4 October 2011
Global Dynamics
of Innovation and
Project Management
A look at innovation in established and emerging markets
and implications for project management.
Global Dynamics of Innovation and Project Management
The World Turned Upside Down
The Economist, April 2010
Developing countries are becoming hotbeds of business innovation in much the same way as Japan
did from the 1950s onwards. They are coming up with new products and services that are dramatically
cheaper than their Western equivalents: $3,000 cars, $300 computers and $30 mobile phones that
provide nationwide service for just 2 cents a minute. They are reinventing systems of production and
distribution, and they are experimenting with entirely new business models. All the elements of modern
business, from supply-chain management to recruitment and retention, are being reinvented in one
emerging market or another.
Contents
Background and Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Centers of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
New Definitions of Innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Choosing the Centers of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mobile Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Mobile Medicine (mHealth) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Convergent Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Human 2.0 (Human Augmentation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Alternative Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mobile Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Challenges and Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Global Dynamics of Innovation and Project Management
Background and Key Findings
Background
PricewaterhouseCooper’s 2011 Growth Reimagined
survey finds that CEOs are focused on innovation as the
top means of growth for their firms. (1) In fact, the study
shows that the percentage of CEOs who view “new
product/service development” as their main opportunity
to grow their business has more than doubled from
13% in 2007 to 17% in 2009 to 29% in 2011. This report
echoes similar findings from 2010 reports from IBM and
McKinsey and a 2011 report from Wipro and Forbes.
The Wipro/Forbes report shows that 68% of executives
surveyed say that “innovation is now more important
than it was prior to the recession.”(31)
According to the PwC report, a key driver for this renewed
focus on innovation is the significant and fundamental
shift in the priority target consumer marketplace from
developed markets such as the United States and Canada,
Western Europe and Japan to developing markets such
as India, China and Brazil. While developed markets
suffer from slow GDP growth, high public debt and the
need to significantly cut governmental spending and
possibly raise taxes in the near-term, the developing
world is seeing strong growth and a rapidly growing
middle class (i.e., “prime consumers”). Findings from the
research indicate that regardless of where a company is
based, most CEOs will be seeking their greatest growth
throughout Asia and Latin America. In order to compete
in these high-growth consumer markets, companies need
to tailor their offerings to the markets and this requires
innovative products, strategies and business processes.
That being said, the 2011 Global R&D Funding Forecast,
sponsored by Battelle, finds that United States research
and development is “so large compared to R&D
performed in the rest of the world that its individual
components are mostly larger in funding and structure
than the entire spending of most other countries.”(2)
The report states that only China, Japan and Germany
have R&D infrastructures at a scale comparable with the
United States.
However, the same report does note that the
globalization of R&D has started to erode the lead the
United States has maintained for the past 40 years.
Specifically, the report states that “the economies
of China, Korea, India, Russia and Brazil, and their
investments in R&D, are expanding at rates substantially
higher than that of the United States, Japan, and
Germany. As a result, emerging economies are starting to
challenge the technological and discovery capabilities of
the historic R&D leaders.”
Key Findings
This PMI report looks at key innovation developments
around the world. We examine the dynamics of
innovation in today’s business environment and the
challenges these dynamics present. Lastly, we integrate
the implications for project management. Some
highlights are below:
■■
Much of the innovation happening today is due
to a convergence of existing, albeit mostly new,
technologies. Because of this, firms are working
together within and across industries towards
common deliverables. Thus, the ecosystem around
any specific innovation area typically involves a
great number of players; from government agencies
and NGOs who fund and regulate to private or
public-private manufacturers who research and
develop the products or services to the various
distribution channels that ultimately delivery the
goods to market.
■■
Somewhat related to this finding is the fact that
innovation is rarely geo-centralized in today’s
“flat” world. From the initial research through to
the development and delivery of a new innovation,
governments and companies are working with
global networks of stakeholders. We also found
that, although there are clearly some leaders in
any given innovation area, at least most of the
major economies (or companies within them) are
investing to some degree in most innovation areas.
These findings are somewhat contradictory to the
traditional concepts of innovation “centers” or
“hubs” in that value is being created and consumed
in a highly diffused manner.
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Global Dynamics of Innovation and Project Management
■■
■■
4
Analysis of patent and R&D data shows that the
United States is still a major player across nearly
every major industry. However, Japan and China
outrank the United States in nearly every patent
category. China has increased its patent applications
by between 100% and 1000% per industry over the
past five years, surpassing the United States and
Japan as the leader in several key industries, such
as aerospace, agrochemicals, medical devices and
pharmaceuticals. Along with South Korea, these
three nations out-pace patent production of other
nations by several multiples in nearly every industry.
That is to say that looking solely at patent and
R&D data does not provide a good indication of the
development of smaller innovation hubs.
The examples in this report and the reviewed
literature on innovation and project management
suggest that the convergent and distributed nature
of much of today’s innovation has significant
implications for project, program and portfolio
management. Specifically, project, program
and portfolio management must enhance the
management of open innovation, must speed
commercializing of innovations, must support the
development of new customer markets and provide
enhanced risk for large funders of innovation.
||
Enhancing open innovation: Managing
innovation across multiple companies
adds significant complexity to the mix.
Can the practices of program and portfolio
management be introduced to enhance the
process? Can best practices in distributed
project management be applied as well?
||
Speeding commercialization: In today’s
highly competitive global marketplace, speedto-market is essential. Can organizational
agility or iterative practices or Japanese kaizen
or obeya techniques compress the process
without sacrificing quality?
||
Targeted new market segments: As global
firms seek to shift focus to customers in
emerging markets, what roles will change
management and risk management play?
||
Funding innovation: In both developed
and developing economies, government
departments are major funding sources for
innovation. However, stakeholders are keeping
an ever-closer eye on how these entities use
their resources. Again, program and portfolio
management may have a significant role to
play.
Global Dynamics of Innovation and Project Management
The Centers of Innovation
New Definitions of Innovation (Excerpts from recent articles on innovation)
Frugal Innovation
Also known as “reverse innovation” or “constraintbased innovation,” takes the needs of poor
consumers as a starting point and works backward
to strip offerings down to their bare essentials. This
does not simply mean cutting costs to the bone
because frugal products need to be tough and easy
to use.(5) - First break all the rules: The charms of
frugal innovation. The Economist.
Ambidextrous Innovation
Looks to gain both efficiencies and differentiation
at the same time. Cloud computing, for example,
can enable companies to manage business
processes more efficiently. But it can also empower
entirely new business models, for example, ones
that connect supply chain partners in a single
differentiated offering for customers.(1) - Growth
reimagined, prospects in emerging markets drive CEO
confidence. PricewaterhouseCoopers.
Scaling Up and Scaling Out
When companies aim to reduce unit costs by
centralizing manufacturing and producing long runs
of identical items, they are said to be “scaling up.”
However, centralized production adds expensive
layers of bureaucracy, and it is hard to make it work
in emerging markets where populations are often
widely scattered and distribution systems abysmal.
A growing number of entrepreneurs in the emerging
world are replacing scaling up with “scaling out,”
which means involving a wider range of people
in the process of production and distribution,
something that has been made much easier by
mobile phones and the internet.(4) - Here be dragons:
The emerging world is teeming with new business
models. The Economist.
Open Innovation
Demand for innovation is driven through the supply
chain. In a 2010 PwC survey, 39% of CEOs said
they expected the majority of their innovations to
be co-developed with suppliers. Many CEOs are
concluding that no one organization has enough of
the right people and the right amount of funding
to innovate successfully on its own. (1) - Growth
Reimagined, Prospects in emerging markets drive CEO
confidence. PricewaterhouseCoopers.
Mass Production of Services
The developing world’s most innovative business
model may be the application of mass-production
techniques to sophisticated services. This started
with India’s outsourcing firms, which demonstrated
that economies of scale and scope could be reaped
from services that used to be highly fragmented
and geographically rooted. These outsourcers
are still expanding and moving upmarket. Indian
consultancies are now challenging Western ones in
complex services, not just dealing with customer
complaints. Emerging-market entrepreneurs want
to apply these techniques beyond IT and the back
office. For example, they see a huge market for legal
services requiring a high level of expertise. (4) - Here
be dragons: The emerging world is teeming with new
business models. The Economist.
Pull Models
Western companies have spent the past century
perfecting “push” models of production that
allocate resources to areas of expected demand.
But in emerging markets, particularly those where
the Chinese have a strong influence, a very different
“pull” model often prevails, designed to help
companies mobilize resources when the need arises.
Hong Kong’s Li & Fung and China’s Chingquing
Lifan Group can use their huge supply chains to
produce fashion items or motorcycles in response to
demand. These pull models fundamentally change
the nature of companies. Instead of fixed armies
looking for opportunities, firms become loose
networks that are forever reconfiguring themselves
in response to a rapidly shifting landscape. (4) - Here
be dragons: The emerging world is teeming with new
business models. The Economist.
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Global Dynamics of Innovation and Project Management
“It doesn’t matter where scientific discoveries and breakthrough technologies originate – for national prosperity,
the most important thing is who commercializes them.”
—The McKinsey Quarterly
Choosing the Centers of Innovation
A 2009 McKinsey Quarterly article looks at the
definition of innovation in a broader sense, stating that
“innovation involves the development of new products
or processes and the know-how that begets them. New
products can take the form of high-level building blocks
or raw materials (for example, microprocessors or the
silicon of which they are made), midlevel intermediate
goods (motherboards with components such as
microprocessors), and ground-level final products (such
as computers).”
Selecting the centers of innovation to include in this
report was a combination of art and science. The report
is not meant to detail all centers of innovation or even
the largest; but instead highlights several thought to
have significant potential impact on the business world.
We started with an analysis of patent and R&D data by
country to spot areas that were clearly taking a serious
approach to innovation.
We also used a number of compiled lists of “most
innovative countries” from sources such as The Economist
and BusinessWeek.(6) We then drilled down into a
selection of both developed and developing countries to
study patent data at the industry level (using a custom
report from Thomson Reuters). This information helped
us understand not only which countries were innovating,
but in which sectors they were most heavily investing.
The McKinsey article concludes that arguing about which
innovations or innovators make the greatest contribution
to economic prosperity, however, isn’t helpful, for they
all play necessary and complementary roles. Innovations
that sustain prosperity are developed and used in a huge
game involving many players working on many levels
over many years. (3)
Patent data for select countries and industries
US
Japan
Germany
South
Korea
Singapore
China
Finland
India
Israel
Brazil
Industry
Total
Biggest Mover
‘06 to ‘10
Aerospace
7,443
9,420
3,211
3,484
20
11,247
28
53
26
93
35,025
China
Agrochemicals &
Agriculture
3,777
3,705
830
2,289
1
14,791
42
235
4
281
25,955
China
Automotive
10,556
37,642
12,129
9,368
13
25,286
46
310
28
559
95,937
China
Computing &
Peripherals
65,546
76,672
5,190
25,063
107
65,101
148
653
112
499
239,091
China
Medical Devices
15,895
10,021
3,055
3,815
15
28,249
54
197
36
406
61,743
China
Semiconductors
15,390
43,060
2,068
18,195
51
18,786
30
81
14
72
97,747
China
Petroleum & Chemical
Engineering
8,602
8,257
1,943
2,873
17
25,167
76
180
15
244
47,374
China
Pharmaceuticals
20,015
8,637
1,263
4,890
33
29,495
66
1,439
20
276
66,134
China
Telecommunications
24,104
25,815
1,492
13,585
58
34,214
72
406
54
180
99,980
China
Country Total
171,328
22,329
31,181
83,562
315
252,336
562
3,554
309
2,610
Source: Thomson Reuters
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Global Dynamics of Innovation and Project Management
It became clear that most countries at least dabble in
innovation in nearly all sectors, so we refined our list
to target those centers that had the strongest local
ecosystem. We looked at factors such as available
resources; natural, human and financial as well as
government support. We also looked at local need: was
the sector critical to the current and future well-being
of the local population (e.g., water supply in India or
medical care in underserved areas)?
However, despite all the existing data on innovation
at the industry or country level, the concepts of open
innovation and alliance networks appear to be taking
center stage for most innovations. Our research found
that innovation areas that transcend industries and
national boarders were often the most compelling in
terms of current momentum and future potential.
In the following sections we summarize six innovation
areas, five of which involve industry convergence.
Industry Innovation Convergence Web
Telecom
Smart/
Renewable
Energy
Mobile
Technology
Physical
Sciences
Human 2.0
Alternative
Energy
Mobile Money
Mobile Medicine
Convergent
Healthcare
Financial
Services
Biotech
Pharma
Medical
Devices
Source: PMI 2011
Innovation Areas
Mobile Money
Mobile Medicine
Convergent Healthcare
Human 2.0
Alternative Energy
Mobile Technology
Industry
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Global Dynamics of Innovation and Project Management
Mobile Money
“The Emerging World’s Five Most Crucial Words:
‘To Move Money, Press Pound’.”
The main agents in the mobile money area include:
■■
Global Hubs: These are typically money transfer
organizations such as Western Union, which
transfers money from the sender agent to the
recipient agent. Also, they provide the physical
agent location when the sender or recipient does
not have a mobile-enabled account.
■■
Mobile Network Operators: These serve as the
digital agents, with a large target subscriber base.
Mobile payments provide them with the opportunity
to generate additional revenue from money transfer
and to reduce churn.
■■
Financial Institutions: Most countries allow only
banks or bank holding companies to store and hold
money. Therefore, the financial institutions play an
important role, as carriers expand their MMT service
to serve also as a savings tool for the recipient.
■■
Mobile-Wallet Providers: M-wallet is an electronic
account for mobile phones and is usually linked to
a mobile number. The user can deposit funds into
the account or the account can be used for mobile
commerce, mobile payments at point-of-sale and
peer-to-peer money transfers.
—Ram Menno, The Global Information Technology
Report 2010 - 2011, World Economic Forum (7)
Mobile banking was recently identified as the number
one mobile application by Gartner. According to Gartner,
“Mobile banking will have a big impact in developing
markets, by giving people access to financial services;
both banks and mobile operators can expect new revenue
streams from this service.”(8)
According to a 2010 McKinsey Quarterly article,
“Financial services for the unbanked are among the most
promising opportunities for mobile-telecom operators
hoping to counter slowing subscription growth with
auxiliary offerings, such as banking, health care, and
education services. Approximately one billion people in
emerging markets have a mobile phone but no access
to banking services; by 2012, this population will reach
1.7 billion. Today, only about 45 million people without
traditional bank accounts use mobile money, but we
expect that this number could rise to 360 million by 2012
if mobile operators were to achieve the adoption rates of
some early movers.” (9)
Global Hot Spots for Mobile Money Transfer
Afghanistan
China
Pakistan
Sub-Sahara
Africa
Brazil
8
India
Philippines
Global Dynamics of Innovation and Project Management
Mobile Medicine (mHealth)
“Fifteen years ago, we never could have imagined mobile health. Today the debate has shifted. It is not about
whether mobile technology can be used to deliver good quality healthcare, but how to do it in the most efficient
and cost-effective manner.”
—Sachin Pilot, Minister of State for Communications and Information Technology of India
According to research compiled by Booz & Company,
computing and healthcare are the two largest global
R&D areas; accounting for nearly half of all R&D
spending in 2009. (14) One convergence between these
two segments is telemedicine or mobile health. Mobile
health technology can empower frontline community
healthcare providers, including accredited social health
activists working at the village level, by giving them
mobile access to basic information such as checklists,
reminder systems and immunization records. Mobile
health technology will also enable patients and
healthcare providers to access holistic, cradle-to-grave
health records. With 3G and 4G broadband cellular
communications on the horizon, there is the potential
to use cellular networks to help prevent and manage
chronic disease, offer consultation, make diagnoses and
prescribe treatments.
Global Hot Spots for Mobile Medicine
Canada and
United States
Perhaps nowhere are the areas of healthcare and
telecommunications coming together faster than in
India. India’s healthcare system needs massive additional
investment. About 70% of the population lives in villages
with no access to healthcare. Some five million Indians
die of cardiovascular diseases every year, more than the
quarter of them under 65. About two million die from
drinking contaminated water. Healthcare delivery in
India has typically followed a top-down approach. Yet, no
matter how fast they move to build new hospitals and
clinics, public health officials are always playing catch-up
as the population continues to grow. At the same time,
roughly 600 million Indians now have cellular phones
and it is estimated that an additional 50 more mobile
phones are sold every second. Politicians have promised
to deliver world-class infrastructure – in this case,
broadband access – to 250,000 villages by 2012. Cellular
devices therefore offer an effective way to reach much of
the bottom of the pyramid with healthcare in a way that
is localized, effective, affordable and scalable. (13)
Western
Europe
China
India
South Africa
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Global Dynamics of Innovation and Project Management
Convergent Healthcare
“The aging population in the United States will certainly put an unprecedented burden on the health care system.
The shift toward an older, more engaged patient (consumer) base is prompting greater focus on and demand for
improvements to the diagnosis and treatment of chronic conditions. At the same time, U.S. based life-sciences
firms are facing diminishing returns from their R&D, intensifying cost and competitive pressures from global
competitors. Convergence presents a new avenue for innovation and business growth for these firms.”
—Deloitte Consulting (16)
The convergence of drugs, devices, and diagnostics
is leading to innovative health care solutions and
new opportunities for business growth and product
differentiation in the life sciences industry. Motivated
by scientific advances, consumer demand, and market
pressures, firms in all sectors of the life sciences industry
have already created a full spectrum of combination
products. Examples include diagnostics that help target
drug therapies, devices that can monitor patients and
precisely deliver drugs, and devices that are coated, filled,
or packaged with drugs. Many of the early examples
involve combining diagnostics or devices with drugs,
but this is shifting as new opportunities emerge to
integrate diagnostics and devices with sophisticated
instrumentation and information technologies.(15)
The number of combination products under development
is rising quickly as developers seek to enhance existing
products and introduce fundamentally new health care
solutions to the market. Convergence is transforming
cardiovascular care, orthopedic treatment, tissue-wound
management and other clinical areas. One of the most
salient examples of convergence between a device and
a drug is the drug-eluting stent (DES), a tiny, bare metal
stent coated with a drug that helps prevent restenosis
(the narrowing and reclogging of arteries) after heart
surgery.
Global Hot Spots for Convergent Healthcare
United Kingdom
United States
Germany
Switzerland
Japan
Singapore
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Global Dynamics of Innovation and Project Management
Human 2.0 (Human Augmentation)
The field of human augmentation (sometimes referred
to as “Human 2.0”) focuses on creating cognitive and
physical improvements as an integral part of the human
body. (17) Human augmentation moves the world of
medicine, wearable devices and implants from techniques
to restore normal levels of performance and health (such
as cochlear implants and eye laser surgery) to techniques
that take people beyond levels of human performance
currently perceived as “normal.”
Human augmentation as an emerging field is still in the
first stage of development according to Gartner’s latest
emerging technologies Hype Cycle report.(18) They do,
however, see “transformational” potential for the field.
The Gartner Hype Cycle report goes on to state that the
World Health Organization estimates there are more
than 750 million disabled people in the world and that
the video game, filmed entertainment and the television
network business markets are already at US$46.5 billion,
US$104 billion and US$227 billion, respectively. Given
the medical and entertainment opportunities to enhance
people’s lives through human augmentation, this field
will easily reach and surpass the US$1 billion mark during
the next decade. A few major possibilities include:
If computer power continues to develop rapidly,
while physical processors continue to shrink in size,
future enhancement might easily allow a person to
attain “network enabled telepathy,” or the ability to
immediately access and manipulate massive amounts
of information with a simple thought. Chris Taylor, a
futurist with Business 2.0 reported that, “Sony has
already patented a game system that beams data
directly into the brain without implants,” heralding that
the technology in question is well on its way.(20) Also, in
2009, Honda Research Institute developed the world’s
first “Brain Machine Interface” technology that uses
electroencephalography and near-infrared spectroscopy
along with newly developed information extraction
technology to enable control of a robot by human
thought alone. It does not require physical movement
such as pressing buttons. According to Honda, this
technology can be further developed to integrate with
human-robotic systems, such as exoskeletons. (21)
Global Hot Spots for Human Augmentation
Germany
United States
Japan
South Korea
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Global Dynamics of Innovation and Project Management
Alternative Energy
“The pace of global investment in renewables
bounced back in 2010 following a subdued
2009. This was largely driven by a recovering
global economy, the presence and expansion
of strong incentive schemes for renewables in
the pursuit of national targets, and a generous
earmark of stimulus funding for renewable
energy projects by countries including the United
States, China, Germany and Japan. Installed nonhydro renewable capacity, mostly wind power,
increased by 21% year on year according to our
estimates, with China accounting for 40% of
this growth. Although it still accounts for only a
small fraction of global generating capacity, solar
power experienced a boom in 2010, and capacity
expanded by 30% in OECD member states.”
Common Alternatives
—The Economist Viewswire, June 2011
Wind energy: Wind power is now the world’s
fastest growing energy source, and the recent
development of offshore wind farms has the
potential to deliver substantial quantities of energy
at a price that is cheaper than most of the other
renewable energies, as wind speeds are generally
higher offshore than on land.
Perhaps no sector is as good an example of globally
diffused innovation as alternative energies—from
Brazil’s investments in non-hydro renewables such as
wind, and incentives for investments in solar thermal
energy to India’s plans to install 20 million solar lights
and 20 million square meters of solar thermal panels
to generate 20,000 megawatts by 2022. China added
more wind power capacity than any other country in
2010, and Germany is pursuing an aggressive target of
35% of electricity generation from renewable sources by
2020, and recently released draft legislation to expand
incentives for new wind and solar projects.
Solar energy: Photovoltaic solar power is one of
the most promising renewable energy sources in
the world. It is non-polluting, has no moving parts,
requires little maintenance and has a life of 20 to
30 years with low operating costs.
Biomass energy: Biomass is one of the most
plentiful sources of renewable energy in the
world. Broadly speaking, it is organic material
produced by the photosynthesis of light. The most
common biomass used for energy is wood from
trees. However, innovations are needed to make
biomass more efficient, less polluting and at least
as economical as current energy sources.
– www.altenergy.org
Global Hot Spots for Alternative Energy
United States
Northern &
Western
Europe
China
Japan
India
Brazil
Australia
12
New
Zealand
Global Dynamics of Innovation and Project Management
Mobile Technology
“In emerging markets, many (mobile) operators are almost turning themselves into finance companies as they
look to take advantage of various mobile money services. Kenya’s Safaricom, a leader in this area, is particularly
noted for the success of its M-PESA service, which allows customers to receive and send money and make
payments using simple text-messaging technology. With the rollout of more sophisticated data networks,
opportunities will develop in areas like machine-to-machine communications. Deutsche Telekom (Germany), for
example, believes that new opportunities in the energy, healthcare, media distribution and automotive sectors will
account for €1 billion of its total revenue by 2015.”
—The Economist Viewswire, June 2011
While the market for mobile phones is highly saturated
in the developed economies and growth is even
slowing in developing economies, the potential for
mobile technology is still significant. Specifically, data
plans and the applications and content they support
will continue to grow this market. Rising incomes in
developing countries will also facilitate upgrading of
mobile handsets, notably to 3G-enabled models. In
fact, China’s 3G subscriber base was expected to reach
100 million by the end of 2011 and pass the 150 million
target set by the Ministry of Industry and Information
Technology within 2012. (24) China’s ZTE, the country’s
second-largest telecom equipment maker, boosted
R&D spending to 45% and it had the second highest
number of international patent applications in 2010.
ZTE recently announced that it would be setting up ten
international innovation centers across Europe and South
America. Although ZTE operates a number of innovation
centers in China, they also announced the creation of
additional centers there. In addition, ZTE has established
collaborative research centers with four research
institutes and 19 universities, including Peking University
and Tsinghua University. (25)
Elsewhere, South Korea-based handset makers LG
Electronics and Samsung have recently each released
early 4G wireless phones designed to take advantage
of the increased speed and bandwidth of 4G networks.
In the United States and abroad, Apple has created
a new market for tablets, which with their increased
functionality and screen size can significantly benefit
from data-friendly 4G networks.
Global Hot Spots for Mobile Technology
United States
Northern &
Western
Europe
China
Japan
India
13
Global Dynamics of Innovation and Project Management
Challenges and Implications
“To turn really interesting ideas and fledgling technologies into a company that can continue to innovate for
years, it requires a lot of disciplines.”
—Steve Jobs, 2006
Innovation has never been easy. Innovating in emerging
economies for a quickly evolving consumer base brings
its own set of challenges. The stories surrounding the
highlighted innovation hubs, as well as the literature on
innovation and project management, suggest a number
of implications for project, program and portfolio
management. A commonly found implication for project
management is that flexibility is a necessity, suggesting
a high value for organizational agility, including the use
of iterative methodoligies. However, the literature also
suggests a need for more formal methods to manage
the “fuzzy front end” of innovation more like a project.
The importance of strong change management and risk
management capabilities are also recurring themes.
The research suggests that there is also a high potential
value contribution from program management and
project portfolio management. The drivers of technology
convergence and its counterpart – open innovation –
are primed for some manner of disciplined program
management to tie the various parties and projects
together. Likewise, the combination of explosive business
growth and talent shortages in developing economies
begs for a mechanism for project selection and
prioritization (i.e., portfolio management).
Below we summarize the key trends and challenges in
innovation and suggest implications for each.
Implications/Opportunities
■■
Network project portfolio management
Project portfolio management takes on new
challenges as the portfolios of various partner
organizations come into play. Tools and services
to help network participants select and prioritize
across a variety of innovative ideas may be of value.
■■
Project portfolio matching
Likewise, assistance in matching firms with similar
portfolio goals and gaps may be of value.
From the Literature: “Integration uncertainty refers
to whether necessary interfaces exist to integrate
components into an effective combination product.
In creating the first drug-eluting stent, a special
material was needed to enable the anti-clogging drug
to adhere to and be released from the metal stent. J&J
partnered with SurModics to adapt its patented drugdelivery coating technology. From the early stage of
feasibility testing to the later stages of formulation
and process optimization, the two companies worked
together to integrate J&J’s stent and Wyeth’s
sirolimus drug.” (15)
■■
Managing Open Innovation
Most of the highlighted centers of innovation mentioned
in this paper include players from multiple industries and/
or multiple countries. Open innovation and network “pull
models” (reference page 5) are clearly more than buzz
words. Firms like China’s ZTE, Boston Scientific from the
United States and Vodafone from the United Kingdom
have embraced the idea of co-innovating with partners
as a main strategic focus. From building the right partner
network to working together to take an idea through
to commercialization, innovating across industries and
borders is not without challenges.
14
Network program management
Open or network pull innovation nearly
always implies multiple related projects across
multiple firms. The significance of good program
management practices here is clear.
From the Literature: “Key success factors for
innovative programs; The project team needs to be
largely self-managed; micro scheduling and planning
every activity is inappropriate; Accountability
processes must emphasize progress and learning.” (27)
■■
Network program risk management
When multiple firms are working together on
separate-but-related projects, there is clearly an
increase in the risk for overruns or program failure.
Global Dynamics of Innovation and Project Management
■■
■■
Virtual program management
Running programs across a distributed network
requires specialized skills and resources. Can
best practices in virtual project management be
positioned to assist in this regard?
Implications/Opportunities
■■
M&A program management
M&A activity is very high in the developing
economies. Can program management be
positioned as a discipline to help mitigate the risk of
mergers and acquisitions?
Targeting New Market Segments
From the Literature: “Projects concerned with
innovation and those involving radical strategic
change require very similar organizational cultures
and processes to operate effectively. The projects
undergo iterative development. Open communication
and senior management support are essential.” (27)
Working “down the income pyramid” can be tricky, even
for well-established global brands. Local competitors can
be numerous and nimble. Existing marketing and sales
platforms are typically inappropriate and distribution
logistics can seem overwhelming. When companies
aim for the “bottom of the pyramid” they often have
to educate the market on the need for their product; a
process that can take years itself. The most successful
firms are those that closely study their new potential
customers, even embedding employees in the local
cultures to better understand how to make their product
or service “fit.”
According to the Economist Intelligence Unit, “The most
difficult trick of all is what some call “straddling the
pyramid” or “playing the piano:” serving both the people
at the bottom of the pyramid and those at the top. The
acknowledged masters of this are consumer-goods giants
such as P&G and Unilever. These companies not only
rigorously segment their markets by income level; they
also lead consumers up the value chain as they become
richer. However, the true masters of pyramid-straddling
are mobile-handset makers. Nokia produces phones for
every market, from rural models designed to cope with
monsoons to fashion accessories that will look cool in a
Shanghai nightclub.” (34)
Change management
As was highlighted by the PwC study findings,
organizations are shifting significant resources
to focus on a new customer base in developing
economies. Multi-national banks and mobile
operators working to bring mobile banking to
underserved populations is one example. The
enterprise level implications of shifting to a
new priority market require world class change
management processes.
“(There is a) need for an effective vehicle for
organizational management of the rapidly altered
environment created by changes in technology
and innovation. Specifically, it requires a greater
organizational tolerance for risk and ambiguity, as
opposed to the quashing of these elements in the
name of quality and control.” (28)
■■
Project risk management
The inherit business risks in serving customers at the
“bottom of the pyramid” require skilled project risk
management.
From the Literature: “With failure as a built-in
possibility, innovation teams are more actively
involved with risk management and need to learn to
fail fast and fail smart in order to move on to more
attractive options.” (32)
■■
Project management for market research
Can the practice of frugal innovation be enhanced
by bringing formal project management techniques
to customer insight research? Does stakeholder
management start before the formal project starts?
15
Global Dynamics of Innovation and Project Management
Speeding-Up Commercialization
“Growth shapes the outlook of the developing corporate world. There is a spirit that is rare now in the West, born
from a mixture of optimism and arrogance. The business news buzzes with stories of acquisitions and start-ups. To
flourish in this atmosphere, it helps to have the spirit of a frontier settler, not a corporate bureaucrat. Companies
are obsessed with grabbing their share of the frontier, both geographical and technological, before somebody else
does. This puts a premium on both speed and flexibility. But businesses also sometimes engage in lateral moves
that make little sense to Western managers. A property company, say, might suddenly move into computers.
Rather than worrying about synergies or core competences, they see opportunities and seize them. The pursuit of
growth is forcing firms to engage in relentless innovation.” (34)
—The Economist Viewswire
Implications/Opportunities
■■
Anti project management attitude
Will the innovators in the developing world view
traditional project management techniques
(especially project risk management) as slow and
limiting?
■■
Agile project management practices
Most literature on innovation stresses the
importance of flexibility in the ideation and
commercialization process. Agile and other iterative
project management practices are being used by
innovative firms like Google to constantly bring new
products and features to market.
From the Literature: “By their nature, projects
involving high levels of change and/or innovation
have “outcomes that are not clearly defined and
their execution may require many iterations of
development.” (27)
■■
Obeya
“Big room” in Japanese: this method has become an
important part of project management at Toyota;
primarily aimed at shortening the plan-do-checkact cycle, which in turn leads to a speedier timeto-market. The method emphasizes effectively and
timely communications between upper and lower
management, and across functions.
From the Literature: “An obeya group at Toyota
would meet daily and would typically include
engineers, assembly workers, marketers, designers
and suppliers. An obeya room would have whiteboards
with graphics to depict schedules, progress, warnings,
and scenarios for a product’s development.”(31)
16
■■
Managing the “fuzzy” front end of innovation
Innovation requires flexibility. However, firms
cannot simply invest endlessly in promising fields.
There needs to be some timeline and process
by which to bring innovative ideas into the
commercialization process. Can aspects of project
management be incorporated into “pre-project”
work?
From the Literature: “Because of the nature of
discovery, it has largely remained outside the domain
of conventional project management. Breakthroughs
in technology require time: discoveries cannot be
scheduled. However, resources and programs can
and must be managed.” He suggests a process, which
involves periodic time-based reviews of learning. (29)
“Value analysis may be a useful tool to help qualify
an idea as an opportunity. Value analysis provides a
first screening of ideas by looking at the contributing
value that the idea brings to the business. SAVE
International is the organization that oversees the
professional standard for value management.” (30)
“The definition of the project life cycle as per
the PMBOK® Guide is ‘project managers or the
organization can divide projects into phases to
provide better management control with appropriate
links to the ongoing operations of the performing
organization.’ The opportunity management
framework used by innovation management
consulting firms such as Make Innovation Happen
(mihcentre.co.uk) or multi-nationals such as Nortel
Networks fits exactly the description of the PMBOK®
Guide. It is a series of phases that connect the input of
ideas with the output of business results.” (30)
Global Dynamics of Innovation and Project Management
Funding Innovation
According to PMI’s 2010 Government Best Practices
in Program Management Study, stakeholders expect
governments to deliver innovative solutions to the
public’s challenges. There are in fact many governments
who are funding innovation, from DARPA in the United
States to India’s investments in mobile health programs.
NGOs such as the World Bank and the Bill and Melinda
Gates Foundation are also investing in the discovery of
new ways to meet the challenges of today’s society.
Implications/Opportunities
■■
Project portfolio management
Can project portfolio management help these
entities fund the right project and allocate resources
to them in a way that increases the odds of success?
■■
Program management
We know there are pockets of excellence in program
management in the government. Can PMI be part
of the network that spreads this excellence across
agency lines?
From the Literature: Statistical analysis of the data
indicates that the relationship between project
management and innovation (at a country level) is
best represented by an inverted U-curve. The analysis
also shows that, when three outliers are eliminated,
the U-curve accounts for 66% of the variability in
the data. This is a quite remarkable result given that
the innovation score is aggregated from 25 different
indicators. Analysing the data shows that increasing
levels of project management are correlated to
increasing levels of innovation. A nation’s ability to
build and sustain its innovation capacity depends on
developing and maintaining project management
skills at world-class levels, on high-quality, education
(not just painting by numbers) and on the best
professional accreditation in the discipline.” (33)
17
Global Dynamics of Innovation and Project Management
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