Pipeline Construction Innovation
Steve Markham
North Carolina State University
Center for Innovation Management Studies
Copyright 2007 Markham
Introduction
Personal Introduction
• Professor at North Carolina State University
• Research Foundation President for the Product Development
and Management Association
• BP’s Innovation Board
• IBM’s Innovation Council
• Nortel’s Business Venture Group
• Innovation consultant for numerous fortune 500 companies
• Founder/Director of 8 high technology startup companies
• CFO for 5 startups, VP Product Development
• Research: innovation, champions
• Former Director of CIMS
Copyright 2007 Markham
Introduction
CIMS is a virtual research center
• CIMS network includes over 100 research
investigators at 55 universities involved in CIMS
research programs
• CIMS is located on the Centennial Campus of NC
State
• First national research center (NSF sponsored IUCRC) devoted
exclusively to research on the management of technological
innovation
• The International Association of Management of Technology (IAMOT)
rated the College of Management 1st in Technology Management
• Journal of Product Innovation Management article ranks College of
Management 11th in the Management of Technology/ Innovation.
Located in the Research Triangle Park (RTP) CIMS is in one of
America’s most dynamic technological environments
Copyright 2007 Markham
Introduction
Agenda
The Case for Innovation
 Growth
 The Innovation Cube
Definitions
 Innovation, Invention, Management, Ideas,
Opportunities, Radical,, Incremental
Objectives
 Community: Individual/company/inter-company
Championing Projects
 Building the case
 Relationships
Selling Ideas
 Rational Ignorance
 Getting Approvals
Copyright 2007 Markham
Making the Case
Phil Hopkins, Technical Director,
Professorial Fellow at the University of Newcastle
We must not always value experience above
other attributes, such as a willingness to learn,
a willingness to change, and new knowledge.
Copyright 2007 Markham
Making the Case
The Case for Growth!
• Growth is dominating discussions in boardrooms around the
world1
• Barriers to competition have fallen precipitously…
• 50% of sales of “successful” companies come from new
products/services… over 60% for “most successful”2
• Next round of competitive positioning will be based on
innovation
• Only innovation increases the size of the pie – making its
mastery vital
1. 2004 Global CEO Survey, IBM Business Consulting Services
2. PDMA Handbook of New Product Development
Copyright 2007 Markham
Making the Case
Management is waking up to innovation
April 24, 2006 edition of Business
Week magazine
Copyright 2007 Markham
Making the Case
Unfortunately many managers may be better at
controlling costs
• Companies have invested considerable resources and energy in
becoming leaner and more nimble
• The quest for productivity, quality and speed has launched a
number of management tools: TQM, Reengineering, Six sigma,
Outsourcing, etc.
• Senior management is frustrated by their inability to translate
gains into sustainable, profitable growth
• The products and services of these firms are indistinguishable
Bit by bit these tools have taken companies away from viable
competitive positions
Copyright 2007 Markham
Making the Case
But just “how to” innovate can be a difficult and
complex problem
To get ahead of the pack, managers at leading companies are
asking:
• How can they move beyond producing only incremental
products and create more radical innovations?
• Which emerging technologies have the potential to be
disruptive and generate breakout financial results?
• Are there adjacent markets where they can leverage
existing platforms?
• What internal capabilities do they need to be successful
innovators?
Copyright 2007 Markham
Making Innovation Easier
CIMS IM Framework provides a systematic way
to think about managing innovation
Levels:
• Firm
• Industry
• Macro-environment
Dimensions:
• Strategy
• Organization & Culture
• Process
• Techniques & Tools
• Metrics
Competences:
• Idea Management
• Market Management
• Portfolio Management
• Platform Management
• Project Management
It breaks IM down into elements that can be
learned, practiced, measured, and improved
i.e. managed
Copyright 2007 Markham
Determining IM Competence
IM Assessment Tool – Maturity Model Definitions
Five levels of maturity separate ‘Ad hoc’ companies
from those that are ‘Optimized’:
1. Ad hoc - Initial state; results from having no concerted focus on
innovation.
2. Defined - Organization makes innovation a strategic imperative;
resources are dedicated to improving the firm’s IM proficiency.
3. Managed – Manager’s actions reinforce the desired new behavior;
their goal is to institutionalize the new innovation business model.
4. Leveraged - Synergies occur; company involves people /
competencies from outside the boundary of the firm.
5. Optimized - New innovation model is fully internalized; business
results are repeatable and predictable (This state represents CIMS
knowledge of leading IM practice).
Copyright 2007 Markham
Your Questions & Challenges
What are your company’s innovation enemies?
Source: April 24, 2006 edition of Business Week
Copyright 2007 Markham
Definitions
First, some definitions…
Innovation Defined
•
Invention is a new device or method derived through experimentation.
Often confused with ‘innovation’
•
Innovation is turning ideas into a business success; it must always be
user focused. Innovation is much broader, it is ‘the commercially
successful use of inventions’.
•
Innovation Management is a multidisciplinary process that involves
Strategy, Marketing, Finance, Economics, Logistics, Operations, etc. to
create new and valued products, services, and business models.
•
Idea is the recognition that something has a commercial advantage
•
Opportunity is an idea grounded in needs and capability to deliver
•
Incremental vs Radical
Few words are so ubiquitous…its on the minds of CEOs, government
officials, and academic leaders as they search for a way to survive.
Sam Palmisano, IBM CEO
Copyright 2007 Markham
Definitions
For incremental innovations, problems are
structured at the corporate level and information
flows outward to the organization
Boundary Interface
Gate-keeping Interface
Project Interface
Problems and opportunities are identified
and directed to individuals/small groups
for information search
Macroenvironment
Boundary
Spanners
Gatekeepers
Corporate
Decision
Makers
Project-level
Decision
Makers
Small Groups
of Individuals
You are
here
Front End of Innovation
Reid and de Bretani, The Fuzzy Front End of New Product Development for Discontinuous
Innovations: A Theoretical Model. Journal of Product Innovation Management, May 2004.
Copyright 2007 Markham
Definitions
However, for breakthrough innovations information
flows inward and decision making is individual and
fragile
Boundary Interface
Gate-keeping Interface
Search for new
technologies; intuit
unaddressed markets
Macroenvironment
Boundary
Spanners
Project Interface
Determine value to
organization; reduce
uncertainty
Gatekeepers
Greatest source of discontinuous
technologies/ideas
Corporate
Decision
Makers
Project-level
Decision
Makers
Small Groups
of Individuals
Idea Management
Reid and de Bretani, The Fuzzy Front End of New Product Development for Discontinuous
Innovations: A Theoretical Model. Journal of Product Innovation Management, May 2004.
Copyright 2007 Markham
Definitions
Opportunities for Partnership Difficulties
• One partner has interest in radical innovation the
other wants incremental
• One partner wants to talk about ideas, the other
wants to talk about opportunities
 Neither partner knows the difference
• A partnership agreement includes a “development”
project that could be an invention or an innovation
project
• How Partners ability to go at the same speed differs
• Boundary Spanners and Gatekeepers do not know
their roles – can’t talk to their partners or internally to
their own companies
Copyright 2007 Markham
Agenda
The Case for Innovation
 Growth
 The Innovation Cube
Definitions
 Innovation, Invention, Management, Ideas,
Opportunities, Radical,, Incremental
Objectives
 Community: Individual/company/inter-company
Championing Projects
 Building the case
 Relationships
Selling Ideas
 Rational Ignorance
 Getting Approvals
Copyright 2007 Markham
Objectives
Objectives
Build an Innovative Community Around OnShore Pipeline Construction
 Innovation at this conference
 Innovation between companies
 Innovation inside your company
Copyright 2007 Markham
Objectives
Innovation at this Conference
Innovation in the next 36 hours – How do we
use our relationships to increase value by
jointly benefiting each other through
adoption of new practices?







This is not a detailed technical discussion
Not creativity by itself
. . . But may
Not invention alone
include all of
these
Not just new “ideas”
Nor is it a “what are all the problems” session
This is not just a brainstorming workshop
This is a “how do we collaborate” discussion
– Individually, company, collectively
Copyright 2007 Markham
Objectives
Individual Participation at this Conference
Innovation is a difficult
choice we make
 Open discussion
– Offer ideas without fear of being assigned to do it
– Talk about innovation without fear of competition
– Suggest how we can work together without fear that your
company can actually deliver it
– Talk about early concepts without fear of looking bad
– Think about future opportunities without skepticism of the
past
– Participate without worrying about language barriers
– Help set expectations about what can be done
Copyright 2007 Markham
Objectives
Innovation Between Companies
Requires a community (This meeting?)
 Mutual interest
 Willingness to share
Requires trust
 Setting and meeting expectations
 Reassess what is competitive and what is cooperative
Requires a strong reason for doing things differently
 Risk
 Resources
Discussion: What do you hope to get out of this
meeting?
– System approach – not just doing things good for your
company but shifts problems/costs to others
– No use to do it alone – needs other parts of the supply chain to
make an innovation work
– Innovation Partners?
Copyright 2007 Markham
Objectives
Innovation in Your Company
Know what is needed to participate in the
community
What is the advantage for your company
 Not obvious at first
– Automotive (Paint) / Electronics (SRC)
Identify what is negotiable and what is not
“Sell” innovation (building a community) to
others in your company
 Discuss the obstacles
– Trust
– Risk
– Resources / Priority
Copyright 2007 Markham
The ProblemC
Resources
The Valley of Death
Decision space
between discovery and
development
Existing
Commercialization
Resources
Existing
Research
Resources
(Technical and
Market)
Discovery
Early
Development
Level of Development
Commercialization
Used by permission
Copyright 2007 Markham
The Problem
Resources
Championing Projects
Decision space
between discovery and
development
Existing
Research
Resources
(Technical and
Market)
Discovery
Existing
Commercialization
Resources
Use relationships to prepare case
and sell the opportunity
Early
Development
Level of Development
Commercialization
Used by permission
Copyright 2007 Markham
Rational Ignorance
Rational Ignorance
People can’t be experts about everything
 They are selective about what they care to be
knowledgeable about
Yet . . . People have opinions about
everything
 They manage the world by habit
When people do not accept your ideas its
because of rational ignorance
 They don’t know the value of your idea
Rational
people
protect
their
ignoranc
e
carefully
Copyright 2007 Markham
Rational Ignorance
Rational
Ignorance
Brilliant
Idea
Copyright 2007 Markham
Rational Ignorance
. . . but who is Ignorant?
Decision makers are rationally ignorant of
the value of the idea
The inventors are rationally ignorant about
how decisions are made
Effective selling requires knowledge
of both sides of the decision
Copyright 2007 Markham
Rational Ignorance
Combined Ignorance
Copyright 2007 Markham
Selling Ideas
Selling Closes the Gap
All ideas must be sold to overcome rational
ignorance
 FIRST - Selling provides a reason to transfer an idea
from a habit, relatively uninformed state, to an actively
considered concept
 SECOND – Selling provides salient information about
the idea to decision makers. Requires both the
decision maker and innovator to make sense.
Copyright 2007 Markham
Selling Ideas
Opportunity:Identify
Identify Your Your
CompanyCompany
Needs
Opportunity:
Needs
Who is the intended customer
Why is your IDEA a necessity to them
 Cost savings, Production improvement, HSE.
What is the decision process for adoption
 Who, Criteria, Process, Timing
Often there is an
over emphasis on
criteria
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Selling Ideas
Why do they need it?
Performance improvement (10X)
Cost reduction (30%)
Something new and valuable
Features
vs
Benefits
Quantify in salient terms
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Selling Ideas
Targets
Who are the decision makers
Talk their language
 Not technical capabilities or features but benefits
assuming it works; simplify your information
Copyright 2007 Markham
Selling Ideas
Selling
Tools
Opportunity:
Identify Your Company Need Selling Tools
Compelling Case
• Explain so people can see
the value
• Provide whole picture to
decision makers
• Create an “object of
support”
• Get other people to help
The Story – the idea as
a: Benefit, Problem,
Solution, Opportunity,
Indispensable,
Interesting, Dramatic . . .
Selling tools
Elevator Pitch
• Explain their opportunity in
less than 2 minutes
• Selling Tactics
• Target identification
• Safety Tips
Sell
“Killer” Graphic
• Make value obvious
• Simple representation
• Variables and relationships
Value Proposition
Compared to base line
Copyright 2007 Markham
Selling Ideas
Safety Tip
Never go into a meeting to get an approval
 The meeting must be a formality of the decisions that
have already been made
– Get buy in from decision makers before meeting
– Count votes before the vote
– No surprises
Don’t beg, grovel or tantrum
 Be willing to walk away
 Keep being genuine
Copyright 2007 Markham
Conclusion
Breakthrough Innovation - Objectives
Innovative companies will be able to:
 Create and evaluate innovative product ideas that are based upon unique
technology capabilities, and link these to partners.
 Research both the technology and the partner opportunity efficiently utilizing
an information-gathering hierarchy.
 Research and evaluate the business opportunities on operational and
strategic dimensions to uncover ‘fatal flaw’s at an early stage.
 Develop a business model and commercialization strategy for the best
opportunity.
 Build an appropriate business case for innovations, venture, alliance or new
line of business, with the case tailored to the appropriate decision-makers.
Copyright 2007 Markham
Conclusion
Result = acquiring new behaviors - collectively
• Work as a project team -- locally or remote. Coordinate multiple,
interdisciplinary tasks in order to achieve innovation in an action-oriented business
setting. This includes familiarization with critical management issues such as
governance and performance measurement.
• Conceive, develop and market innovations. Lead innovation projects including
the design of the innovation team and use of effective performance metrics. This
includes proficiency in quantitative and qualitative techniques in market research,
technology commercialization, and portfolio optimization.
• Wire the organization for success. Participants will be able to assess the
drivers of an organization’s culture, determine corrective actions, and facilitate
organizational change. This includes dealing with the tougher HR issues that are
often pushed under the rug.
• Create the case for change. Initiate the development of specific execution
strategies to better align innovation activities with the firm’s business strategy. This
includes being able to objectively assess the maturity of their own organizations
IM competence.
i.e. you will be able to increase
your organization’s capacity to
innovate.
Copyright 2007 Markham
Your Questions & Challenges
Thank
You!
Copyright 2007 Markham