leading successful innovation: processes in transition erkki ormala, sampo tukiainen, jukka mattila...
TRANSCRIPT
Leading Successful Innovation:
Processes in Transition
Erkki Ormala, Sampo Tukiainen, Jukka MattilaAalto University School of Business
STARTING POINT
• Innovation is the most important factor in generating firm performance and success
• Thus, questions relating to • organizing, • generating, • motivating, • steering, • strategizing and • leading
innovation management processes are of primary importance
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CURRENT INNOVATION ECONOMIES
ArgentinaBrazilChileColombiaMexico
CanadaUSA
Bangladesh ChinaIndiaIndonesiaMalaysiaPhilippinesSri LankaThailandVietnam
Australia JapanKoreaSingaporeNew Zealand
EgyptKenyaNigeriaSouth AfricaTunisia
RussiaUkraineTurkey
Austria BelgiumCzech DenmarkFinland
France GermanyGreece Hungary Ireland
ItalyNetherlandsNorwayPolandPortugal
SpainSwedenUK
Innovation economies
Resource & Efficiency economies
IranPakistanSyria
Connectivity Scorecard 2011 May 2011
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
THE FIRM’S CHALLENGE
1) HOW TO ORGANIZE?
2) HOW TO GAIN SUBSTANTIAL KNOWLEDGE ABOUT INNOVATION MANAGEMENT WORKFLOWS?
3) HOW TO LEAD?
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
THE ELEMENTS OF WINNING
• We argue that success in contemporary competition rest on two dimensions: 1) Growth and 2) Development. These two are intertwined.
• To successfully combine the two, firms need integrative structures and processes. These, in turn, comprise of the following elements:
1) Anticipating the future business environment with the help of a strategy process2) Linking the innovation strategy with the business strategy 3) Implementing the innovation strategy and 4) Bringing innovations to the market and expanding the market.
Innovation calls for interlinkages between these elements
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
LAYER 1
Mapping the future business environment
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
MAPPING THE FUTURE BUSINESS ENVIRONMENT
The development in the changing oglobal and regional markets,o technology development, opolitical environment,ocustomer needs,ocompetition, oeconomic and regulatory landscapes,
should affect 1) companies’ visions,which should lead to 2) choices and choices should establish 3) strategic
intents.
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
WORLDMAP TRENDS 2018 ON EVOLUTION CURVE; (Nokia example 2010)
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
FROM MEGATRENDS TO CONCRETE VISIONSTO BE OR NOT TO BE: In addition to mapping and following megatrends, focus also on how to influence, create, and organize for megatrends
1) Encourage creating understanding on company specific transformation paths for the next 3 – 10 years based on visions and gap-analyses.
2) Consider “blue ocean strategy” leaps – prepare for 3 – 10 year implementation spans – create roadmaps and milestones
3) Utilize existing data and services: Team Finland, ministries, barometers, Finpro, ELY-Centers etc.
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
Political and regulatory risks – Company Readiness and Competitor Engagement
CompanyReadiness
High
CompanyReadiness
Low
CompetitorEngagement
Low
CompetitorEngagement
High
Corruption
China Risk
Substances/Raw Materials
Social Aspects ofLearning/Local Context
Human RightsRegulation
Patents
Global Marketfragmentation
ConsumerInformation
EducationBusiness Opp.
Blended Learning/Vocational training
Privacy/Freedom of Speech
LATAMRisk
Energy and ClimatePolicy Debate
Energy and Climate/Smart/Public Transit
Business Opp.
StandardsIndia TradePolicy Risk
Waste management
ResourceEfficiency
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CASE: Microsoft Finland
”We want to be developing Finland and the possibilities of the Finns to utilize IT.”- Active participation with own agenda- With the help of industry federations and networks- High level contacts with even PM and other cabinet members- A plan, programmatic with clear goals - the company as a "trusted advisor” for the publilc sector
decision makers
-> Improved impact on regulatory setting plus early warning system
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
LAYER 2
Linking innovation strategy with business strategy
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
INNOVATION STRATEGY
• Does a separate innovation strategy complement business strategy?
• Can innovation strategy and business strategy diverge?• Or is it a question of balancing the two?• Continuous process instead of Ad Hoc experiments• Two approaches:
– Top-down or – bottom-up feedback between innovation and business strategy
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
LINK BETWEEN BUSINESS AND INNOVATION
Top-down innovation strategy o Business strategy cascades down to innovation strategy
Bottom-up innovation strategyo Innovation strategy feeds to business strategy
Our findings show that 1) top-down model dominates in the Finnish context, 2) Only few radical new openings / innovations
Consider balancing!
How to deal with exceptional initiatives and long time frames?
– Innovation can start as strategy-driven, and end up being non-strategic, and even later again emerge as strategically important.
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
INNOVATOR’S DILEMMA (Christensen 1997) RENEWAL VS. STREAMLINING
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
LAYER 3
Implementing the innovation strategy
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
IMPLEMENTATION
1) The Stage-gate model –> be mindful that this model may lead to business line/unit domination in the innovation process
2) An iterative, customer engagement model –> builds on innovation co-creation with the customer from early on
– Current ecosystem –level innovation for companies often means innovation activities with the closest subcontractors and clients
– Then, how would you expand your markets?
NONETHELESS,– Radical/disruptive innovations might require development work
outside of the boundaries of current strategy/business units – aim to utilize open innovation, crowd funding/sourcing
– Internal venture units can be utilized for developing radical/disruptive innovations
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
THESES OF OPEN INNOVATION
• Mental leap of faith: Are we strong enough to open up the boundaries and grant access to our core innovation capabilities and knowledge Foster global mindset
Access and drive global intellectual vision and insight
Build global test beds to learn from broader audiences
Establish transparent management and collaboration rules
Fair rules for IPR ownership and use
Reformed reward and incentive systems
• Home market covarage is rarely enough for sustainable growth
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
IPR Guidelines for partnerships
1) Foreground: all parties have access right royalty-free to all foreground generated in the project
2) Background:
A) parties shall grant access right to background if it is needed for the project work (royalty free)
B) parties shall grant access right to background if it is needed for the commercialization of foreground (FRAND)
C) each consortia decides if they will create inclusion lists or exclusion lists
3) Ownership: Joint ownership is not preferred
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
TWO WORDS OF CAUTION
A generic note from a study:”We aim to be the leading company in our field, with the help of cost cuts”
Ormala et al. 2014: “Only a few comments about radical, disruptive innovations and activity aimed at them. This kind of activity was described to happen especially outside business strategy, ‘under the radar’, or in terms that business strategy was seen to restrict this kind of innovation activity.”
!!!!!! -> Consequences?
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
COMPANY CASE
A lesson from the study:”Both stage-gate and iterative models are needed. They fit to different industry and economic contexts”
Stage gate model: from an idea to conceptualization, business case and plan, in order to be able to evaluate profit potential, and to convince specific business units.”
Iterative model: Reversing the traditional order by engaging with the client for co-creation, building up mock-ups, demos rapiply with the client, conceptulizing and expanding business plans afterwards.
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
LAYER 4
Expanding the market
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CREATING NEW VALUE
• BUILD!– Build industrial ecosystems to gain leadership of the new
emerging value domains
• EXPAND! – Aim to expand the “innovation horizon” to involve the
ecosystem more holistically, e.g. start-ups, “kickstarters”, crowd sourcing, crowd funding, “hackathons” etc.
• CAPTURE!– Capture the critical knowledge assets to enhance value
generation in the network economy
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CREATING NEW VALUE
• Innovation is often network and ecosystem dependent• Utilize available resources: public and private
organizations and data• Companies usually have a limited understanding of the
ecosystem and value chain• Dig into Big Data! May lead future transformation - an
opportunity, but not used extensively yet• Market and competition perspective conservative, not
reflecting the business environment vision
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
Summa Summarum
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CHALLENGES TO INNOVATION ACTIVITY ON THE LEVEL OF PRODUCTS/TECHNOLOGY
• Ownership of innovations seems to disperse among business units
• In the stage-gate model, there is internal bureaucracy and personal reflections
• The stage-gate model seems to serve short-sighted innovation
• Innovations requiring risk and courage, about which it is difficult to evaluate the anticipated revenue accurately, are often discarded when defining final development programs
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
CHALLENGES TO INNOVATION ACTIVITY AT THE COMPANY LEVEL
• A need for more creativity, experimenting and entrepreneurship in order to create breakthrough innovations
• The focus of management is easily concentrating on emphasizing incremental development of existing activities
• New initiatives and actively changing the business environment were not emphasized in the interviews, even if changes in the business environment were actively monitored in the strategy process
• It is often possible to promote new openings and radical innovations only outside the current organizational structure and the existing strategy
• The development logic followed by companies causes an innovation gap at the level of society
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
KEY OBSERVATIONS & RECOMMENDATIONS • Innovation requires process ownership by a dedicated
person, who has a proper motive to bring innovations to the market
• Uphold long-term vision and perspective in top management teams regarding radical/disruptive innovations
• Encourage risk-taking and enable inclusion of projects with uncertain expected returns
• Maintain, attract and enrich human capital to provide a solid base for innovations
• Focus especially on new value creation – take into consideration a general tendency of companies to over-emphasize cost-cutting and lean-processes
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
NATIONAL INNOVATION POLICY & SERVICES
• TEKES, SITRA, SHOKs, and different industry bodies play a key role in creating new innovation platforms and integrative forums
• Creating new business models, ecosystems, businesses and value calls for strengthening the integration of key stakeholders – including universities and the companies them selves
• Strengthening and advancing the interlinkages between universities and industry is crucial in the future
• With regards to the companies’ possibilities to bring innovations to market, there seems to be an “oversupply” of innovative ideas – spin-off activities should be developed within technology hubs and incubators
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015
Thank you
Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015