doing innovation creating economic value book1

7/28/2019 Doing Innovation Creating Economic Value Book1

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Published by IEEE-USA

Copyright 2009 by the IEEE. All rights reserved. Printed in the United States o America

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Cover design and layout by Josie Thompson, Thompson Design

This IEEE-USA publication is made possible through unding provided by a special dues assessment o IEEE

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Copying this material in any orm is not permitted without prior written approval rom the IEEE.


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Tabe of Ctets

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Book I. Perspectives on Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Historical Background o Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Ambiguities Associated with Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Innovation as a Management Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Basic Concepts o Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Independent Innovators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Organizational Innovators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Bottom-up Innovators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Top-down Innovators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Technological Innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Management Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Continuum rom Idea to Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Raw Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Invention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Types o Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

How Innovation Takes Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Brainstorming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Creative People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Problem Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Sources o Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Open Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

DoInG InnoVATIon: CrEATInG EConomIC VAlUE Book I. PErSPECTIVES on InnoVATIon


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4 Itducti

Doing Innovation: Creating Economic Valuecomes about rom a concern that while

innovation appears to receive considerable attention in the academic and business media,

these so-called innovations provide little, i any, consistent and signicant economic growth.

Academia, government, and industry struggle to various degrees to translate ideas into

innovations that not only provide or economic growth but also oer some social benet.

Articles that present Innovations-o-the-Year too oten describe substitute products with

new bells and whistles. These products took considerable eort and talent to market and while

interesting, do not provide signicant economic value.

The Doing Innovation series will include our E-Books that provide the reader with an

understanding o the undamentals o converting ideas into innovations.

Book1Perspectives on Innovation

Introduction to innovation

Considers the ambiguities associated with innovation

Describes the basic concepts associated with innovation

Dierentiates between idea, concept, invention, and innovation

Denes the types o innovation

Identies how innovation takes place

Considers innovation in dierent types o organizations

Book2 Developing a Workable Innovation Process

Teaches the undamentals related to the innovation process

Presents various models with their limitations

Identies the limitations o process models Describes the innovation design process

Considers the issues in developing a process model

Suggests a generic model

Describes organizing or innovation



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Book3 Fostering an Innovation Culture

Links organizational culture theory and practice

Identies and classies cultures and their impact on innovation

Dierentiates the idealistic rom the real world

Considers what it takes to change a culture

Suggests the role o managers in changing culture

Describes some organizational cultures

Suggests approaches to developing the appropriate culture

Book4What It Takes to Be an Innovator

Identies the required personal characteristics and attitudes o the innovator

Describes the required skills o the innovator

Considers the role o the knowledge base o the innovator

Links the innovator to the organizations culture

Identies the innovators challenges

Presents the obstacles to innovation

Doing innovation

These our E-Books provide the basics or gaining an understanding o what innovation

involves, what it takes to be an innovator, and what it takes to develop a culture where

innovation can thrive. Innovation involves thinking about thinking. It is multi-disciplinary.

It is multi-unctional. It involves individual and team eort. It requires systems thinking.

Doing innovation is not a how to book series: its purpose is to learn and apply the

undamentals in the context o the organizations purpose and associated values. So, iyoure looking to become an innovator, or participating in the innovation process, begin

with Book 1: Perspectives on Innovation.

Gerard H. (Gus) Gaynor

InTroDUCTIon


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6

Book1Pespectives IvatiInnovation occupies many pages o the business and academic press, yet under close scrutinyit is dicult to nd innovation that provides economic value. We need to ask the question:Where are the innovations that have an impact on economic growth? Introducing new eatures

to current products or processes dominates the innovation discussion. This situation exists

because there appears to be much conusion as to what this activity we describe as innovation

really involves. Innovation is not science or engineering, and it is not technology; it is about

taking ideas and developing them into products and services and bringing them to the

marketplace to generate new economic growth. At times, it appears that the innovations that

drove economic growth in the past no longer exist. Innovations in the nancial sector are notconsidered in this discussion, as we might conclude that nancial innovations somehow missed

all the requirements o successul innovations.

Doing Innovation -- Book 1 explores:

A brie historical background o innovation

Ambiguities associated with innovation

Some basic concepts associated with innovation

A continuum rom idea, concept, invention, and innovation

Types o innovation

How innovation takes place

Innovation in dierent types o organizations



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Histica Bacgud f Ivati

In Search of Excellence,1 authored by Peters and Waterman and published in 1982, ocused

on the importance o innovation and entrepreneurship in pursuing business leadership.

The authors reported on their study o sixty-two companies that were considered to be

innovative and excellent by a group o management academics, business consultants,

the business community, and the business press. In their study, the authors ound that the

excellent companies were brilliant at the basics, tools didnt substitute or thinking, intellect

didnt overpower wisdom, and analysis did not impede action. These excellent companies

worked to keep things simple in a complex world, persisted in pursuit o their objectives,

insisted on top quality, valued not only their customers business but their product use

expertise, listened to their employees and customers, and gave the innovators and their

champions the opportunities to pursue the chaotic aspects o the innovation process.

The study identied eight attributes that characterize excellent and innovative organizationsas ollows:

A Bias f Acti emphasis on experimentation, try it do the last experiment

rst

Cse t the Custe learn rom people you serve, theyre a source o ideas or

innovation

Aut ad Etepeeuship innovation is an expectation, not a choice; risk

taking with discipline

Pductivit thugh Pepe people are the source o ideas, respect or the

individual

Hads-o, Vaue-Dive make the rst try, then the second, and as many as

required, based on the agreed value system

Stic t the kittig stay close to the businesses, technologies and markets where

you have competencies, but dont ear becoming the pathnder

Sipe F, lea Staff simpliy the organizational structure and watch the

headcount

Siutaeus lse-Tight Ppeties centralize and decentralize to t the needs

o the organization organized chaos precedes innovation


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8A ew years later, some o the organizations Peters and Waterman cited were no longer

excellent, but that was no reason to disregard the impact o the eight attributes aecting

innovation. It is dicult to argue against any o these attributes, however, Stick to the Knitting

may raise some issues. But Stick to the Knittingdoes not imply that you orget about whats

going on in the world. Henry Ford introduced the Model T, but the technologies that made it

a success did not work in the post-World War II period. The idea that you could have any color

you wanted as long as it was blackno longer met customer requirements. Organizations needto stick to areas where their competencies allow them to perorm eectively in their eld o

interest. It is doubtul that Boeing would wish to compete with 3M in producing Post-it Notes,

and likewise, it is doubtul that 3M would begin investing in designing a leading edge aircrat.

So, Stick to the Knittingimplies that the knitting may need continuous monitoring and ne

tuning.

Peters and Waterman also provide an example o what hinders the innovation process. One

product innovation they researched required 223 interviews and approvals rom seventeen

dierent standing committees to develop it rom an agreed upon concept to the marketplace.

Each o these 223 links may have made good sense but created a sort o macro nonsense.

In this example, the management process dees logic.

HISTorICAl BACkGroUnD oF InnoVATIon


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Abiguities Assciated with Ivati

Unortunately, it appears that it is almost impossible to agree on a common description oinnovation. Peter Drucker reminded us in Managing in a Time of Great Changethat everyorganization not just business needs one competence: innovation.2

Innovation does not come about rom Eureka moments. I, by happenstance, that Eureka

moment appears, it was most likely preceded by a signicant amount o prior thinking about

related thoughts. It was preceded by hours o attempting to ormalize an idea into an under-

standable and workable concept. Innovation does not occur by ollowing ten easy steps, or

ollowing the seven-step panaceas suggested by some innovation gurus who never participated

in the innovation process. Innovation involves the willingness to live through the proverbial

blood, sweat and tears required to accomplish a goal. It doesnt occur by watching the clock

rom eight to ve, and spending the day on doing what one is told to do. It requires individualinitiative, a sense o imagination, and a stick-to-itiveness to make it happen.

Innovation as a Management Discipline

Innovation requires reedom as well as a management discipline: it comes about rom a

disorderly process that searches or order and involves moving rom an idea to a concept to

an implementation or commercialization o the original idea. In more recent times, the word

innovation seems to appear without any understanding o the meaning o innovation. Too

oten, the word innovation is used without any relation to real innovation. Innovation is oten

used interchangeably with ideas, concepts, and invention. Ideas and concepts provide little, i

any, benet, unless implemented in some manner. Inventions provide little, i any, economic

value unless implemented. The ollowing comments3 rom those who have studied innovationprovide dierent points o view, and some insight and will help us dierentiate this continuum

that includes ideas, concepts, inventions and innovation:

Joseph Schumpeter:

Mid-20th century economist described innovation as the rst commercial use o a product

or process that hadnt previously been exploited.

Theodore Levitt:

Generally speaking, innovation may be viewed rom at least two vantage points: (1) new-

ness, in the sense that something has never been done beore, and (2) newness, in the

sense that something has not been done beore by the industry or company now doing it.

Strictly dened, innovation occurs only when something is entirely new, having never been

done beore.

Peter Drucker:

Its [innovations] criterion is not science or technology, but a change in the economic or

social environment, a change in the behavior o people as consumers or producers, as

citizens, as students, or as teachers, and so on. Innovation creates new wealth, or new

potential or action, rather than new knowledge.



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10Edward B. Roberts

The rst generalization is: innovation = invention + exploitation. The innovation process

covers all eorts aimed at creating new ideas and getting them to work. The exploitation

process includes all stages o commercial development, application and transer, including

the ocusing o ideas or inventions toward specic objectives, evaluating these objectives,

downstream transer o research and/or development results, and eventual broad-based

utilization, dissemination and diusion o technology-based outcomes.

Gifford Pinchot III:

Invention is the act o genius in creating a new concept or a potentially useul new device

or service. In innovation, that is just the beginning. When the invention is done, the second

hal o innovation begins: turning the idea into a business success.

Each o the descriptions o innovation ocuses on dierent aspects o the many issues in-

volved in the innovation process: none o them contradictory. Innovation must be viewed in the

context in which it takes place. It may have dierent meanings in the activities that lie on the

continuum rom one end that may involve a solid state device, and at the other end, implemen-

tation o a macro system such as a nationwide electric grid. 3Ms Post-it Notes may be at

one end o the continuum, the development o the Boeing 787 Dreamliner may be at the otherend o the continuum. Innovation is dierentiated rom idea, concept and invention, because it

involves execution, i.e., commercialization, or implementation.

The ollowing descriptions summarize what innovation involves as provided by comments o

the ve scholars previously considered:

Schumpeter proposes commercialization

Levitt ocuses on newness in the sense that it has never been done beore

Drucker requires changes in behavior in the economic and social environment, action,

and creating new wealth

Roberts suggest that innovation = invention + exploitation

Pinchot III considers innovation as turning an idea into a business success.

Innovation begins with an idea that is developed into a workable concept, and then hopeully,

into an invention. A summary o these descriptions can lead to proposing that:

Innovation = Invention + Commercialization or Implementation4

Invention is included in this description o innovation, because something new is about to

emerge rom the eort. Ideas lead to concepts to inventions. This theory does not suggest in

any way that the invention would necessarily involve issuance o a patent: it may or may not,

depending on the circumstances. Some organizations preer to ocus on condentiality, rather

than exposing details to the public through patents. Inventions may or may not involve some

revolutionary discovery. In most cases, inventions provide or creating new combinations o

what is already known into a new architecture.

I have included commercialization and implementation in this description o innovation, because

while the major growth objective may involve commercialization, there are innovations within

the organization or its unctional groups that are not commercialized, but are implemented.

These innovations, although not being commercialized, will provide a signicant benet. As

an example, innovations in those administrative and sta departments that provide signicant

savings by implementing innovative processes. To this extent, no organizational department can

be excused rom ocusing on innovation.

AmBIGUITIES ASSoCI ATED WITH InnoVATIon


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1Basic Ccepts f Ivati

Too oten, the concerns about innovation ocus solely on technological innovation.Technological innovation is a misnomer because it is really technological invention.The commercialization o the invention is what makes this new invention an innovation.

This concept is not just a play on words, but an attempt to avoid using invention to mean

innovation. Innovation is not innovation is not innovation: it occurs in dierent environments

and ocuses on:

Independent innovators

Organizational innovators

Technological innovation

Management innovation

Independent Innovators

Innovation does not occur by an algorithm or some standard model: it deals with unknowns, un-

predictable events, ill-dened and ambiguous goals. James Bryan Quinn5 considers innovation

as controlled chaos rom the innovators perspective, and ocuses on the mental attitudes

o the independent innovator and the corporate innovator. Quinn distinguishes between the

independent innovators working in the garage or on the kitchen table, and the organizational

innovators ghting the status quo bureaucracy. Independent innovators tend to operate inor-

mally: no long-range planning; can live with rustrations and setbacks more easily, since they

are not subject to the innovation prevention department, except perhaps by a disgruntled

spouse; are more optimistic than their organizational counterparts; and will spend a great deal

o their time seeking adequate unding. These people are willing to ulll their dream idea at

all costs.

The successul independent innovators play a major role in bringing new products to the

marketplace. They are oten a threat to major businesses, because they are generally unknown

until they publicly announce some new product or service. They also provide a base or

acquisition by major organizations. Much o the growth o the major producers o medical

devices has occurred though acquisition o start-up companies. Similar situations have occurred

in all industries.

Organizational InnovatorsOrganizational innovators involve two classes: those working on their own ideas that arise rom

the bottom-up, and those working on top-down ideas, in pursuit o an identied organizational

goal. The two groups are subjected to dierent infuencers.

Bottom-up innovators

Bottom-up innovation is what the name implies: innovation occurring someplace in the bowels

o the organization. Everyone is welcome to participate. Bottom-up innovators think dierently;



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12 ask many questions; have many interests and experiences; are dissatised without change;

sometimes considered arrogant; ask why not more oten than why; create problems or

their rst-level managers; reuse to take no or an answer; are not concerned about

possible negative impact on a career; gain a certain satisaction rom rocking the boat; and

disregard criticism, but determine to a great extent the uture o the organization.

These are the people who go through the laborious process o rst convincing themselves othe viability o an idea, and then convincing several levels o management. Being a bottom-up

innovator requires courage, collegial relations with colleagues throughout the organization, a

track record, and above all, the ability to sell ideas. You might ask why anyone would choose to

ght the corporate bureaucracy. The bottom-up innovator just accepts the act that naysayers

will exist until something is demonstrated, and then all will race to join the bandwagon.

Top-down innovators

Top-down innovation presents ew roadblocks to the innovator. The project obviously has the

blessings o some high-level executive who can run intererence with other executives and

managers, and will most likely become the sponsor o the eort, and who will take responsibil-

ity or the results. These top-down projects usually come about rom either an unsolicited idea

or proposal foating to the top o the organization and not having a home, or a play by some

upper-level manager to exercise his/her authority with some pet project.

The advantage o the top-down project is that the people in power set the pace, and while

being orgiving in not meeting expectations, can at the same time be very demanding by their

personal involvement. Detractors will most likely remain silent, unless they nd the sponsor in

a questioning mode as to progress, or as to continuing investment. Top-down projects usually

have the benet o receiving adequate unding without putting the innovator in the position to

search or those unds. However, innovation unded rom the top o the organization puts pres-

sure on the sponsor regarding progress and especially rom colleagues whose projects may not

have been approved.

Technological innovations

Some technological advances do materialize into marketable products or services that meet

all the requirements o an innovation. The test o technology is in the marketplace and not

the laboratory. This statement does not in any way belittle technological advances. But, were

talking about innovation and not invention. Bringing an innovative product to market involves

the total support o the organizations resources.

The product needs to be produced with involvement rom all the manuacturing unctions,

like logistics, quality and procurement. Marketing and sales will be responsible or the

success or ailure o the product. The marketing group is responsible rom the perspective

o pre-introduction planning and placement, and the sales department rom generating theexpected income. The success o marketing and sales depends on whether the product entry

was or was not encumbered by major product problems. In short, a successul innovation

requires a management system approach.



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1Management innovation

A vast body o knowledge has been accumulated in the past 50 years on this topic we reer

to as innovation. But little, i any research, has ocused on management innovation. Gaynor6 in

Innovation by Design considers the need or innovation rom all members o the organization

based on their ability. Birkshaw, Hamel, and Mol,7 et al, have dened management innovation

as:

the invention and implementation of a management practice, process, structure, or

technique that is new to the state of the art and is intended to further the organizational

goals.

One would expect that no research would be required to convince executives that management

innovation begins at the top o the organization; it is an organizational prerequisite or success.

As we look at the U.S. auto industry, we could conclude that these organizations required

implementation o some management innovation in the past. These companies have been

undergoing reorganizations or what appears to be decades, but evidently not much has

occurred to change the organizational dynamics.

BASIC ConCEPTS oF InnoVATIon


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14 Ctiuu f Idea t Ivati

Innovation does not take place by a dened linear process. Its a matter o starts and stops,

two steps orward and one step back. And sometimes, two steps orward and back to zero.The innovation continuum includes coming up with that raw idea and describing it, ormulating

the idea into a concept that can be veried and tested, doing the work o invention, and then

bringing the result to the marketplace as a successul innovation.

Raw Ideas

Raw ideas provide no benet, unless pursued toward some end. The Universal Industrial

Success Curve8 shows a seven stage segmentation scale o ideas: rom 3,000 unwritten

ideas, 300 will be ormalized in written orm perhaps leading to one success. Thats not a very

good result. One would think that 300 ormalized and written ideas would yield more than one

success. A raw idea is just what the name applies, a raw idea. It needs some hard thinking.

According to Levitt9:

The trouble with much creativity today is that many people with the ideas have the

particular notion that their jobs are nished when they suggest them: that it is up to

somebody else to work out the dirty details and then implement the proposals.

Typically, the more creative the man, the less responsibility he takes or the action.

There is no shortage o creative people. There is a shortage o creative people who will be dedi-

cated to take an idea, write it down, turn it inside out, outside in, upside down and downside

up, and analyze it as to its viability. Ideas need to be ramed within the context o the business.

Its not sucient or productive to vocally announce an idea. My experience shows that when

people take the time to compose and commit the idea in writing, they very quickly recognize

its faws. But thats the beginning o the process, not the end. Somehow documenting the ideaquickly brings out the inconsistencies and implementation problems and orces one back to

consider some undamentals o determining just what constitutes a viable idea. Raw ideas are

only valuable i someone takes the time develop it into a concept.

Concept

Transorming an idea into a concept becomes an iterative process. Much iteration will be

required, because this transormation is not solely about technology or marketing, but rather

about the business that will arise rom the concept. Its a business decision that will be based

on insucient inormation and, most likely, lack o understanding o those making the go-no-

go decision. The work eort to make the transormation rom idea to concept includes:

Describing the deliverables clearly

Identiying the internal and external resources

Understanding the limitations o the organizations management inrastructure

Assessing the organizational competencies and capabilities

Managing interaces



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1Assuming that the idea has been clearly articulated, here are some issues that need to be

explored:

How does the concept advance the organizations mission, objectives, and strategic

direction?

What would be the advantages to the organization?

Has the concept been analyzed rom a systems perspective?

Are the required technologies available internally or externally?

Are all technologies known and well dened?

Are any required technologies unproved?

What are the competitive issues?

What are the potential knockouts (those items or issues that would orce cancellation, or

result in ailure o the project at some time)?

Is there a preliminary nancial analysis? Have risks and uncertainties been considered?

Does a timeline exist?

These are but a ew questions that need a response beore major investment o time and

resources are allocated. You may ask, how can all o these questions be answered, and why?

Responding to these questions is not done with mathematical or nancial precision. The

purpose is to get a eel or the potential benet to the organization, i the next stage should

go orward.

Invention

The word invention does not need an extensive explanation, but it can be dened rom dierent

perspectives. The ollowing descriptions come rom a management scholar, an eminent educa-

tor, and an economist.

Management scholar:

We discover what beore existed, though to us unknown; we invent what did not exist

beore.10

Eminent educator:

The invention process covers all eorts aimed at creating new ideas and getting them to

work.11

Economist:

Every invention is (a) a new combination o (b) preexisting knowledge which (c) satises

some want.12

All o these descriptions o invention have a common theme: invent what did not exist, getting

ideas to work, new combinations o pre-existing knowledge to satisy a want. These state-

ments are very succinct, but upon refection, require a tremendous amount o individual and

team initiative, creativity, commitment o resources, and personal dedication to make some-

thing happen. Those components, assemblies, various types o mechanisms and sotware

ConTInUUm From IDEA To InnoVATIon


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16 programs must all be designed, developed, tested to meet many dierent requirements, and

integrated into the product, which is then tested and tested to meet specications. Now, we

have the results o an idea that was delineated to the level o a concept and concluded with

a product the invention.

InnovationInnovation involves risk-taking. Innovation involves commercialization or implementation o an

invention (something new), but rom a systems perspective. The process is not simple. Even

a product innovation within a successul organization can create hours o needless discussion.

Here are a couple o examples that require some serious though:

A proposal is put orth to change a manuacturing process. Production people most likely

will begin a campaign to dissuade management rom giving it serious consideration. All types

o arguments will be made as to why the proposal should not be pursued. The reasoning is

quite simple. The production line is running and meeting expectations, so why take on a new

workload, and possibly miss uture production targets, even though signicant savings are

projected? It may take months or years to resolve the issue, and by that time, a competitor

may have been gaining market share. This decision is not an easy one, but it will determine

the uture o the organization.

Another example that comes to mind involves making obsolete a very protable current

product. What would occur i you proposed to management a replacement or this product?

The response would most likely be negative. But everyone knows that, at some time, this

high margin product will be replaced, the only issue is, when? It may be in ve, perhaps ten

years, but nobody knows. However, ignoring the proposal could create major organizational

changes in the uture, depending on the size o the organization.

ConTInUUm From IDEA To InnoVATIon


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1Tpes f ivati

The descriptions or types o innovation13 have grown over many years o attempts to dice

and slice the meaning into ner and ner distinctions. Even with these many types o

innovation, the dierences become blurred. The literature provides the ollowing categories:

Iceeta ivati includes what I reer to as the nuts and bolts o innovation

and involves modication, renement, simplication, consolidation, and other

enhancements to products, services and processes related to production, distribution,

manuacturing, marketing and sales, and all the administrative unctions.

Disctiuus ivati discontinuous innovations diminishes the value o current

knowledge and experience o proessionals, including engineers, scientists, marketers,

accountants, lawyers, and so on; obsoletes technologies, products and processes; and

involves a paradigm shit. Examples would include transition o the horse and buggy to

the automobile; the transitions rom candles to gas lights to oil lamps to electric light

bulbs; rom manual type writers, to electric word processors o various types, to per-

sonal computers.

Achitectua ivati recongures the system o components that denes

the product, process, or service. The core design concepts are recongured in a new

architecture. Examples would include the transistor as a replacement or the vacuum

tube; material substitutions o various plastics or steel, aluminum, etc.; using jet

engines in place o radial engines. Boeing, in its introduction o the 787 Dreamliner,

totally changed the design architecture, use o new materials and introduction o new

abrication and assembly technologies.

Sste ivati involves the integration o activities rom multiple disciplines,

unctions, and organizations. It involves many dierent businesses, academic, and gov-

ernmental activities that are plagued on many occasions with societal and government

regulations, with the added diculty in dealing with the interace problems. Examples

would include implementation o communication networks, satellites, and the World-

Wide Web. Systems innovations create societal diculties, as well as opportunities.

Automatic switching o telephone exchanges and switchboards orced the release

o thousands o telephone operators. Satellites have raised issues o condentiality,

ownership o intellectual property, and access. The Web has served some noble

as well as some questionable benets, and o course the distinction becomes very

personal.

radica ivati involves introducing new products or services that develop into

a major new business, or spawn new industries, or cause signicant changes in an

industry. Examples might include the computer industry advancing rom kilobytes to

gigabytes and more. The banking industry moving to electronic banking or the Internet.



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18 Disuptive ivati brings a new proposition, as suggested by Clayton Christens-

en in The Innovators Dilemma. Disruptive innovations generally underperorm current

products or services when introduced. These disruptive innovations have eatures that

attract the group reerred to as early-adopters. These are the people who want to be

on the leading edge. They are not concerned about price, but do want to be recognized

or their astuteness in working with the latest technologies. Examples would include

the transition rom silver-halide based photographic lm and the introduction o digitalphotography. When the Mavica digital camera was introduced that perormed well under

the quality o silver-halide lm based products, the paradigm shit to digital became

obvious. But that Mavica digital cameras poor perormance did not dissuade the early-

adopters rom really acting as the rst digital electronic quality control specialists. The

minute Mavica was introduced, a marker had been set down to provide the demise o

most silver-halide lm products.

Beathugh ivati are moments in history that set the stage or the uture.

They are as Nayak and Ketteringham describe:

The act o doing something so dierent, that it cannot be compared to

any existing practice or perception. Breakthroughs, whether in commercialenterprise, science, or politics are moments in history. Innovations are

events behind the scenes that set the stage or history

For all practical purposes, all o these categories need to be simplied. So, we consolidate all

the categories into:

Iceeta ivatis dominates the innovation scene

new-t-the-aet ivatis combines discontinuous, systems, radical, and

disruptive innovations into a single category, since they involve something thats

new-to-the-market

Sste ivatis innovations that cross disciplines, involve massive investments

and generally impact society

Beathugh ivatis are what the name implies, something that changes the

game

TyPES oF InnoVATIon


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1Hw Ivati Taes Pace

How innovation takes place depends on the environment in which it is born. Someenvironments nurture innovation, others inhibit innovation. Innovation in government-driven organizations becomes a matter o ollowing procedures and policies that are anathema

to innovation. Innovation at the automobile companies is quite dierent rom innovation at

organizations like 3M, Proctor & Gamble, HP, and others who provide reedom to innovate

and depend on innovation or advancing the organization. Innovation also begins in those

non-descript garages, and by individual entrepreneurs who have an idea and pursue it with

a passion, oten without sucient resources. But any environment requires a business dis-

cipline. Everyone cant just do as they please. The organization has a strategic direction and

innovation needs to support that strategic direction.

Situations do occur where proposals need to be evaluated, even though the proposal may be

outside the strategic directions o the organization. No algorithm can make the decision. Such

decisions are a matter o judgment, and thats why management must be suciently fexible

to recognize opportunities that take it outside o its intended direction. The development o

xerography provides an excellent example. Ater being issued a patent on xerography, Chester

Carlson contacted many Fortune 100 companies, who not only turned him down, but oten

ailed to even consider an interview. Ater all, what was wrong with carbon paper, or the spirit

duplicator?

Theoretically, everyone could be an innovator, although levels that span a continuum rom

incremental innovation to breakthrough innovation require dierent competencies. Very little

evidence exists as to how innovation takes place. Innovation involves context. The iPhone may

be identied as an innovation, but compared to the communication system on which it depends

or perormance, it could be considered inconsequential. The innovators o iPhone and the

communication system unction in totally dierent environments. The communication system

innovators would need more than people skilled in technology they would need a vast num-

ber o people skilled in the management sciences, management, and those with competence

to develop a system o systems.

Innovation occurs through a two-stage process:

Stage 1 includes ideation and the eort to convert the idea into a workable concept. The

conversion o an idea to a workable concept presents many obstacles, and may ester in some-

ones mind or long periods o time. Stage 1 generally involves the eort o a single individual

to bring the concept to the table. This stage is not to suggest that colleagues and others may

not be involved, but the eort ocuses on the individual. Someone must be willing to take thelead, and have the courage to propose something that at rst sight may appear to be o little

consequence. Colleagues and others may add support, but the execution depends solely on the

innovator. Articulating the concept, and doing the necessary proo o concept, signals the end

to the innovation process. As mentioned, these are not Eureka moments, but are preceded by

conscious thought regarding some nagging problem or opportunity. While ideas are plentiul,

we need to be cautious in casually disregarding them, too oten they go unexplored because

o a lack o interest. Were all amiliar with the person reerred to as the idea generator, who

somehow never takes the time to develop the idea into a concept worthy o examination.



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20The Post-it Notes innovation provides an excellent example. Art Fry, a 3M scientist, sang in the

choir o his local church or many years and saw those little pieces o paper that identied the

hymns drop to the foor rom his hymnal. Why, on this particular Sunday, did he decide there

must be a better way? Im positive he thought about this issue many times over those many

years. I dont know why Fry decided to ocus on nding a better way to mark the hymns on

this particular Sunday.

Stage 2 activities ocus on doing the work related to commercialization or implementation.

This stage is not to suggest that issues wont arise where the concept may require redeni-

tion, but in essence, much o the work now requires application o known project management

principles. It is not possible to innovate successully, i innovation continues throughout the lie

o project implementation. Stage 2 eorts no longer can depend solely on the innovator who

ought the battles, and brought the concept orward or ormal consideration. Stage 2 requires

a team capable o reducing the concept to practice; dening uture activities; developing prod-

uct or service requirements; exploring manuacturing, marketing and distribution capabilities;

and proposing a business or operational plan to bring the innovation to ruition. The innovation

process will be covered in the second e-book in this series Developing a Workable Innova-

tion Process.

Brainstorming

Innovation requires deep thinking. I explore organizing a group o people to generate ideas in

reerence to what goes on the innovation agenda or a subsequent meeting. We know that

the more we think about an idea, the less we know about it, and that very oten the developed

concept has no relation to the original idea. Going through the thinking process raises issues

that could not have been considered in the original idea. The thinking machine orces us to exit

cloud nine and ace realities.

There must be a better way. Brainstorming in its many orms tends to yield quantity rather than

quality. The problem is that ideas emanating rom a brainstorming session limited to two or

more hours will not yield the organizations next breakthrough innovation. Most sessions endwith only a cursory, i any appraisal, o the ideas. While brainstorming may provide a benet

or ocusing on resolving a specic problem by bringing in the people knowledgeable about the

issue, bringing in people who have no knowledge o the topic only creates a distraction.

Brainstorming sessions can be eective or innovation but they need more than the two-hour

period the guidelines prescribe. Brainstorming sessions involve thinking. As an example, devel-

opment o a new product, process, or some major change in organizational behavior requires

a dierent ormat. As a practitioner, my brainstorming sessions usually included three to ve

days o concentrated eort at an osite location, preceded by some preparatory work, and

included people willing to work around the clock, with no personal agenda. Why around the

clock? I you reach a point where the group achieves a certain rhythm, you dont want to go

by the clock. I the group is on a roll, you need to take advantage o those moments to capturethe thinking. That same environment may not be there by morning. However, i someone

can no longer contribute to the discussion because o atigue, that person may take leave o

the group.



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2Creative People

Keep in mind that innovation is not science: it involves taking what is known and packaging

it to create economic value. Innovation does not develop new theories, and it does not search

or the unknown. Innovation involves a put-it-all-together competence, where the knowns

are recongured or architected in some new conguration. As an example, Chester Carlson in-

vented the xerographic process in 1938. That was the invention. A copy machine was unveiledin 1948, but it took another decade beore Haloid-Xerox was able to deliver the rotary-drum

copier that provided an eective way o copying documents. Why did it take a decade to bring

the rotary-drum concept to market? The technologies were available; there were no mysteries

in resolving the issues. Diculties, yes. But no insurmountable problems. Someone just didnt

think about it, or i someone did propose the rotary-drum concept, management chose not to

invest.

Creativity as related to innovation involves doing. The artist must paint. The author must write.

The musician must practice. The designer must design. The innovator must innovate. These

activities involve not only knowledge, but more importantly, dedication, insight, oresight, and

the ability to consider an issue rom many dierent perspectives. Keep in mind that:

Ivati = Iveti + Ceciaizati Ipeetati

No commercialization or implementation, no innovation.

Customers

Customers can be a source o new ideas, primarily in relation to product improvement, more so

than providing the next breakthrough innovation. The academic community has written much

about how customers have developed products through supplier customer relations. We need

to be cautious here, because customers do not produce products. I they did, they would own

the intellectual property, and that could create certain diculties as to determining ownership.

This is not to say that a customer may not suggest possible new product ideas and even de-

velop concepts, but they do not provide marketable products.

The controversy comes rom the use o the phrase produce new products. Just what does the

phrase produce new productsmean? To me, it borders on completion, and not on suggestions

or ideas. Early in my career as a young engineer, I had worked on a new product project or ap-

proximately 18 months, and was asked to report my results to a major committee. The review

also included a demonstration o the product. The product was at the stage where it was ready

to be introduced to the marketplace. Questions ollowed the presentation and the demonstra-

tion. In my presentation, I remarked that development was complete. What ollowed was one

o my rst lessons as an engineer, about what it means to use words like complete and n-

ished. The Chair o the Board reminded me that I made statements that indicated that all the

work was completed, and there were no loose ends that needed to be resolved. He said, Gus,

what youre saying is that I can take this unit, put it under my arm, and go talk to customers to-morrow. I responded by saying that we had a ew loose ends that needed to be cleaned up

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22 Problem Finders

Innovation requires problem nders and problem solvers. Unortunately, it is much easier to

nd problem solvers than problem nders. Coming up with ideas and ormulating them into

concepts requires problem nders. Someone must be sensitive to those uture needs and

those uture products, processes, and services required to support the organizations purpose.

Problem nders, the innovators, are somehow endowed, or have developed, sensitivity levelsto changing events, and take ull advantage o the many opportunities provided to them in past

experiences. They have powers o observation; they have many interests; they are inspired by

the new and novel; and they can imagine the uture. In addition, they are results-oriented, as

demonstrated rom implementing the innovation. Problem nders do need problem solvers to

ulll their expectations.

Problem solvers provide that body o knowledge required or ormulating and resolving a given

problem: they do not identiy the problem. It is unortunate but too many proessionals in all

disciplines all into this category. They have the necessary knowledge and experience to solve

a problem, regardless o its complexity. As the innovator becomes more involved in the specic

innovation, problem solvers take on a major role. The innovation has reached project status and

the innovation stage is completed. Now is the time to do the work, and make it happen. Theseproblem solvers will come rom all the related organizational unctions, and resolve those many

unknowns, whether related to engineering, marketing, manuacturing, sales, or any other

unction.

Sources of Innovation

Too oten, innovation is related solely to the organizations technologically related activities,

such as research, product development, manuacturing, and inormation. The proo o innova-

tion resides in the marketplace, not at the organizations headquarters, or the research acilities.

Technological innovation only satises one part o the innovation equation.

Any successul organization requires innovation rom each o its organizational units, whethersta or operations. A product innovation without comparable innovation in the marketing and

sales organizations will provide only a minimum benet. A product innovation without related

innovation in manuacturing ails to maximize the benets. A product innovation without

innovative ways to resolve customer service requests jeopardizes the organizations credibility.

The product innovation alls into the system that requires innovations rom supporting

unctions.

Recognizing opportunities is the critical issue in innovation. Those opportunities involve not only

implementing the new, but discarding old policies and practices that no longer provide a ben-

et. Those opportunities reach rom the mail room to the executive oces. Im not suggesting

that everyone becomes an innovator. Being an innovator involves risk, because it attempts to

undermine the status quo. Proposing the elimination or consolidation o certain scientic orengineering unctions to gain a competitive advantage may appear to be a logical step, but

the scientist or engineer who recommends such action would require not only courage to pro-

pose the change, but also to ace the criticism rom colleagues who may be aected negatively

by the action. Similarly, proposing the elimination o certain marketing or manuacturing opera-

tions, consolidating them, or moving them to a new location or improved perormance would

require a great deal o courage. Yet, that may be what is required to eliminate some organiza-

tional bottlenecks.



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2Open Innovation

Open innovation allows organizations an opportunity to capitalize on the intellectual property

and experience o customers, suppliers and the academic community, as contrasted to

considering innovation as an internal propriety activity inside the organization. According to the

McKinsey Quarterly,14 executives in a number o companies are considering the delegation o

management o innovation to networks o suppliers and independent specialists that interactwith each other to co-create products and services. Customers would be included in this

process. McKinsey notes that more organizations are now using this innovation model, or its

variations, not only to reduce costs but to reduce the total time to market. The challenges o

implementing open innovation include ownership o intellectual property, increased operational

risk, and losing the expertise that will be required to take the next steps. The undamental

question: Can you essentially outsource major innovation activities, even with appropriate

controls?

There is no doubt that products reach the marketplace through many participants in the value

chain. In developing the 787 Dreamliner, Boeing outsourced major sections o the aircrat or

design, as well as abrication: it was Boeings major competitive eort in the airline industry.

The Dreamliner introduced new technologies, new production processes, and totally new as-sembly processes; all could be classied as innovative. This approach or building aircrat was

revolutionary. But the results are disappointing. The Dreamliner will probably reach the market-

place two years later than planned.

Open Innovation is unknown territory. Customers, suppliers, academia, and possibly competi-

tors can provide the intellectual property to move products to market more quickly, but what

are the unintended consequences o such actions in the uture? What happens when Company

X has been bought out or merged with Company Y, and new management comes in with a

totally dierent management philosophy?

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24 refeeces:

1. Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence, (Harper & Row

Publishers: New York, 1982) pp. 13-16.

2. Peter F. Drucker, Management, Tasks, Responsibilities, Practices(New York: Harper &

Row, 1973) p. 788.

3. Gerard H. Gaynor, Innovation by Design, (New York: American Management Association,

2002) pp.15-17.

4. Gaynor, Innovation by Design, p. 16.

5. James Bryan Quinn, Managing Innovation: Controlled Chaos, Harvard Business Review,

May-June 1995, pp. 73-84.

6. Gaynor, Innovation by Design, p. 4.

7. Julian Birkinshaw, Gary Hamel, and Michael J. Mol, Management Innovation, Academy

of Management Review, 2008, Vol. 33, No. 4, pp. 825-845.

8. Greg A. Stevens and James Burley, 3000 Raw Ideas = 1 Commercial Success!

Research Technology Management, May-June 1997, pp. 16-28.

9. Theodore Levitt, The Marketing Mode, (New York: McGraw-Hill, 1969) pp. 155-170.

10. Robert A. Burgelman, Modesto Maidique, and Steven C. Wheelwright, Strategic

Management of Technology and Innovation, (Chicago: Irwin, 1966), p.1.

11. Edward B. Roberts, Generating Technological Innovation (New York: Oxord University

press, 1987) p. 3.

12. Jacob Schmookler, Invention and Economic Growth (Cambridge; Harvard University Press,

1966)

13. Gaynor, Innovation by Design, p. 24-30.

14. Jacques Bughin, Michael Chui, and Brad Johnson, The Next Step in Innovation,

The McKinsey quarterly, June 2008.



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