INNOVATION MANAGEMENT
(ECM515A)
STUDY MATERIAL
PG & RESEARCH DEPARTMENT OF
COMMERCE
ST.JOSEPH’S COLLEGE OF ARTS & SCIENCE
(AUTONOMOUS),
CUDDALORE -1.
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III-B.COM
SEMESTER – V
ELECTIVE – II (B)
INNOVATION MANAGEMENT
(For the Students Admitted from the year
2016 onwards)
ECM515A
HRS/WK -6
CREDIT -5
Objectives
1. To help students understand, describe and explain the phenomenon of Innovation.
2. To present students a toolkit to successfully navigate complex landscape that surrounds the
innovation process.
Unit I: Innovation and Competitive advantage: (10 Hrs.)
Innovation – Introduction, meaning, definition, concepts, nature, importance, early-stage of
innovation - identifying opportunities-Discovering new points of differentiation. Innovation
drivers- State – Technology - Types of innovations; Descriptions of technological, marketing and
organization.
Unit II: Innovation and Creativity: (20Hrs.)
Creativity - meaning, definition, need for and importance of creativity – Factors influencing
creativity. Individual – Self-evaluation of individual – SWOT Analysis – Team – Group dynamics
–Meaning, Characteristics, Stages, Types, Factors affecting group behavior and team building –
Leadership – Meaning and nature – Creating Breakthroughs in innovation. Perception – meaning,
Definition, Perceptual process, Factors affecting perception and techniques to improve perception.
Unit III: Innovation Theories: (20Hrs.)
Major contemporary theories: Disruptive-Networked-Open; Alternative theories: EvolutionaryUncontested- Adaptive - Green Initiatives.
Unit IV: Innovation Process: (15Hrs.)
New Product Development-Criticality of the Value Proposition, Differentiation - Paths to MarketSystems of Ideation, Experimentation and Prototyping – Innovation Labs.
Unit V: Success and Innovation: (10Hrs.)
Transformation of Business - Business processes - Recognition and Execution strategiesDesigning a Winning Innovative Culture – Patents – Intellectual property – successful innovation
case studies (any two).
TEXT BOOKS
1. Tidd Joe, and Bessant John., Managing Innovation, John Wiley and Sons, Chichester, UK.,
2. Global innovation Management, A strategic Approach, Palgrave Macmillan.
REFERENCE BOOKS
1. Moore, G.A., Dealing with Darwin: How Great Companies Innovate at Every Phase of
Their Evolution, Capstone.
2. Collins, J., How the Mighty Fall: And Why Some Companies Never Give In, Random
House.
3. Prahalad C.K. and Krishna, The New Age of Innovation: Driving Concreted Value
Through Global Networks, M.S. McGraw Hill.
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INNOVATION MANAGEMENT
UNIT I
INTRODUCTION
Innovation is essential for business survival in highly competitive markets where it is increasingly
difficult to differentiate products and services. Innovation is important for the following reasons:
• It allows businesses to expand their customer base by refreshing the market with new and
improved products
• It is a key component of competitive advantage and helps companies stay ahead of competitors
before rivals’ innovations take market share
• It supports the ability to charge a premium
• It provides incremental revenue and profit and also increases shareholder value.
Businesses that are not growing through new product and service introduction are likely to decline
as their existing sales portfolio inevitably matures.
It is not surprising that companies such as Procter & Gamble and General Electric have actively
embraced the management of innovation. Their principal goal is to drive growth and then to
improve shareholder value.
‘Nothing is more central to sustain growth than innovation that leads an industry and not only
product innovations, but innovative design, innovative marketing, innovative in-store shopping
experiences, innovation across the entire business. The companies and brands that lead innovation
are the catalysts for growth.’
MEANING AND DEFINITIONS OF INNOVATION
The term “Innovation” seems to derive from the Latin novus (Hsu 2005), which means new or
young or novel. For most people “to be innovative” means to be creative and/or to make something
new.
Unfortunately there is no single accepted definition of the term “Innovation”. For some people it
means a new idea, for others it means an invention (a materialized new idea), for some it means a
new product (a developed invention), for some others it means the act of creating a new product
or process, while for others it means to create a new business.
Innovation is defined simply as a "new idea, device, or method. However, innovation is often also
viewed as the application of better solutions that meet new requirements, unarticulated needs, or
existing market needs. This is accomplished through more-effective products,
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processes, services, technologies, or business models that are readily available to markets,
governments and society. The term "innovation" can be defined as something original and more
effective and, as a consequence, new, that "breaks into" the market or society. It is related to, but
not the same as, invention.
The process of translating an idea or invention into a good or service that creates value or for which
customers will pay.
To be called an innovation, an idea must be replicable at an economical cost and must satisfy a
specific need. Innovation involves deliberate application of information, imagination and initiative
in deriving greater or different values from resources, and includes all processes by which new
ideas are generated and converted into useful products. In business, innovation often results when
ideas are applied by the company in order to further satisfy the needs and expectations of the
customers.
“Innovation is the introduction of new ideas, goods, services, and practices which are intended to
be useful (though a number of unsuccessful innovations can be found throughout history). The
main driver for innovation is often the courage and energy to better the world. An essential element
for innovation is its application in a commercially successful way. Innovation has punctuated and
changed human history (consider the development of electricity, steam engines, motor vehicles,
etc.).”
INVENTION MEANING
An object, process, or technique which displays an element of novelty
Innovation is
The act of introducing something new: something newly introduced
• The successful exploitation of new ideas
• A creative idea that is realized
Innovation is the entire process by which an organization generates creative new technological
ideas (invention) and converts them into novel, useful and viable commercial products, services,
and business practices for (potential) economic gain.
According to Rosabeth Kanter, “Innovation is the generation, acceptance and implementation of
new ideas, processes, products or services”
IMPORTANCE OF INNOVATION
Innovation is the process of creating and implementing a new idea. It is the process of taking
useful ideas and converting them into useful products; services or processes or methods of
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operation. These useful ideas are the result of creativity, which is the prerequisite for innovation.
Creativity in the ability to combine ideas in a unique way or to make useful association among
ideas. Creativity provides new ideas for quality improvement in organizations and innovation puts
these ideas into action.
Change and innovation are closely related, even though they are not the same. Change often
involves new and better ideas. The new idea may be the creation of a new product or process or it
can be an idea about how to change completely the way business is carried out. Successful
organizations understand that both innovation and change are required to satisfy their most
important stake holders.
Strategic Importance of Innovation:
For both established organisations as well as new organisations, innovation and change become
important in a dynamic, changing environment. When a company fails to innovate and change as
needed, its customers, employees and the community at large can all suffer. The ability to manage
innovation and change is an essential part of a manager’s competencies.
PROCESS OF INNOVATION MANAGEMENT
The innovation management process has become an important part of the operations of many
businesses, as the recognition of the importance of initiatives towards innovation has become much
more common. That said, while many companies do attempt to have a solid approach to creativity
and innovation, too few actually focus on it as a single function. Instead, they seem to hold many
separate activities in isolation, such as brainstorming sessions, pilot projects and campaigns, and
vague communication with the market, and simply keep fingers crossed that it will come together
in the end. While this has worked for some in the past, it is far from the ideal way of performing
this important task. Instead, the best way to accomplish this is to have a set innovation activities
which integrates the activity into the regular cycle of your business. The list below shows the
phases in innovation management process, which will help your organization to put it all together
as one process.
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Setting the goals for the process Innovation always begins with a goal in mind. It is many
times based on finding the solution to a problem. Once you have this goal, it should be
discussed among everyone in the problem solving team. This team may consist of you and
another person, a group of people, or may even be all of your organization’s employees. It
may involve others such as your customers (who can provide suggestions and feedback
based on their own experience with your product or service) or other stakeholders in the
business. When you establish the team for this process, make sure that you have someone
representing all the parts of the process from start to the end.
Cooperation The innovation team should work together so that instead of trying to come
up with an idea separately, they can bounce ideas off one another and create a collaborative
solution. This can include the use of online tools, attendance of events such
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as trade shows that can be inspiring and informative, or simply consist of brainstorming
sessions. You might consider having a trained business coach facilitating the discussions.
There are many online tools available for real-time document sharing that might help teams
that are geographically separated to still have intense cooperation.
Combination of ideas Once the ideas are in, choose the best ones and then consider
whether they can be combined to create an even greater idea. Often, strong ideas will be
complementary to one another and will join well to create an even better result. As you
know, the whole result can be bigger than its individual parts. And for this combination to
work well, you need representatives of all parties involved in the process, because they
forsure have ideas that people from other departments could not come up with. Business
coaches may be useful here for making sure that all the angles of innovative aspect are
covered.
Evaluation of innovation This is an important and yet all too frequently overlooked aspect
of the innovation management process. When the best ideas have been combined, finetuned, and polished, it is time to subject them to evaluation based on peer reviews. This
helps to ensure that any ideas that have a promising veneer but that are poorly thought out
will be identified before resources, funding and time have been poured into them. It also
helps to select the ideas with the greatest potential from among several that appear equally
capable of being successful. It is cheap to change your innovation at this stage compared
to later stages. Each step you take forward will cost you more…
Testing the ideas Once the ideas with the greatest potential have been identified, they can
be tested so that they can be better developed. One of the most common means of testing
a product or service idea is to create a prototype or test group. This allows the team, as well
as customers and investors to have a better look at how the product will function and what
changes can be made to it so that it will be even further improved. Make sure that the
product or service not only raises interest but is able to generate orders also. If people say
that they are interested in it, then ask them if they give you the order right away.
Execution of innovation implementation The ideas that survive the testing process can
be further developed and altered until they are ready to be executed as a part of the business
offerings. The execution of implementation is a step that is unique to your business and,
unless your new product causes you to have to drastically alter the typical way that your
go-to-market strategy functions, then this part of the innovation management process
should be relatively commonplace in your organization. It should be easier for you to
movefrom testing to execution if you were able to generate orders already in testing phase.
Assessment of innovation life-cycle After the execution of an idea, its implementation
needs to be carefully monitored and assessed in terms of a number of milestones that should
be set. Should a milestone not be reached, then changes will need to be made or the idea
will need to be shut down. Remember to keep always customer in your mind also
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in execution phase and design your measuring systems so that they measure added value
for the customer (you get what you measure and customers weight you based on that!).
8. Rethink The next step in the process is simply to start again, always finding new needs,
inspiration, solutions and taking them through the cycle until they can be offered by your
company.
EARLY -STAGE OF INNOVATION
The Linear Model of Innovation is an early model of innovation that suggests technical
change happens in a linear fashion from Invention to Innovation to Diffusion. Invention
Innovation Diffusion
Original model of three phases of the process of Technological Change: It prioritizes
scientific research as the basis of innovation, and plays down the role of later players in the
innovation process.
Current models of innovation: It derives from approaches such as Actor-Network Theory
or social shaping of technology and provides a much richer picture of the way innovation
works. current ideas in Open Innovation and User innovation derive from these later ideas.
Traditional Phase Gate Model: Under this model, product or services concept is frozen
at early stage so as to minimize risk. Also innovation process in enterprise involves series
of sequential phases/steps arranged in such a manner that thepreceding phase must be
cleared before moving to next phase. Thus a project must pass through a gate with the
permission of gatekeeper before moving to the next succeeding phase.
VERSIONS OF LINEAR MODEL OF INNOVATION Two versions of the linear
model of innovation are given below:
1. "Technology push" model
2. "Market pull" model.
TECHNOLOGY PUSH
In the period 1950s-Mid-1960s the industrial innovation process was generally perceived
as a linear progression from scientific discovery, through technological development in
firms, to the marketplace, Rothwell (1994)
The stages of the "Technology Push" model are:
Basic science→ Design and engineering→ Manufacturing→ Marketing→ Sales
MARKET PULL
In the period mid 1960s- Early 1970s emerges the second-generation Innovation model,
referred to as the” market pull “model of innovation. According to this simple sequential
model, the market was the source of new ideas for directing R&D, which had a reactive
role in the process.
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The stages of the "market pull” model are:
Market need—Development—Manufacturing—Sales.
IDENTIFYING OPPORTUNITIES
At the beginning of any innovation process or project, you need to dedicate time to asking yourself
the question: Am I solving the most profitable opportunity? By placing more focus and time on
making sure you have identified the best opportunity to solve, the resources that you dedicate to
solving this opportunity will be infinitely more optimised.
One of our personal heroes, Professor Clayton Christensen from Harvard University, developed a
formula to help quantify any innovation opportunity.
So here is what you need to do when weighing up which opportunity your organisation should be
going after:
The formula is based on identifying things that customers need, how adequate the current solution
is, how often the customer has this need, and how important this need is. To quantify your
opportunity, ask yourself the below three questions:
1. (Importance) On a scale of 1-5, where 5 is very important and 1 is not at all important, how
important is it to the customer that this need gets met?
2. (Frequency) On a scale of 1-5, where 5 is frequently and 1 is infrequently, how often does the
customer have this need?
3. (Frustration) On a scale of 1-5, where 5 is very frustrated and 1 is not at all frustrated, how
frustrated is the customer with the current solutions that are available to address this need?
Now that you have these three scores, plug them into the below formula:
(importance + frequency) x frustration = size of opportunity
You can either plug in the numbers based on your gut feel or you can be a bit more scientific about
it and survey a large number of customers asking them the above three questions. After applying
this formula to a selection of potential opportunities you could solve, it will become obvious where
you should focusing our time.
DISCOVERING NEW POINTS OF DIFFERENTIATION
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Most profitable strategies are based on differentiation. If we look at Customers entire experience
with a product or service what is called a consumption chain, it may uncover unforeseen
opportunities. Following are steps that can be followed:
Mapping the consumption chain.
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How do people become aware of their need for your product or service?
How do consumers find your offering?
How do consumers make their final selections?
How do customers order and purchase your product or service?
How is your product or service delivered?
How is your product installed?
How is your product or service paid for?
How is your product stored?
How is your product moved around?
What is the customer really using your product for?
What do customers need help with when they use your product?
What about returns and exchanges?
How is your product repaired or serviced?
What happens when you product is disposed of or no longer used?
Analyzing your customer’s Experience
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What are customers doing at each point in consumption chain?
Where are customers when they are at this point in consumption chain?
Who else is with the customer at that point?
When (day, date, time) is customer at that point in consumption chain?
How are Customer’s needs being addresses?
INNOVATION DRIVERS
Innovation can be unique, it is complex, it needs careful design and facilitation to extract the most
from the rich choices we have on offer to us. Working through these eight can open up our
thinking.
1. Intelligence drivers – so much today is swirling around, often unsettling and changing. We
don’t have long periods of stability anymore and to offset this we need to revert to often
artificial intelligence to ‘read, sense and be more interpretative’ of these constant shifting
patterns. We need ways to make sense of often disparate flows that piece together in different
ways, difficult to initially see, so as to provide insights that can open up our thinking to new
innovation. Cognition refers to a faculty for the processing of information, applying
knowledge, and changing preferences that allows for development into concepts; individual
minds, groups, and organizations need to pick up and explore this driver far more for
innovation.
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2. Technology drivers – The world of external collaboration, leveraging our personal and group
networks and the different ways to interacting, are challenging organizations significantly. We
all need to open up in areas where internal intellectual property, heavily guarded in the past, is
being exposed to a different scrutiny. Technology needs revisiting to accommodate a new
diversity of opinion that extracts value in new more open ways. Also the management of
physical and virtual relationships is also needing dramatic change in our behaviors and trust.
We need fresh frameworks and designing these into our technology solutions for allowing open
thinking. Much of this will come from the management of technology and the new
understanding of the needs to capture, translate and extract in new ways. Getting the
technology balance right and you open up to innovation in such an unparalleled way than in
the past. Technology understanding will influence innovation and drive it in some dramatic
ways in the future.
3. People drivers – “Our people make innovation work, they drive it”. This is heard increasingly
yet our actions run contrary to this so many times. We need to look at what drives people to
rise to new heights and performances within themselves? It is getting the mix right- in
creativity, in talent, through diversity of opinion, exploring dialogues and having a constant
focus on building relationships; it is providing them something in return for ‘driving’
innovation. Keeping people and not shedding them when it suites immediate needs and your
bottom line must become a thing of the past, simply as less people are entering the work force
with the more experienced ones leaving more than ever for multiple reasons. This means we
must treat people as an increasing valuable asset that needs to be prized very highly not in ways
that fitted 20th century practices when supply was plentiful. Keeping experience within
organizations is a growing challenge. We also need to value our middle managers more, give
them empowerment not more restrictions. You lose someone or sometimes many simply at
one go, and you lose their relationships, their sets of experiences that cannot be easily replaced.
You through away an incredible investment. Can we afford to keep managing in this way? No,
I don’t think so, people are driving innovation more and more and if organizations don’t stop
these current practices of reducing headcount to meet short term numbers, they will lose one
of the richest drivers of innovation, their people, and nothing else can make up for this loss in
managing innovation.
4. Customer drivers – Marketing needs to do a significant ‘reset’ as customers shift from price,
lower volume demand and seek increased value and personal engagement. Getting into the
mind of your customer, understanding their unmet needs and then interpret these into new
innovation solutions is tougher than ever. As organizations expand globally there is going to
be a need for far more reverse engineering innovation to match need with product or service
in these times of diminishing income. Customers are driving innovation more than ever and
organizations are presently struggling to catch up and master the new dynamics of the customer
and the economics of the markets. Innovation for and with less is very relevant today. Same as
knowing customers real needs.
5. Rational drivers – Innovation needs greater process and rational innovation thinking. This
will come from a greater focus on innovations strategic architecture, the management of the
systems to ‘drive’ innovation through to commercialization, the innovation process designed
on shrinking the time line, increased productivity and interventions so to enable successful
movement towards this commercialization. We need to advance execution and results from
this activity and that needs us to approach innovation in a more rational way to get consistent
results.
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6. Social drivers – How we are engaging in the world around us are one of the challenges we
need to resolve. Interactions that can transmit genuine desire for the good, which are seen as
enduring and meaningful to the lives of people, are going to be valued. Thinking these through,
then implementing these in careful, thoughtful ways is going to be critical to growing
innovation in social responsible ways that are meaningful for the communities and on a
personal level will provide a completely new avenue to innovation activity.
7. Emotional drivers – We need to gain permission to enter people’s lives. We need to learn, to
create, to explore people’s dreams, desires and hopes. Exploring the eight fundamental human
emotional drivers of (1) connection and sense of self, (2) maintain security over our lives, (3)
wanting more diversity, seeking variety, (4) achieving recognition and significance to grow
beyond the present, (5) having a sense of achievement and progress, (6) opportunities for
challenges and personal growth, (7) achieving self-satisfaction and pride in what we do and
finally (8) the wish to contribute and be responsible. Mastering this set of emotional drivers
through different innovation activity can be very powerful.
8. Environment drivers – the culture and climates provided that we operate within can allow or
deny innovation. There is a growing need to increase co-operation between the diverse aspects
of innovation activity and other organizations on third party platforms so as to involve as
diverse a group as possible. We need to consider the organizations complete value chain and
its diverse networks across the whole organization, than in the present silo form of present
open innovation thinking (just R&D departments for instance). There is a difficult choice to
make between quick results, always needed, and longer term structures to ensure sustaining
innovation on a broader platform. Innovation is increasingly driving sustainable society in new
products, processes and organization designs. Environment has to date seldom been an explicit
targeted comprehensive process for many in innovation activity. It has been experimental.
Increased attention to understanding the broader environment we operate within, how finite
and sometimes fragile it is, will play a greater role for innovation development. The
effectiveness in addressing environment problems will drive innovation significantly in the
years ahead.
Within each of these eight drivers for innovation activity is a bountiful harvest of innovation
opportunities to explore. Understanding what can drive innovation opens up significant
possibilities.
TYPES OF INNOVATION
Innovation varies in scope, time for completion and organisational and societal impact.
Categorisation of any kind usually involves areas of duplication, where the lines between one
category and another overlap. We will overview the main types of innovation and simplified
classification.
We also need to note that categorising an innovation is not a science and any one innovation can
be positioned into different categories by firms.
Four main types of innovation
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As an object of the innovation, the Oslo Manual concentrates on four innovation types:
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product innovation
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process innovation
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marketing innovation
organizational innovation.
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A product innovation is the introduction of a good or service that is new or significantly improved
with respect to its characteristics or intended uses. This includes significant improvements in
technical specifications, components and materials, incorporated software, user friendliness or
other functional characteristics.
Examples of product innovation: first portable MP3 player; introduction of ABS braking, GPS
(Global Positioning System) navigational systems or other subsystem improvements in cars.
A process innovation is the implementation of a new or significantly improved production or
delivery method. This includes significant changes in techniques, technology, equipment and/or
software
Examples of new production methods: are the implementation of new automation equipment on
a production line or the implementation of computer-assisted design for product development. An
example of a new delivery method is the introduction of a bar-coded or active RFID (Radio
Frequency Identification) goods-tracking system.
A marketing innovation is the implementation of a new marketing method involving significant
changes in product design or packaging, product placement, product promotion or pricing.
Marketing innovation is aimed at better addressing customer needs, opening up new markets, or
newly positioning a firm’s product on the market, with the objective of increasing the firm’s sales.
The distinguishing feature of a marketing innovation compared to other changes in a firm’s
marketing instruments is the implementation of a marketing method not previously used by the
firm. It must be part of a new marketing concept or strategy that represents a significant departure
from the firm’s existing marketing methods. New marketing methods can be implemented for both
new and existing products.
For example: The first use of a significantly different media or technique – such as product
placement in movies or television programmes – is a marketing innovation.
An organisational innovation is the implementation of a new organisational method in the firm’s
business practice, workplace, organisation or external relations.
Organisational innovation can be intended to increase a firm’s performance by reducing
administrative costs or transaction costs, improving workplace satisfaction (and thus labour
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productivity), gaining access to non-tradable assets (such as non-codified external knowledge) or
reducing costs of supplies.
The distinguishing features of an organisational innovation compared to other organisational
changes in a firm is the implementation of an organisational method that has not been used before
in the firm.
Examples: the first implementation of practices for employee development and improving
worker retention, such as education and training systems; the first introduction of management
systems for general production or supply operations, such as supply chain management systems,
business reengineering, lean production and quality-management systems.
TECHNOLOGY AND INNOVATION:
Technology is defined as the systematic application of scientific knowledge to a new product,
process or service. It is also defined as the methods, processes, systems, and skills used to
transform resources into products. Technology is embedded in every product, service, process and
procedure used or produced.
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INNOVATION AND CREATIVITY
UNIT 2
CREATIVITY
Creativity is the process of bringing something new into being. Creativity requires passion and
commitment. It brings to our awareness what was previously hidden and points to new life. The
experience is one of heightened consciousness: ecstasy.” – Rollo May, The Courage to Create
Is this possible in business? I believe so, but you have to be willing to take risks and progress
through discomfort to get to the finish line.
Creativity refers to the phenomenon whereby a person creates something new (a product, a
solution, a work of art, a novel, a joke, etc.) that has some kind of value. What counts as "new"
may be in reference to the individual creator, or to the society or domain within which the novelty
occurs. What counts as "valuable" is similarly defined in a variety of ways
“A product is creative when it is (a) novel and (b) appropriate. A novel product is original not
predictable. The bigger the concept, and the more the product stimulates further work and
ideas, the more the product is creative.”
—Sternberg & Lubart, Defying the Crowd
“Seeing the intersection of seemingly unrelated topics and combining them into something new.”
– Brian Clark
“Starting with nothing and ending up with something. Interpreting something you saw or
experienced and processing it so it comes out different than how it went in.” – Henry Rollins
“Building universes out of nothing.” – Danny Sullivan
“Tapping into your soul and your intuition and allowing them to guide what you make.” –
Bernadette Jiwa
“Giving the world something it didn’t know it was missing.” – Daniel
Pink CREATIVITY AND ECONOMIC DEVELOPMENT:
We are living in the age of creativity. Daniel Pink in his book, A Whole New Mind: Why RightBrainers Will Rule the Future defines Economic Development as:
• Agriculture Age (farmers)
• Industrial Age (factory workers)
• Information Age (knowledge workers)
• Conceptual Age (creators and empathizers)
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THE IMPORTANCE OF CREATIVITY AND INNOVATION IN BUSINESS
Innovation and creativity have become critical skills for achieving success in business, and the
need for creative problem solving has arisen as more and more management problems require
creative insights in order to find suitable solutions.
Without creativity there is no innovation
Creativity is the ability to produce new and at times unique ideas, and innovation is the
implementation of that creativity, whether that be a new idea, solution, process, or
product. Creativity is the driving force behind innovation and looking at things from a
different perspective.
Creativity involves breaking down and restructuring our knowledge about a subject in order
to gain new insights.
Business creativity is what keeps businesses alive and thriving. It is a thinking skill that
all workers possess, but few are given the means and opportunity to use.
What happens, even to entrepreneurs inspired by new ideas, is that we quickly establish rules
in our businesses, that if not adjusted on occasion, cause us to stagnate. Our minds become
numb and our actions go on autopilot.
Why is creativity important in business?
Creativity and innovation within well-run businesses is a sure path to success. Stimulating
creativity and creative problem solving will:
 lead to improvements in the process of solving problems
 propel innovation forward
 increase the productivity of the business
 give that competitive edge that every business is striving to achieve Where does it come
from?
Creative ideas and innovative approaches can come from almost anywhere:
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your partners
customers
target groups,
employees
marketing experts
who can bring you fresh perspectives and ideas.
Encourage employees to ‘think outside of the box’, show them you are listening and open to
their feedback, allow and nurture an open exchange of ideas, and give them time and resources to
explore new areas for innovation (take away the ‘box’) – this is the key to cost-effective business
solutions.
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Many businesses give creativity lip service or totally ignore it altogether, but simply creating
an intention of embracing creativity will give your business a step up.
SWOT ANALYSIS
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition,
Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some
measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be
external factors over which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position
of the business and its environment. Its key purpose is to identify the strategies that will create a
firm specific business model that will best align an organization’s resources and capabilities to the
requirements of the environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect the success. A consistent study of the
environment in which the firm operates helps in forecasting/predicting the changing trends and
also helps in including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given
below1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s
mission. These are the basis on which continued success can be made and
continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or
what you have expertise in, the traits and qualities your employees possess
(individually and as a team) and the distinct features that give your organization its
consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an
organization, which includes human competencies, process capabilities, financial
resources, products and services, customer goodwill and brand loyalty. Examples of
organizational strengths are huge financial resources, broad product line, no debt,
committed employees, etc.
2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate influences on
the organizational success and growth. Weaknesses are the factors which do not meet
the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research
and development facilities, narrow product range, poor decision-making, etc.
Weaknesses are controllable. They must be minimized and eliminated. For instance to overcome obsolete machinery, new machinery can be purchased. Other examples of
organizational
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weaknesses are huge debts, high employee turnover, complex decision making process,
narrow product range, large wastage of raw materials, etc.
3. Opportunities - Opportunities are presented by the environment within which our
organization operates. These arise when an organization can take benefit of conditions in
its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain competitive advantage by making use of opportunities.
Organization should be careful and recognize the opportunities and grasp them whenever
they arise. Selecting the targets that will best serve the clients while getting desired results
is a difficult task. Opportunities may arise from market, competition, industry/government
and technology. Increasing demand for telecommunications accompanied by deregulation
is a great opportunity for new firms to enter telecom sector and compete with existing firms
for revenue.
4. Threats - Threats arise when conditions in external environment jeopardize the reliability
and profitability of the organization’s business. They compound the vulnerability when
they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability
and survival can be at stake. Examples of threats are - unrest among employees; ever
changing technology; increasing competition leading to excess capacity, price wars and
reducing industry profits; etc.
GROUP DYNAMICS
People may underestimate the importance of society and group memberships on their lives. Whilst
people sometimes undertake solo journeys yet by and large much of our experiences of life
involves being engaged with others and groups.
Within an organization we do find number of groups. Individuals joining group (s) is a reality –
may be formal or informal groups. People work in groups quite frequently and in many different
areas of their life e.g. at work, school/college, sport, hobbies. The managers need to understand
Group Dynamics that can enable managers to adopt the right approach of interacting with them.
What is Group Dynamics?
Group dynamics deals with the attitudes and behavioral patterns of a group. Group dynamics
concern how groups are formed, what is their structure and which processes are followed in their
functioning. Thus, it is concerned with the interactions and forces operating between groups.
Group dynamics is relevant to groups of all kinds – both formal and informal. If the UPA
government has set up Group of Ministers for every governance issue, the Supreme Court of
India has 27 Group of Judges committees overseeing all manner of non-judicial work in the apex
court. In an organizational setting, the term groups are a very common and the study of groups and
group dynamics is an important area of study.
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What is A Group?
Every organization is a group unto itself. A group refers to two or more people who share a
common meaning and evaluation of themselves and come together to achieve common goals. In
other words, a group is a collection of people who interact with one another; accept rights and
obligations as members and who share a common identity.
Characteristics of a Group:
4. 2 or more persons (if it is one person, it is not a group)
5. Formal social structure (the rules of the game are defined)
6. Common fate (they will swim together)
7. Common goals (the destiny is the same and emotionally connected)
8. Face-to-face interaction (they will talk with each other)
9. Interdependence (each one is complimentary to the other)
10. Self-definition as group members (what one is who belongs to the group)
11. Recognition by others (yes, you belong to the group).
Process/Stages of Group Development/Evolution:
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Group Development is a dynamic process. How do groups evolve? There is a process of five stages
through which groups pass through. The process includes the five stages: forming, storming,
forming, performing, and adjourning.
Forming:
The first stage in the life of a group is concerned with forming a group. This stage is characterized
by members seeking either a work assignment (in a formal group) or other benefit, like status,
affiliation, power, etc. (in an informal group). Members at this stage either engage in busy type of
activity or show apathy.
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Storming:
The next stage in this group is marked by the formation of dyads and triads. Members seek out
familiar or similar individuals and begin a deeper sharing of self. Continued attention to the
subgroup creates a differentiation in the group and tensions across the dyads / triads may appear.
Pairing is a common phenomenon. There will be conflict about controlling the group.
Norming:
The third stage of group development is marked by a more serious concern about task performance.
The dyads/triads begin to open up and seek out other members in the group. Efforts are made to
establish various norms for task performance.
Members begin to take greater responsibility for their own group and relationship while the
authority figure becomes relaxed. Once this stage is complete, a clear picture will emerge about
hierarchy of leadership. The norming stage is over with the solidification of the group structure
and a sense of group identity and camaraderie.
Performing:
This is a stage of a fully functional group where members see themselves as a group and get
involved in the task. Each person makes a contribution and the authority figure is also seen as a
part of the group. Group norms are followed and collective pressure is exerted to ensure the
Process of Group effectiveness of the group.
The group may redefine its goals Development in the light of information from the outside
environment and show an autonomous will to pursue those goals. The long-term viability of the
group is established and nurtured.
Adjourning:
In the case of temporary groups, like project team, task force, or any other such group, which have
a limited task at hand, also have a fifth stage, This is known as adjourning.
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The group decides to disband. Some members may feel happy over the performance, and some
may be unhappy over the stoppage of meeting with group members. Adjourning may also be
referred to as mourning, i.e. mourning the adjournment of the group.
The readers must note that the four stages of group development mentioned above for permanent
groups are merely suggestive. In reality, several stages may go on simultaneously.
TYPES OF GROUPS
One way to classify the groups is by way of formality – formal and informal. While formal groups
are established by an organization to achieve its goals, informal groups merge spontaneously.
Formal groups may take the form of command groups, task groups, and functional groups.
1. Command Groups:
Command groups are specified by the organizational chart and often consist of a supervisor and
the subordinates that report to that supervisor. An example of a command group is a market
research firm CEO and the research associates under him.
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2. Task Groups:
Task groups consist of people who work together to achieve a common task. Members are brought
together to accomplish a narrow range of goals within a specified time period. Task groups are
also commonly referred to as task forces. The organization appoints members and assigns the goals
and tasks to be accomplished.
Examples of assigned tasks are the development of a new product, the improvement of a
production process, or designing the syllabus under semester system.
Other common task groups are ad hoc committees, project groups, and standing committees. Ad
hoc committees are temporary groups created to resolve a specific complaint or develop a process
are normally disbanded after the group completes the assigned task.
3. Functional Groups:
A functional group is created by the organization to accomplish specific goals within an
unspecified time frame. Functional groups remain in existence after achievement of current goals
and objectives. Examples of functional groups would be a marketing department, a customer
service department, or an accounting department.
In contrast to formal groups, informal groups are formed naturally and in response to the common
interests and shared values of individuals. They are created for purposes other than the
accomplishment of organizational goals and do not have a specified time frame. Informal groups
are not appointed by the organization and members can invite others to join from time to time.
Informal groups can have a strong influence in organizations that can either be positive or negative.
For example, employees who form an informal group can either discuss how to improve a
production process or how to create shortcuts that jeopardize quality. Informal groups can take the
form of interest groups, friendship groups, or reference groups.
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i. Interest Group:
Interest groups usually continue over time and may last longer than general informal groups.
Members of interest groups may not be part of the same organizational department but they are
bound together by some other common interest.
The goals and objectives of group interests are specific to each group and may not be related to
organizational goals and objectives. An example of an interest group would be students who come
together to form a study group for a specific class.
ii. Friendship Groups:
Friendship groups are formed by members who enjoy similar social activities, political beliefs,
religious values, or other common bonds. Members enjoy each other’s company and often meet
after work to participate in these activities. For example, a group of employees who form a
friendship group may have a yoga group, a Rajasthani association in Delhi, or a kitty party lunch
once a month.
iii. Reference Groups:
A reference group is a type of group that people use to evaluate themselves. The main objectives
of reference groups are to seek social validation and social comparison. Social validation allows
individuals to justify their attitudes and values while social comparison helps individuals evaluate
their own actions by comparing themselves to others. Reference groups have a strong influence on
members’ behavior. Such groups are formed voluntarily. Family, friends, and religious affiliations
are strong reference groups for most individuals.
Factors Affecting Group Behaviour:
The success or failure of a group depends upon so many factors. Group member resources,
structure (group size, group roles, group norms, and group cohesiveness), group processes (the
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communication, group decision making processes, power dynamics, conflicting interactions, etc.)
and group tasks (complexity and interdependence).
1. Group Member Resources:
The members’ knowledge, abilities, skills; and personality characteristics (sociability, selfreliance, and independence) are the resources the group members bring in with them. The success
depends upon these resources as useful to the task.
➢ Group Structure:
Group Size:
Group size can vary from 2 people to a very large number of people. Small groups of two to ten
are thought to be more effective because each member has ample opportunity to take part and
engage actively in the group. Large groups may waste time by deciding on processes and trying to
decide who should participate next.
Evidence supports the notion that as the size of the group increases, satisfaction increases up to a
certain point. Increasing the size of a group beyond 10-12 members’ results in decreased
satisfaction. It is increasingly difficult for members of large groups to identify with one another
and experience cohesion.
Group Roles:
In formal groups, roles are always predetermined and assigned to members. Each role shall have
specific responsibilities and duties. There are, however, emergent roles that develop naturally to
meet the needs of the groups.
These emergent roles will often substitute the assigned roles as individuals begin to express
themselves and become more assertive. Group roles can then be classified into work roles,
maintenance roles, and blocking roles.
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Work roles are task-oriented activities that involve accomplishing the group’s goals. They involve
a variety of specific roles such as initiator, informer, clarifier, summarizer, and reality tester.
Maintenance roles are social-emotional activities that help members maintain their involvement in
the group and raise their personal commitment to the group. The maintenance roles are harmonizer,
gatekeeper, consensus tester, encourager, and compromiser.
Blocking roles are activities that disrupt the group. Blockers will stubbornly resist the group’s
ideas, disagree with group members for personal reasons, and will have hidden agendas. They
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may take the form of dominating discussions, verbally attacking other group members, and
distracting the group with trivial information or unnecessary humour.
Often times the blocking behaviour may not be intended as negative. Sometimes a member may
share a joke in order to break the tension, or may question a decision in order to force group
members to rethink the issue. The blocking roles are aggressor, blocker, dominator, comedian, and
avoidance behaviour.
Role conflicts arise when there is ambiguity (confusion about delegation and no specific job
descriptions) between the sent role and the received role which leads to frustration and
dissatisfaction, ultimately leading to turnover; inconsistency between the perceived role and role
behaviour (conflict between work roles and family roles); and conflicting demands from different
sources while performing the task.
Group Norms:
Norms define the acceptable standard or boundaries of acceptable and unacceptable behaviour,
shared by group members. They are typically created in order to facilitate group survival, make
behaviour more predictable, avoid embarrassing situations, and express the values of the group.
Each group will create its own norms that might determine from the work performance to dress to
making comments in a meeting. Groups exert pressure on members to force them to conform to
the group’s standards and at times not to perform at higher levels. The norms often reflect the level
of commitment, motivation, and performance of the group.
The majority of the group must agree that the norms are appropriate in order for the behaviour to
be accepted. There must also be a shared understanding that the group supports the norms. It should
be noted, however, that members might violate group norms from time to time.
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If the majority of members do not adhere to the norms, then they will eventually change and will
no longer serve as a standard for evaluating behaviour. Group members who do not conform to
the norms will be punished by being excluded, ignored, or asked to leave the group.
Group Cohesiveness:
Cohesiveness refers to the bonding of group members or unity, feelings of attraction for each other
and desire to remain part of the group. Many factors influence the amount of group cohesiveness
– agreement on group goals, frequency of interaction, personal attractiveness, inter-group
competition, favourable evaluation, etc.
The more difficult it is to obtain group membership the more cohesive the group will be. Groups
also tend to become cohesive when they are in intense competition with other groups or face a
serious external threat to survival. Smaller groups and those who spend considerable time together
also tend to be more cohesive.
Cohesiveness in work groups has many positive effects, including worker satisfaction, low
turnover and absenteeism, and higher productivity. However, highly cohesive groups may be
detrimental to organizational performance if their goals are misaligned with organizational goals.
Highly cohesive groups may also be more vulnerable to groupthink. Groupthink occurs when
members of a group exert pressure on each other to come to a consensus in decision making.
Groupthink results in careless judgments, unrealistic appraisals of alternative courses of action,
and a lack of reality testing.
Evidence suggests that groups typically outperform individuals when the tasks involved require a
variety of skills, experience, and decision making. Groups are often more flexible and can quickly
assemble, achieve goals, and disband or move on to another set of objectives.
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Many organizations have found that groups have many motivational aspects as well. Group
members are more likely to participate in decision-making and problem-solving activities leading
to empowerment and increased productivity. Groups complete most of the work in an organization;
thus, the effectiveness of the organization is limited by the effectiveness of its groups.
3. Group Processes:
Decision-making by a group is superior, because group generates more information and
knowledge, generates diverse alternatives, increases acceptance of a solution, and increases
legitimacy. But it is also true, that decision making is like ‘munde munde matirbhinna’.
Decisions take longer time, minority is dominated, pressure is applied to conform to group
decisions, and none is responsible for the decisions. Group processes also include communication,
conflict management, and leadership that we shall discuss in details in the chapters to follow
hereafter.
Turning Groups into Effective Teams:
All teams are groups but not all groups are teams. Teams often are difficult to form because it takes
time for members to learn how to work together. People in every workplace talk about building
the team, working as a team, and my team, but few understand how to create the experience of
team work or how to develop an effective team. Belonging to a team, in the
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broadest sense, is a result of feeling part of something larger than oneself. It has a lot to do with
your understanding of the mission or objectives of your organization.
In a team-oriented environment, one contributes to the overall success of the organization. One
works with fellow members of the organization to produce these results. Even though you have a
specific job function and you belong to a specific department, you are unified with other
organization members to accomplish the overall objectives. The bigger picture drives your actions;
your function exists to serve the bigger picture.
It is on record that teams are better than groups, because they are more flexible and responsive to
dynamic environment. A work group has no opportunity to involve in collective works.
Informal Group:
In every organisation along with formal groups there exists informal groups which emerge
naturally due to the response and common interests of the members who can easily identify with
the goals or independent activities of the informal groups.
Sometimes the efforts may be driven by a common goal that may compliment or work against the
goals of the formal group. An informal group can be defined as a group that evolves spontaneously,
not shown in the organization’s structure, with the objective of fulfilling personal and social need
of its members.
Informal Group Vs Informal Organisation:
An informal group is a voluntary group of people casually acquainted with each other for their
own personal fulfillment because they have some common and shared backgrounds,
characteristics and concerns (values / interests / hobbies / friendship).
Whilst it is easy to differentiate between a formal group and a formal organisation, the differences
between informal group and informal organisation tend to be difficult. The difference
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between informal organization and informal group is that informal organisation is a larger entity
consisting of all informal groups in an organization.
Informal Organisation= Sigma Informal Groups:
An informal group is the nucleus of informal organization. When an informal group adopts a
formally defined structure and group processes, it no longer remains an informal group.
Informal Group vs. Formal Group:
The two are different in very many ways.
Characteristics of Informal Groups:
1. Creation:
It is not created by the organisation but springs up spontaneously.
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2. Satisfaction of Needs:
The needs which cannot be satisfied within the framework of formal organisation, like social and
psychological needs of people, such people create informal groups.
3. Voluntary Membership:
Nobody is compelled to join an informal organization.
4. Multi-Group Membership:
A member of an informal group can be a member of more than one informal group to pursue
different interests.
5. Systems and Processes:
Members of such groups follow their own norms, leadership, communication, etc. to remain
cohesive. The communication channels are referred to as ‘Grapevine’. Grapevine i.e., informal
channel runs very fast to spread the information across the organization.
6. Leadership:
Every informal group has a leader, selected by the group, and who is capable of helping to realize
their goals. The moment it is realized that the leader is incapable, (s) he is replaced with a new
leader.
Reasons for the Emergence of Informal Groups:
1. People working together may come together.
2. People with similar values, beliefs, attitudes, and interests often feel attraction to come
together.
3. Need satisfaction – to belong, to associate, etc.
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4. Removal of monotony of routine tasks – to get rid of monotony and psychological fatigue, jobrelated boredom and frustration provides an opportunity to behave in a natural and relaxed manner.
5. Promotion of other interests and pursuit of goals – People join Rotary or Lions Club to expand
their contacts which may help them to satisfy their personal goals.
Benefits of Informal Groups:
The benefits of an informal group are as follows:
1. Blending with formal group allows people to work for the formal organisation.
2. Informal work group lightens the workload for the formal manager.
3. Brings satisfaction and stability to the organisation as a whole.
4. Provides a useful channel of communication.
5. Encourages managers to plan and act more carefully.
Limitations of Informal Groups:
The limitations are as follows:
1. Resistance to Change because they do not want to deviate from existing norms and learn new
ways.
2. Informal group provides most fertile ground for Rumour Mongering because of maliciousness,
lack of proper communication systems and processes and ambiguous circumstances.
3. Since a member of an informal group is also a member of a formal group, at times it creates
role conflict.
4. Creativity of group member (s) is restricted because of strong pressure for conformity applied
by the group.
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5. It is the work team whose members ‘work intensely on a specific, common goal using their
positive synergy, individual and mutual accountability, and complementary skills’.
Team-building helps to increase intra-group and inter-group effectiveness to bring members
together, make them share their perception of each other and understand each other’s point of view.
Thus, resolve problems and work together in a cooperative and collaborative mode. Teams can be
of four types – problem-solving teams (only making suggestion), self-managed, teams (operate
without a manager), cross-functional teams (a group of experts from different specialities), and
virtual team (members collaborate online). In terms of size, teams may be institutional (comprising
of hundreds of members) and operational (a small, cooperative group, in regular contact and
contributes responsibly to achieve task at hand).
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Eight Cs for Team Building:
To show business results and profitability, ways are explored by the executives to improve their
productivity.
Successful team building, that creates effective, focused work teams, requires attention to
each of the following:
1. Clear Expectations:
The managers must clearly tell the team members of the expected performance and the team
members must understand the reason for its creation. For it the organization must support the team
with resources of people, time and money.
2. Commitment:
Team members must participate in the team, feel that the team mission is important, and show
commitment to accomplishing the team mission and expected outcomes. Commitment will come
if team members perceive their service as valuable to the organization and to their own careers.
3. Competence:
Team members must have the knowledge, skill and capabilities, the resources, strategies and
support needed to accomplish its mission to address the issues for which the team was formed.
4. Control:
The team must have not only enough freedom and empowerment to feel the ownership necessary
to accomplish its charter, but also the accountability. There has to be a defined review process.
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5. Collaboration:
The team should understand group processes and work effectively and cooperatively with other
members of the team. For it they have to understand the roles and responsibilities of team
members, team leaders, and team recorders.
6. Communication:
To make team members clear about the priority of their tasks, and receive regular feedback, team
members must clearly and honestly with each other. Diverse opinions be welcome and conflicts
be taken up positively.
7. Creativity:
The team should value creative thinking, unique solutions, and new ideas; and reward members
who take reasonable risks to make improvements. If necessary, it should provide the training,
education, access to books and films, and field trips to stimulate new thinking.
The creative development of new products, new technologies, new services, or new organizational
structures is possible because teams may have variety of skills needed for successful innovation.
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Team members can uncover each other’s flaws and balance each other’s strengths and weaknesses.
Managers should empower the team and make it accountable for the innovation process.
8. Coordination:
Teams should understand the concept of internal customer to whom they provide a product or a
service. Team efforts need to be coordinated by a central leadership team that assists the groups to
obtain what they need for success.
The cross- functional and multi-department teams must work together effectively. The
organization should develop a customer-focused and process-focused orientation and move away
from traditional departmental thinking.
Spend time and attention on each of these eight tips to ensure your work teams contribute most
effectively to your business success. Your team members would love you, your business will see
new heights, and empowered people will “own” and be responsible to their work processes
Perception
Perception is the result of processing of information received by individuals regarding various
events around them. It involves the organization of inputs through a dynamic inner process which
shapes all that comes in from the outside environment.
This information processing approach rests on the assumption that a person’s perceptions of
another person are based on the information available about the person and how one uses this
information. Various researches on perception revealed that quite often a perceiver uses his or her
own race or sex stereotypes to assume certain things about another person.
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The individual, while perceiving the world, provides a picture that expresses his or her own
individual view of reality. This may differ from the reality. The study of the difference between
the perceptual world and the real world is of great significance in organizational behaviour.
Since the behaviour of an individual at work is the product of the individual’s perceptions, it is
important for a manager not only to understand his or her own perceptions but also the perceptions
of his or her subordinates, to create a situation under which their behaviour might improve.
Perceptual Set:
Perception, as we have defined, is a generic term for the complex sensory control of behaviour. It
is inferred from a hypothetical internal event of unspecified nature, controlled largely by external
stimulation and variables such as habit and drive.
Therefore, it is appropriate to state that people tend to perceive what they expect to perceive. This
is the primary reason why different individuals perceive the same situation in different ways.
Understanding of the perceptual process helps us to understand why individuals behave in the way
they do.
Definition of perception
Perception means perceiving, i.e., giving meaning to the environment around us. It can be
defined as a process which involves seeing, receiving, selecting, organising, interpreting and
giving meaning to the environment.
Nature of perception
Perception is the intellectual process.
Perception is the basic cognitive or psychological process.
Perception becomes a subjective process and different people may perceive the same event
differently.
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Perception and Sensation
There is a distinction between sensation and perception. Sensation is the response of a physical
sensory organ. The physical senses are vision, hearing, tough, smell and taste. These senses are
bombarded by stimuli and reactions in particular sense organ take place because of these, e.g., of
sensation may be reaction of eye to colour, ear to sound and so on. Sensation percedes perception.
Perception is much more than sensation. Perception depends upon the sensory raw data. The
perceptual process adds to or/and subtracts from the sensory world. Perception is determined by
both physiological and psychological characteristics, of the organism. However, sensation only
activates the organs of the body and is not affected by such psychological factors as learning and
motives. Activation of eyes to see an object is sensation and the inference what is being seen is
perception. For managerial action, it is the latter which is important.
Fig. 13.1: Perceptual Process.
Perceptual Process
Perception is a process of receiving, selecting, organising, interpreting, checking and reacting
to stimuli. This is like an input-through put-output process in which the stimuli can be considered
as 'inputs' transformation of 'input' through selection, organization and interpretation as 'through
puts' and the ultimate behaviour/action as 'output'. The whole perceptional process can be
presented as follows : These are explained one by one
1. Receiving Stimuli : The first process in the perception is the presence of stimuli. The stimuli
are received from the various sources. Through the five organs. It is a physiological aspect of
perception process. Stimuli may be external to us (such as sound waves) and inside us (such as
energy generation by muscles).
2. Selection of Stimuli : After receiving the stimuli or data, some are selected. Others are
screened out. Two types of factors affect selection of stimuli for processing : external and internal
factors. External factors relate to stimuli such as intensity of stimuli, its size, movement, repetition,
etc. Internal factors, relate to the perceiver such as his/her age, learning, interest, etc.
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Normally, he will select the objects which interest him and will avoid that for which he is
indifferent. This is also called 'selective perception'.
3. Organization of Stimuli : Organising the bits of information into a meaningful whole is
called "organization". There are three ways by which the selected data, i.e., inputs are organised.
These are :
(i) Grouping, (ii) Closure and (iii) Simplification.
(i) Grouping : In grouping, the perceiver groups the various stimuli on the basis of their
similarity or proximity. For example, all the workers coming from the same place may be
perceived as similar on the basis of proximity.
(ii) Closure : When faced with incomplete information, people fill up the gaps themselves to
make the information meaningful. This may be done on the basis of past experience, past data, or
hunches. For example, in many advertisement, alphabets are written by putting electric bulbs
indicating the shape of the concerned alphabets but broken lines. In such cases, people tend to fill
up the gap among different bulbs to get meaning out of these.
(iii) Simplification : People identify main stimulus features and assesses how they are
organized. He interprets a stimulus situation, the perceiver simples the information.
Factors Influencing Perceptual Set External Factors
1. Size : Bigger size attracts the attention of the perceiver
2. Intensity : A loud sound, strong odor or bright light is noticed more as compared to a soft
sound, weak odour or dimlight.
3. Repetition : A repeated external stimulus is more attention getting than a single one.
Advertisers use this principle.
4. Novelty and Familiarity : A novel or a familiar external situation can serve as attention
getter.
5. Contrast : It is a kind of uniqueness which can be used for attention getting. Letters of bold
types, persons dressed differently than others, etc., get more attention.
6. Motion : A moving object draws more attention as compared to a stationary object.
Advertisers use this principle.
Internal Factors
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Self-concept : The way a person views the world depends a great deal on the concept or image
he has about himself. The concept plays an internal role in perceptual selectivity.
Beliefs : A person's beliefs have profound influence on his perception. Thus, a fact is conceived
not on what it is but what a person believes it to be.
Expectations : These affect what a person perceives. A technical manager may expect ignorance
about the technical features of a product from non-technical people.
Inner Needs : The need is a feeling of tension or discomfort, when one thinks he is missing
something. People with different needs experience different stimuli. According to Freud, wishful
thinking is the means by which the Id attempts to achieve tension reduction.
Response Disposition : It refers to a person's tendency to perceive familiar stimuli rather than
unfamiliar ones.
Response Salience : It is the set of disposition which are determined not by the familiarity of
the stimulus situations, but by the person's own cognitive predispositions. Thus, a particular
problem may be viewed as a marketing problem by marketing personnel, a control problem by
accounting people and human relations problem by personnel people.
Perceptual Defence : It refers to the screening of those elements which create conflict and
threatening situation in people.
1. Denying the existence or importance of conflicting information.
2. Distorting the new information to match the old one.
3. Acknowledging the new information but treating it as a non-representation exception. The
factors that influence perception may be broadly divided into three categories :
1. Factors that reside in the 'Perceiver' (i.e., attitude, motives, interests, past experiences and
personality, expectations)
2. Factors of the 'situation' and-factors connected with the 'Target'.
3. Factors that determine the preferred location of a brand on each of the relevant dimension in
perceptive mapping.
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Techniques for Improving Perceptual Skills
1. Knowing Oneself Accurately:
One of the powerful ways to minimize perceptual distortions is to know yourself. One should be
aware of his or her values, beliefs and prejudices. People normally misperceive others because
they fail to perceive themselves accurately. The more accurately a person understands himself, the
more accurately he can perceive others. The concept of Johari window must be applied by people
so as to increase awareness about self and others.
2. Emphatize with Others:
Empathy refers to a person’s ability to understand and be sensitive to the feelings of others.
Empathy is a natural phenomenon and develops within an individual by itself. However, empathy
skills can also be developed over a passage of time by proper feedback system and by close
interaction and working. By emphasizing with other person, one can perceive the other individual
more aptly.
3. Have a Positive Attitude:
Attitudes have a strong and long lasting effect on perception. If one holds a negative attitude
towards someone or something, our perception is undoubtedly going to be distorted. We should
make effort to have a positive attitude and should not let our personal biases to crop in and hinder
the perceptual powers.
4. Postpone Impression Formation:
It is a natural tendency of the human beings to form impression about something or someone very
quickly. Just in a meeting or two we draw conclusion about someone. Forming judgments with
such limited information is very wrong. A much better strategy is to postpone the impression
formation until more information about the individual and the situation is collected.
5. Communicating Openly:
Much of misperception in an organisation arises due to inadequate communication or one way
communication. Utmost care should be taken, so that the message reaches the right person, at the
41
right time and in the right manner. Proper transmission of information followed by appropriate
feedback can help minimize perceptual distortions.
6. Comparing One’s Perceptions with that of Others:
Another useful strategy to reduce perceptual errors is to compare one’s own perception with the
perception of the other person about the same object. By sharing perceptions we come across
different point of views and potentially gain a much better understanding of the situation and the
object.
7. Introducing Diversity Management Programs:
If we talk of today’s organisations, they are very much diverse and heterogeneous. The workforce
is so diverse with language differences, religious differences and cultural differences that it
becomes really hard to make the employees work together in an effective manner. The biggest
challenge in front of the management in to minimize perceptual bias and benefit from such
diversity.
For this purpose, an important strategy it to use training programs which may help in
communicating the value of diversity on one hand and help the participants acquaint with one
another and provide them room to mix with one another with different backgrounds. These training
programs mainly increase the employees, awareness of difference and thus help in minimizing
perceptual biases and distortions.
To include we can say that successful managers understand the importance of perception on
behaviour and they act accordingly. They are aware of perceptual distortions and they know that
perceptual differences are likely to exist in any situation. As a result they try to make decisions
and take action with a true understanding of the work situation as it is viewed by all persons
concerned.
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UNIT -3
INNOVATION THEORIES
Major Contemporary theories:
Disruptive Innovation
The disruptive innovation is probably one of the most important innovation theories of the last
decade. The core concepts behind it circulated so fast that already in 1998, one year after the
publication of the theory, people were using the term without making reference to Harvard
professor Clayton Christensen or to his book The Innovator’s Dilemma (Harvard Business School
Press). The term disruptive innovation as we know it today first appeared in the 1997 best-seller
The Innovator’s Dilemma.
Sustaining vs. Disruptive Innovation
The
central
theory
of
Christensen’s
work
is
the
dichotomy
of sustaining and disruptiveinnovation. A sustaining innovation hardly results in the downfall of
established companies because it improves the performance of existing products along the
dimensions that mainstream customers value.
Disruptive innovation, on the other hand, will often have characteristics that traditional customer
segments may not want, at least initially. Such innovations will appear as cheaper, simpler and
even with inferior quality if compared to existing products, but some marginal or new segment
will value it.
Customer demand for capacity was growing at 25% every year, while producers of 8’inch disk
drives found that with sustaining innovations they were able to increase their disk capacity by 40%
every year, almost twice as fast. Notice that most disruptive innovations will improve faster than
what is demanded by mainstream customers, meaning that after some time disruptors should be
able to attack established firms as the figure below illustrates.
43
Networked Innovation Model
Innovation Networks or Open Innovation is a paradigm that infers that Global firms can use
external ideas as well, apart from internal ideas to advance their technology or create solutions to
user or mass demands and real world problems. As the economy is going more globally
interconnected and permeable, there is a need for networking of innovation and R&D departments
of various firms to foster innovation at a grander scale, but keeping it more economical. The term
“Innovation Networks” encompasses many other similar structures such as cumulative innovation,
mass innovation, crowdsourcing, Networked Innovation, etc.
The central idea behind Innovation networks is that, in a world of widely distributed knowledge
and niches, an individual firm cannot, by itself, rely entirely to conduct its own research on all
areas, but instead, resort to buying or licensing processes, inventions, or even research data from
other firms which might be having a niche on that specific area. Also, in case the R&D department
of a firm is planning to conduct researches on new subjects that are not central to the firm, it would
be highly economical and optimal to take the research outside the company by licensing, joint
ventures or spin-offs.
Innovation networks go beyond just using external sources of innovations such as rival companies,
customers, academic institutions and can also incorporate employment and management of
intellectual property. Thus Innovation networks as a whole would encompass a firm’s systematic
use of a wide range of internal and external research opportunities, integration of such globally
shared research opportunities with its own local capabilities and resources, and exploitation of
such opportunities through multiple channels. The advantages of implementing a networked
architecture in the innovation and R&D processes are as stated below:
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• Highly economical since a firm needn’t start from scratch in a specific research domain. A lot
of research manpower and time is saved by reusing already existing research data and technology
employed by external sources.
• More effective since due to the globally distributed architecture, a firm can employ the best tools
and techniques employed by external firms to come to a better and more optimal research
conclusions. Hence it gives a larger base of ideas and technologies for a firm to access.
• Reduce redundancy since firms need not go on ‘reinventing the wheel’ but to implement
already existing pioneering research models and data to reduce excessive effort.
 Conserve time since firms can directly use the research data and innovative ideas already
existing in the environment and save time on unnecessary redundant R&D processes.
 New source of Revenue: Firms can now resort to licensing and selling their research data to
increase revenue.
Open Innovation
In order to match the growing demand for innovation from customers, suppliers companies
increasingly adopt innovation “eco-systems” across countries. In these innovation networks,
companies link up with people, institutions (universities, government agencies, etc.) and other
companies in different countries to solve problems and tap into new ideas. Network Innovation is
fast becoming an integral part in the innovation strategies and business models of companies in
recent years. Innovation is based on the knowledge assets that are, most of the times, beyond the
boundaries of the companies and hence cooperation has become an important of way accessing
the knowledge assets outside in order to generate new ideas and bring them quickly into the market.
Apart from this “outside-in” approach, companies may also, license out or sell intellectual
properties that they have developed internally, but might be outside their core business scope and
may be better developed and commercialized by other players (the inside-out approach).
45
What is Open Innovation?
Recently, growing attention has been devoted to the concept of “Open Innovation”, both in
academia as well as in practice. Chesbrough, who coined the term “Open Innovation” describes in
his book “Open Innovation: The New Imperative for Creating and Profiting from Technology”
(2003) how companies have shifted from so-called closed innovation processes towards a more
open way of innovating.
Traditionally, new business development processes and the marketing of new products took place
within the firm boundaries (Figure 1).
Figure 1 Closed innovation
However, several factors have led to the erosion of closed innovation (Chesbrough, 2003). First of
all, the mobility and availability of highly educated people has increased over the years. As a result,
large amounts of knowledge exist outside the research laboratories of large companies. In addition
to that, when employees change jobs, they take their knowledge with them, resulting in knowledge
flows between firms. Second, the availability of venture capital has increased significantly
recently, which makes it possible for good and promising ideas and technologies to be further
developed outside the firm, for instance in the form entrepreneurial firms. Besides, the possibilities
to further develop ideas and technologies outside the firm, for instance in the form of spin-offs or
through licensing agreements, are growing. Finally, other companies in the supply chain, for
instance suppliers, play an increasingly important role in the innovation process.
As a result, companies have started to look for other ways to increase the efficiency and
effectiveness of their innovation processes. For instance through active search for new
technologies and ideas outside of the firm, but also through cooperation with suppliers and
competitors, in order to create customer value. Open Innovation can thus be described as:
combining internal and external ideas as well as internal and external paths to market to
advance the development of new technologies.
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Figure 2 Open innovation
What does this mean?
In the first place, the shift described above means that companies have to become aware of the
increasingly importance of open innovation. Not all good ideas are developed within the own
company, and not all ideas should necessarily be further developed within the own firm’s
boundaries. The table below further illustrates this:
Closed Innovation Principles
Open Innovation Principles
The smart people in the field work for us. Not all the smart people work for us, so we must find
and tap into the knowledge and expertise of bright
individuals outside our company.
To profit from R&D, we must discover
it, develop it, and ship it ourselves.
External R&D can create significant value: internal
R&D is needed to claim some portion of that value.
If we discover it ourselves, we will get it We don’t have to originate the research to profit from
to the market first.
it.
The company that gets an innovation to
the market first will win.
Building a better business model is better than getting
to the market first.
If we create the most and the best ideas
in the industry, we will win.
If we make the best use of internal and external ideas,
we will win.
We should control our intellectual
property (IP) so that our competitors
don’t profit from our ideas
We should profit from others’ use of our IP, and we
should buy others’ IP whenever it advances our
business model.
This means that within the company a shift should take place in the way people look at the
company and its environment. Involving other parties when developing new products and
47
technologies can be of great added value. Think for instance about cooperation with other firms
in your sector, suppliers, universities, and of course end-users.
The business model plays a crucial role in this is. After all, how and when external knowledge
is required and used is to a large extent determined by the companies’ business model which
describes how value can be created from innovations and which elements have to be sourced
internally or externally.
Alternative Theories:
Evolutionary theory of innovation
This is in contrast to the neoclassical perspective which pictures innovative activity as arising
from scientific advances triggered by firm – sponsored technological developments; from firm‟s
own experience of design, development, production and marketing; from a wide variety of external
sources at home and abroad – their customers, suppliers and contractors; from universities,
government laboratories, consultants, licensors, etc (Freeman, 1994; Dosi, 1997); from a variety
of learning processes – making use of the knowledge and problem – solving capabilities that firms
embody in different degrees.
Evolutionary theory says that:
a. Even though innovation offers profit to the innovating individual, firm or country, it is costly
in terms of resources and time devoted to it; it is also uncertain in term of the actual returns on
resources invested, and its ultimate economic and social acceptability.
b. It is known from empirical studies of innovation that uncertainty prevails at all stages of
technological evolution, from initial design choices, through success or failure in the market place,
to eventual environmental impacts and spin-off effects; that it is impossible to forecast
technological change.
c. Technology keeps changing all the time. Change includes a continuous introduction of new
varieties, or “species”, and continuous subsequent improvements and modifications (Grubler,
1998).
d. Furthermore, technological changes build on previous experience and knowledge. Hence,
technological knowledge and the stock of technologies in use grow continuously. As knowledge
grows usually through “learning by doing” and “learning by using”, unit costs of production
decline. But they do not decline exponentially as portrayed by neoclassical economics, for that
would mean that the cost reductions can be maintained indefinitely. In the real world, cost
reductions become smaller relative to each increase in production volume, i.e., the experience
required for each subsequent reduction in costs takes longer to accumulate and is more and more
difficult to achieve. One might say that the potential for cost reductions becomes increasingly
exhausted as the technology matures (Grubler, 1998).
48
e. There are reasons other than profit maximization or cost minimization which motive firms to
undertake R&D:
i. Countries and firms undertake R&D to catch up with technology leaders.
 Countries and firms want to be first to develop new products and processes and thus be in a
position to reap monopoly rents.
iii.Countries and firms generally keep up with technical developments in order to be ready to
exploit opportunities as they arise. 3
iv.R&D activities have to be created, promoted, and fostered; and governmental or public support
is indispensable in this regard.
v. R&D is an activity that gives rise to more R&D; and conventional economics with its
assumptions of constant returns to scale and diminishing returns to factors is not well equipped to
deal with the R&D phenomenon.
vi.R&D in agriculture must necessarily be done in situ.
In the face of such unpredictability, such uncertainty, such unreliability of the market to give
correct signals to resource allocation; in the face of the dynamic, cumulative, synergistic nature of
technological change, making R&D be guided by market forces is not only naïve but shows the
economic profession as readily willing to gloss over important economic and social issues if their
tools cannot handle them. Dosi (1997) makes the point that even though some expected differential
profitability is a necessary condition for private actors to undertake expensive and uncertain search
efforts, there is not much evidence that the intensity of search grow monotonically with the
expected value of the rent streams. Rather, differences in opportunities and firm-specific
capabilities account for firm‟s propensity to innovate.
Adaptation innovation theory
"People are different in cognitive style and sit on a normally distributed continuum, ranging from
highly adaptive to highly innovative (Kirton, 1976; Goldsmith & Kerr, 1991)."
The adaptation innovation theory has helped organisations to understand problem solving and
cognitive style. Consider case study evidence, success factors and practical implementation steps
to discover where individuals in your organisation are placed on along the continuum scale.
Adaptation Innovation Theory Definition
The adaptation-innovation theory was developed by Kirton in 1976 to determine people's cognitive
styles and to identify adaptors and innovators on a continuum scale. This problem-
49
solving and creativity model aims to increase collaboration and reduce conflict within groups
(Kirton, 1976; Stum, 2009).
Green Innovations
Green innovations help companies insert environmental issues into their strategies in order to
create or consolidate their competitive advantage. Numerous empirical findings confirm a positive
relationship between green innovation and firm performance. Green innovation is closely
associated with corporate environmental management and eco-target achievement; therefore,
green innovation is widely believed to stimulate environmental performance. Green product and
process innovation not only reduce negative environmental impact, but they also increase the
economic and social performance of a company through waste and cost reduction. Companies
implement green process innovation in the manufacturing process to shorten production time and
reduce costs. In addition, a good product innovation improves market position, affirms brand
names, leapfrogs competition, creates breakthroughs, and attracts new customers. The literature
on the topic employs different terms to refer to green innovation; words like eco-innovation,
environmental innovation, eco-technologies, and green technologies are used indistinctly because
they are related to the same topic and can be used largely interchangeably. A number of definitions
exist for the notion of green innovation. One of the first, by Fussler and James defines ecoinnovations as “new products and processes which provide customer and business value but
significantly decrease environmental impacts”. In a similar manner, Kemp and Pearson define ecoinnovation as “the production, assimilation or exploitation of a product, production process,
service or management or business method that is novel to the organization and which results,
throughout its life cycle, in a reduction of environmental risk, pollution and other negative impacts
of resources use (including energy use) compared to relevant alternatives”. Driessen and
Hillebrand apply “a rather pragmatic definition”, stating that it “does not have to be developed
with the goal of reducing the environmental burden. ( . . . ) It does however, yield significant
environmental benefits”. Chen et
50
al. define green innovation “as hardware or software innovation that is related to green products
or processes, including the innovation in technologies that are involved in energy-saving,
pollution-prevention, waste recycling, green product designs, or corporate environmental
management”. In comparison to the eco-innovation definitions, Oltra and Saint Jean define green
innovation “as innovations that consist of new or modified processes, practices, systems and
products which benefit the environment and so contribute to environmental sustainability”. This
definition includes all the changes in the product portfolio or in the production processes that help
to reach environmental targets and consider the effect of the innovation activities without taking
into account the initial intent, including both incremental and radical improvements. After a
detailed literature on the topic, Schiederig et al. Identified six important aspects in the different
definitions of this kind of innovation:
9. Innovation object: Product, process, service, method;
10. Market orientation: Satisfy needs/be competitive on the market;
Environmental aspect: Reduce negative impact (optimum = zero impact);
5. Phase: Full life cycle must be considered (for material flow reduction);
6. Impulse: Intention for reduction may be economical or ecological; and
Level: Setting a new innovation/green standard to the firm.
These innovations can occur not just in green industry, namely sectors in which the environmental
protection represents the main firm’s core business, such as recycling material, generating and
storing renewable energy or natural product manufacturing companies, but also in companies
situated in traditionally non-green industries or with a product portfolio filled with goods that are
not green. Green innovations may be technological or non-technological (organizational,
institutional or marketing-based) and can be driven by economic or environmental influences
based on the need to balance shareholder and stakeholder interests
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UNIT – 4
INNOVATION PROCESS
New product development
New product development (NPD) is the process of bringing a new product to the marketplace.
Your business may need to engage in this process due to changes in consumer preferences,
increasing competition and advances in technology or to capitalise on a new opportunity.
Innovative businesses thrive by understanding what their market wants, making smart product
improvements, and developing new products that meet and exceed their customers' expectations.
'New products' can be:
•
products that your business has never made or sold before but have been taken to market
by others
•
product innovations created and brought to the market for the first time. They may be
completely original products, or existing products that you have modified and improved.
NPD is not limited to existing businesses. New businesses, sole traders or even freelancers can
forge a place in the market by researching, developing and introducing new or even one-off
products. Similarly, you don't need to be an inventor to master NPD. You can also consider
purchasing new products through licensing or copyright acquisition.
This guide explains the importance of NPD and describes the steps involved.
New product development strategy
With a well-considered new product development (NPD) strategy, you can avoid wasting time,
money and business resources. An NPD strategy will help you organise your product planning and
research, capture your customers' views and expectations, and accurately plan and resource your
NPD project. Your strategy will also help you avoid:
•
overestimating and misreading your target market
•
launching a poorly designed product, or a product that doesn't meet the needs of
your target customers
•
incorrectly pricing products
•
spending resources you don't have on higher-than-anticipated development costs
•
exposing your business to risks and threats from unexpected competition.
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There are several important steps you will need to plan into your NPD strategy.
Define your product
An accurate description of the product you are planning will help keep you and your team focused
and avoid NPD pitfalls such as developing too many products at once, or running out of resources
to develop the product.
Identify market needs
Successful NPD requires a thorough knowledge of your target market and its needs and wants. A
targeted, strategic and purposeful approach to NPD will ensure your products fit your market. Ask
yourself:

What is the target market for the product I am proposing?

What does that market need?

What is the benefit of my proposed new product?

What are the market's frustrations of existing products of its type?

How will the product fit into the current market?

What sets this product apart from its competition?
Draw on your existing market research. You may need to undertake additional research to test your
new product proposal with your customers. For example, you could set up focus groups or a
customer survey.
Find out more about customer research.
Establish time frames
You need to allow adequate time to develop and implement your new products. Your objectives
for developing new products will inform your time frames and your deadlines for implementation.
Be thoughtful and realistic. Some objectives might overlap but others will be mutually exclusive.

Your objective to race against your competition will require efficiency from your team.

Your aim to achieve a specific launch date will be influenced by demand for
seasonal products and calendar events.

Your aim to be responsive to your customers' needs and demands will require time
for research to ensure you develop the right products at the right time.

Your objective to stick to business as usual and maintain other schedules will affect
the resources you make available for NPD.
53
Identify key issues and approaches
There are many tasks involved in developing a product that is appropriate for your customers. The
nature of your business and your idea will determine how many of these steps you need to take.
You may be able to skip or duplicate certain stages, or start some of them simultaneously. Key
tasks include:
11. generating and screening ideas
12. developing and screening concepts
13. testing concepts
14. analysing market and business strategy
15. developing and market testing products
16. implementing and commercialising products.
CRITICALITY OF VALUE PROPOSITION
Your value proposition is the promise that you give to a customer that assures them that you will
deliver value to them. It's a statement that explains the benefit that you have to offer, who you are
offering the benefit to, and why you are the best person to deliver that benefit. It is important when
developing your value proposition that it be clear and concise.
A value proposition has three components:
7. The target buyer
8. The problem you solve
9. The reason you are the best candidate for the job
To create an effective value proposition, start by brainstorming and focus on what needs your
target demographic group have in common. This can be accomplished by doing market research.
Ask, "what do they all want that my business can provide? What is important to them?"
Keep in mind that the purpose of your value proposition is to identify and satisfy an unmet need
that your target market possesses. Once you've found a common need, you'll start developing your
value proposition around that need.
Why Is the Development of a Value Proposition so Important?
A well-thought-out and well-written value proposition can help you grow your business.
Here is a value proposition that belongs to a sales consultant:
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Our clients grow their business, large or small, typically by a minimum of 30-50 percent a year.
And, they accomplish this without working 80 hour weeks and sacrificing their personal lives.
This value proposition is powerful and grabs your attention because of the stellar numbers and
benefits to the consumer. It pulls you in and makes you want to know more. It also accomplishes
the following:
12. Creates a strong differential between you and your competitors
13. Attracts the right prospects and increases not only the quantity but the quality of
prospective leads
14. Gains market share in your targeted segments
15. Assists you in enhancing tools that will help you close more business
16. Improves your operation efficiency
3 Things to Do When Developing Your Proposition
Define: Define and identify the problem that you solve. What is the problem or the pain that your
product and/or service solves?
Solve: Who does it solve the problem and/or pain for? Who do you provide the solution for?
Differentiate: What sets you apart from your competition? Is it experience? Price? A special skill?
You have to make this clear in your proposition so that there is no hesitation in your target market
selecting you.
Test Your Marketing Proposition
The biggest mistake that businesses make when developing their marketing proposition is to create
a statement that is too vague or too confusing. To make sure you aren't making this mistake see if
you can recite your marketing proposition in ten words or less. If you can get it down to 10 ten
words or less, you are well on your way to a marketing proposition that will work, but you have to
test it.
Ask yourself the following questions:
Is my Marketing Proposition Relevant?: I am not referring to relevance internally, I'm talking
about relevant externally, especially to your target market.
Is It Believable?: A compelling message is important, but it also must be believable and credible.
Can I Defend It?: You must be able to own your statement, and, if necessary, be able to defend
it if it's questioned.
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Is It Flexible?: Can it grow along with your business if necessary? Your marketing proposition
will not work if it confines you and creates a barrier to future business expansion and growth.
Is It Emotional?: Your prospects and customers have to connect with you emotionally. Your
proposition has to resonate with them on a gut level or they won't connect and there won't be any
buy-in.
DIFFERENTIATED INNOVATION
In the first report in the series, The New Innovation Conversation, we introduced the notion that
innovation applies to all businesses, in all sectors. It’s also about making innovation part of
everyone’s role, in every team, every day. As such, innovation becomes the by-product of an
innovative organisation.
In this initial report, we also introduced a framework to work from, based on the five pillars of
innovation: Strategy, Leadership, Management, Culture and Tools & Processes.
Next, we created the Guide to Becoming an EveryDay Innovator, providing actionable and
practical steps for organisations to establish their own innovation culture and build their own
repeatable and sustainable innovation models. This is based on discovering their starting point to
innovate, using a tool such as Innovation Pulse.
This now brings us to the next report in the series, on Differentiated Innovation which is focused
on providing customer-centric innovation. This report focused on the first pillar, Strategy, and how
to include Differentiated Innovation in your innovation mix.
The innovation Mix
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The innovation spectrum includes three broad categories of innovation: incremental,
differentiated and radical.
➢ Incremental – focused on improving existing products and services as well as continuous
improvement/process improvement.
➢ Differentiated – focused on medium-scale changes with low to medium risk, that involve
multiple teams. Innovations in this category are generally customer focused, to create
competitive advantage.
➢ Radical – large-scale, radical projects, usually complex and typically requiring significant
investment.
Digging deeper, what do we mean by Differentiated Innovation?
6. External, customer-centric focus
7. Clear objectives to identify and solve real customer problems with creative solutions.
8. Focus on speed to market as customer needs evolve quickly.
How to get started with Differentiated Innovation?
Getting started can be daunting but if the building blocks of innovation have been put in place
through incremental innovation initiatives, it will be much easier. If your staff is already involved
in innovation and your organisation encourages them to participate and listens to their ideas and
solutions to address internal problems, listening to customers and other external stakeholders is a
natural progression.
Here are the necessary steps, succinctly put:
3. Define the problem to be solved, which should be tied to your overall strategic objectives.
4. Involve your internal stakeholders in coming up with ideas to improve customer experience.
5. Take it a step further and involve external stakeholders, by looking at a broader group
for help in delivering a better customer experience – Open Innovation
Our report Differentiated Innovation – Putting the customer at the heart of your innovation
programme expands on these ideas and concepts and provides real life examples from our
customers such as Aviva or the British Library. To read it, head to our website to download for
free.
PATHS TO MARKET:
7. Spend less and sell more.
8. Get the right products and services to the right customers at the right time.
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9. Retain existing customers and secure profitable new customers.
10. Optimize your marketing mix and sales and distribution channels to maximize revenue
and profitability throughout the product life cycle.
11. Get everyone in product management, marketing, sales, customer service, and your
distribution partners aligned and working together to maximize results.
12. Determine the optimal level of spending for each function in marketing, sales and
customer service, for each market segment, product and service.
IDEATION
Ideation is the creative process of generating, developing, and communicating new ideas, where
an idea is understood as a basic element of thought that can be visual, concrete, or abstract.
Ideation comprises all stages of a thought cycle, from innovation, to development, to
actualization. Ideation can be conducted by individuals, organizations, or crowds. As such, it is
an essential part of the design process, both in education and practice. Methods of Ideation
Problem solution
This is the simplest method of progress, where someone has found a problem and as
a result, solves it.
Derivative idea
This involves taking something that already exists and changing it.
Symbiotic idea
A symbiotic method of idea creation is when multiple ideas are combined, using
different elements of each to make a whole.
Revolutionary idea
A revolutionary idea breaks away from traditional thought and creates a brand new
perspective. For example, the writings of Copernicus (a development of classical Greek
thought).
Serendipitous discovery
Serendipitous solutions are ideas which have been coincidentally developed without
the intention of the inventor. For example, the discovery of penicillin.
Targeted innovation
Creating a targeted innovation deals with a direct path of discovery. This is often
accompanied by intensive research in order to have a distinct and almost expected
resolution. For example, linear programming.
Artistic innovation
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Artistic innovation disregards the necessity for practicality and holds no
constraints. Philosophical idea
The philosophical idea lives in the mind of the creator and can never [ citation needed]
be proven. This type of idea however can still have vast residual effects. For example,
the idea of eternal recurrence.
Computer-assisted discovery
This uses a computer in order to widen possibilities of research and numeric possibilities.
This list of methods is by no means comprehensive or necessarily accurate. Graham and
Bachmann's examples of revolutionary ideas might better be described as evolutionary; both
Marx and Copernicus having built upon pre-existing concepts within new or different contexts.
Similarly, the description provided for artistic innovation represents one perspective.
EXPERIMENTATION AND PROTOTYPING
Combining experimentation with market research
Whereas many organizations have deep and meaningful expertise doing large-scale market
research, their findings are hitting critical limitations.
Product teams responsible for introducing new solutions to the market are embracing agile
workflows and need to engage in higher-velocity decision-making to inform recurring code
sprints. They can’t wait for large-scale studies to be completed and so are left making decisions
based on non-contextualized data from past reports at best or gut feelings at worst. In an effort
to get closer to Amazon’s benchmark of having 70% of the information needed, some product
managers even go to nearby Starbucks to generate feedback from random patrons. It’s not a
rigorous practice by any means.
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In short, market research is extraordinarily effective for sensing broad marketplace changes
and informing the organization about what markets to enter and what go-to-market strategies to
deploy. But it simply can’t inform the day-to-day decisions that product teams need to make.
Small bets, via experimentation introduces data to these daily decisions. Designed specifically
for continuous iterations, experimentation informs product teams with directional insight into
distinct user preferences and behaviors.
Whereas market research can be used for sophisticated initiatives like market segmentation and
conjoint analysis studies, experimentation involves more tactical roadmap prioritization
activities like concept split tests and usability assessments. Integrated together, market research
and experimentation can enable organizations to allocate resources intelligently and efficiently.
When it comes to adding experimentation to market research, the biggest mistake you can make
is not using each to its strengths and weaknesses. Misusing data can be more dangerous than
operating without data. Remember that experimentation is an iterative testing methodology that
provides directional insight, whereas market research consists of study-based methodologies to
provide statistically significant results.
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The quality of the insights generated is directly correlated to the quality and rigor of
your methodology. With regard to experimentation, you should ensure that:
You are eliminating bias from psychological distance by generating revealed preferences
(i.e. authentic reactions) to stimuli rather than stated preferences (i.e. zero-risk answers)
to survey questions
You are running split tests so that your insights are comparative (e.g. Feature A vs. Feature B)
rather than independent (e.g. reactions to just Feature A), especially with smaller samples
You are sourcing an audience based on behaviors and problems, and not on
preconceived notions of how certain demographics map to preferences
Done right, you can combine experimentation with market research to achieve a powerful
trifecta:
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Experimentation best practices
You don’t have to wait until you have a fully engineered product in the market to get feedback
from customers for the first time. Split testing, or “A/B testing,” is a hugely popular marketing
tactic for optimizing collateral and improving conversion funnels early in a campaign, before
making major investments in any particular direction. Similarly, product teams can run tests
using alternative prototypes or mockups to save time and money while also unearthing potential
for innovation – all before writing a single line of code!
Follow this 5-step split testing process and accompanying example to generate qualitative
and quantitative data with prototypes:
Formulate a hypothesis: Begin with a decision that needs to be made, and work
backward toward the assumptions or questions that need to be tested or answered in order
to be as informed as possible. You have limited resources and stakeholders simultaneously
clamoring for a number of features. You can’t do everything. You have to choose amongst
alternatives, each of which has their own merits. Frame your assumptions and success
criteria that will ultimately drive whatever individual decision you need to make.
Create alternative prototypes or mockups: Once you have a clearly defined hypothesis,
you have to create stimuli that will generate the user feedback you need to validate or
invalidate your hypothesis. If you are prioritizing features on a roadmap, create a prototype
that highlights the feature along with a prototype that doesn’t include the feature. If you
are determining which possible implementation of a feature would perform best, create a
prototype of each.
Source your target audience: Once your prototypes are ready, you’ll need access to your
target audience to generate feedback. You’ll need a small sample for qualitative testing and a
larger sample for quantitative testing. Depending on what you’re looking to learn, you may
want to stagger and reorder qualitative and quantitative testing to maximize insights.
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3. Generate authentic feedback: Alpha’s on-demand insights platform has best practices
built into testing, but the rule of thumb is to do your best to simulate what would be an
authentic shopping or evaluation experience. In the real world, customers usually have
multiple options when making a purchasing decision. They’re usually in a specific
mindset when shopping for certain types of offerings. Your testing methodologies should
simulate these experiences and mental models, and include hard-hitting questions that
generate authentic behaviors and responses.
4. Objectively evaluate results: Evaluating test results is often just as, if not more,
difficult than generating the data in the first place. I recommend two techniques to
mitigate bias. First, never rely on a single data point to make a decision. Iteration,
robustness, and replicability are the most powerful weapons in your arsenal. Second, try
to separate the ideation process from the evaluation process. Don’t let individuals who
are emotionally invested in ideas also be the ones to evaluate the test results.
Prototyping best practices
Testing your product ideas in prototype form is a critical part of the product life cycle. While
surveys are powerful for learning about user preferences, testing interactive prototypes are needed
to generate specific, insightful feedback about how your users understand and interact with your
product.
But there are a few things you should know first.
Don’t test the one prototype to rule them all. It’s very common for product teams to create large
prototypes that achieve multiple goals: To present to major stakeholders for approval on the design
and user experience or to show to developers so they can better understand the build expectations.
While these heavy prototypes may be a necessary part of your product process, they are not ideal
for focused user testing. An unfocused prototype means that your testers can meander down any
possible pathway in your product, and may never see the areas that you are actually need feedback
on.
Instead, break up these large prototypes into shorter, smaller flows with fewer screens, so that
each prototype is focused on an area you want to test. Smaller prototypes take less time to create,
review and edit, and naturally shorten the production time. To decide what to include in the
prototype, ask yourself:
1. What is the most important thing we want to learn from this test?
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4. What screens and / or interactions does the tester need to experience, in order to answer
our questions?
5. What does the user not need to see for this test?
Keep each prototype to 2 flows maximum, and decide which areas are necessary for interaction /
clickability. To simplify the prototype, omit any interactions that are not related to the most
important thing you want to learn.
You must also be aware of misaligned objectives from different stakeholders in the process. While
user research and testing have become popular buzzwords, allowing the time to execute short
testing cycles (and iterate based on testing feedback) within a waterfall framework is very, very
difficult. Many large companies (and agencies working with large companies) are required to get
approvals before moving to the testing phase. These approval processes can take weeks, if not
months. In addition, most agencies create budgets with milestones and deliverable dates they need
to hit, and may not factor in the time for multiple cycles of user research and testing, due to clientdictated timelines.
To address this issue, encourage budget creators to allow for these multiple test cycles up front, as
well as communicate to the client that it is important to include this time. Testing shorter prototypes
(as mentioned above) will help alleviate the stress of creating prototypes for testing and client
approval, as well as providing data points to back up all design decisions
INNOVATION LABS
How to define an innovation lab?
The drawing below shows there are many ways to encourage innovation within a business.
Some of these involve a strategic and goal-focused unit, perhaps focused on a specific area like
big data, tasked with creating anything from a new product or service to a new technology or
business model.
Other innovation initiatives may not be physically co-located, they can be as radical as Google's
model of 20% 'free' time for workers to innovate, or simply involve setting up a group to
collaborate with other industries, startups, or academia.
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Image via The Fintech Book, Wiley
The challenges of setting up an innovation lab as follows:
(iv) What roles should be filled?
(v) What types of people make the best innovators?
(vi) Should you recruit from inside the company or look for fresh perspectives?
(vii) Do you define a governance framework from the beginning or let it evolve?
(viii)
What projects will you prioritise?
(ix) How do you integrate with the rest of the organisation and not be perceived as outlaws?
(x) Do you need dedicated infrastructure?
(xi) How can ideas be tested softly? Who are your actual clients?
The aims of the innovation lab
Whilst the goal of any innovation lab is ultimately to create new revenue streams or bolster
existing ones by improving productivity or speed, there is much more to consider.
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Many of the methods of encouraging innovation represent both means and an end. For example, a
new culture of working may be beneficial for productivity, but in its own right can make for a
happier workforce.
So, what are some of the common aims of the innovation lab?
Incubating a new culture
Many think of culture as the wishy washy side of both innovation and digital transformation.
Fixing broken windows (the idea of new office decor, relaxed dress code and seating, and Macs
for all) can often be seen as an empty gesture - snacks can only make a company so much more
enjoyable to work at.
However, these changes are an important step when combined with a focus on new ways of
working - customer centric, data driven, tech-enabled.
Communication between a lab and other teams, often involving a cross-functional team, is
important in instigating a 'test, learn, iterate' culture.
One of the challenges of the lab, as Sean Cornwell of Travelex states (though referring to broader
digital transformation), is avoiding the cool kids in the corner syndrome.
Incubating culture is a fine balance and further down the line may ultimately hinge on hiring
and firing.
Ideation
Fairly obviously, this is a large part of what innovation labs promise. That can involve hackathons
or day-long collaborative events.
Innovation labs may work on proposals submitted from across the business, even involving a
competition element to reward teams or employees.
At the lighter end of the lab scale, hack spaces or CX demos can be created merely to demonstrate
the latest tech in a particular industry and encourage staff or even clients to think big.
Talent replenishment
A catch-22 can occur at relatively slow-moving companies. These companies must attract talented
staff with digital skillsets in order to change the company, but these candidates may not want to
work for companies that may be perceived as boring or old fashioned.
So, the lab can be created as an attractive base for new employees. Ryanair provides a good case
study here, showcasing all the benefits of working for its lab on a dedicated microsite.
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Salary, empowerment, startup culture and often a new location (such as a metropolitan office
rather than the out-of-town HQ) are all used as a draw.
Open data
This isn't always an aim of innovation labs, but opening up data for third parties to innovate can
be a good method of early product development in certain industries.
Nesta, the British innovation charity, runs the Open Data Challenge with the Open Data Institute,
which has spawned new digital products and boasts a five to tenfold ROI.
One such product built on open data is Movemaker, an 'app for house hunters, which helps
people living in social housing swap their properties'.
In-housing
Part of investment in a lab can be a focus on developing in-house capabilties. Rather than
looking to agencies to develop new media, for example, companies can bring competency
in house.
Emphasizing long term revenue
The lab can be a form of insulation against short term accounting that some see as the enemy of
innovation. Though product development can be fast through agile methods, creating new products
or business models doesn't always lead to an immediate return. The lab is an environment where
long-term thinking can be encouraged.
This requires what Tom Guy of Hive (British Gas's home internet-of-things spinoff) calls 'air cover'
from stakeholders.
Time and money granted from senior members of the business, managing upwards.
New businesses
Investing in an accelerator allows companies to give money, facilities and training to a range of
startups and have a stake in their success, either aiming for integration in the long term, or a
portfolio of successful tagential businesses.
Axel Springer's Plug and Play accelerator in Berlin is a good example, and includes
other partners such as Deutsche Bank.
So, innovation labs should be much more than PR
In summary, though labs can seem like PR on the surface, they need to stand for much more
in order to change big businesses.
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Unit -5
BUSINESS TRANSFORMATION
Increasingly in the worlds of project management, change and organizational development
the term Business Transformation is being used. But what does it mean? What is exactly is
Business Transformation?
Is it change re-branded? Is it outsourcing? Is it a way for IT companies to sell
additional services?
In this unique piece Mike explores Business Transformation and looks at how this approach
can be used in your company. He gets behind the hype and looks at what can be done at a
practical level to manage transformational change.
Introduction to Business Transformation
Business Transformation is a change management strategy which has the aim to align People,
Process and Technology initiatives of a company more closely with its business strategy and
vision. In turn this helps to support and innovate new business strategies. For any transformation
of a business or business processes innovation is one of the key drivers. Having a strong innovative
capacity within the culture of the business can be a the make or brake of a transformation process.
Change in business
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Transformation and change is a critical issue for most organizations. Research shows that the
failure rate of change programmes at 70-80%, many organizations are struggling.
The flip-side is that organizations which use effective transformational approaches obtain almost
80% more success than those that don’t.
Definition
Transformation – A marked change, as in appearance or character, usually for the better.
Transformation (n) – The process or result of changing from one appearance, state, or phase to
another.So in business transformation it could be said that transformational change is the process
of changing from one ‘look’ to another, or one culture to another. If visible change has not taken
place (both inside and out) then the change is not transformational in nature or form.
In.psychology
Wilfred R. Bion conceived of transformations as the changes that the analysand’s sense
impressions of emotional experience undergo to become a progressive series of mental
realisations. Note this talks about a series of changes which are realised, not one change in itself.
Origins of transformation
The first report of transformation was an example of natural transformation. This was by Dr.
Frederick Griffith a public health microbiologist studying bacterial pneumonia during the 1920s.
What is Business Transformation?
Business Transformation appears to have began as a label used by IT companies to re-brand their
consultancy processes in order to sell integrated information systems more effectively.
Now business transformation means much more. It implies a holistic process transforming across
the business It also implies that this is the only valid strategic process towards achieving your
corporate vision or way forward.
Many organizations and consultancies appear to get lost in the chase for growth and change.
Imagine that you have just watched your corporate video/MP4/Podcast or newspaper in three years
time. Have all the key elements of transformation been achieved compared to how they were? Or
is there a lot more to do?
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Communicating and advertising your business transformation expectations and outputs to your
Board, stakeholders and staff now is a must-do if your vision is to become a thing of reality. The
old adage – what gets measured gets done, is as true today as it has always been.
What is Business Transformation all about?
Transformation a process that enables your business across all the Key Performance Indicator so
that you can maintain your customers and outperform your competitors on an ongoing basis.
Transformation relies on implementation of effective market and stay-in-business strategies that
attract more profitable customers in selected markets and lower operating costs.
How do you know you need to transform your business? Ask yourself:
•
•
•
Are we reinvesting in opportunities the market evolves?
Is our performance superior to our major competitors?
Is our competitive advantage strong enough to leverage more customers and more
business from existing customers?
If the answers to any or all of these issues are doubtful, you need to change your approach. If you
don’t change, your competitors will change.
Enabling Transformational Change
The move from ‘running the business’ or project delivery to business transformation requires
action at many levels.
At a project level, five key activities are:
Focus on benefits
Start thinking of projects in terms of business-led transformation activities, spanning many
functions. Stop thinking of projects merely as functional and top down. The main objective of each
project must be to gain specific benefits for all stakeholders. Project planning must clearly show
how these benefits will be realised by enabling people to do things differently. The business
changes required to realise the benefits must be clearly identified, ownership for them must be
established, and the overall plan must address these changes as well as the delivery of any new
technology.
Resourcing
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To realise the benefits will depend on leadership of the project, the people involved, the
effectiveness of the project team and the quality of communication and engagement with all the
various stakeholders of the project. The implications for the role of the sponsor and the project
leader are significant. Do they and the wider team have the expertise, and the time, to address the
wider issues of transformation. Is there enough focus on resourcing? Getting the right people, at
the right time in the right roles to enable success?
Expanding, developing and learning
Do projects, build in opportunities to explore the possibilities and learn about the potential
benefits?
Is there an opportunity to evolve and refocus as the project progresses? By itself this is a huge shift
for many organisations. fixed and traditional mindsets can be very damaging and often stifle any
innovation or risk-taking. risk-taking and innovation
Sustainability
The project to be successful, will provide an opportunity for a continuous stream of benefits. In
many situations the focus and effort should come after the initial project has been delivered. All
too often the project team moves on as soon as the process change is live and so the opportunity
for continued benefits realisation is lost.
Skills development
Underpinning all these factors is the need for skills and knowledge development. This is about
training and education and some significant shifts in thinking are required to learn to approach
transformation in a new way and not as just another change project.
Outsourcing – is it transformational?
It is interesting that many organizations categorise outsourcing as the key strategy for business
transformation.
Certainly outsourcing CAN BE a valid strategy – but it is not the only one. equally not all
outsourcing is transformational change. Outsourcing can only be classified as transformational if
it is SEEN by all parties. many organisations attempt to mask this fact to customers and staff. If
hidden then unless the new service demonstrates measurable change and is perceived as so by
service users then it cannot be transformational. Many outsourcing services offer the same as inhouse teams formerly did – is is not transformational – it is transactional change.
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Useful research
In a survey of enterprise level companies* released by Cap-gemini Consulting in partnership with
the Economist Intelligence Unit, Western European businesses have launched on average seven
major transformation programmes in the past three years.
Of these, 44% are motivated by the growth of international competition, 34% are motivated by
industry consolidation and 34% are motivated by increased competition in domestic markets.
Whilst 86% of those questioned feel that managing these business transformations is now an
integral part of management, only 30% believe it is something at which they excel.
These transformation projects tend to focus on reducing cost due to new economies of scale at an
international level and, increasingly, on achieving growth by seizing each and every opportunity
offered by emerging markets. Whether the intention is to boost turnover or to improve profitability,
the study underlines the extent to which economic globalisation impacts on the number and content
of these transformation programmes.
The analysis reveals two major forms of transformation:
•
Fundamental change that generates a strong impact on results in less than two years, such as
mergers and acquisitions (57%), outsourcing and off-shoring (53%), restructuring (46%) or
strategic changes (46%). These programmes involve external players and generate major
transformation within the organisation
• Programmes that generate comparative improvement, such as value-chain optimisation
(33%), cross-functional performance improvement (44%), information systems redesigning
(54%).
Of the executives questioned:



70% express dissatisfaction with the communication of objectives to employees, and 75%
express dissatisfaction with training, commitment and people management
73% consider themselves to be unsuccessful in avoiding slippage in execution time
70% say they are not in a position to properly assess the success of their programme
“Trends in business Transformation” is a white paper produced by Capgemini Consulting
and written in co-operation with the Economist Intelligence Unit.
What is not business transformation?
Business transformation is not (or does not have to be):



Outsourcing
Downsizing
Change re-labelled
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17. Expensive
18. Only managed by consultancy firms
19. Limited to IT projects
Tools for use in Transformational Change
RapidBI’s family of Business Improvement Review tools have been used successfully as a key
part in the business transformation of many organizations – large and small. for more information
see: Business Improvement Review
BUSINESS PROCESS
A business process is an activity or set of activities that will accomplish a specific organizational
goal. Business process management (BPM) is a systematic approach to improving those processes.
If an organization is unable to perform certain business processes internally due to cost or
resources, the company might utilize business process outsourcing (BPO). Many organizations
contract specific business tasks, such as payroll, human resources (HR) or accounting, to a thirdparty service provider.
To measure success of a business process, organizations track successful completion of different
steps within the process, i.e., benchmarks, or reaching the end point of the process. When a
business process is not helping an organization reach a goal within timeline or with the resources
at hand, there are a number of strategies to execute for improvements. Business process
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mapping is
often
undertaken
as
engineering and process transformation to
an
exercise
during business
process
re-
improve a maybe unsuccessful business process.
Organizations might also focus on business
process visibility to identify issues in process
performance or execution.
Business processes categories
Depending on the organization, industry and nature of work, business processes are often broken
up into different categories. Categories include:
10. Operational processes (or primary processes): Operational or primary processes deal with
the core business and value chain. These processes deliver value to the customer by helping to
produce a product or service. Operational processes represent essential business activities that
accomplish business objectives, e.g., generating revenue. Some examples of this include taking
customer orders and managing bank accounts.
11. Supporting processes (or secondary processes): Supporting processes back core processes
and functions within an organization. Examples of supporting or management processes
include accounting, HR management and workplace safety. One key differentiator between
operational and support processes is that support processes do not provide value to customers
directly.
12. Management processes: Management processes measure, monitor and control activities
related to business procedures and systems. Examples of management processes include
internal communications, governance, strategic planning, budgeting, and infrastructure or
capacity management. Like supporting processes, management processes do not provide value
directly to the customers.
Business process mapping or modeling
Business processes are often depicted visually with a flowchart showing a sequence of tasks with
certain benchmarks or decision points. Business process mapping or modeling illustrates
pictorially, through graphs and charts, how certain processes flow into others.
There a few different ways to think about business process mapping and workflow:
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17. Sequential business process: Sequential business processes are outlined on a document with
clear start and end points. When following this process map, an organization performs the
series of actions in order to complete the task within the constraints of a predetermined
timeline.
18. Status-driven business process: A status-driven business process doesn't have strict start and
end points. These processes can finish at any stage depending on workflow changes, nature or
production or the office culture. Also, it is typical for status-driven processes to recur or cycle
on the same step in the process.
19. Parallel business process: When activities in a business process are executed in parallel, they
are carried out simultaneously. In this type of business process execution, the activities on all
branches must be completed before the next step in the business process can commence.
RECOGNITION STRATEGY
Strategic recognition programs link the actual performance being recognized directly to the
organization’s core values and strategic objectives. Therefore, by tying recognition to your
organization’s objectives and then measuring that activity, you are not only better able to manage
the company culture and the talent of the organization, but you are providing on-going feedback,
which can be lacking in many organizations.
In other words, strategic recognition is:
➢ Tied back to your core values and goals;
➢ Measured, recorded and analyzed;
➢ Universal, consistent and centralized for easy reporting; and a
➢ Clearly defined process for recognition.
Furthermore, these types of programs allow employees to have a better understanding of
organizational objectives and they feel better able to achieve those objectives. These programs also
allow for feedback that normally an employee would not receive from management. As an added
bonus, companies have reported that their turnover rates have dropped significantly.
The Best Ways to Measure Employee Recognition Programs
The best way to measure your return on investment of your employee recognition program is by
looking at specific metrics such as:
9. productivity;
10. customer/employee retention;
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6. employee engagement;
7. return on profit margin; and
8. return on equity.
Organizations that use these metrics when analyzing their recognition programs found an increase
in these metrics and overall in how engaged the employee was in the organization.
It is highly recommended you keep in mind what employees really
want from these programs, and more importantly employees want to feel valued for a job well
done by those they respect and admire. Overall what employees want from work depends on the
person of course, however that said, employees typically want fairness, clarity and consistency
when it comes to employee recognition programs. If this does not exist in your recognition
program, you will not see positive results and employees will “lose faith” in the value of the
program and any feedback that comes with it. Therefore, recognition programs need to be thought
through with a clear purpose and guidelines of what is expected in order for an employee to receive
recognition. In addition, these programs should be available to all employees.
As mentioned before, having your rewards tied to the mission and values of the organization will
motivate employees to be more engaged. The key to creating a truly effective program is to ask
your employees what they want from work and what type of rewards engage them. You will be
surprised at how many simple and inexpensive opportunities employees will suggest!
STRATEGY EXECUTION
Strategy execution is a hot topic in management today. In fact, the Conference Board’s recent
Survey of CEOs revealed that chief executives are so concerned about strategy execution that they
rated it as both their number one and number two most challenging issue. For anyone who’s tried
to execute strategy, this finding should come as no surprise: it’s estimated that more than 60% of
strategies are not successfully implemented.
When asked to define strategy execution, most managers respond with statements like, “It’s the
successful implementation of a strategic plan” or “It’s getting your strategy done.” While these
perspectives are certainly valid, they aren’t very helpful in terms of understanding what needs to
be done to actually drive business results.
Here’s a look at some mainstream approaches to strategy execution:
9. Strategy execution as a process.
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The most notable book to date on strategy execution is Execution: The Discipline of Getting
Things Done, by Larry Bossidy and Ram Charan. Bossidy, a retired CEO, and Charan, a
renowned management consultant, make the case for execution as a discipline or “systematic
way of exposing reality and acting on it.” They explain that “the heart of execution lies in
three core processes":
13.
People
14.
Strategy
15.
Operations
They explain the processes and descriptions managers use to successfully drive business results.
Strategy execution as a system. The information presented in Execution is certainly useful,
but the authors don’t fully explain how an organization can implement their three core
processes to achieve strategy success. There have been significant advancements in this area
since Execution was published in 2002. In 2008, Harvard Business School Professor Robert
S. Kaplan and his Palladium Group colleague David P. Norton wrote The Execution
Premium: Linking Strategy to Operations for Competitive Advantage. In it they present their
management system, which houses six sequential stages intended to help organizations
capture what they call an “execution premium”—a measurable increase in value derived
from successful strategy execution. They outline six stages in this system:
1. Develop the strategy
2. Plan the strategy
3. Align the organization
4. Plan operations
5. Monitor and learn
6. Test and adapt
Through detailed subactivities—26 in total— Kaplan and Norton explain how organizations
have successfully executed strategy via application of their management system.
Strategy execution as a step-by-step process. Both of the models outlined above are important
and anyone serious about the practice of strategy execution should be familiar with them, but
they suffer from what might be called the “Goldilocks Problem.” The process view doesn’t
contain enough detail to help managers construct the three processes within an organization (i.e.,
too cold). Conversely, the systems view contains so many sub steps that it can be overwhelming
to managers (i.e., too hot).
So, how can we find a solution that is “just right"? While there is no easy answer, the best of
both approaches can be synthesized into 10 steps outlined below. These steps provide both high
level direction as well as the detail necessary to capture the lion’s share of strategy execution
success.
Step 1: Visualize the strategy. One of the most pressing challenges in all of strategy is simply
understanding what a strategy is. An effective way to improve this understanding is to visualize
the strategy via an illustration that shows both the important elements of the strategy and how
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each relates to one another. Frameworks such as the Strategy Map by Kaplan and Norton,
the Activity Map by Michael Porter, or the Success Map by Andy Neely help in this regard.
Step 2: Measure the strategy. Key elements of the visualized strategy should be assigned an
easily understood performance measure. The full set of strategic performance measures can be
organized into a dashboard, a Balanced Scorecard, or some other framework so the reader can
determine that progress is being made toward completion of the strategy.
Step 3: Report progress. In the same way that a budget is reviewed monthly to ensure financial
commitments are being kept, the strategy should be reviewed regularly, but with more of an eye
toward determining if the strategy is producing results, versus controlling performance.
Step 4: Make decisions. Strategy execution is much like sailing a boat toward a planned
destination. A defined course and a full complement of navigational charts will never eliminate
the need to remain vigilant, to assess the environment, and to make corrections as conditions
change. As part of the regular reporting process leaders must make ongoing strategic decisions
to keep the strategy current and on course.
Step 5: Identify strategy projects. Organizations may have scores, if not hundreds, of projects
ongoing at any point, but they rarely have a firm grasp on the type and range of these projects.
The first step in improving project-oriented strategy execution is to capture and organize all
projects—strategy projects in particular—that are underway in throughout an organization.
Step 6: Align strategy projects. Once projects are captured they must then be aligned to the
strategies or goals for the organization. This step entails comparing each project, either proposed
or ongoing, to the strategic goals to determine if alignment exists. Only those projects that
directly impact the strategy should be resourced and continued.
Step 7: Manage projects. Organizations must develop a capability in project management if
they are to execute strategy effectively. In some settings, projects receive very little
management. In others, projects persist well beyond their scheduled completion. The full
complement of projects in any organization should be coordinated and controlled by a central
project office or officer with the responsibility for monitoring both progress and performance.
Step 8: Communicate strategy. It is difficult to execute strategy when the strategy itself isn’t
well understood, or performance relative to it is not communicated. Leaders must communicate
their visualized strategy to the workforce in a way that will help them understand not only what
needs to be done, but why.
Step 9: Align individual roles. Employees want to know they are making a meaningful
contribution to their organization’s success. It’s up to senior leaders to ensure that employees at
all levels can articulate and evaluate their personal roles toward achievement of specific strategic
goals. This is perhaps one of the most critical aspects of the execution process.
Step 10: Reward performance. In strategy execution, as in any other area of management,
what gets measured gets done. Taking this one step further, what get measured and rewarded
gets done faster. After explaining the strategy and aligning the workforce to it, senior managers
institute the incentives that drive behaviors consistent with the strategy.
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Strategy execution is difficult in practice for many reasons, but a key impediment to success is
that many leaders don’t know what is strategy execution or how they should approach it. Homegrown approaches may be incomplete if they fail to incorporate many of the basic activities
highlighted above.
While the 10-step approach outlined here won’t guarantee strategy execution success, it will
greatly improve the odds, perhaps pushing the topic down a notch on the list of CEO concerns.
Strategy execution may be difficult to apply, especially for new managers. Register for our crash
courseon how to get your management career off on the right foot.
DESIGNING A SUCCESSFUL INNOVATION CULTURE
Innovation is something every business has been seeking right from the outset of the industrial
revolution. It has come to the fore in the last two decades and not all of them are a success. Mark
Payne, in his book on How to kill a Unicorn, mentioned that around 90 percent of
groundbreaking projects either fail in the market or just never see the light of the day. Why
innovation as a practice does not succeed to take-off in spite of the huge investments and the best
intentions?
Innovation programs in organizations are successful in making an impact when they have the
right approach and are perceived favorably by the employees—their biggest stakeholders. It is
important to list down the do’s and don’ts, before going about building an innovation culture.
The building blocks for innovation are as follows:
Make innovation a collaborative effort
First and the foremost, organizations need to set the objectives straight across teams. It is critical
to communicate the value that the innovation will create for the end-customer and for the business
in return. Failures are the first step to success but companies often shy away from accepting these
as intrinsic to innovation. Companies need to ensure that they put genuine failures on an equal
pedestal as successes with an intention to create better value. So, why not celebrate and call it a
spectacular failure?
Keeping innovation cross- functional is also important, as it has a perpetual bearing on the
overall success. For a customer-relevant innovation, it is pertinent for organizations to allow the
best of its people, with varied skills, to come together--right from product development engineers
to those bringing specialization in front-line support, CRM (Customer Relationship Management)
and client training. The idea should never be left to the one who conceived it but
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should permeate horizontally and vertically across the organization. Technology, sometimes, has
limitations and involving other teams is beneficial for the growth of the idea.
Organizations should look for ways to encourage and elevate these efforts by the employees. What
better way than rewarding and recognizing the promising ideas? They should not only encourage
their people to come up with such ideas but also invest in, develop and capitalize on these ideas to
enrich their overall product portfolio. Such recognition can further foster the culture of innovation.
In this competitive era, we often hear about design thinking being an essential ingredient to build
a strategy for innovation. Design-led companies such as Apple, Coca-Cola, IBM, Nike, Procter &
Gamble and Whirlpool have outperformed the S&P 500 over the past 10 years by an extraordinary
219%, according to an assessment by the Design Management Institute few years earlier. Investing
in design thinking, a discipline that draws upon logic and systematic reasoning, to create what is
technologically feasible can help businesses convert an idea into customer value and potential
market opportunity.
Having talked so much about what we can do to propel innovation, there should also be enough
focus on those factors that can bring all these efforts to a grinding halt, preventing companies from
growth.
Stay away from menace
Now, this is for all those who think innovation is an ongoing process. It's not, and time we should
accept. Art is associated with the science of innovation, and therefore its outcome cannot be tied
down by processes. It is akin to asking an artist how many paintings he will come up with in a
year. Setting expectations is well-suited only for laid out processes. So, we need to stop calling
innovation a process. The other factor that can pull the plug on your innovation is a lack of
collaboration. A recent survey conducted by co-working magazine, Deskmag, found that people
who work in a team are more creative, productive and confident. A total of 71% of those
questioned said they were more creative; 62% reported that their standard of work improved
significantly and 90% said they felt more confident when co-working. We have seen employees
working in silos for ages now. But, it is for the human resource teams to motivate each and every
employee to partake innovation.
A business can make headway into its market by having the cognizance that it requires imagination
and creativity along with a deep understanding of its customer needs. The key to building such an
organization begins with its ability to create an ecosystem for innovation to prosper. And, how do
you do that? Facilitate fertile platforms for individuals across the organization to come together
and learn from each other’s diverse experience thus aiding the evolution of novel and incremental
ideas.
PATENT
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A patent application will be about the ideas behind your product such as how it works, what it
does and why. A granted patent gives its owner the right to prevent anyone else producing,
importing or selling, within the geographical jurisdiction.
Making a patent application gives you a date for priority over other people for your application,
ideas or product. It also lets you claim you have a ‘Patent Pending’ which can be useful for many
commercial reasons.
A granted patent provides a monopoly over the idea and so prevents all competitors from creating
imitation or similar products that use the idea.
Although patents are very important they are not applicable to every project. Sometimes it is not
possible to obtain a patent on your idea and sometimes there are other more relevant forms of
protection from which you could benefit
INTELLECTUAL PROPERTY (IP)
Intellectual Property (IP) refers to the protection of creations of the mind, which have both a moral
and a commercial value.
IP law typically grants the author of an intellectual creation exclusive rights for exploiting and
benefiting from their creation. However, these rights, also called monopoly right of exploitation,
are limited in scope, duration and geographical extent.
IP protection is intended to stimulate the creativity of the human mind for the benefit of all by
ensuring that the advantages derived from exploiting a creation benefit the creator. This will
encourage creative activity and allow investors in research and development a fair return on their
investment.
IP confers on individuals, enterprises or other entities the right to exclude others from the use of
their creations. Consequently, intellectual property rights (IPRs) may have a direct and
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substantial impact on industry and trade as the owner of an IPR may - through the enforcement of
such a right - prevent the manufacture, use or sale of a product which incorporates the IPR.
For this reason control over the intangible asset (IPR) connotes control of the product and markets.
IP protection encourages the publication, distribution and disclosure of the creation to the public,
rather than keeping it secret while at the same time encouraging commercial enterprises to select
creative works for exploitation.
Intellectual property legal titles relates to the acquisition and use of a range of rights covering
different type of creations. These may be industrial or literary and artistic.
SUCCESSFULL INNOVATION CASE STUDIES
CASE STUDY: 1
FROM BANKRUPTCY TO INDUSTRY LEADING SUCCESS – THE LEGO STORY
LEGO has earned the right to celebrate. Not only are kids playing with more mini LEGO people
than there are human beings on the planet (Delingpole J, 2009) but in 2015, they were nominated
by Forbes as the most powerful brand in the world. For a company which was on the brink of
bankruptcy in 2004, the toy maker has made an amazing turnaround. They restructured, hired a
new CEO, and forged more licensing partnerships than ever before. Most importantly, they
discovered the secret to some of the world’s most successful, low risk innovation strategies.
These strategies helped LEGO create a powerful brand envied by every other company in the
world. However, successes like these are not, and need not be, restricted to global companies
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with billions in revenue. The point of low risk innovation tools is that one can use them to test
ideas in any setting and with any budget. Whether you are a cash strapped startup or a Forbes 500
firm, sustainable innovation can be your ticket to success.
Out of LEGO’s lessons and that of hundreds of other companies, I have distilled the most
successful techniques to innovate cheaply and effectively. They are all contained in the book
Innovation Tools and, as an additional bonus, the readers of the Innovation Management
community can get it for free this week. Among others, my book answers questions regarding how
strategies used by companies like LEGO are able to turn companies around from looming
bankruptcy to industry leading success.
When LEGO restructured and returned to their core business to climb out of a $300 million loss
in 2004, they realized innovation as usual was not an option. The first step on the toy maker’s
journey was to embrace their loyal and creative fan base. They hired so-called “adults fans of
LEGO” for their design team and began to crowdsource new toy kits.
A typical engineering mistake is wanting to invent all the things the product might consist of in
one go…
As the crowdsourcing venture proved successful, the block manufacturer turned this into a full
blown open innovation policy by opening up the LEGO Ideas portal. Through user input, this
online platform generates hundreds of new product suggestions each year and uses some subtle
and powerful open innovation techniques, employing everything from social media to peer
selection to entice fans into contributing new designs.
Within its factories, LEGO has also embraced a philosophy of rapid prototyping, even to the
dismay of its older engineers. David Gram, Head of Marketing at Lego’s Future Lab, stated that
“[W]e only develop the few key features that are really needed. A typical engineering mistake is
wanting to invent all the things the product might consist of in one go … we throw that into the
market and get feedback from consumers” (Durkin P, 2015). This is a technique blossoming all
over the world in Maker Faires, Hackerspaces, and Makerspaces.
As big and successful as LEGO is, they could still benefit from the many other innovative
strategies employed by other industry leaders. For example, there are powerful forces driving both
the creation and dissemination of knowledge to the world. As many technical discoveries are
driven by access to the latest information, this will be a game changer for business. For
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startups or large companies pursuing numerous risky ventures, information is power, and risk
mitigation is the name of the game.
Another powerful shift disrupting traditional industries is the new way software is delivered around
the world. Products are now able to be delivered in smaller parts, requiring less commitment from
a consumer and turning the decision to use a tool into a “no-brainier.” This is even affecting
industries with business models based on completely unrelated ways of delivering their services
such as medicine.
For startups or large companies pursuing numerous risky ventures, information is power, and risk
mitigation is the name of the game.
Another important piece of the innovation puzzle is us; you and I. In the end, it is up to us to make
the innovation decisions, but how do we decide? This question can be answered by one of the most
exciting developments of the 21st century: a symbiosis between two powerful branches of science,
behavioral economics and innovation.
Although these tools are important for a company’s and entrepreneur’s day-to-day work, we also
want to know why all this innovation stuff even matters. What happens when we innovate cheaper?
What benefits are there to simply lowering our innovation risk beyond the obvious?
Understanding the basics of these techniques and integrating them into your innovation strategy is
what differentiates the disruptors from the disrupted. Up until now, it has been difficult to find
them all collected in one place with enough details to be able to successfully use these innovation
tools (Shellshear E 2016).
Competition never sleeps and LEGO is continuously being challenged by new disruptive
innovators attacking their market side-on, such as Minecraft. Although the block manufacturer has
a license to produce Minecraft styled pieces, challenges can come from anywhere. Full throttle up
the innovation curve requires low risk tools to balance the innovation and fiscal imperatives.
LEGO has discovered this, but have you?
The point is that we need to keep innovating without risking financial ruin. This is a difficult
balance that my book seeks to discover. It details some of the best techniques available to not just
turn an almost bankrupt company around, but also to supercharge any business or entrepreneur
wanting to develop the next unicorn opportunity.
CASE STUDY: 2
AMAZON: A MASTER OF REINVENTION
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"Amazon is the single best example of a serial business model innovator," according to
Julian Birkinshaw
Amazon is the single best example of a serial business model innovator,” says Julian Birkinshaw,
Professor of Strategy and Entrepreneurship at London Business School and Academic Director of
the Deloitte Institute of Innovation and Entrepreneurship. “It’s a company that has relentlessly
built new businesses alongside its existing ones. Some of these new businesses have been
complementary; some have cannibalised the existing ones. Protecting existing earnings is not a
priority.” What can we learn from this master of reinvention?
Customer first
Amazon’s continual self-reinvention flows naturally from Jeff Bezos’ famously customerfocused approach. “We’ve had three big ideas that we’ve stuck with for 18 years, and they’re the
reason we’re successful,” he has said. “Put the customer first. Invent. And be patient.”
There’s a difference between being patient and holding back. “If you’re competitor-focused, you
have to wait until there is a competitor doing something. Being customer-focused allows you to
be more pioneering. We innovate by starting with the customer and working backwards.”
Be a cannibal
When disruption hits, in any industry, the incumbent can struggle to address the threat, aka the
opportunity, because they’re so stuck in what they are used to doing. One of the ways of
overcoming this is to “eat your own lunch,” Silicon Valley-speak for building a business that
cannibalises your existing offerings. So, in 2007, Amazon launched the Kindle, an electronic
book reader which, if successful, would directly affect its existing business of selling traditional
books. The sceptics (“Nobody is going to sit down and read a novel on a twitchy little screen.
Ever” – fiction writer Annie Proulx) were proved wrong within weeks.
People won't understand. Do it anyway
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Late-adopters still opined that Bezos was trying to kill people’s love of reading. Which leads us to
another of his maxims: “You have to be willing to be misunderstood if you’re going to innovate.”
Amazon continues to self-reinvent at dizzying speed. BusinessWeek called Amazon Web Services
“so far from Amazon’s retail core that you may well wonder if [Bezos] has finally slipped off the
deep end”. Did Bezos care?
Amazon’s innovations include Amazon Affiliates and Amazon Prime – a massively different
delivery model, creating a club of people who pay a fixed price per month rather than for individual
items. In the last few years Amazon has shifted from being a vehicle for the movies we watch into
producing its own content, snapping up the Top Gear team and hiring the likes of Woody Allen
and Ridley Scott to work on new movies with Amazon Studios.
If in doubt, invent
Now there’s Amazon Fresh, just launched in the UK, which expands the shopping on offer to fresh
food groceries – and Amazon Restaurants, promising takeaway food delivery within an hour in
London.
The pace of innovation at Amazon is made possible by Bezos’ belief that most problems can be
solved through invention, through bringing smart people together to find a better way. The oldfashioned view of strategy – that you figure out what your core competencies are and build
everything around those – is turned on its head. Here, you’ve got the exact opposite: “We can
always learn to do new stuff – if there’s a customer need we can buy and find the skills to do it.”
Take leaps of faith
Inevitably there are some failures along the way. “What really distinguishes Bezos is his harrowing
leaps of faith,” said Alan Deutschman in a Fast Company article. Some of these leaps end up the
corporate equivalent of a sprained ankle. Take the Fire Phone – Amazon’s push into smartphones
– which launched with considerable fanfare in 2014. It was quietly withdrawn a year later. And
the company has continued to face questions about its overall strategy. With such a diverse
portfolio of businesses, how can the company continue to succeed on all fronts? Is Amazon’s
unusual model truly sustainable?
It's always day one
Time will tell, but a man who persuaded his parents to put a large chunk of their life savings into
a business that he told them was 70% likely to fail should never be underestimated. Bezos raised
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US$1 million from friends and family to launch Amazon in July 1995 from a garage with five
employees.
His organisation has maintained a flat hierarchy, where every employee is allowed, in fact
expected, to show initiative. Another of Bezos’ mottos is, “It’s always day one” – in other words,
even though the company is now vast, it still aims to function like a start-up.
Bezos has generally ploughed profits straight back into growing the company, but in July
Amazon revealed a record-setting quarterly profit for the third straight quarter: it earned US$857
million, or $1.78 a share, in the second quarter on $30.4 billion in revenue, surpassing analyst
estimates of earnings per share of $1.11 on $29.5 billion in revenue. As one commentator
recently put it, “Bezos’ vision has no end, because the Amazon model is limitless.”
CASE STUDY:3
Is the right innovation at the right time down to luck?
Lessons from YouTube – an innovator that harnessed the winds of change.
YouTube provides the modern-day substitute for the philosophical question, "If a tree falls in a
forest and no one is around to hear it, does it make a sound?" Now it’s, “If it’s not on YouTube,
did it really happen?”
YouTube serves more than one billion users today – the same number of videos that people view
on a mobile device every single day. Over a decade the channel has transformed the way video is
shared online, and it has done so at speed.
In February 2005 the video-sharing company was founded by three former PayPal employees
Chad Hurley, Steve Chen and Jawad Karim – part of the so-called ‘PayPal Mafia’ that also
includes VC Peter Theil, LinkedIn founder Reid Hoffman, and Elon Musk. In November 2006 it
was bought by Google for US$1.65 billion. It took the trio just 16 months to start streaming
more that 30 million videos a day. This, says Julian Birkinshaw, Professor of Strategy and
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Entrepreneurship at London Business School and Academic Director of the Deloitte Institute of
Innovation and Entrepreneurship, is what’s known as “harnessing the winds of change” – with an
emphasis on the plural.
“Innovators have to have smart insights about how user needs. But they also have to get the timing
right. The most successful are astute to how the world is changing, they spot the opportunity, and
they ride the waves of change.”
Three waves of change: the “adjacent possible”
In 2005 people were uploading the occasional photo, but sharing even short video clips online was
prohibitively slow. YouTube brought video into the mainstream with what Stephen Johnson, the
author of Where Good Ideas Come From, calls the “adjacent possible”, says Professor Birkinshaw.
He argues that technology moves forward and makes innovation possible in areas adjacent to
what’s already known and what already exists.
“So while Da Vinci had all these cool ideas about flying machines,” Professor Birkinshaw says,
“they didn’t take off because he was ahead of his time.”
Johnson writes that “the adjacent possible is much more about limits than it is about openings”. In
the YouTube story, this couldn’t be truer. If the founders had tried to launch their idea in 2002
they would have failed because three important waves of change were only just starting to take
shape.
1. Download speeds had to be fast. Who wants to wait an hour to download a two-minute video
clip about elephants and their trunks (YouTube’s first ever video)? It would have taken this long
with a 14.4 bps modem in the age of the dial-up connection. The trio’s vision, “broadcast yourself”,
would have required a serious dose of patience.
2. The software had to exist. By launching when they did, the founders were able to serve up videos
using Adobe’s Flash. It helped them focus their efforts on the ease of sharing and discussing clips
– rather than on spending a fortune developing a new platform. Timing here is everything: Flash
didn’t support video until 2002. Before 1996, it didn’t even exist.
3. People had to be ready to share their lives. The year before YouTube was launched, Facebook,
then called ‘thefacebook.com’, had proved an immediate hit. A flurry of social sharing sites from
LinkedIn through Myspace to the UK’s Friends Reunited meant the world was ready to use the
internet as a place not only to discover new information, but to share it.
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YouTube was a good idea made possible by technology that was ready by only a whisker to help
it launch. Any earlier and it would have been before its time – like Yahoo’s failed video provider
broadcast.com, bought for US$5.7 billion in 1999. Any later and someone else would have done
it first.
So what can we learn from innovators who harness the winds of change?
Lesson one: pivot your idea until it gets traction
The venture didn’t set out to make YouTube stars like Stampy Cat. At first YouTube only shared
videos for online auctions. It only became clear once the site was live that people wanted to post
any videos – quirky, sharable, moving – for people to comment on.
Professor Birkinshaw says: “With any innovation there is an element of adaptation. Until a
product, service or platform is launched we don’t know how people will use it. Innovators have to
be prepared to pivot their ideas to suit their market.”
Lesson two: solve one problem, stay true to the values
The YouTube founders were clear on their values from the beginning: uploading should be simple
and advertising should be kept to a minimum. They even managed to preserve these principles
when they entered the Google empire in 2006.
Professor Birkinshaw says: “Its core purpose helped enormously. A good innovation is one that
solves one problem really well rather than being all things to all people. The internal dilemma is
to have on the one hand a clear belief, and on the other a willingness to pivot if it’s not working.
This made YouTube the perfect acquisition for Google.”
Lesson three: move from value creation to value capture
“At some point, innovators have to move from value creation to value capture,” he says. YouTube
provides an endless supply of weird, wacky and inspiring content every day. The social value it
creates is undeniable.
Professor Birkinshaw says: “Early on, YouTube was essentially storing the world’s videos. It has
been a painful transition to make the move to an advertising business model because they didn’t
originally want that. But they have done it in a way that means their videos remain free to share
and free to watch.”
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