MBIE1903-8273

Enterprise Innovation
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WEEK 9: Learning Innovation

 Importance of Learning
 Environments – fast changing. Ability to learn faster, better and more
cheaply than competitors could mean the difference between
market leadership and survival.
 Sales Learning Curve Concept – time taken to achieve cash flow
breakeven is reasonably independent of sales force staffing.
 It depends entirely on how well and quickly the entire organization
learns what it takes to sell the product or service while incorporating
customer feedback into the product itself.
 The key to learning is not to avoid making mistakes but to learn from
them (E.g. Microsoft had made learning from mistakes a virtue –
relentless improvement with Versions until the company achieves
market domination – listens and sees how the product is used).
 Importance of Learning
 Organizations not usually expert at learning from their mistakes on innovation.
 Systems that enable people to learn faster, better and in a cost effective manner
are vital.
 Innovation learning disabilities - Disbelief in effectiveness of innovation, stumbling
during implementation and execution, opting for incremental innovation and
amazed at other companies taking risks are typical signs.
 Company A – did not believe in innovation and failed to learn about it.
 Company B - organizational antibodies resisted change and innovation.
 Organizational change and learning go hand in hand. Innovation is all about
change and learning is an intrinsic part of innovation.
 Properly executed organizational learning can unleash powerful forces of
creativity and development of processes.
 CEO’s need to……
 Ensure specific processes for learning and change management are in place and
that they link to strategy and continuous improvement.
 Take a systems approach to complex organizational dynamics where actions and
reactions are understood.
 Ensure the organization is flexible and agile – enhance changes and create an
environment that is favorable to ongoing innovation.
 Anticipate challenges and threats instead of responding to crises. Often change
comes from within the organization rather than from the top.
 Ensure a collaborative, challenging environment is in place – this maximizes
creative tension and minimizes destructive tension.
 Two Major Types of Learning

 Learning to Act
 Learning to Learn
 Learning to Act

 Includes collaborative assessments of how current systems (structure,

processes and resources) are working.
 A shared understanding of strengths and weaknesses and a
proactive effort to improve them.
 Quality circles (team brainstorming) a classic example
(manufacturing PDAs).
 Planning effort focuses on incrementally improving current actions
and moves the company along the current strategic trajectory.
 May run the risk of becoming a ritual exercise with little value added
and the worst case of bureaucracy.
 Learning to Learn

 Consists of structure processes to assess how well the organization

learns and changes.
 Big Picture perspective is critical to ensure that the investments in
innovation are giving maximum return and that the organization is
building sustainable innovation.
 This style questions current processes as the best way to innovate.
 By questioning what is pursued and how, the organization is more
open to new ideas and educated risks.
 Innovation relies on both learning cycles

 Incremental Innovation – Learning to Act.

 Incremental innovation is grounded on the knowledge that is widely
shared in the organization.
 People know what the problem is, what potential solutions exist,
what the current process intends to do, why is it in place, how it
works and they can easily communicate ideas.
 This is explicit knowledge – can be stored and retrieved from
knowledge repositories.
 New projects can then use this knowledge coded in an existing
Intranet to provide better service to clients.
Innovation relies on both learning cycles

 Radical Innovation – Learning to Learn.

 Relies to a lesser extent on explicit knowledge.
 A dive into unexplored territory where knowledge is not well
articulated, it is raw in the heads of people and crystallizes through
interactions.
 Management may not be able to see this as a great idea because
of its inability to articulate it or find numbers to back it up.
 This is implicit knowledge. E.g. SpaceShipOne – developer did not
know how many people would buy space flights, but it was obvious
that a business opportunity existed.
 Learning Systems for Innovation
 Systems interact with the learning process of an organization at four
different levels.

1- Systems for delivering Value

2- Systems to refine the current market model
3- Systems to build competencies
4- Systems for crafting strategy
 1- Systems for delivering Value

 Reflect what the organization knows and makes the knowledge explicit in
the processes.
 These systems capture explicit knowledge coded into systems that govern
the innovation process.
 Their purpose is to make sure that the innovation effort has the highest
chance at to deliver the value it is intended to generate.
 Learning happens through adapting the system to the needs of each
particular effort.
 1- Systems for delivering Value
 These systems give visibility into the future of the innovation project.
 The learning is anticipatory – comes from planning ahead of time
and from examining the different alternatives before the team dives
into execution.
 They outline a path that provides direction to the innovation effort.
 The learning is mostly incremental.
 2- Systems for Refining the current model
 Systems interact with learning through the improvement of organizational
processes.
 They move the current business model into the future and embed the
Learning to Act cycle that forces constant improvement.
 Learning takes place about how an organization can improve its
innovation processes. Systems here refine processes.
 The learning here is not anticipatory but experiential. Team members draw
on their experiences to identify problems and envision solutions.
 2- Systems for Refining the current model

 The learning process may incorporate knowledge from other

organizations, through visits, use of consultants or external experts.
 Knowledge is implicit – it does not exist before the problem is solved
and usually develops through the effort of a team.
 Knowledge is dispersed in the heads of people and teamwork.
 A system review could lead to identification of a radical innovation
prospect.
 3- Systems for Building Competencies

 Facilitate the learning associated with new capabilities.

 Top Management uses these to induce the organization to
experiment and develop the capabilities needed for future
strategies (strategic renewal).
 These systems guide the knowledge creation process in the direction
of the chosen capabilities.
 4- Systems for Crafting Strategy
 Encourage and capture knowledge outside the current business model
that emerges throughout the organization.
 Ideas happen all the time and these systems ensure that they are not
wasted and do not go into creating value in a different company.
 Innovation emerges from unexpected places – unplanned discoveries that
initially may grow outside top management’s span of attention and could
constitute radical innovation projects.
 Attracts attention because of its uniqueness.
 Making Learning work – The Tools
 Learning is captured through a proactive approach.
 Several tools are available to do this – they have proven to be
valuable in helping crystallize learning so that the organization can
use it.
1- Knowledge Management
2- Ignorance Management
3- The Project Roadmap
4- Failure as part of the process
5- Learning Histories
 1- Knowledge Management

 Important elements to code data and give it a structure that makes it

useful throughout the company.
 These systems rely heavily on information technology and store particular
executions of organizational processes that can help current projects be
more efficient.
 Their value depends on their design – how easy it is to store and retrieve
information, how is the database structured and the discipline of the
organization to code learning histories of the projects.
 E.g. British Petroleum (BP) peer assists.
 2- Ignorance Management
 Incremental innovation builds on data about established technologies and
existing markets and uses the process of knowledge management and data
mining to move forward.
 For radical innovation, ignorance management replaces knowledge
management.
 Managers familiar with incremental innovation feel very uncomfortable when
ignorance dominates.
E.g. Salesforce.com
 Ignorance Management is the process of identifying the most important things the
team does not know and designing an approach to help reduce the ignorance to
a level that allows forward movement.
 Experiments are great ignorance management tools. They help in resolving
technological decisions and also business model design.
 Rapid prototyping is another example.
 3- The Project Roadmap

 Assist management in understanding how different innovation efforts

reinforce each other.
 A roadmap visualizes how the learning in a particular project becomes the
basis for a new project.
 Projects are not isolated efforts – they form a whole in which learning
accumulates to make possible alternatives that may otherwise seem
unfeasible.
 Motorola effectively used project roadmaps to plan and develop its line of
products. Robert Galvin, CEO huge supporter of the process.
 Roadmaps ensure that we put in motion today what is necessary in order
to have the right technology, processes, components and experience to
meet future needs for products and services.
 4- Failures – Part of the Process
 Difficult to predict at the start of the creative process which ideas will
be successful.
 Failure is an important part of the creative process.
 Learning what does not work often leads to what does work.
 If organizations do not realize the value of failure, people will be
discouraged from experimenting through the fear of failure.
 5- Learning Histories
 Learning histories review past projects, initiatives and situations to identify in as
unbiased way as possible, what really happened, what worked, what did not and
what the possible causes were.
 In story form, they speak to individuals in the organization better than slide
presentations.
 Crucial perspectives and insights are gained. They identify recurring themes. E.g.
Frito Lay used learning histories to understand the root causes.
 The purpose of the learning history process is to spark new insights both – in the
people who took an active part in this experience and in others within the
organization who could benefit from sharing this learning.
 Purpose is not to assign blame or credit – it is to try and learn from what is shared
from the experience.
Innovation Learning Lifecycle - Stages

 The Technology Stage

 The Performance Stage
 The Market Segmentation Stage
 The Efficiency Stage
 The Complementarities Stage
 1- The Technology Stage
 Early in the lifecycle of an industry, technology innovation dominates.
 Companies bet on different technologies – a risky environment populated by start
ups. Learning focuses on exploring new technologies and generating new
solutions.
 Learning systems focus on building the capabilities to develop the technologies
that top managers have in mind or crafting new ideas that may radically change
the technology.
 E.g. Computer industry in the 1970s, CRM software market.
 The outcome of this first stage is the emergence of a technology that dominates
the market.
 Large firms may create the technology and drive this first stage (e.g. Sony and the
Walkman). Other companies rely on learning from outside and establish links with
these start up companies (E.g. Intel Capital).
 2- The Performance Stage

 After a dominant technology emerges performance begins to improve quickly.

 A few companies may still look for new technologies, but most companies will
invest in improving the performance of the technology as quickly as possible.
 Performance is usually measured on single dimension – E.g. Image resolution in
digital cameras – competition focuses on this dimension.
 The advantage goes to the company able to execute the learning cycle faster.
Market share shifts quickly to the product that performs better.
 Examples – Guidant and Medtronic defibrillators – medical devices.
 3- The Market Segmentation Stage
 As product performance improves, certain customer segments are happy with the
level achieved and start valuing different product dimensions – price, availability,
cost of ownership, style etc. Now a new stage in the innovation process begins.
 Now the technology has stabilized, the attention moves to the market.
 Customer needs evolve quickly and new segments appear at a fast pace.
 The investment in learning moves to develop market knowledge.
 The winners are companies that are able to ‘read’ the market and understand the
differences across market segments.
 4- The Efficiency Stage
 As market segments stabilize, competition shifts to efficiently create more value to
customers (supply chain, design or marketing).
 Efficiency becomes critical. The winner is the most efficient company.
 Winning can happen via superior learning on how to make a steady flow of
incremental innovations.
 E.g. Toyota and its quality drive in 1970s.
 Most of the innovation game is played out around a theme – a new technology, a
leap in performance or a new market segment may redefine the industry and
move it to a new lifecycle.
 5- The Complementarities Stage
 This capability comes from establishing a network of partners that can substantially
enhance the value proposition to the customer.
 Competition shifts from identifying the value proposition for each market segment
to managing interactions and complexity.
 Example – FMC Corporation.
 Example – Microsoft and Sony.
 As industries evolve incrementally, through these lifecycles, radical innovations can
move the industry to a new lifecycle at any time.
 Learning and the Innovation Rules
 Leadership supports learning and puts in place systems to make it happen.
 Driving innovation into the business mentality requires learning and change.
 Learning systems are necessary to manage the balance between value creation
and value capture (E.g. Apple too much value creation not enough value
capture).
 Innovation networks are dynamic. Managing them requires information and
learning to remodel and update the structure. Without learning, networks
become bureaucratic and ineffective.
 Learning is one of the most important elements in combating organizational
antibodies. Learning systems allow the organization to differentiate between
good and bad changes.
 Innovation learning changes over time as the business and industry evolve from an
initial technological focus for innovation through to a mature stage where
efficiency becomes the focus of innovation.
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Questions?