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Corporate Innovation Online

In this presentation we de-construct and re-build an organization’s management practice to focus on innovation. We set out measures which can be used to assess whether innovation is working. Releasing creativity from its ‘surrounds’ is the challenge!

Web site: http://www.corporateinnovationonline.com

Demystifying corporate innovationEffective innovation management

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Table of Contents

Overview

De-constructing

innovativeness

Management

practices impacting

innovativeness

Measurements of

innovativeness

Stages of innovation

management

Leadership

Organization and

management of day-to-day

affairs

Idea generation and

realization

Creativity

The ‘surrounds’ of corporate innovation

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Creativity, as a key part of the innovation process, remains mostly a mystery, and will likely remain so for some time to come. Creativity is at the centre of innovativeness and yet is the least understood.

While creativity remains much of a mystery, other aspects of corporate innovativeness are much better understood and yet, remarkably, often missed in practice.

De-constructing a corporation’s innovativeness can be part of a process which ultimately provides an opening for creativity.

Overview

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The toughest nut to crack is creativity and there is no solution to this aspect of innovation except for having the right people and more specifically, their brains.

The ‘surrounds’ of creativity are, however, more amenable to understanding and therefore able to be restructured and improved upon.

Measurement is the best way to start to really understand if innovativeness is working.

De-constructing Innovativeness

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Other aspects of innovativeness are much more open to modification than creativity. There are at least three themes to understanding the management practices which encourage innovativeness – the ‘surrounds’.

First, obviously is leadership, nothing happens unless top level support for innovation at Board and CEO level is evidenced.

Secondly, there are better and worse ways of organizing and managing a corporation and each practice, by itself or with other practices, can impact innovativeness.

Thirdly, and specifically concerning the movement of ideas within the corporation, there are practices which can stimulate or retard the flow of ideas. Without ideas - the only evidence of creativity at work - there is no innovation. Innovativeness becomes marginalized.

De-constructing Innovativeness

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A recent study has shown that innovation per se cannot only be studied and measured but also nurtured and encouraged.

Creativity, as Einstein put it ‘is the residue of time wasted’.

Examples provided are drawn from the corporate practices of highly-innovative companies such as 3M; which we have researched at length (see 3M profile on the web site).

Part of measurement – and nurturing – is to know which management practices lead to innovations.

The Economist, March 17, 2012, a review of a new book by Jonah Lehrer, Imagine; How Creativity Works, published by Canongate

De-constructing Innovativeness

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Management practices impacting innovativeness

We segment

management

practices into

three themes;

• Leadership

•Organization and

management of

day-to-day

operations

•Idea generation

and realization

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Emphasis on short versus longer-term profits – F#1

Extent to which management explicitly looks for innovation – F#2

Planning emphasizes opportunities and not just cost reduction – F#4

Use of career ladders and recognition of innovators – F#7

Tolerance for risk in the planning process – F#9

De-constructing Innovativeness Leadership

Leadership plays the key role in setting the ‘surrounds’. Five management practices, if recognized, can make a big difference to setting the climate - the culture – for the organization.

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Emphasis on management of people and their interactions – F#6

Degree of formal communications in the organization – F#10

Use of independent work groups – F#11Management decisions with input from a broad cross

section of employees – F#12Formality of the decision process – F#13Planning versus action orientation – F#15Decentralization versus centralized hierarchy – F#18Staff versus line involvement in the decision process – F#20

De-constructing Innovativeness Organization and management of day-to-day affairs

Simple practices ,which are well known, can be improved upon to create a climate which encourage people to share, trust, and engage in the process of innovation. Finding the right balance is the key!

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Tolerance for mavericks – F#3Tolerance for failure – F#5Tolerance for variation from a corporate norm

– F#8Mechanisms in place to reward innovators –

F#14Resources generally available for new

ventures – F#19R&D budget levels above the competition –

F#23

De-constructing InnovativenessIdea generation and realization

Priming the ‘innovation pump’ is brought about by demonstrating tolerance on a number of fronts and by judiciously funding new ideas whether big or small.

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De-constructing InnovativenessNot all Factors are equal in their cause and impact!

F#19; availability of resources for new projects is seen to be constrained

•F#5;tolerance for failure takes a hit and the company becomes more risk averse

•F#23; R&D budget put under heavy scrutiny and likely constrained

F#15; managements' focus shifts to more careful analysis - less action

•F#12; management restricts input from staff overall in order to make difficult decisions

•F#18; organization becomes more heavily centralized

•F#13; decision process taken to a new level of scrutiny and formality

•F#11; authority granted to independent groups is curtailed

•F#10; communication within the organization becomes more carefully spun and less frequent

F#4; management shifts emphasis to rationing resources and less on looking for opportunities

•F#2; employees question managements' real interest in being innovative

•F#9; tolerance for uncertainty in the planning process drops

What happens when management and the Board shift emphasis to profit improvement – short term! The degree of ‘shift’ is as important as the new focus.

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By breaking down the 19 management practices which impact innovativeness and innovation, we can assess the relative importance of each Factor and whether the organization has best practices in place; i.e. understanding the ‘surrounds’.

The climate for change is dictated by the focus and statements from management and the Board.- stimulating innovation – because it is missing?- creating shareholder value – if the shares have been depressed?

Knowing the current situation is basic to making a decision on what to improve and what to leave alone.

The next step is to measure, as best one can, whether innovation is working – or not.

De-constructing Innovativeness

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Many corporations use as a measure of innovation the percentage of new products which have been introduced over the last 5 years and seek to keep this figure at 25% or better (see P&G profile on the web site).

The hypothesis is that the product line is continually being refreshed, new business platforms established (See DSM profile on the web site), and that change will bring about growth and profit.

The percentage of new products is an indication of product-inspired innovation but is, in reality, only one part of the answer to the question; is my corporation’s innovativeness in place and working well?

Innovation goes beyond the introduction of new products!

http://www.corporateinnovationonline.com.

Measurement of Innovativeness

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Measurements of Innovativeness

• New industries

penetrated

• Product Line Extensions and Enhancements

• Business Process Continuous Improvement

• New Products• New business

models/platforms

High riskInvestment in creativity in new and emerging technologies Low riskInvestment in reward systems to capture and implement new ideas

Medium riskInvestment in technologies and creativity to differentiate a product or service

Low riskInvestment in common technologies to keep up to date

Every innovation requires an investment of funds, time, and emotion and comes with risk.

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New products, business models and platforms

•Patent applications•Patents achieved•Ability to hire SMETS personnel•Number of ‘breakthroughs’•Rewards from external sources•Publications in prestigious journals•Licensing fees derived• New products as a % of current offerings•Dropping under- performing products

Business Process and continuous improvement

•Reduction in cost per unit•New technologies adopted•Service levels improved•New customers added in existing markets•Revenue per employee•Revenue per units of production•Measurable quality improvements

Product line extensions and enhancements

•Ideas generated and in the pipe-line•Ideas generated and implemented•New markets entered

New Industries penetrated

•Number of collaboration linkages•Stakeholder (employees, suppliers, customers) surveys•Results of ‘exit’ interviews with innovators•Risk profile at target level

 

 

 Measurement of InnovativenessOther measures

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Measurement of Innovativeness Other measures

Surveys that provide customers opinion of your company’s innovativeness and its brand image – as compared to the competition.

Financial analyst rankings and feedback from investor relations broadcasts to the media.

Stakeholders’ (in this case suppliers, investors, etc.) opinions on the ‘innovativeness’ of your company compared with their opinion of the competition.

New sales to new customers - marks the rate of new customer acquisition reflecting the efforts to enhance the brand.

Measurements of incidence, or rate of increase, of attractive, internally generated investment opportunities (the size of the pipe line) which come under review by senior management and the Board.  

Increase in the value of intellectual property generated from internally-sourced ideas; augmented by acquisitions of IP from other organizations. The information could be broken out by IP for existing versus new product initiatives.  

Share price premium attributed to the company’s reputation for innovativeness. Conducting an analysis focused on employee retention and ease of attraction. Collaborations and partnerships reflecting the company’s reputation for its

innovativeness The percentage-of- time key executives/Board members spend on innovation as a

specific topic of a meeting, seminar or workshop.

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The on-line survey, one of the tools used to measure innovativeness, addresses employees and stakeholders’ opinions regarding 25 Factors which provide metrics for corporate innovativeness.

Respondents are asked to provide their opinion on what would be an ‘Ideal’ situation and then asked for their opinion on their ‘Reality’. The difference is a measure of their concern

The answers to three of the 25 Factors can indicate the presence of a problem. The answers to the remaining Factors provide a direction for making changes.

Measurement of InnovativenessOther measures – the on-line survey

Factor #

Means of measurement Explanation

21Innovators are leaving the company – or not. Factor #21 – a huge gap between the ‘Ideal’ and ‘Reality’ indicates

the presence of an issue.

22Company has an innovative tradition – or not. Factor #22 – a tradition established and still exists? Establishing a

tradition is more difficult than keeping one!

24A sense that innovation is increasing or decreasing.

Factor #24 – probing in which direction innovation is trending?

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Do all or most employees appreciate the importance of innovation to the future of the company?

Is management’s message regarding innovation getting through?

Is what we do as managers, encouraging innovation thinking?What is the employee attitude to innovation?Are innovative people leaving the firm? Why? Is the starting point that the company already has an

innovative tradition or is the view that this has yet to come?How do we identify our innovativeness? How broad and how

deep is our innovativeness?

Measurement of Innovativeness Critical questions

In summary, the idea is to remove constrictions which interfere with the release of ideas for improving productivity and shareholder value.

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Stages of innovation and innovation management characteristicsInnovation

management Start Up Rapid Growth Growth Mature Aging

Management’s overall attention

Establishing credibility

EntrepreneurshipSurvival

Developing a strong competitive position

Market share

Maintaining a strong competitive position

Maintenance of profit and market position

Exiting the businessOngoing survival

Innovation effort

Specific new product development tasksSetting in place the seeds of a culture for innovation

Business model establishmentNew product quality and supportCustomer feedback for success

Product enhancements and modificationsSearch for innovation

Opportunistic only

Innovation management systems

Non existentReward is skewed to share value appreciation

Simple idea management systemRewards migrate to other forms of recognition

Full-fledged idea management systemSophisticated reward system for full range of innovation spectrum

System maintenance

Management structure

Loose and informal, lack of definition of responsibilitiesIndividual performance

Some organizational definition requiredIndividual and group performance

Group performanceDecentralizedWell defined responsibilities and accountabilities

Management’s innovation style Open and ad hoc Bordering on

participativeOpen and non-hierarchical Formal, delegation and control

Collaborative initiatives

Virtually none outside the enterprise Mainly Internal effort

Seeking outside collaborators; research institutions etc. for new ideas

Managing outside collaboration

Likely casualty during stage

Cost reduction and continuous improvement, cost containment

Risk profile shifts from risk taking to more conservative

New products No new products

Stages of innovation managementMeasuring innovation is more relevant and important at the middle stage of development

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Leadership

Organization and

management of day-to-day

affairs

Idea generation and

realization

Creativity

Selecting the appropriate measure(s) is a most important step. The choice will dictate the approach taken at all levels in the organization and impact the climate and the culture for innovation.

The measures chosen then become the target for objective setting.

2011

2009

2007

$- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000

Revenue Per Employee/Store

John Deere (per employee)Starbucks (per store NR/Total Stores)3M (per employee)

Revenue p

er

unit

Unleashing creativity is the goal

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