult for R&D team members to know all the development in progress. Furthermore, as disciplines get more specialized and demands for lower costs and higher efficiency increase, cross-disciplinary communications decline and the need for building focused R&D communities increase. Many companies like Caterpillar have taken web-based or wiki-based approaches to drive communications across geographic locations (with varying degree of success). MIT Sloan Review has a useful article on How Reputation Affects Knowledge Sharing Among Colleagues.:

Social networks are a defining feature of 21st-century information exchange. Within research and development-intensive industries, in particular, social networks have always been key to fostering innovation. But what lies at the heart of a researcher’s decision to share information within a network of fellow researchers?”

As anticipated, people who have known one another longer and have meaningful relationships are more likely to share knowledge. Predictability and reciprocity are also positive factors. But being indebted to someone is a negative factor: Someone can’t be seen as taking more than giving. There are surprising results as well. The frequency with which people correspond, for instance, doesn’t correlate to them being more likely to share knowledge.

So, what are the drivers to building focused communities? Clearly physical distance is one. The other is familiarity or shared connections (a way to know who to contact and how) and lastly reputation (is it worth going through the effort?):

The research has a number of practical implications. It suggests that physical distance, for instance, poses barriers for those seeking knowledge. The best course of action is to talk to someone in the same city, or at least the same state. It’s also best to request information from those with whom you have a shared connection within an organization. Other scientists within the same company are most likely to share unique and not easily replicated scientific knowhow–that which could potentially provide a greater contribution. So someone seeking assistance will more likely succeed if he or she can make the case that the knowledge is vital to accomplishing a task and that the source has the expertise to provide it.

Because both proximity and organizational ties positively influence people to share knowledge, R&D workers may be more innovative if they are closely connected. The study even lends support to the idea of rotating groups of workers to improve knowledge sharing.

However, most R&D managers do not have simple approaches to change physical locations or drive familiarity. The cost and efficiency pressures are such that there is not enough budget to allow for social networking across large distances. Furthermore, the effect of social contacts fall off rapidly with time, so even if R&D managers hold internal meetings the return-on-investment in increased interaction is not guaranteed. Furthermore, disciplines are getting so specialized communications needs are for very specialized expertise (e.g. not just any electronics, GaN LNA implementation at 40 GHz). Hence, R&D managers need new tools that automatically build an expertise directory that allows engineers to quickly locate people who are working in exactly the same area.

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!

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.

Invention vs. Innovation

The article “Innovation is key to prosperity” from Canada (The Star) does not have a lot of useful information, but it does actually make a claim that there is too much money being spent on invention and too little on innovation:

The Canadian government puts too much emphasis on invention, and not enough on innovation – even though the latter drives economic prosperity, according to a new report from a competitiveness think-tank. Government policy tends to support inventions at the expense of improvements in existing products or processes that would provide value to consumers, says the provincially funded Institute for Competitiveness and Prosperity.”

The article makes amazing claims: Innovation needs to be improvement of existing products. “Business Innovation” can be the real driver of innovation and not science and technology.

“Obviously, we need science-based discovery as a foundation for innovation. But our prosperity is the result of business innovation that adds value to our day-to-day lives,” said Roger Martin, chair of the institute.

“Without greater emphasis on true innovation, we will continue to spend billions of dollars funding invention and get little innovation to show for it.”

I have found definition of innovation to be a pretty regular problem R&D management. How one defines innovation will decide how much money is being spent on innovative projects and how much on the others? How does your organization measure innovation?

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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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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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Frugal Engineering

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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:

Cross-functional teams
Non-traditional supply-chain
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

Quest for Innovation

This 2006 American Management Association study “The Quest for Innovation” has an amazing amount of information and a lot of good metrics for benchmarking your organization. Below are a few results that out found interesting:

Customer and competitors drive innovation: Top two factors (Page 69).
Innovation strategy and plans are difficult: Lack of definition around innovation, an innovation strategy and plan are key impediments to innovation. (Page 70)
R&D is not the driver: Only 27% of the executives surveyed felt innovation occurred in R&D (Page 74)
Being good at innovation is hard: Only 15% of the executives believed their firms are good at innovation (Page 73)
Collaboration is key: Collaboration with external entities and effective team work second most important factor in innovation (Page 66).
Identifying and evaluating innovation is difficult: 46% of the companies do not have a standard process (Page 72)
Rewarding innovation is difficult: 26% of respondents felt innovation is not rewarded.

There is a lot more to the study (its huge). Please check it out when you have some time.

What are some of your observations around innovation and R&D in general. One of the companies I worked at had a great process for assessing ideas and ferret out innovation, but there was no strategy or plan to drive it further. Funding for innovative projects kept getting cut for near term fires…

Borderless Innovation

Just like Open Innovation, there is another new trend in accessing innovation outside the captive R&D organization – Borderless Innovation. The article proposes four different models:

The Orchestra Model, which is highly structured and centralized. It is typically focused on upgrading an existing product or service that dominates a market, with tightly controlled ownership of intellectual property. Examples include the iPhone, whose developers have been releasing roughly 10,000 applications a month for use with it, or India’s ultra-low-cost Tata Nano car, which uses a localized network to manufacture units from a fixed design.

The Creative Bazaar Model, which is based on leading players in a particular market that want to acquire new ideas from small companies or individual inventors in order to broaden their range of products and market position. A case in point is Dial. The soap manufacturer aims to find 30% of its new ideas from outside the company through a program called “Partners in Innovation” that it launched with the New York-based United Inventors’ Association, an organization founded in 1990 to foster education and support for inventors.

The MOD (“MODification”) Station Model, in which ideas come from a broad, global community, with the goal of coming up with new uses for existing products. One example is Mappr, a photo service developed by Stamen, a company in San Francisco. As users of Facebook and other social networking sites tag open-source photos, they help to build a database that Mappr uses to create photographic guides to different geographic locations.

The Jam Central Model has the loosest organizational structure and mission, often involving experts asked to solve problems that might not fit well into a large corporate profit strategy. For example, for the Tropical Disease Initiative, volunteer scientists are using open-source collaborative software to address Third World health problems, such as malaria and dengue fever. The medicine needed to cure these diseases does not have the recurring revenues that pills for chronic conditions have, so it attracts little attention from the big pharmaceutical companies.

These are interesting models and each one if implemented effectively can bring significant benefits. However, much is left unsaid about implementation. Accessing innovation outside is not sufficient, organizations need processes, tools and cultures to mature the idea once brought inside. This is easier said than done. R&D teams frequently have Not-Invented-Here foreign body rejection of outside innovation (sometimes necessarily so because of the sense of pride in their team). Also, developing maturation plans and resource requirements for outside ideas gets more difficult the more out-of-the-box the idea is. Finally, these innovation seeds need special attention from the R&D managers to make sure they develop into successful products.

In summary, Borderless Innovation is a very good idea – if the organizations have processes, tools and metrics to manage it effectively. A strong intellectual property management skill is also needed to protect all this innovation.

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Using rivalry to spur innovation

Mckinsey Quarterly has an interesting article on how to spur innovation. Their suggestion is to use rivalry to drive innovation. As in the case of GE and reverse innovation in India, the underlying thesis is that innovation does not just happen – R&D managers need to actually provide the circumstances to fuel it.

One such approach is to through rivalry as it happened in Renaissance Italy. The author proposes three approaches to get the rivalry going in modern R&D organizations:

Forming teams. Competing teams could come from different divisions, include a diverse array of experts, and take explicitly different approaches to the same problem. After all, there are often many ways (sometimes coming out of different disciplines) to resolve an R&D challenge, and there is often no way of knowing which one is best without trying them out. Moreover, teams can have biases and narrow specializations, making it all the more important to have an explicit diversity of approaches.
Appreciating differences. During the Renaissance, paintings were placed side by side so that viewers could compare and appreciate them and other artists could borrow from them. In the same way, the various solutions that teams develop can be held up next to one another in order to judge them on their relative merits. On many occasions, ideas from one can be integrated into the other. Or a solution that is ultimately passed over can be sent back to the labs for development in new directions.
Conducting “market tests.” Another way to replicate the practice of paragone is to bring designs to an internal jury or group of customers and let them weigh and contrast the different solutions. In some cases, more than one of the products may find customers who appreciate them, just as Renaissance artists each had their own following.

If you have the luxury of setting up competing teams to do the same development, more power to you. Clearly, the other two suggestions are valid however you decide to evaluate innovation. Another interesting approach I remember is through “Theme-Based Innovation” – something I read in an RTEC case study of Coloplast‘s go-to-market strategy. They define launch slots for products and have a primary and an alternate candidate. Whichever makes it goes first. This way, you are not wasting any development resources.