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Implementing Structured Approaches to Innovation: From Theory to Practice

Exam Synopsis: Implementing Structured Approaches to Innovation: From Theory to Practice Name: <redacted> Hand-in date: 25 Oct 2012 5 Pages, 9812 characters

What is innovation? Innovation is everywhere around us today, and there have been many formal attempts to define it. Michael Porters definition, and even Joseph Schumpeters 5-point definition from the 1930s take a holistic view of innovation, while other definitions such as Everett Rogers idea, practice, or object that is perceived new by the individual, or other unit of adoption focus on the perception of newness. Goffin and Mitchell refer in their text to the dimensions of innovation, i.e. New Product Innovation, Services, Manufacturing Processes, Business Processes and Business Model Innovation. In this course we looked at innovation mainly from the New Product Development or NPD perspective (because it is the most frequent type of innovation project for most companies), although the underlying processes and concepts are applicable to most other types of innovation perspectives like the service sector, or even social innovation. Hence for the purpose of this document while I restrict the definition of innovation to an NPD perspective, the ideas discussed are directly applicable to most types of innovation. Why innovation? Economic growth is the most obvious driver for innovation. As innovation transforms knowledge into new products, it becomes a major, if not fundamental, source of growth. Companies innovate in order to enjoy the benefits of the competitive advantage it brings, and of course the resultant growth in revenues and the bottom line. For humanity, innovation is about progress. But the need for innovation from a company perspective is about survival. In the words of Kantrow, For companies to survive a discontinuity they must face the rather unpalatable reality that there may have to be fundamental changes in who they are, what they do, and how they do it. Why a structured approach to innovation? Structured and formalized approaches distinguish the sciences from the arts. Managing innovation within an organization is a complex (and potentially expensive) affair, that requires a wide range of capabilities including technical skills of engineering and project management, business skills of finance and control, soft skills from the social sciences of people management and creativity, as well as knowledge of risk management techniques. The manager in charge of overseeing NPD activity in an organization has to integrate this diverse range of skill-sets from different streams while meeting other reporting and company specific strategy objectives. In such a situation, adopting an established integrated methodology can make life much simpler if an appropriate methodology can be found, of course. We look at two structured approaches or frameworks in the course, the Innovation Pentathlon Framework by Goffin and Mitchell that builds on Wheelwright and Clarks Development Funnel, and Robert Coopers popular Stage-Gate System. In practice, an organization may choose one of these or any other system, or choose to create their own

process to manage innovation. There can be many approaches to managing innovation, and they can be contradictory for example, Takeuchi and Nonaka (1986) discuss a rugby-like approach where the NPD process arises out of the interplay of a multidisciplinary team. They specifically argue against defined and highly structured stages, which on the other hand, although in different ways, form the basis of both Coopers Stage-Gate system and NASAs more linear Phased Review system. How are these frameworks supposed to be implemented in an organization? Once the manager has chosen a framework that is in line with the organizations strategy and vision, the existing culture and structure, as well as the innovation goals the manager is trying to achieve, the manager now needs to bring in the change and implement the framework. This typically starts with some sort of assessment to judge where the organization is currently in terms of an innovation process and performance. There is a fundamental prerequisite of buy-in from top management, which is essential to proceed. The Pentathlon framework suggests approaching the implementation from a project perspective, while Cooper suggests this could be a lifestyle change in the company culture. In either case, the gap between the new product development performance and objectives should be identified, and the current practices should be audited to identify both positives and deficiencies. This is a great time to benchmark other firms, or preferably to analyse industry reports to set benchmarks. If taking a project approach, project management principles can be applied, dividing the project into phases, setting project aims in a project charter to create specifications, and allocating time and money. Along with the Project Schedule, the Work Breakdown Structure and Resource Plan are created. Risk management is also an important aspect, which can be covered through the use of checklists, or the use of Failure Mode and Effect Analysis (FMEA). For service products, service-concept descriptions and service blueprinting are handy additional tools to generate ideas for innovation. Managing Stakeholders and expectations is an important aspect for any change project, and since innovation is likely to cause a change in the existing order of things, resistance must be anticipated and dealt with. Johnson and Scholes Spectator Matrix is a simple but effective way of classifying stakeholders and the managers response to them. Once the innovation management system is in place, continuous assessment is necessary to ensure it is functioning in line with the desired objectives and companys strategic goals and vision. For project style approaches, a post-project review session is helpful, especially if this knowledge is made available formally to future projects. Creating permanent change through culture

If done correctly, institutionalizing a culture of innovation in an organization can be one of the most beneficial outcomes of a structured approach to innovation. Companies which go out of their way to provide employees the freedom and support to innovate find innovation becoming a part of their culture. Bringing in an innovation system is itself an innovation for an organization. During this process, the organizational structure can be realigned, creating cross functionally aware or autonomous teams. Routines, rituals and symbols can be utilized to support innovation. However this must all be supported by adequate control systems including processes for portfolio and NPD management. Measuring Innovation Performance through Assessment Only that which gets measured can be improved. However, according to McKinsey, measures are one of the main challenges of Innovation Management. Organizations need to measure all three of inputs, process and outputs. Here it is vital to note that the number of patents filed is merely an indicator of creativity, and not innovation. Earnings from patent licensing are a more appropriate measure. According to Neely, Richards, Mills, Platts and Bourne, Measurement Systems should be simple, easily understood, linked to strategy, reliable and appropriate. Innovation audits are another method of collecting both quantitative and qualitative information that can provide insights into the organizations performance on innovation parameters. Priority areas and linkages thus identified can improve the efficacy of the structured innovation system. What happens in reality? From practical experiences of managers who have implemented innovation frameworks and other structured approaches to innovation within their organizations, we see that the formal approaches are rarely, if ever, implemented exactly. Christiansen and Varnes (2009) talk about the practical need of managers for sense-making of the formal rules into flexible systems suitable for their organization, culture or projects particular requirement. We a have also heard how the Stage-Gate System is modified for use at Rockwool as a type of innovation project dashboard. As also observed at Amazon, a company known for its innovative environment and culture, I feel that when frameworks are modified or temporarily abandoned for a particular innovation project, it might improve the speed or performance of that innovation project, however this prevents the full benefits, including tacit learning and knowledge transfer, from reaching the organization. Conclusions I feel that in reality until structured approaches to innovation management take on an almost religious practice like what happened with TQM, Six Sigma, Lean or TPS, managers will continue with ad-hoc implementations that satisfice temporary requirements but are not continued in the long run. Such implementations also do not

bring with them the long term benefits like creating an organizational culture of innovation. For this religious adoption to happen, innovation management needs a large and visible corporate benefactor, a success story that makes people stand up and take notice, like what GE did for Six Sigma and Toyota for TPS. Although systems like StageGate are popular, I believe that on a larger scale, organizations are more likely to follow such corporate-promoted success stories than consultants like Cooper.

References: Cooper, R.G. (2011), Winning at New Products Goffin, Keith and Mitchell, Rick (2010), Innovation Management: Strategy and Implementation using the Pentathlon Framework Christiansen, John K. and Varnes, Claus J. (2009), Formal Rules in Product Development: Sensemaking of Structured Approaches, Journal of Production and Innovation Management Vol. 26, pp 502-519 Neely, A., Richards H., Mills, J., Platts, K. and Bourne, M., Designing Performance Measures: A Structured Approach, International Journal of Operations and Product Management, Vol. 17, No. 11 (1997), pp 1131-1152