Introducing the Corporate Innovation Process

Innovation has rapidly assumed a position of prominence in world competition. Today's marketplace is characterized by fast-paced and unremitting competition on a global scale. To compete in this environment, organizations need a level of innovation and intrapreneurship that was unheard of even a decade ago. As competition becomes more global and time-based, corporations must develop and deliver better new products in less time. The challenge for modern organizations is to revitalize themselves so they can successfully and continuously develop new products and new businesses. They must not only improve their procedures for new product and new business development, but must also improve their culture. It is not enough that a company have an effective innovation process; it must also have an innovative culture. In this book, we will use the term innovation to mean the development of something new from its earliest beginning to it ultimate completion. New product development refers to the development of a product, either a good or service, from its initial idea until it becomes a commercial product available for public use. A venture is a product, market, or process development project thatgoes all the way from the initial idea to a commercial product, market, or process. A venture refers more to the development project than to the new product itself. The term is also more general in that it can refer to market and process development as well as product development. We will usually use "venture" in lieu of the more lengthy "new product development project." When we discuss the venturing process we are discussing the development process primarily for new products, but possibly for new markets and new processes as well. An intrapreneur is involved in the venturing process, that is, in developing a new business inside a corporation from its initial idea until it becomes a viable business. Entrepreneurship differs from intrapreneurship in that entrepreneurship refers to a new business developed outside an existing business rather than inside.Innovation will be used as the more inclusive term that includes both intrapreneurship, new product development, and venturing. The innovation process is extremely detailed and complex. If a company is going to be successful at innovation, it must have a model of the innovation process that everyone in the company knows and follows. In this way, the collective actions of everyone involved will be coordinated, even though the people involved may change with time. History indicates that one of the major causes of failure in new product developments is the lack of a valid model that everyone in the company can follow.

This book provides a time-tested, easy-to-follow model of the innovation process that organizations can use to become competent in new product development. The Corporate Innovation Process is made up of two processes: (1) the Innovative Culture Development Process and (2) the New Product Development (Venturing) Process. As we will learn, the Innovative Culture Development Process is a continuous process that never ends, whereas the Venturing process is a repetitive process that repeats for each new product. After defining the meaning of an innovative culture, we will provide an overview of its development in the first half of the chapter and then describe the development of the corporate venturing process in the second half of the chapter.

DEFINING AN INNOVATIVE CULTURE

For an enterprise to succeed in global competition, it must develop new products and new businesses in less time with higher quality than its competition. There is no question that the new product and new business development processes themselves must be highly effective and efficient. However, that alone will not ensure that a company's new products and new businesses will be competitive. The product and business development processes must be supported by an appropriate culture throughout the enterprise. A growing body of research indicates that the individual innovators and intrapreneurs must have an organization that supports, encourages, and fosters innovation for the company to succeed in the long run. In short, for an innovative company to succeed, it musthave an innovative culture. We do not take the position that innovation cannot occur without the proper culture. It has occurred in the past in an extremely hostile culture, and it will undoubtedly occur in such cultures in the future. However, the appropriate culture will enable innovations to occur faster and better. If all companies use the same product development procedures, the company with the better culture will win the competition. However, a company should not wait for its culture to be right before starting innovation. Not only might the wait be long, but a successfully completed innovation is one of the best actions for improving a company's innovative culture. In the first half of the chapter, we will define an innovative culture, the culture a firm should have to excel at new product development. We will first look at corporate culture in general, then identify the characteristics of an innovative culture, and finally look at how an innovative culture is developed.

What Is Corporate Culture?

Every organization has its own culture. Organizational culture is similar to an individual's personality -- an intangible, yet ever-present theme that provides meaning, direction, and the basis for action. Culture is the shared values, beliefs, expectations, and norms learned by becoming a part of and working in a company over time. Much as personality influences the behavior of an individual, shared values and beliefs within a company influence the pattern of activities, opinions, and actions within the firm. A company's culture influences how employees and managers approach problems, serve customers, deal with suppliers, react to competitors, and otherwise conduct activities now and in the future. Corporate culture is an organization's basic values, beliefs, and assumptions about what the organization is all about, how its members should behave, and how it defines itself in relation to its external environment. A culture is an organization's reality; its culture shapes all that goes on within an organization. Culture represents the unwritten, informal norms that bind organization members together. A culture is reflected in an organization's philosophies, rules, norms, values, climate, symbols, heroes, and almost everything its member do. In summary, we will define corporate culture as "the set of shared behaviors, artfacts, values, beliefs, and assumptions that a corporation develops as it learns to cope with the external and internal aspects of survival and success." We will define an innovative culture somewhat more practically and broadly. When we use the term innovative culture we are referring to the total internal environment that supports, or hinders, new product development throughout the total enterprise. An innovative culture includes anything and everything within the total internal environment of an organization that affects new product development. Success in new product development requires a supporting, innovative culture, one that strives for excellence and endeavors to win continuously by developing products and services that are unequaled in its marketplace. Corporate culture can be pictured on two levels, as shown in Figure 1-1 : the upper level is outwardly observable, but the lower level is hidden from view and resides in people's minds. The upper observable level includes observable phenomena such as artifacts, patterns of behavior, speech, formal laws, technical know-how, and the use and production of physical objects and products. The deeper, hidden level is located in the minds of the members of the organization. It includes the mental frameworks, ideas, beliefs, values, attitudes, assumptions, and ways of perceiving the environment. It contains the

internal processes through which behavior is learned and the implicit (often unstated) rules through which behavior is governed. These two levels of culture are easily distinguished, but nearly impossible to Figure 1-1 Observable and Hidden Levels of Culture Includes anecdotes, art, ceremonies, OBSERVABLE Behaviors heroes, habits, communications, jargon, language, LEVEL and Artifacts management practices, myths, norms, physical arrangements, Readly observable, but hard to rituals, stories, symbols, and traditions interpret Includes assumptions, befiefs, HEDDEN Values, Beliefs, cognitive processes, commitment, consensus, ethics, LEVEL and Assumptions feelings, ideologies, mind-set,philosophy, principles, purpose, sentiments, Not directly observable-can be thinking, understanding, values, vision, inferred worldview from how people Justify what they do separate. In reality they are two parts of the same entity. The hidden level of culture usually can be inferred by observing the behavior of organizational members, especially those at the top. Each level reflects and reinforces the other. Each person inherently desires the two levels to be consistent and will instinctively modify his or her behavior and/or thoughts to make them consistent. The hidden aspect of the culture is the substantive portion of the culture, the part that truly influences peoples' behavior. If managers focus only on the observable aspect of culture, they will not fully understand the human behavior they are trying to manage, which is controlled by employees' values and beliefs, the hidden aspect of culture.Culture emerges in organizations because of the organization's need to deal with the external and internal aspects of survival and success. Organizations face options and influences as they face their customers, suppliers, regulators, and other entities in the external environment. To cope with the external environment, they must develop cultural solutions for adapting, including:

A sense of corporate purpose (mission) Corporate objectives and strategies for achieving the mission Lower-level objectives and strategies, focusing on product-market strategy Procedures for measuring and revising planned courses of action

To adapt to and integrate the internal environment, a firm must address the following issues: A sense of shared meaning (vision) Organization structure Developing and Managing Human Resources Designing and Managing Work Processes Continuously improving processes and people

In Chapters 2 through 5, we will discuss these aspects of an innovative culture in more detail.

What Is an Innovative Culture?

An answer to the simple question of "What is an innovative culture?" is neither simple nor short. In the following pages, we will try to give you an idea of the complexity and scope of an innovative culture by discussing some of its most significant characteristics. 1. Far-Sighted High-Level Strategic and Cultural Leadership. Highlevel leaders in innovative companies take the long-range view, looking down the road and striving to anticipate every contingency. They develop a mission and vision that are consistent, challenging, but realistic. They also develop strategic plans to achieve the mission and cultural plans to achieve the vision. Innovative leaders attract the voluntary commitment of followers to the company's mission and vision through example and assertive, convincing persuasion. Innovative high-level leaders take charge, make things happen, dream dreams, and then translate them into reality. They make decisions that serve long-term strategic and cultural purposes rather than making short-term politically expedient decisions. 2. Emphasis on Innovation, Intrapreneurship, and Achievement. The need to be innovative and the need to explore new approaches in the future are integral parts of the company's culture. All employees at all levels of the organization welcome new ideas and are extremely active in generating new approaches and new ways of doing things. There is a

willingness to take risks and an eagerness to break new ground. People are hired for their creativity, talent, and diversity. Innovative people are held up as examples and appropriately recognized. Formal training sessions are used to help people free up their creative energies and become more innovative. The corporate growth plan includes a definition of the role of internally developed new products during the next five years. 3. Strong Customer Focus. Members of an innovative organization recognize that every company and every person are part of a long chain (actually many long chains) of customers and suppliers. Each company and person is a customer to its suppliers and a supplier to its customers. They understand both near-term and long-term customer needs and expectations and employ systematic processes for gathering customer needs and market information. They understand the linkages between the voice of the customer and marketing, design, and production. They measure customer satisfaction, compare the results relative to competitors, and use the information to evaluate and improve internal processes. Products are designed to satisfy the customer's needs rather than what the producer thinks they need or can best build. 4. Emphasis on Total Quality Management. In the innovative organization everyone -- both managers and workers -- are deeply involved in a continuous integrated effort to improve the quality of the firm's goods and services at every level. Continuously improving quality will maximize the customers' total satisfaction and minimize the firm's total costs. Total Quality Management is a total system approach that is an integral part of the firm's high-level strategy. It works horizontally across functions and departments, involving all employees, top to bottom, and extends backward and forward to include the supply chain and the customer chain. 5. Flexible and Adaptable Organizations. If hierarchy was central to traditional organization, the lack of hierarchy is central to the innovative organization. The innovative organization is much flatter, with fewer levels of managers. Most work will be horizontal (process) knowledge work performed by multidisciplinary teams. Rather than satisfying their immediate supervisor (vertical relationship), team members concentrate on satisfying the needs of the next person in the process (horizontal relationship). The composition and life of the project teams will be dynamic. Teams will be given considerable autonomy and will be expected to carry out the intent of the company's mission and vision. Networking will be used to hold the teams together and coordinate their actions. Project managers and network managers will replace most of the

middle managers and functional staff in the traditional organization. 6. High Levels of Collaboration, Teamwork, and Trust. An act of collaboration is an act of shared innovation and/or shared discovery. It takes the collaborative efforts of people with different skills to create innovative solutions and innovative products. Current situations put a real premium on group processes, trust, and reaffirmation of what we believe. Companies succeed by tapping the talent and dedication of their people and by combining that talent and dedication in a team effort. The building of trust is emphasized. Politics, infighting, and departmental jealousies are minimized. Leaders work hard to earn their peoples' trust and to create conditions in which trust can flourish. There is widespread enthusiasm, a spirit of doing whatever it takes to achieve organizational success. 7. Participative Management Style and Employee Empowerment. Innovative organizations are taking the lead in implementing employee empowerment. Empowerment means giving power and is the natural extension of employee participation concepts such as quality circles and task teams. However, it is more than employee participation. It represents a high degree of involvement in which employees make decisions themselves and are responsible for their outcomes. The objective of empowerment is to tap the creative and intellectual energy of everybody in the company -- not just those in the executive suite -- and to provide everyone with the responsibility and resources to display real leadership within his/her own individual sphere of competence. The ultimate goal of empowerment is self-management, in which employees exercise complete responsibility and initiative, monitor their own work, and use managers and staff as teachers and facilitators. 8. Emphasis on Human Resources. In the current era, human resources -- not financial and physical capital -- -are the organization's competitive edge, and innovative organizations maximize the output of highly educated workers. Human