GB
Special Feature : InnovationSpecial
& KM
SMEs
Feature by
: Innovation
& KM by SMEs
Managing innovation capability in SMEs
The Fraunhofer three-stage approach
Hans-Jörg Bullinger, Marc Bannert and Sabine Brunswicker
SMEs need to innovate in order to survive and create competitive advantages. Competitive success is dependent upon an organization’s management of its innovation
competencies. This article presents the three-stage Fraunhofer approach to assess,
enhance and manage the company’s innovation capability in a targeted and sustainable manner. It is based on an intensive review of existing literature and empirical
research and builds upon good practices in innovation management in SMEs. This
approach enables an SME to continuously control and improve innovation capability, independent of external experts.
Prof. Hans-Jörg Bullinger
President
Fraunhofer Gessellschaft
Hansastrasse 27C
80686 München, Germany
Tel: (+49-89) 1205 1000
Fax: (+49-89) 1205 7500
Marc Bannert
MT Innovative Technologies
Tel: (+49-711) 970 2245
Fax: (+49-711) 970 2287
E-mail:
marc.bannert@iao.fraunhofer.de
Sabine Brunswicker
Research Associate
Competence Center Innovation
Management
Tel: (+49-711) 970 2035
Fax: (+49-711) 970 2299
E-mail:
sabine.brunswicker@iao.fraunhofer.de
Fraunhofer Institute for Industrial
Engineering (IAO)
Nobelstrasse 12 C, D-70569
Stuttgart, Germany
Introduction
T
he need for small- and mediumsized enterprises (SMEs) to innovate originates from various
factors. First, globalization exposes
SMEs to new competitors from distant
parts of the world, resulting in an acceleration of the already rapid increase
in competition. Secondly, niche markets
that were traditionally served by SMEs
are more intensively targeted by large
enterprises as there is a tendency to
make production processes more flexible in order to adapt them quickly to
new market niches. A third factor is the
rapid technological progress that has
changed the nature of competition and
makes existing products obsolete. Finally, more demanding customers are
now looking for products and services
of high quality, enhanced performance
and enhanced user experience - a
fourth factor that comes into play.1, 2
In order to sustain this increased
competitive pressure, SMEs are forced
to rethink their existing competitive
strategies. Indeed, innovation is considered as being the most valuable
sources of growth and competitiveness.
Traditional management practices,
such as quality management or cost
reduction measures, are not sufficient
to sustain competitive performance.3 A
company’s capability to continuously
generate innovation is now the key prerequisite to position itself successfully
in the market and to gain a unique and
superior competitive posture.2
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Special Feature : Innovation & KM by SMEs
Figure 1: Classification of different assessment approaches
Execution of analysis
Enablers
Process audit
Process control
Performance audit
Performance control
The notions that innovation is related to R&D only, that it usually happens by accident and that it is “unmanageable” is widespread among SMEs.
However, studies have shown that innovation is not only based on excellence in R&D but also dependent on
an enabling environment in a firm’s
entire innovation system.3 It is the result of a goal-oriented and systematic
allocation of resources and outcome
of well-planned tasks, activities and
processes. Only those companies that
systematically manage the innovation
process and that establish the organizational and structural setting required
for generating a continuous flow of innovation will achieve sustainable performance.2, 4 The need for a holistic and
systematic view on innovation management, addressing all dimensions of
a corporate-wide innovation system, is
not yet well understood among SMEs.
Tools and techniques such as the
Innovation Audit and the Innovation
Card give SMEs the opportunity to analyze and evaluate their innovation
capabilities and in turn to develop and
implement measures to improve their
capability to manage innovation.
This article is structured in the following way: First, we outline existing
practices and models to evaluate a
company’s innovation capability. Next,
we present the Fraunhofer innovation
management model, which provides a
conceptual backbone to evaluate a com-
18
Continuous
Results/Output
Focus of analysis
Real-time
pany’s innovation management performance. For each area selected we
present the critical success factors.
Thereafter, we introduce the threestage Fraunhofer approach to improving the innovation capability of SMEs;
and then describe each phase in detail. We conclude with summarizing the
benefits of the three-stage Fraunhofer
approach in effectively improving an
SME’s innovation management on a
sustainable basis.
Evaluating innovation
capability - an overview
Innovation capability is defined as the
holistic, corporate-wide potential of a
company to generate new and unique
values.5, 6 It relates to a variety of areas
and is influenced by different factors
inside and outside the organization. It
is a complex construct that is difficult to
be captured and measured.7 However, it is possible to establish a structure
for this complexity and thus to make it
manageable.8 This has been concluded in a range of studies in the area of
value management and company evaluation. These studies did not necessarily focus on innovation only but addressed research questions linked to
value management and innovation.
Related approaches are either very
general - such as the Balance Scorecard - or focus on a very specific issue,
such as a company’s financial value,
its processes of quality management
(such as the EFQM or ISO 9000) or its
innovation capability.
Within the last group a range of
different models have been developed
over the last decades with the aim of
improving a company’s innovation capability.9, 10, 11 Both from a scientific and
practical perspective, the corpus of
existing approaches and measurement techniques is highly fragmented
and often conflicting, with consensus
evident only at an abstract level.12 That
is, they differ with regard to their scope,
their underlying conceptual models,
and the measurement approaches.
Methods and tools available range from
internet-based self-assessment tools,
to scorecard methods applied in a
workshop settings, to comprehensive
audits applied by external experts. The
objectives and foci differ among this
group of different methods and tools.12
Indeed, a range of models and assessment techniques have been principally developed in the context of technology.12, 13, 14 Others focus on the analysis
of processes or investigate performance-oriented output measures.
When investing strengths and
weaknesses of exisiting approaches12
and collecting the requirements for a
successful assessment and management of company activities15, 16, 17, 18, four
key criteria for analysing and improving the innovation capability of a company appear (Figure 1):
A process audit investigates enabling factors and processes of the
corporate system. It investigates the
actual weaknesses within the innovation system and addresses the
individual performance and quality of installed processes and structures for innovation in comparison
to best practices. Process audits are
usually applied on a “live” or realtime basis manner and are conducted by external experts.
A performance audit focuses on
the output of individual innovation
processes and dimension within
the innovation system. It demonstrates the success of, and the value generated from, today’s innovation activities. To measure performance, indicators such as time-toprofit and time-to-market are usually applied and compared with the
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Figure 2: The three-staged Fraunhofer approach to improve innovation capability
What is the status-quo of our
What is themanagement
current status of
innovation
our innovation management?
performance?
What are
are key
the areas
key areas
What
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improvement?
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to
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What
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wewe
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Phase
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Innovation audit
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Phase3:3:InnovationCard
Innovation card
Phase
andImplementation
implementation
and
Phase2:2:Design
Designphase
phase
Phase
Innovation Culture
Know ledge
&
Competency
Innovation
Strategy
Product
&
Services
-
Innovation
Processes
M arket
Structure
&
Netw orks
Technology
IM Success
&
Business
Impact
M ethods & Tools
Detailed analysis
Detailed
analysisofofall
alllevers
levers
innovation management
of innovation
management
Identification of
Identification
of focus
focusareas
areas
for improvement
improvement
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Concept
to design
design measures
measuresfor
forselected
selected
modules/focus
modules/
focusareas
areas
Development of
Development
of detailed
detailedmeasures,
measures,action
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plans and roadmaps
roadmaps
plans
Development of
Development
of aa customized
customizedinnovation
innovation
scorecard (InnovationCard)
(Innovation card)
scorecard
performance of selected competitors or with the average of the whole
industry. Again, a performance audit is usually conducted by external experts.
In process controlling the performance of processes and structures
related to innovation are continuously evaluated, monitored and
controlled. Usually, qualitative indicators are applied to identify deviations between planned and as-is
data; such as, for example, the degree of customer integration and
the efficiency of market analysis.
Consequently, it provides insight
into changes in innovation management performance over time.
Performance controlling is usually applied in conjunction with process controlling. It focuses on quantitative indicators to measure innovation output (and input). It is specifically applicable to compare different units or companies.
The Fraunhofer approach
In response to the various difficulties
and challenges faced, Fraunhofer has
developed a three-stage approach to
improve innovation capability, addressing all four types of evaluation described above (Figure 2).
In the first phase, the innovation
audit is conducted by external auditors.
It takes into account enablers (Process
audit) and results/outputs (Performance
audit) and evaluates them with regard
to strengths and weaknesses. The aim
is to identify the current status of innovation management performance and
to identify priority areas that will provide the base for future measures to
improve innovation capability.
In the second phase, customized
concepts for selected measures are
developed and a road map, with detailed action plans, is laid down. The
scope and the structure of the design
phase is customized to the needs of
the individual company and, depending on the results of the innovation audit, implementation takes place sequentially or in parallel.
In the final phase, the Fraunhofer
innovation card - a customized scorecard for managing innovation - is implemented, enabling the company to
continuously control enablers of the
innovation system (Process control)
and results/output (Performance control). The innovation card builds upon
the results of previous phases and provides the company with a measurement
system comprising customized qualitative and quantitative success factors.
A successful implementation in the or-
Implementation
Implementationofofdesigned
modules
designed modules
Implementation
Implementationofof
Innovation
Card
InnovationCard
Continuous
Continuous measurement
measurement
improvement
of improvement
ganizational structures and processes
enables the company to fully embed
activities aimed at improving innovation capability at strategic and operational levels.
Concept
The conceptual backbone of the threestaged Fraunhofer approach is the Fraunhofer innovation management model,
which is based on nine key areas addressing mainly enabling aspects and
area-specific outputs. In order to successfully link innovation to value growth,
an additional area focuses on business
impact and overall innovation management success. Consequently, the Fraunhofer innovation management model
focuses on both enablers and results/
outputs of the corporate-wide innovation system (Figure 3).
The innovation management model was developed in a two-year research project of the Fraunhofer Society between 2004 and 2006 after a
comprehensive literature review of existing approaches. It also drew upon
primary data collected during a telephone survey based on a structured
questionnaire with 152 SMEs of the
mechanical and electrical engineering
sector. To complement this data, 14 oneday workshops (focus group sessions)
with selected, highly innovative com-
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Figure 3: Fraunhofer innovation management model
Innovation culture
Knowledge
and
competency
Innovation
strategy
Product
and
services
Innovation
processes
Technology
Market
Structure
and
networks
IM success
and
business
impact
Methods and tools
panies of the same industry were conducted to identify additional success
factors and measures and to better
understand the underlying processes
and structures. Critical success factors
and key indicators identified were analyzed with regard to their relevance,
consolidated and sorted into categories. As a result the 10 key areas presented above were identified and formed the
base of a synthesized framework for evaluation and control of innovation management activities. An excerpt of the
results and their implication to the
Fraunhofer Approach is presented in
Table 1.
Each area is briefly described.
Innovation strategy
An innovation strategy is based on a
company’s vision of its overall aim as
an innovative player in its markets. The
innovation strategy has to be derived
from the overall vision in a systematic
way.4 Innovation strategy focuses on
the time sequence of decisions on capabilities and competencies to be built
up, on markets to be exploited or entered, on new products/services to be
developed and on processes and structures to develop them.12 To successfully
implement these decisions, an innovation strategy should comprise clear
innovation targets, “innovation search
areas” to focus innovation activities,
innovation roadmaps and a specific
innovation budget.19, 8 Activities taking
place within the innovation strategy
development process must be consistent with an overarching, organizational strategy that requires management
to take conscious decisions regarding
innovation goals.12 Consequently, innovation strategy has a long-term focus
20
and needs to be clearly linked with the
overall business strategy.20
Technology
For many companies the development
and application of technologies is the
prerequisite for new products and production processes.21 Taking this into
account, technology addresses the
planning, management and controlling
of it. In this context the capability to identify new technologies, to assess their
value and to successfully exploit them
is evaluated.22 Success factors that are
analyzed in the context of this area are,
for example, the understanding of relevant technological developments23 or
the ability to secure access to key technologies.
Competencies and knowledge
Knowledge, competencies and skills
available within a company are fundamental to innovation, as they provide
the base for new ideas and their successful development.24 Therefore, their
goal-oriented development and application are highly important to improve
the innovation capability.25 Processes
and activities that impact innovation
capability are the generation of new
knowledge, the development of existing capabilities, the integration of knowledge (externally and internally), the access to knowledge from unrelated disciplines or industries (“crossing horizons”) and the quality of technical, methodological expertise and soft skills.
Products and services
Products and services are the outcome
of the innovation process in the innovation system. The value generated in
the market represents the success of
the innovation management activities.
Companies that successfully manage
innovation succeed in developing products/services that are superior to those
of competitors. The success of a product depends mostly on the value created for the customer with regard to functionality, quality, price and related factors (user experience, etc.); in short, the
needs met and the problems solved. In
addition, aspects such as continuous
improvement of existing products, the
systematic and goal-oriented lengthening of the product/service life cycle,
and the intelligent combination of products, services and additional factors are
the foci of products and services.8
Innovation processes
For SMEs it is most critical to keep the
time-to-profit (the period between first
idea and break-even) as short as possible. Having an efficient process that
enables the company to manage the
ambiguity of the innovation is universally agreed to be critical to innovation.26 Indeed, networked innovation
processes are the prerequisite for a
successful realization of innovation
projects. An integrated innovation process comprises the following distinctive phases: idea generation and assessment, product, process and service development, and the commercialization of products/services.4, 27, 28, 29, 30
Structure and networks
This part focuses on the company’s
organizational structure, which provides the basis for a successful implementation of an innovation strategy.
The organizational structure of an innovation-oriented company differs from
that of other companies in aspects such
as decision-making processes and formalization. 31 In a dynamic context,
SMEs face the challenge to find the
right balance between control on the
one hand and flexibility and adaptability on the other.12 There are tasks that
need to be clearly managed and controlled. For example, employees require clearly defined areas of activity,
and access to budgets needs to be
planned. However, the structure should
be flexible enough to react to changes
in the environment.2 To an SME inno-
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vation networks and partnerships are
as important as the internal organizational structure.4, 8 For example, a goaloriented cooperation with partners to
leverage off their own innovation capability is extremely important.12, 13, 32
haviour (Sourisseaux, 1994).33 An innovation culture is an important element
of the overall innovation system. It is the
total sum of values, norms, assumptions, beliefs and ways of living built up
by a group of people and transmitted
from one generation to another.34
For example, the innovation culture is represented in the way people
handle failure, the motivation from a
leadership supporting innovation, the
willingness to exchange knowledge
and the targeted promotion of innovators within the company.
Market
Demand and supply meet on the market - the world of customers, competitors and suppliers. In order to be successful, companies need to analyze
customer needs and changes in customer behaviour. Finally, it is the customer that is the most important source
for new ideas. In addition, it is crucial to
take into account the competitors’ actions, identifying, for example, which
ideas are followed by competitors and
which competitors are relevant as networked partners.8
Methods and tools
The focus here is on tools supporting
innovation management that were not
explicitly covered in other areas. They
reach from IT and knowledge management tools to performance measurement and information technology tools,
including assessment tools and benchmarking.4, 35 IT and knowledge management ensure that an SME and its employees have access to knowledge that
Innovation culture
This area addresses aspects such as
communication and cooperation behaviour, leadership and motivational be-
it has already created. Even in small
companies, often the knowledge resides in the heads, computers or drawers, where it cannot be shared in a systematic manner.
Business impact
Innovation has to create value on the
market. Ultimately, for innovation management to be beneficial to the company, it has to lead to increased competitiveness.35 Therefore, this area links
the overall business performance to
innovation activities. It evaluates the
overall output of innovation management activities reflected in indicators
related to its business impact.
The following sections describe
each phase of the three-stage Fraunhofer approach to improve innovation
capability.
Innovation audit
The innovation audit comprises four
distinctive steps, which are usually
completed within 4 to 6 weeks.
Table 1: Areas and key success factors to assess innovation capability
Areas/Key factors
Implication for Fraunhofer approach
Reference Nos.
1. Innovation strategy
• Vision for innovation
• Roadmap in place
• Innovation goals clearly
defined and communicated
•
•
•
•
Existence of a vision clearly linked to innovation
Vision is fully communicated to all employees
Systematic planning of innovation portfolio
Roadmap is aligned with technology and market
developments
• Setting for clear fields of innovation, goals and
funding
• Innovation strategy plan is based on a systematic
process
36
37
38
19
40
8
• Defining technology objectives and fields
• Relating technology to business objectives
• Systematically identifying, monitoring and
evaluating technology trends
• Clear procedure to assess technology potentials
• Using different sources of technology
41
42
21
14
22
43
44
•
•
•
•
•
•
•
45
46
25
47
48
2. Technology
• Definition of technology
strategy
• Continuous technology
forcasting
• Evaluation and sourcing of
technology
3. Competence and knowledge
• Understanding own strengths
and weaknesses
• Capability to enhance the
knowledge base
• Systematic knowledge
management
Building the required core competences
Assessing the competitors’ capabilities
Ability to identify, acquire and utilize knowledge
Aligning knowledge acquisition with strategy
Cross-linking of departments
Integrating external knowledge
Continuous knowledge transfer
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4. Products and services
• Superiority of
products/services
• Continuous improvement of
existing products/services
• Strong customer-orientation
5. Structure and networks
• Superior functionality
• Low costs
• Relatively high quality
• Offering product-service combinations
• Extending the life-cycle of existing products
• Early involvement of customers in the product development
• Successful external
cooperation
• Continuously evaluating the value of partners
• Systematic assessment of partners
• Establishing strategic partnerships
• Budget flexibility
• Ability to quickly assess budget for innovation projects
• Internally networked organization
• Multidisciplinary teams
• Team structure oriented towards innovation fields
• Roles and responsibilities for innovation
13
8
49
8
50
8
12
51
27
2
31
6. Processes
• Systematic idea
management
• Successful product/process
and service development
• Integrated life-cycle
management
• Systematic idea generation
• Exploitation of different sources of ideas
• Systematic development process in place
(stage-gate process with clearly defined
responsibilities)
• Systematic assessment of ideas, concepts and
products at different milestones
12
51
30
8
26
27
7. Market
• Systematic tracking and evaluation of market
trends
• Systematic evaluation of competitors' moves
• Integration of customers into the innovation process
• Strong interaction with suppliers
29
8
• Project management
• Successful application of tools in project
management
• Performance measurement
• Controlling the innovation management process
• Set up KPIs (key performance indicators)
• Benchmarking
• Benchmarking of process performance and innovation management against best practices
• Identifying opportunities for improvement
15
54
55
56
57
58
• Market intelligence and
industry trends
• Strong cooperation with
suppliers and customers
52
53
8. Methods and tools
9. Innovation culture
• Climate for innovation
• Commitment of senior
management
• Efficient communication
• Encouraging intra-and entrepreneurship risk taking,
idea generation, etc.
• Failures are tolerated and seen as lessons learnt
• Senior management visible to drive innovation
• Promoting innovation by senior management
• Open communication
• Efficient cross-linked communication
59
60
61
62
63
64
10. Innovation management success and business impact
• High profit from new
products/services
• Cost reduction through
process innovation
•
•
•
•
High impact of innovation on profit growth
Organic growth resulting from innovation
High revenues from new products/services
High revenue growth due to innovation
2
13
8
• Strong value growth
22
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In the first step the company and
the auditor jointly define the objectives
of the analysis. Both the scope and the
duration of the audit are defined in accordance with the objectives and the
organizational characteristics. In parallel, both parties decide upon the participants and agree upon the timing of
the audit process. Here, it is important
to address all hierarchy levels, functions and divisions within the innovation system of the company in order to
integrate different perspectives within
the innovation system.
In addition, performance indicators
(such as financial data on sales and
profit and investment in R&D) and additional information related to innovation management are collected.
In the second step, interviews with
selected interviewees are conducted,
based on a structured guideline. It
builds upon the 10 areas described in
Table 1. Both strengths and weaknesses are identified. If required, the interviews are complemented with moderated workshops or specific data and
“system analysis”, such as an analysis
of the implemented idea management.
The interview guideline is semi-structured and, for each area, specific audit
criteria are assigned that are investigated with one open “key question”. For
each key question there are more detailed additional questions to enhance
the value of the analysis with regard to
the objectives and the content of the
assessment. To validate the answers,
additional “validating questions” are
asked.
In the third step, data are evaluated and key findings are analyzed
based on the Innovation Audit Scorecard and the Fraunhofer benchmarks
of good practices in innovation management. The Innovation Audit Scorecar is an effective means to measure
gaps between current practice and targeted “good” practices and performances. For each audit criterion there
is a scorecard with two main functions:
On the one hand, it helps to assign a
value to the answers on a range from 1
to 4, to identify good practice criteria
and priority areas for improvement. On
the other hand, the Innovation Audit
Scorecard provides a base for defining high-level actions, as there is a list
of valuable actions and measures as-
signed to each criterion. An excerpt of
the Innovation Audit Scorecard is presented in Appendix 2. On the basis of
the analysis of the identified areas for
improvement, customized concepts
can be developed (see Design phase
below). In this phase the expertise of
the auditor, good practice benchmarks
and the characteristics of the company
play an important role. The most important results are the identification of
key areas for improvement.
In the fourth step the Innovation
Audit is completed with presenting the
results to the client. On the basis of the
Innovation Audit Scorecard, results are
visualized and presented in a consolidated form. In addition, key strengths
and important areas for improvement
are presented and first recommendations and high-level measures are provided. If required, recommendations for
improvement are evaluated and prioritized. The final result is a first high-level roadmap which serves as a base for
the second design phase, which is explained in the next section.
Design phase
The aim of the design phase is to develop detailed concepts for the priority
areas identified in order to improve the
innovation capability of SMEs. It further
elaborates the results of the Innovation Audit. Therefore, the focus is on
those priority areas and recommendations for improvement that were defined in the Innovation Audit. The development of detailed concepts and
measures takes into account customer needs and the organizational context. Indeed, the scope and the duration of the design phase varies widely
among different enterprises as it is developed in a customized manner.
The design phase comprises the
following high-level phases:
Definition of objectives and key
performance indicators of the design phase;
Detailed analysis and definition of
requirements;
Development of detailed concepts
and configuration of indicators. For
selected areas, indicators are defined to measure and control the
sustainability of innovation capability. On the basis of the detailed anal-
ysis key performance indicators are
identified and targeted values defined. If required, for the remaining
areas of the Fraunhofer Innovation
Management model, a configuration of indicators also takes place.
This helps to adapt the indicators
of each area towards the company’s needs. This configuration provides the base for an implementation of the Innovation Card; and
Development of a plan to implement detailed design concepts (a
detailed roadmap) and selected
indicators.
Implementation of
innovation card
The implementation of the detailed
design concepts and a customized innovation card evolves from the results
of the design phase. The implementation usually takes place in four steps in
a pilot phase to adapt it to the company’s specific settings in an iterative and
continuous way.
In the first step a measurement
plan and an organizational concept are
defined. If not already completed in the
design phase, for each area of the
Fraunhofer innovation management
model, indicators are defined and target values specified. Also defined are
how and in what time frame these values will be collected. For each indicator a specific measurement procedure
is defined. The plan contains information about the sources of the data to be
collected, the measurement procedure
(interviews, retrieval from a database)
to be applied and the frequency of
measurement. If no measurement procedure is in place, a specific process
is developed. To successfully implement the measurement procedure, existing organizational structures are effectively used. It is important to clearly
define responsibilities for required actions.
In the second step the Innovation
Card is tested “in real life” in order to
identify the strengths and weaknesses
of the controlling tool. If required, adaptations have to be made.
In the third step, the data collected
is analyzed and interpreted and the first
conclusions drawn. This is an important
step, as valuable insights can be gen-
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erated from thorough analysis and
evaluation. From the conclusions derived, decisions on future planning and
measures to be taken are made. This
is done by defining clear measures and
their implementation. At this stage it is
useful to predefine which “performance
stage” should be achieved within the
next time-frame to make objectives and
expected results more transparent.
In the fourth step feedback on the
innovation card is collected in order to
continuously improve the approach. Iterative feedback enables the company to sequentially introduce a continuous control process that meets the requirements of innovation projects of the
company. Collecting feedback on satisfaction with the results of the measurement and the quality of the measurement procedure helps to address
the company context and to continuously improve the innovation card.
Benefits of the approach
The Fraunhofer approach represents
a systemic methodology to manage
and control innovation capability. It has
been tested in various settings and
successfully implemented in the field.
It has been used in a practical context,
where it has passed tests of both usefulness and usability. The benefits of
the approach are as follows:
Effective and structured analysis of
current innovation capability as the
underlying model embraces all relevant areas of innovation management. The Innovation Audit Scorecard supports a rapid assessment
of innovation capability with respect
to known good practices. The Innovation Card, building as it does
upon the results of the Innovation
Audit, enables the company to analyze its innovation capability in an
efficient way without the support of
an external auditor.
Guided approach providing an effective means to improve and implement innovation management in
a systematic way. As a result companies can rely on increased professionalism of their innovation activities and will manage to better
exploit their innovation potentials.
Continuously managing and improving their innovation capability
24
ensures value creation and value
growth.
Focus on highest potential. As the
evaluation focuses on the identification of key strengths and areas
for improvement, it helps the company to concentrate first on the priority areas with the highest potential for improvement and to implement measures to work on these
key issues. Activities usually focus
on a specific area but take into account interrelationships between
different areas.
Scalability. The three-stage approach is scaleable and adaptable
to the needs of the company.
Development of targeted measures
to improve innovation capability.
Examples are the improvement of
procurement processes and production logistics, increased development of capabilities and training
of staff, cultural change initiatives
or improved external cooperation
with suppliers and customers.
There is a range of factors that affect
the success of this method. One important factor is openness and a willingness to communicate with all participants of the project. Only if participants
are aware of the relevance of innovation management and are highly motivated to conduct an innovation audit
and to implement an innovation card,
will the project provide valuable results
both in the short-term and the long-term.
The quality of the results will also depend on the selection of the right business unit and interview partners. It is
necessary to ensure the selection of at
least one representative business unit
that reflects the company and its business activity and of interview partners
from different hierarchy levels and organizational functions.
Conclusion
Within SMEs, innovation processes
are often neither efficient nor systematic and therefore hinder a successful
and rapid transformation of innovative
ideas into products and services that
prove their value on the market. Fraunhofer has developed a three-stage approach to improve the innovation capability of SMEs, resulting in increased competitiveness and value
growth.
The holistic model embraces all
relevant areas and factors of innovation management. The innovation audit provides a means to assess the innovation capability of the company.
Based on the definition of the current
innovation management, performance
priority areas are identified, and first
high-level recommendations are provided to be detailed in the second
phase - the design phase.
The innovation card complements
the innovation audit and enables the
company to successfully install their
own innovation management control.
This can be applied continuously without the support of an external expert to
measure and control innovation management performance.
As a result, the three-stage Fraunhofer approach enables SMEs to continuously improve their innovation capability in an effective and efficient way,
increasing competitive performance
with sustainable impact.
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Review, Vol. 47, No. 3, pp. 47-76. Appendix 1: Excerpt - Audit questionnaire
Criteria: Idea assessement
Main question
How and by which means are innovative ideas assessed (product/process/service)? How are first concepts and the requirements
catalogue developed? What kind of information is included in the product concept paper? How systematically are projects assessed
and selected?
Detailed questions
Are critical customer requirements/product functionalities and economic and technical data addressed in the first (product)
concept (in the sense of a requirements catalogue)? Are both technical feasibility and economic issues taken into account? Are
releases dependent on the completeness of the requirements catalogue?
Are innovative ideas assessed based on predefined criteria in a systematic way?
Is there a formal idea assessment and project prioritisation process in place?
What methods are applied? Are partners and customers integrated when assessing and selecting ideas?
Is each innovative idea assessed based on the same criteria? Are there different criteria in place for assessing incremental versus
radical ideas?
Are different alternatives selected based on a comparison of risk and market value (potential)?
Is the prioritisation guided by the overall strategic goals (short-term liquidity and long-term business development) with the aim to
achieve a balanced project portfolio?
Control questions
Is each idea based on the processes in place, and implemented?
How is the value and quality of the implemented process perceived and evaluated within the company?
Are processes often reviewed and adapted? When did the last review take place?
How is the assessment of ideas usually conducted?
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Appendix 2: Excerpt - Scorecard
Criteria: Idea assessment: How are ideas assessed?
Customer needs are
roughly known. Ideas are
assessed and selected
unsystematically. ITsupport is not used (idea
databank, storage
system, assessment
tools, etc.)
Customer needs are
roughly sized in terms of
a product concept
catalogue. Ideas are
assessed and selected
by means of varying
tools and criteria. ITsupport is randomly
used.
Customer needs are
sized in terms of a
product concept catalogue. Technical and
economical issues are
checked and ideas are
assessed and selected
by means of fixed tools
and criteria. Risk and
chances of innovation
projects are evaluated
separately. IT-support is
regularly used.
Customer needs are sized in
terms of a product concept
catalogue. Technical and
economical issues are checked
and ideas are rated and selected systematically by means of
fixed tools and criteria. Projects
are evaluated against each
other and categorized in terms
of risk and chance. Additionally
projects are prioritized on the
basis of their degree matching
cooperative strategy (e.g. long
term, short term objectives). ITsupport is used intensively.
Methods/toolkit
• Qualitative tools = checklist technique, dual rating technique, scoring technique, portfolio technique, lead user
method, expert panels
• Quantitative tools = internal revenue, break even analysis, Net present Value (NPV), Return on investments
(ROI), etc.
• Software solutions for idea assessment
Recommendation catalogue
• Develop a product assessment catalogue by integrating customers and suppliers
• Develop a product assessment catalogue by an interdisciplinary team of members of R&D, marketing, sales,
construction and production
• Apply tools to develop a systematic rating tool for innovation projects (project portfolio)
• Install an idea storage and assessment system
Appendix 3: Result presentation - Example
Methods and tools
Innovation
strategy
Competencies
and knowledge
Innovation
culture
Technology
Innovation
process
Structure and
networks
Products
and services
Markets
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