INNOVATION DEVELOPMENT IN SCG (THE FIRST STAGE)
Pimjai Wangkiat
The Siam Cement Public Company Limited
1 Siam Cement Rd. Bangsue, Bangkok 10800, THAILAND
Tel. +66 2586 3306 pimjaiw@scg.co.th
ABSTRACT
In 2004, 7 years after the 1997 economic crisis, SCG, one of the largest industrial conglomerates in Thailand, reached its historical peak
in revenue and earnings since established. Utilizing the same successful strategies as the past would prove difficult for the company to
maintain its level of earnings momentum. SCG’s senior management team was aware of this challenge, and in response, has formulated a
new growth strategy called “Innovation”.
Working teams were set up in the first stage to explore how to start turning the highly disciplined and conservative SCG to be an
innovative organization. The proposed working structure was approved and moved forward under the supervision of the Innovation
Committee. The 6 working teams – People System, Award and Recognition, Communication, IP, and Knowledge Management – have
been working independently but closely aligned to modernize the system and structure that support the development of Innovation
culture; whereas investment in technology development or R&D would enhance SCG’s competitive edge to deliver high value-added
products and services for its customers.
This paper will show in details of the overall picture on how SCG initiated its process to reach the goal – an innovative workplace of
choice.
Keywords: Innovation, Innovation Culture
INTRODUCTION
After economic crisis in 1997, SCG decided to focus its resources within its core businesses – Cement, Paper, Chemicals, Distribution,
and Building Materials, while divesting other businesses to their right parent companies. Some small investment shares, however, have
been retained in some companies. With the focused business model and determination from the management team and all employees,
SCG reached its historical peak in revenue and earnings in 2004 since established.
However, utilizing the past successful strategies would prove difficult for the company to maintain its level of earnings momentum. The
limitation on domestic growth, the shift of competition toward regional and global platform, the drastic increase in energy costs, and the
commodity nature of its major products were among the factors threatening SCG’s competitive edge. It was critical for the management
team to rethink about SCG’s future growth platform. To sustain its value to stakeholders, SCG aimed its strategic agenda to extend its
market leadership in domestic market to the ASEAN region, while moving toward delivering products & services that would provide
increasing value proposition for the customers.
Thus, “Innovation” was identified as a one of the key components of the strategic agenda of SCG. However, success in creating
innovation throughout SCG would depend on its people. The management team, therefore, stepped up to the challenge of building the
culture, leadership, organization and people required to turn SCG into an innovative workplace.
PHASE I: SET INITIAL MOMENTUM OF INNOVATION MOVEMENT (2004 – Q1/2005)
To set the course of direction, SCG’s definition of Innovation and Innovation culture was identified by the management.
SCG’s Innovation definition
SCG’s Innovation refers to the creation of new products, services, working processes, or business models, which could be either
breakthrough (never been created in the world) or incremental (never been created in SCG) development that creates value to its
customers. SCG would leverage its knowledge, creativity, technology, management, and innovation culture development to deliver
effective change that would enhance SCG’s competitive edge.
SCG’s Innovation culture definition
SCG’s Innovation culture is a culture that creates change supporting environment for employees in all levels. It includes thinking-out-of
the box, open-minded, assertiveness, taking risk from trying new things, self development, and continuous eagerness to learn. Reward
and recognition for employees for their innovation development are also included.
Initial exploration and setup in early stage (2004)
In the early stage, working teams were set up to explore how to start the new strategy. The challenge for the teams was to formulate an
Innovation strategy to turn the highly disciplined and conservative SCG to be an innovative organization. The proposed working
structure was approved. The teams moved forward under the supervision of the SCG Innovation Committee.
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SCG Innovation Committee
Culture
Change
Recognition
People
System
Patent
Business
Link
Figure 1: Working structure of Innovation team – the early stage
• Culture Change:
- Diagnose current culture of SCG and all business units (BUs) to determine the gaps between the “as-is” and the right
environment that would support innovation
- Develop behavioral change program, starting from top executives and cascading down the organization
• Recognition:
- Study on how to create big recognition program for those employees who innovate and succeed, take good calculated
risk yet miss, and support the innovation atmosphere
- Encourage “Show and Share” Forums to encourage the culture of information exchange and knowledge sharing
• Business Link:
- Incorporate technology and innovation in the business medium term plan starting from the year 2004
- Set special budget for innovation expenses and investment
- Set target on innovation metrics e.g. number of patents filed and approved, portion of value from new products or
process to net income, etc.
• People System:
- Develop a new recruitment system to include innovation competency, desired capabilities, and diversity as additional
criteria
- Improve performance management system to include innovation criteria for performance evaluation and compensation
e.g. year-end performance rating, variable pay determination, special salary adjustment
• Patent:
- Establish a system and structure for intellectual property (IP)/patent protection including filing, searching, coordinating,
etc.
Before moving forward, SCG Innovation Committee requested the Culture Change team to diagnose SCG current culture. At the same
time, the Recognition team started to promote and kick-off this initiative in August 2004. Every major site of SCG simultaneously
launched the event to create awareness that SCG would move forward by having Innovation as a key strategy.
The culture survey by a third party, Accenture, was conducted in the 4th quarter of 2004. The project was designed to help SCG and
each individual business unit to assess the current culture and the readiness to be an innovative organization. Key cultural blocks and
drivers were identified; recommendations on how to support the change were made.
Deliverables from the culture diagnosis project
The project completed in February 2005. All employees from top executives to operators participated in the survey. The results from the
mass questionnaires, focused-group interview, and top executive interviews showed that, within the 10 areas of innovation capabilities,
Innovation Agenda and Learning Environment were SCG’s key-strength areas while Opportunity Development, Large Scale
Implementation, and Aligned Organization were the key-improvement areas.
Idea Generation
74% / 81%
Rewards
& Recognition
100%
80%
60%
82% / 88%
Innovative
Culture
40%
20%
78% / 85%
0%
Innovation
Agenda
73% / 77%
Opportunity
Development
70% / 80%
Large Scale
Implementation
64% / 78%
80% / 81%
Aligned
Organization
66% / 80%
Resource Allocation
Learning
Environment
Knowledge
Management
87% / 86%
SCG
International Co.
74% / 81%
Figure 2: Innovation Capabilities benchmarking with international companies
Beside these 10 areas of innovation capabilities, key behaviors which were the drivers and blocks were also identified through
management interviews, employee focus groups, and open-ended questionnaires.
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Drivers
Blocks
Teamwork
Lack of Openness
Risk-Averse
Disciplined
Top-Down
Systematic
Conservative
Seniority
Brotherhood
Comfort Zone
4 Core Values
Hierarchical
Figure 3: ‘Drivers & Blocks’ behaviors
In the last part of the project, Accenture ran workshops to develop the recommendations and implementation plans for each business unit.
The plans were framed in 5 areas i.e. Leadership, Management, Enablement, Ownership, and Project management.
Leadership
• Define and communicate widely a clear policy on innovation with targets and actions
• Establish ground rules for all business meetings to promote innovation and effectiveness
• Define and apply measurable innovation-related behavioral criteria for current and future leaders
• Change the performance appraisal system to include innovation-related measures evaluated via two-way feedback
• Change the reward system to reflect the achievement of measurable innovation targets
Management
• Establish organizational business performance measures, such as balanced scorecard, company KPIs and targets
• Encourage problem-solving by “work-out teams” as opposed to leaving problems to be solved by the ‘boss’
• Improve two-way communication on innovation using direct unfiltered channels, and promote the sharing of ideas and successes
in a fun environment
Enablement
• Design and implement a continuous innovation process for idea generation, screening and implementation
• Allocate financial and time-based resources for innovation-related activities as a part of daily business
• Develop innovation-related training courses and foster a supportive learning environment including on-the-job techniques (e.g.
Action Learning events)
• Establish a knowledge management system to capture and promote knowledge-sharing and to protect and cultivate IP
Ownership
• Ensure cross-functional structure of all teams to prevent inward circular thinking
• Promote and measure progress towards greater gender, transnational, and cultural diversity in the workforce
• Create and develop innovation-related alliances with leading-edge institutions and companies including competitors
Project Management
• Use more informal teams (e.g. temporary specialist task forces) to assist SCG and BUs in solving day-to-day challenges
• Use a central lean red-tape-free innovation project management function to co-ordinate, catalyze, and communicate innovation
without stifling creativity
Working Structure of Innovation Teams (2005)
According to the above recommendations, SCG Innovation Committee agreed to redefine its roles and working teams to support the new
move in 2005 as follows.
SCG Innovation Committee
KM
Award &
Recognition
People System
Communication
Figure 4: Working structure of Innovation teams – FY2005
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Intellectual
Property
-
-
SCG Innovation Committee - guiding and aligning overall SCG initiatives
Provide direction and major guidelines for the working teams
Supervise working teams on key action plans and progress
Show and share innovation progress, best practices, and lessons learned among business units
Identify business key performance index (KPI) in business plans (medium term plan and annual plan), i.e. percentage of
revenue from high-value-added products and services on total sales, and percentage of R&D spending on total sales
BU Innovation Committee - leading change in each BU
Build atmosphere to create new culture by way of stimulating creativity and innovation activities
Set up innovation process to help create, capture, and implement new ideas
5 Working teams - supporting common innovation initiatives and help synchronize cross-BU activities
•
KM
- Develop SCG knowledge management guideline
- Encourage employees to share information and exchange knowledge
- Develop infrastructures that enhance the effectiveness and efficiency of SCG knowledge management
• Award & Recognition
- Encourage all SCG employees to realize the importance of innovation
- Create an environment that would support and encourage employees to come up with innovative ideas for their works and
the organization.
- Organize the innovation project contest called Power of Innovation Award
• People System
- Develop human resource management systems that would be in line with SCG growth strategy. The 4 sub-teams were
Recruitment, Career Management, Learning and Development, and Performance Management
• Communication
- Communicate all related information and activities regarding innovation to all SCG employees
- Promote two-ways communication in the organization
• IP
- Educate SCG employees on intellectual property and its importance
- Manage all aspects of SCG intellectual property
PHASE II: INITIATE THE JOURNEY OF INNOVATION CULTURE DEVELOPMENT (Q2/2005 –
Q1/2006)
Defining Innovation Culture
The blocks and drivers from the diagnosis made it clear for SCG that in order to be an innovative organization, SCG needed to alter its
existing culture. The sub-team: Learning and Development was assigned to design the definitive SCG’s innovation culture which finally
came out to be: Innovative People and Innovative Leader.
Innovative People (Inno-People) -- all SCG employees are expected to exhibit the following mindsets & behaviors:
Open Minded:

Listen attentively and try to understand different opinions

Accept better ideas without being afraid of losing face

Do not discourage others who fail
Thinking out of the box:

Think differently and practically - - Try different angle of thinking

Develop or improve existing things creatively

Bring creativity into practice by developing or implementing new things
Assertive:

Express straight forward opinion with self-confident, but not to infringe upon others’ opinions

Criticize ideas (not person)

Propose new ways of working (in your responsibility and other related works) and dare to make a decision
Risk Taking:

Always look for new opportunities

Analyze opportunities, evaluate risks, and dare to initiate and take risk in doing new things that create value

Dare to fail and learn from the mistakes in order to find a way to prevent repeating the same mistakes
Eager to Learn:

Always explore new knowledge to improve yourself and teams

Apply that knowledge to create new things

Share knowledge and thoughts for work improvement or new products development
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Innovative Leader (Inno-Leader) – SCG’s Leaders at all levels are expected to be the Inno-People with additional capabilities as follows:
Lead Change through Vision & Values:

Be a leader in change by employing the change management concept

Clearly define vision and direction of change

Effectively communicate the vision and direction to all employees for clear understanding toward the same goal

Directly guide all employees to foster change and encourage 2-way communication
Facilitate & Support Change:

Create the environment and support initiatives that allow employees to think-out-of the box, dare to make a decision, implement
new ideas, and learn from mistakes

Nurture new ideas toward implementation

Give chances for everyone to speak up, give opinion, and try new things
Execute Change by being the role model:

Be a role model in change

Always be ready to support change

Be patient for the change progress to be unfolded
Innovation Committee endorsed the Innovative-People and Innovative-Leader (called in short: Inno-People and Inno-Leader) as SCG’s
innovation culture. However, due to the difference in business environment, the committee agreed that the implementation would be
conducted by each business unit.
Confirming the Innovation Agenda
Once the innovation culture was clearly defined, each working team revisited and developed supporting systems & structure to reinforce
the new culture. The CEO of SCG, who was also the chairman of the SCG Innovation Committee announced the Innovation Agenda at
SCG’s top management conference on May 27, 2005.
On that day, the CEO explained the rationale why SCG had to make a move from a commodity-based conglomerate to be an innovative
organization. The increasingly intense competition at a global scale as well as the rapid changes in technology, customers, and
competition assumptions are among the key drivers. The definitions of SCG Innovation, Innovation culture, Inno-People, Inno-Leader
were shared to gear common expectation. Key focused areas in the first stage of innovation development during 2005 – 2007 were
announced as follows:
- Redefine business performance measurement so as to reinforce individual performance while attaining business goals. Three
business measurements would be monitored from the year 2006 onward as a part of action plan targets, i.e.
o Percentage of revenue from high value added products and new services
o Percentage of R&D expenses on sales
o Number of implemented innovation projects
- Develop Inno-People and Inno-Leader in order to create new culture, mindsets, behaviors & competency
- Create ‘Creative & Learning’ atmosphere to stimulate the new culture and learning organization development
- Improve communication channels and encourage 2-way communication to allow free flow of feedback and ideas
- Design and implement innovation process to capture and implement innovative ideas
To cascade this strategic intent, the CEO asked all management to keep communicating the same messages to their teams so as to gain
commitment at all levels. The management received a communication package prepared by the Communication team to help them
deploy this policy, such as a copy of PowerPoint presentation, a colorful and eye-catching booklet containing the reasons for innovation
and the definitions of related innovation terms. The same booklet was also handed to all employees for their reference. Mass
communication through Inno-News – a quarterly internal newspaper about innovation, was launched to keep the awareness momentum
on innovation movement.
Figure 5: Inno Booklet
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Figure 6: Inno News
Signaling innovation commitment through the innovation awards
Another big issue which became a talk of the town afterward was the announcement of The Power of Innovation Award of SCG –
launched & promoted by the Award & Recognition team. A 1 million Baht prize would be granted to the winner (team or individual)
who developed and commercialized new products, services, and/or processes during the past year. Three more prizes of lower value
would be given to the first runner up and 2 outstanding teams. The candidates had to be nominated by the business units.
The award decision would be made by a group of judging committee comprised of SCG CEO, 1 SCG top executive and 3 external
experts on innovation, culture, and intellectual property. The award criteria were a weighted average of scores on innovative idea,
implementation effort, benefit and impact, and IP management.
In a year after, in order to make the award more encouraging to more people, the Innovation Committee decided to grant the award prize
in 3 categories: Best of Innovative Products, Best of Innovative Manufacturing Processes, and Best of Innovative Services or NonManufacturing Processes. The prize was changed to be 1 million baht per each category.
Checking the progress to feed forward
By end of the year 2005, the Innovation Committee observed that the awareness on innovation agenda had been created throughout
organization. All business units were active in finding candidates for the innovation award and several activities were initiated to
encourage the ‘thinking out of the box’. However, the idea management process or innovation process was not well in place to push ideas
through implementation. Some changes in working environment were visible but not yet in behaviors. It would have taken more effort to
realign people from a highly disciplined environment where people would seek specific direction, rather than starting their own
initiatives.
All management who were expected to be the Inno-Leader talked in support of innovation activities, yet the time and resources to
commit such ‘walk-the-talk’ were not widely felt. The Committee decided to measure the organization culture in the early of 2006 to
check the status and find out key areas to focus on. The survey results would also be set as a baseline for future benchmarking.
An innovation culture survey was hence conducted with all SCG employees in early 2006. The result showed that SCG had done well in
communication & priority setting by top management, developing new products and services, and creating an environment where people
were not afraid to fail. However, SCG still needed to improve in some key areas i.e. open-minded, empowerment, and quickly
implementing new ideas. All BU innovation teams and other support teams went back to revise their plan to address the issues from the
survey results
PHASE III: BUILD CAPABILITY FOR HIGHER VALUE-ADDED INNOVATION (Q2/2006 –
PRESENT)
Further development in systems & structure to enable innovation in SCG was addressed in 2 dimensions: the hard side of innovation on
technology management and the soft side on people systems and development.
Establish technology management infrastructure
The IP team was then transformed to be the IP Center that would take responsibility in building the infrastructure for intellectual property
management in SCG. Since IP was a new issue to the organization, the efforts of the center were mainly in creating awareness on the
importance of IP for the business and educating SCG management and R&D staff on IP management. The activities during the first 2
years of the IP Center were such as -•
Building awareness and correct understanding on IP to all SCG employees by means of
– Technology & IP magazine for R&D
– e-magazine for top management
– IP kit for new employees
•
Establishing system and infrastructure to support IP management
•
Launching IP Policy as a guideline for all employees
•
Recruiting and developing IP specialists
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As R&D was the key foundation of innovation, each business unit simultaneously appointed its BU technology manager to be in charge
of its respective internal technology development. At SCG level, the “Technology Management Committee” was appointed to be
responsible for setting up the direction and sharing practices among business units on technology and R&D management. Chaired by
SCG’s Vice President, the Committee comprised of BU technology managers and Director of IP center. The major roles of these
technology managers were, for example:
•
Reorganizing BU’s R&D structure
•
Establishing BU’s R&D center and facilities
•
Recruiting R&D staff
•
Embedding IP management practices in daily work of R&D staff
•
Developing BU Technology Roadmap as aligned with BU medium term plan.
•
Deploying the Technology Roadmap to be BU’s R&D plans
•
Establishing alliances with external R&D institutions for technology development
To create a critical mass of R&D staff in SCG, a policy was made to recruit both Ph.D. and new product development staff to join the
team. The guidelines to monitor the R&D spending were agreed upon so as to be able to benchmark with international firms. The job of
IP specialist was created to handle the registration process of patents and trademarks both in Thailand and overseas. Legal and IP staff
were also assigned to deal with IP protection cases. R&D, new product development, and IP-related staff worked hands in hands to
foster the technology development for SCG.
Establish people systems and development
The 4 sub-teams of People System took another major role in shaping innovation culture.
•
Recruitment: defined SCG norm that included Inno-People characteristics as screening criteria for new candidates
•
Career Management: established R&D and Technologist career track such that the job level and payment system would be
separated from general managerial track.
•
Performance Management: redesigned performance measurement to include innovation culture as one of the criteria for
behavioral measurement
•
Learning & Development: introduced new approaches to embed innovation culture into working life
As a part of people learning, the Learning & Development team launched training programs on creativity. They also paved way for SCG
to gradually transform the traditional training programs to new way of action learning experience. The development programs were
mapped to the 3 groups of employees.
Role Model
Executives
Inno
Leader
Inno
People
• Executive Coaching
&
Sponsor
• Coaching for Innovative culture
Coaching
&
• Thunderbolt Thinking Building
an Innovative Workplace
Leading
Change
• Thunderbolt Thinking
Innovation Fundamental
Creative
Thinking
Figure 7: Learning Course Model by levels
Each level of learning courses had different purposes. All Inno-People were required to learn new thinking methodology and how to
bring new ideas to implementation. To be coaches and role models via leading change, Inno-Leader would be equipped with coaching
techniques in order to help them achieve both performance and behaviors. Also provided was the programs on how to build an
innovative workplace. For top executives who had to be the sponsors and major role models, innovation management and practices
together with the executive coaching programs were arranged.
Additionally, a group of change agents, or, so called, innovation facilitators (Inno FA) was developed to facilitate several learning
courses and projects as well as to design activities to stimulate innovative environment in each business unit. The first group of 23
innovation facilitators was hand-picked from all BU high potential staff. By the end of 2007, the group expanded to be a total of 116
facilitators. These innovation facilitators became a major catalyst in building innovation culture in each BU.
CONCLUSION
The efforts paid off as corporate-wide awareness on SCG’s innovation agenda was achieved. Changes in daily work environment are
somewhat visible – specific time has been set aside for people to share ideas; offices were redecorated and special corners were provided
for people to get together and socialize; several leaders encourage their team to speak up while these leaders have been more patient to
listen to their team; roadmaps for high value-added product development are more concrete; investment in R&D has been increased; the
IP Center extended its scope to be the Corporate Technology Office to explore new technology opportunities; several R&D projects are
now in collaboration with leading academic institutes and government agencies; cross-functional projects have been initiated across
companies and business units.
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Patent filing in 2007 was almost tripled the 2006 applications. R&D spending in 2008 would be 50% higher than that in 2007. Revenue
from high value added products and services is expected to rise from a little over 10% of total revenue in 2005 to be around 15% in 2008.
The projection shows a quadruple increase in R&D spending and a triple growth in revenue amount from high value added products and
services in the next 5 years.
All such progress exhibits SCG’s strong commitment to deliver increasing value proposition for its customers through innovation. Yet,
SCG cannot claim the success as an innovative organization until its customers and stakeholders say so. The success and failure of past
initiatives provide SCG’s management and working teams with valuable lesson learned. For a large and diverse conglomerate like SCG,
a lot more of concerted efforts and energy are needed to realign several aspects of organization with SCG’s desired innovation culture.
SCG’s journey was just started.
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