The I Word: Moving Innovation from R&D to Ideation and Realisation

The I Word: Moving Innovation from Research and Development (R&D) to Ideation and Realisation (I&R) : 

The I Word: Moving Innovation from Research and Development (R&D) to Ideation and Realisation (I&R) Alan McSweeney

Innovation Has Become a Ubiquitous and Meaningless Word : 

November 7, 2011 2 Innovation Has Become a Ubiquitous and Meaningless Word The word Innovation is being used and misused pervasively without clear definition, meaning or understanding Every organisation claims to be pursuing and driving innovation or offering innovation development services But are they? Innovation is not just about ideas Innovation is about driving the generation of good ideas and ensuring their appropriate adoption in order to generate value Innovation is or can be a process (that can be measured) Innovation is about generating business value – an idea without implementation has little meaning

Slide 3: 

November 7, 2011 3 Innovation = Good Idea That is Defined and Validated + Appropriate Implementation and Adoption + Generation of Value

Innovation Can Be … : 

November 7, 2011 4 Innovation Can Be … A new idea OR An existing idea or process that is improved OR An existing idea or process implemented or applied elsewhere

Innovation … : 

November 7, 2011 5 Innovation … … Is not necessarily one big idea It can be lots of little ideas

Innovation Is All About Value : 

November 7, 2011 6 Innovation Is All About Value ΣValue{ } >> Value{ } Sometimes …

Innovation Extends Creativity To Implementation And Generation Of Value : 

November 7, 2011 7 Innovation Extends Creativity To Implementation And Generation Of Value Discern Creativity Develop Clarify Verify Implement Market Sell Innovation Value It’s All About The Value }

Innovation Means … : 

November 7, 2011 8 Innovation Means … Acceptance of change – innovation implies and requires change Innovation exposes an organisation to change A secondary affect of successful innovation is the willingness of an organisation to change To be good at innovation means to be good at change Innovation means welcoming change and being able to successfully deliver change Innovation means continuously challenging accepted conventions If you cannot change, you cannot innovate

Being Good At Innovation Creates a Positive Feedback Loop (“Virtuous Circle”) : 

November 7, 2011 9 Being Good At Innovation Creates a Positive Feedback Loop (“Virtuous Circle”) Employees Customers Organisation Shareholders Greater Recognition of Contribution, Greater Satisfaction, Greater Experience, More Interesting Place to Work Better Experience, Greater Satisfaction, Greater Loyalty Greater Long-Term Value Growth, Increased Market Share, Improved Perception, Increased Revenue and Margin, Customer and Employee Loyalty

Being Good At Innovation Creates A Positive Feedback Loop : 

November 7, 2011 10 Being Good At Innovation Creates A Positive Feedback Loop Being Good At Innovation Means Accepting Change Accepting Change Reinforces, Fosters And Encourages Innovation

Strengths Of Being Good At Innovation : 

November 7, 2011 11 Strengths Of Being Good At Innovation Organisation leadership has a personal role in fostering a culture of openness and risk tolerance toward innovation Use external partners and “open sourcing” to expand the pool of innovation ideas Use simple low-cost awards and recognition to encourage and reward innovation Ensure security policies do not inhibit innovation Set performance expectations for leadership traits that drive innovation Use lightweight, non financial criteria for initial evaluation of ideas Early-stage idea evaluation must rest on business judgement and not just quantitative criteria Ensure there is a fast, lightweight process for testing innovation ideas Focus on generating learning when making early-stage investments in innovation ideas Sequence the project to fail fast by testing for the most valuable learning first

Classification Of Areas To Look For Innovation : 

November 7, 2011 12 Classification Of Areas To Look For Innovation

Classification Of Areas To Look For Innovation : 

November 7, 2011 13 Classification Of Areas To Look For Innovation Innovation can be pervasive across all aspects of the organisation Opportunities for innovation exist everywhere Innovation can be a structured process that can be learned, practiced, developed and improved

Types Of Innovation : 

November 7, 2011 14 Types Of Innovation Radical Innovation Fundamental Change Or Fundamentally New Categories Of System, Process, Concept, Device Disruptive, Radical, Discontinuous Incremental Innovation Incremental Improvement Existing Of System, Process, Concept, Device Innovation By Reapplication Application Of Existing System, Process, Concept, Device In A New Domain

IT Innovation And Business Innovation : 

November 7, 2011 15 IT Innovation And Business Innovation IT innovation can drive business innovation Innovation is important to IT because of the very high rate of change IT innovation can fundamentally change the way an organisation operates IT can support business innovation Provide information and other support services Develop new systems, platforms, applications IT can be a catalyst to innovation IT can also innovate within itself

Analysis Of Volume Of Investment In Innovation Across Innovation Areas : 

November 7, 2011 16 Analysis Of Volume Of Investment In Innovation Across Innovation Areas Investment In Innovation Area

Analysis Of Volume Of Investment In Innovation : 

November 7, 2011 17 Analysis Of Volume Of Investment In Innovation Traditional R&D areas dominate Investment skewed in favour of products Narrow focus, especially on pure product

Analysis Of Return Of Investment In Innovation Across Innovation Areas : 

November 7, 2011 18 Analysis Of Return Of Investment In Innovation Across Innovation Areas Value From Investment In Innovation Area

Analysis Of Return Of Investment In Innovation Across Innovation Areas : 

November 7, 2011 19 Analysis Of Return Of Investment In Innovation Across Innovation Areas Returns do not match investment Small investment in non-traditional R&D areas Much greater return from smaller investments outside traditional R&D areas

Comparison Of Investment And Return Across Innovation Areas : 

November 7, 2011 20 Comparison Of Investment And Return Across Innovation Areas Return Investment Investment Greater Than Return Return Greater Than Investment

Comparison Of Investment And Return Across Innovation Areas : 

November 7, 2011 21 Comparison Of Investment And Return Across Innovation Areas Significant gap in returns across innovation areas Small investments in non-traditional areas yield significant returns Large investment in traditional R&D areas yield small returns Some of this can be explained by sustained pattern of investment in traditional R&D and history of low investment in improvements outside these areas Latent available improvements achieved easily Nonetheless demonstrates innovation can be successfully applied outside traditional product-oriented areas to yield significant value Need a wider definition of R&D to I&R - Ideation and Realisation Identifying and implementing innovative ideas across the entire organisation

Eliminating The Disconnect Between Innovation Investment And Value Generated : 

November 7, 2011 22 Eliminating The Disconnect Between Innovation Investment And Value Generated Innovation Approach Now Develop Structured Approach To Innovation Decision-Making To Maximise Returns From Investment Decisions Identify And Develop Innovation From Non-Traditional Areas Outside Standard R&D Activities Future Innovation Approach

Where And What Are The Innovation Ideas? : 

November 7, 2011 23 Where And What Are The Innovation Ideas?

Innovation Metrics – Measure Along The Innovation Process : 

November 7, 2011 24 Innovation Metrics – Measure Along The Innovation Process Innovation Inputs Innovation Process Innovation Outputs People Involved Budget Allocated Number Of Ideas Generated %Age Of Ideas Piloted %Age Of Successful Pilots %Age Of Pilots Commercialised %Age Of Product/Services Launched Number of Innovation Projects By Type Cost of Innovation Projects Speed of Innovation Projects and Change of Speed Estimated Value of Innovation Projects and Change of Value Revenue Generate Cost Reductions New Business Publications/ Patents Innovation Library Size Innovation Training Provided

Innovation Model For Ideation and Realisation (I&R) : 

November 7, 2011 25 Innovation Model For Ideation and Realisation (I&R) Ideas Enter Innovation Process From Multiple Sources Innovative Ideas Validated and Distilled Ideas Discarded Or Implemented In Other Ways Successful Ideas Implemented

Innovation Model For Ideation and Realisation (I&R) : 

November 7, 2011 26 Innovation Model For Ideation and Realisation (I&R) Ideas analysed, validated and distilled as they move through the process Ideas exit the process appropriately Not valid, not proven Not appropriate for the organisation but can be used or applied elsewhere Partially implemented Fully implemented

Define Stage Gates For Ideation and Realisation (I&R) Process : 

November 7, 2011 27 Define Stage Gates For Ideation and Realisation (I&R) Process Idea Prototype Business Case Detailed Design Implement Launch

Innovation Is About Value Obtained : 

November 7, 2011 28 Innovation Is About Value Obtained Value = Return - Investment Minimise Investment Maximise Return Point of Best Value

Achieving A Balanced Approach To Innovation : 

November 7, 2011 29 Achieving A Balanced Approach To Innovation Innovation needs to be balanced against run-the-business activities Too much innovation and associated organisation change can be disruptive and inefficient

Achieving A Balanced Approach To Innovation : 

November 7, 2011 30 Achieving A Balanced Approach To Innovation Industry Profile Project Load Risk/Reward Profile Total Investment Maintenance of Operations Cost of Support Budget Constraints Resource Constraints Cost of Organisation Change Ability of Organisation to Change Decide on your innovation profile

Attitude Inhibitors To Innovation And Change : 

November 7, 2011 31 Attitude Inhibitors To Innovation And Change Adopting innovation requires learning, training and management “I’m not in product development. Why are you talking to me?” “I’ve been here for 20 years and I don’t see why we should change now.” “I am willing to support innovation 100% as long as it does not affect me.” “This is the way it’s always been done and it’s worked well up to now.” “I’ve got 15 minutes to talk to you. I’m very busy with important things.” Attitudes that require change Belief that you know best Focus on short-term returns with no long-term focus Innovation is not the job of senior management Process will slow us down

Organisation Process Models – Common Structure – High-Level : 

November 7, 2011 32 Organisation Process Models – Common Structure – High-Level At their core, all organisations have a common structure Vision, Strategy, Leadership, Business Management Operational Processes With Cross Functional Linkages Management and Support Processes

Organisation Process Models – Common Structure – High-Level : 

November 7, 2011 33 Organisation Process Models – Common Structure – High-Level Vision, Strategy, Leadership, Business Management Operational Processes With Cross Functional Linkages Management and Support Processes Innovation Leadership Comes From Here Direct Innovation – New and Updated Products and Services - Comes From Here Indirect Innovation – New and Updated Support Processes - Comes From Here

Mapping Innovation Areas To Organisation Model : 

November 7, 2011 34 Mapping Innovation Areas To Organisation Model Business Model Networking and Alliances Core Processes Enabling Processes Product Performance Product System Service Channel Brand Customer Experience Vision, Strategy, Leadership, Business Management Operational Processes With Cross Functional Linkages Management and Support Processes

Organisation Process Models – Common Structure – More Detailed : 

November 7, 2011 35 Organisation Process Models – Common Structure – More Detailed Vision, Strategy, Business Management Operational Processes With Cross Functional Linkages Management and Support Processes Develop and Manage Products and Services Market and Sell Products and Services Deliver Products and Services Manage Customer Service Human Resource Management Information Technology Management Financial Management Facilities Management Legal, Regulatory, Environment, Health and Safety Management External Relationship Management Knowledge, Improvement and Change Management Vision and Strategy Business Planning, Merger, Acquisition Governance and Compliance

Core Cross Functional Processes : 

November 7, 2011 36 Core Cross Functional Processes Three cross-functional processes that are common to all organisations Product/service delivery From order/specification/design/selection to delivery/installation/implementation/provision and billing Customer management From customer acquisition to management to repeat business to up-sell/cross-sell New product/service development From research to product/service design to implementation and commercialisation These processes cross multiple internal organisation boundaries and have multiple handoffs but they are what concern customers Cross-functional processes deliver value Value to the customer Value to the company Integrated cross-functional processes means better customer service and more satisfied and more customers Innovation works best when it crosses organisational functions

Every Organisation Has Three Core Cross-Functional Processes : 

November 7, 2011 37 Every Organisation Has Three Core Cross-Functional Processes 1. Product/Service Delivery: from order to completion 2. Customer Relationship Management 3. New Product/ Service Development The organisation sees the structure vertically and in a compartmentalised view and all to frequently does not see the customer viewpoint The customer sees across the structure and is not concerned with but is all too often aware of the operational elements, their complexity and lack of interoperability

Organisation Value Chains : 

November 7, 2011 38 Organisation Value Chains Value Chains Value chains add value and confer competitive advantage when defined and linked Innovation needs to be cross-functional to add real value Cross-functional innovation team sees the complete picture and generates greatest value

Projects And Innovation : 

November 7, 2011 39 Projects And Innovation Projects are about change and innovation Innovations or changes to existing processes, systems, applications, structures Organisations need to be good at two sets of skills Running the Business (RTB) – business as usual operations Change the Business (CTB) – changing existing operations to survive or compete Projects are the way of introducing innovation and change into organisations Projects tend to be multidisciplinary, involving some or all of: Requirements gathering Solution design Hardware installation Product selection Software development or modification Testing Process change Organisation change Data conversion Implementation Parallel operation Organisations need to be good at projects in order to deliver innovation and change

Dimensions Of Being Good At Innovation And Change : 

November 7, 2011 40 Dimensions Of Being Good At Innovation And Change To be good at innovation and change, three dimensions must come together within the organisation: A clear vision for the organisation and the set of projects needed to deliver on the vision A proven capability to deliver projects quickly and effectively Focus on the realisation of expected business benefits and business value associated with the implementation of investments Ability to Execute Projects Completeness of Organisational Vision Effective and Proven Benefits Realisation Approach

Dimensions Of Successful Innovation : 

November 7, 2011 41 Dimensions Of Successful Innovation Innovation Capability – tools, techniques, methodologies for identifying and assessing innovation Innovation Process and Project Management – being able to manage portfolio of innovation projects Implementation of Innovation – being able to adopt innovation Value Management – understanding and articulating business value of innovation Innovation Within IT – being able to drive innovation within IT Innovation Measurement – being able to measure innovation activities, skills and successes

Innovation Value Management : 

November 7, 2011 42 Innovation Value Management Value management means being able to articulate the business value of innovation and communicate in the language of business Connect innovation activities to business value Use standardised measurements and metrics Create effective, appropriate and accurate business cases based on accurate understanding of costs and value

Innovation Business Case : 

November 7, 2011 43 Innovation Business Case Simple Business Case Complex Business Case Low High Limited Pervasive Impact Extent of Adoption

Challenges Of Developing Good Cost Estimates : 

November 7, 2011 44 Challenges Of Developing Good Cost Estimates Requires detailed, stable, agreed requirements Agreed assumptions Access to detailed documentation and historical data for comparison Trained and experienced analysts Risk and uncertainty analysis Identification of a range of confidence levels Adequate contingency and management reserves

Reasons For Good And Bad Cost Estimates : 

November 7, 2011 45 Reasons For Good And Bad Cost Estimates Detailed, Stable, Agreed Requirements Agreed Assumptions Detailed Documentation and Historical Data Effective Risk and Uncertainty Analysis Trained and Experienced Analysts Identification of a Range of Confidence Levels Adequate Contingency and Management Reserves Complex Project or Technology Unrealistic Project Savings New Processes Untrained and Inexperienced Analysts No or Limited Comparison Data Available Project Instability Unrealistic Assumptions Overoptimism Unrealistic or Unreliable Data Unfamiliar Technology or First-Time Use Problems Getting Access to Data Unreasonable Project Baseline Ineffective Risk and Uncertainty Analysis Lost of reasons for and causes of inaccurate cost estimates

Sources Of Risk and Uncertainty In Estimating Costs : 

November 7, 2011 46 Sources Of Risk and Uncertainty In Estimating Costs Lack of understanding of the project requirements Shortcomings of human language and differing interpretations of meaning of project Behaviour of parties involved in the cost estimation process Haste Deception Poor cost estimating and pricing practices

Specific Risks : 

November 7, 2011 47 Specific Risks Sizing and Technology Overly optimistic developers Poor assumptions on the use of reused code Vague or incomplete requirements Not planning for additional effort associated with packages – integration, testing Complexity Tools Applications: software purpose and reliability Hardware limitations Number of modules affecting integration effort Capability Mixed skills of team Optimistic assumption on development tools Optimistic assumption on productivity Geographically dispersed team making communication and coordination more difficult Management Management’s dictating an unrealistic schedule Incorporating a new method, language, tool or process for the first time Not handling creeping requirements and change proactively Inadequate quality control, causing delays in fixing unexpected defects Unanticipated risks associated with package software upgrades and lack of support

Market And Organisation Capability Analysis : 

November 7, 2011 48 Market And Organisation Capability Analysis Organisations need to understand what the opportunity from an innovation is and what is needed to exploit it fully Analyses Growth-Share Matrix Analysis Marketing Strategy and Diversification Analysis SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis PEST (Political, Economic, Social, and Technological) Analysis Quick analyses that will define what is possible and achievable

Growth-Share Matrix Analysis : 

November 7, 2011 49 Growth-Share Matrix Analysis c c c Relative Market Share Market Growth Question Marks Stars Cash Cows Dogs Low High High Low Value of Product/ Service

Growth-Share Matrix Analysis : 

November 7, 2011 50 Growth-Share Matrix Analysis Cash Cows – business units/products and service offerings with high market share in a slow-growing industry Dogs – business units/products and service offerings with low market share in a mature, slow-growing industry Question Marks – business units/products and service offerings growing rapidly, consume cash but with low market shares and not generating much cash Have the potential to gain market share and become a star and eventually a cash cow when the market growth slows Stars – business units/products and service offerings with a high market share in a fast-growing industry Stars become cash cows

Growth-Share Matrix Analysis For Innovation : 

November 7, 2011 51 Growth-Share Matrix Analysis For Innovation Where does innovation ideas fit into the Growth-Share Matrix Analysis Where does the potential lie? What has to be done to actualise the potential?

Marketing Strategy And Diversification Analysis : 

November 7, 2011 52 Marketing Strategy And Diversification Analysis Market Penetration Market Development Product and Service Development Diversification Present New Existing Markets New Markets

Marketing Strategy And Diversification Analysis : 

November 7, 2011 53 Marketing Strategy And Diversification Analysis Four possible growth strategies based on existing and new markets and products and services Market Penetration - focuses on selling existing products and services into existing markets Market Development - sell its existing products and services into new markets Product Development - introduces new products and services into existing markets Diversification – develops and markets new products and services in new markets What approaches should the organisation take? What are the risks? What are the requirements?

Organisational Capabilities To Create And Sustain Innovation : 

November 7, 2011 54 Organisational Capabilities To Create And Sustain Innovation Set of core capabilities within an organisation to create and sustain an innovation function Being good at innovation means being having strong, well-developed and well-functioning capabilities in these areas Use this as a check-list for creating and managing innovation

Organisational Capabilities To Create And Sustain Innovation : 

November 7, 2011 55 Organisational Capabilities To Create And Sustain Innovation

Innovation Organisational Capabilities - How Do You Measure Up? : 

November 7, 2011 56 Innovation Organisational Capabilities - How Do You Measure Up?

Mapping Organisational Capabilities To Dimensions of Successful Innovation : 

November 7, 2011 57 Mapping Organisational Capabilities To Dimensions of Successful Innovation

Summary : 

November 7, 2011 58 Summary The word Innovation is becoming devalued through meaningless use Innovation is about moving ideas to appropriate completion and implementation Innovation is about generating value Innovation potential exists everywhere Innovation is not just about the one big disruptive idea Innovation is a process that can be implemented, measured and monitored Innovation can be learned Innovation means change so to innovate effectively you must be good at or get good at change

Next Steps : 

November 7, 2011 59 Next Steps Understand what you want to achieve from innovation and define an innovation vision Establish a cross-functional innovation team and an innovation progamme Measure where you are now to establish a baseline against which progress can be quantified Develop the organisational capabilities that will make you good at innovation Define a set of innovation metrics/KPIs and measure innovation activities Understand your innovation strengths and weaknesses Learn from lessons such the strengths of being good at innovation

More Information : 

November 7, 2011 60 More Information Alan McSweeney alan@alanmcsweeney.com