Canon of Knowledge Chartered Institute of Marketing Innovation Objectives The Canon of Knowledge is a focused, dynamic reference and inspiration source for Marketers. The Canon covers a number of subjects - Innovation is just one of them. The aim is to identify and promote the information and knowledge about Innovation, which is critical to successful marketing practice. Contents The basic questions Innovation management Inspiring innovators Software and innovation Practical innovation knowledge …and what to know about creativity “The business has…two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs” Peter Drucker Why innovate? Innovation is a crucial source of competitive advantage: Nokia, Intel, Sony, Seiko, Corning & Motorola have all generated sustained competitive advantage. These firms have generated 49% of their revenue through new products versus 11% for mediocre performers. Without innovation core competencies can become core rigidities What is Innovation? A Choice of Definitions: Innovation is the sum of invention plus the commercialisation of that invention. (D.R. Ireland) A major innovation is one that sparks further innovations and investment (e.g. the computer) as opposed to other innovations which are primarily improvements (N. Rosenberg) Innovation is a process by which a company Builds insights about its customers Identifies and evaluates unique market opportunities and prepares a plan to seize them Develops a stream of winning products (JP Deschamps) An Invention is a new product; an Innovation is a new customer benefit (P. Doyle) What is Innovation? A Choice of Definitions: “..the ability to look where everyone else is looking and see what no-one else can see.” Richard J Duggan Innovation is the practical application and use of creativity “Creativity is thinking up new things” .“Invention shows it can be made” “Innovation is making it commercially valuable” Research is the Transformation of Money into Knowledge - Innovation is the Transformation of Knowledge into Money A.C./ McD What is Innovation? Commercial Innovation New Products New Services Business Processes Manufacturing Processes What is Innovation? Terminology “Dimensions” of innovation product service process (manufacturing or service delivery system) business process Degrees of innovation incremental radical / fundamental Where does innovation come from? While the sources for innovations are literally all around us, there are two avenues to harness them: Formal Innovation Processes External Innovation, such as innovation outsourcing or a formalised external scouting structure / network. Institutional Innovation Internal R&D NPD processes New Venture Division / Internal Venture Capital mindset Cultural innovation Innovation is at the centre of management efforts (3M, Rubbermaid) Where does innovation come from? Informal Innovation Processes Individual ideas and observations (often the source of entrepreneurship) Innovation Camps (professionally orchestrated, strategically directed idea generation sessions). Brainstorming sessions (‘let a 1000 flowers bloom’; weird & wacky & all is welcome Innovation Management Managing Innovation Innovation Strategy Creativity / Ideas Management Portfolio Management • Goals • Communication • Technology • Measures Implementation (NPD, etc) Human Resource Management • Culture • Motivation • Appraisal Market -Products -Processes -Services Innovation Strategy Has innovation been introduced as a fundamental part of your company philosophy and values? What is the role of technology in innovation? Does top management spend sufficient time supporting all stages of innovation? Are competitors’ innovation rates known/monitored? Are innovation goals / measures defined - for new products, services and processes? Is there a good balance of truly innovative projects as well as product improvements? Does your innovation strategy integrate all five areas of innovation management? Creativity & Knowledge Management Are creative ideas collected on a regular basis from all employees? How many ideas for new products, services and processes were developed in the last 12 months? Do ideas originate from all departments, often from contacts with customers? Are ideas quickly developed into new product / service concepts? Are creativity techniques and workshops used? Portfolio Management Is there a good balance of ideas for new products, services and processes? Are concept reviews held regularly? Are choices made quickly? Is there a good feedback mechanism from actual product performance to ensure screening decisions Does the responsibility for screening decisions lie too high in the company hierarchy? Implementation Is this a bottleneck stage, because too many projects are attempted? Are best practice techniques such as simultaneous engineering applied, where appropriate? Is your time-to-market comparable to your competitors? Are manufacturing ramp-ups fast and efficient? Does manufacturing regularly develop new processes? Are project reviews effective and used to improve performance? HRM - People Management Is the broad meaning and importance of innovation-new products, services and processes- understood by all employees? Are clear innovation targets set and known by all employees? Do human resource policies support a culture of innovation through stimulating a creative, problem-solving working environment? Are organizational structures flexible and effective? Is innovation covered by employees’ appraisals? Innovation Strategy • • • • • • • Has innovation been introduced as a fundamental part of your company philosophy and values? What is the role of technology in innovation? Does top management spend sufficient time supporting all stages of innovation? Are the innovation rates of competitors known and monitored? Are innovation goals - for new products, services and processes - defined? Is there a good balance of truly innovative projects as well as product improvements? Does your innovation strategy integrate all five areas of innovation management? Creativity Management • Are creative ideas collected on a regular basis from all employees? • How many ideas for new products, services and processes were developed in the last 12 months? • Do ideas originate from all departments, often from contacts with customers? • Are ideas quickly developed into new product / service concepts? • Are creativity techniques and workshops used? Portfolio Management • Is there a good balance of ideas for new products, services and processes? • Are concept reviews held regularly? • Are choices made quickly? • Is there a good feedback mechanism from actual product performance to ensure screening decisions • Does the responsibility for screening decisions lie too high in the company hierarchy? Implementation (NPD, etc) • Is this a bottleneck stage, because too many projects are attempted? • Are best practice techniques such as simultaneous engineering applied, where appropriate? • Is your time-to-market comparable to your competitors? • Are manufacturing ramp-ups fast and efficient? • Does manufacturing regularly develop new processes? • Are project reviews effective and used to improve performance? Human Resource Management • • • • Is the broad meaning and importance of innovation-new products, services and processes- understood by all employees? Are clear innovation targets set and known by all employees? Do human resource policies support a culture of innovation through stimulating a creative, problem-solving working environment? Are organizational structures flexible and effective? Is innovation covered by employees’ appraisals? Upstream innovation definition Jean-Phillipe Deschamps argues that Innovation can be managed as a linear process and split into two major parts: upstream innovation - the process of developing and cultivating ideas for new business creation and evaluating their merit downstream innovation - the process of converting selected opportunities from concepts to market-ready products or services. Most companies have a formal downstream process, but very few manage the upstream process in a formal way, which creates fewer ideas and fewer innovations linked to business goals. He details three stages to the upstream process: Fertilisation: Envisioning Opportunities (usually a top mgmt. task) Seeding: Generating & validating the Idea Flow (innovation teams, etc) Incubation: Managing the early feasibility process (budgets, feedback, time frame) Upstream innovation Some ideas for getting upstream results: The 3M example of allowing certain employees up to 20% of their paid time on independent research efforts Insist on working with people who have their ear to the ground, who ‘have seen the ocean’ and who have the ability to network with intelligent purpose. Professionally managed Employee Idea Schemes (caution: many fail because they are poorly conceived and managed). ‘Thinking Communities’ and ‘Knowledge Forums’ as Intranet’s within the organisation Upstream innovation Some ideas for getting upstream results: Mixing cultures, skills, functions, age and gender within idea teams Creating an Intrapreneur structure / philosophy Creating a New Venture Incubation unit / division. Innovation Task Forces for Product, Services, Processes, Technology, Setting Strategic Innovation goals as major management focus (Rubbermaid’s goal to have 50% of their products less than 5 years old) Upstream innovation Some challenging views: Brian Quinn, Amos Tuck Business School, having studied GE, IBM, Polaroid, etc. found that not a single major product innovation has originated from a company’s formal planning process. Karl Kalcher, MindFolio Ltd, having worked with Clarks, LEGO, Motorola, HP, Polaroid on innovations believes that companies must encourage rebels and missionaries, revel in managing creative tension and strive to obtain results through a parallel process of quick experiments and disciplined innovation methodology. And they must insist on managing a tight AfterAction-Review for every try. Upstream innovation Some challenging views: . Motorola believes in creating new avenues through ‘learning by doing’ Most practitioners agree that ‘cross-functional project teams’ are the only way… Intel insist on ‘staying scared’, believing that they are, at all times, only two years away from bankruptcy. Dana requires employees to generate two ideas for process innovations each month (and supports them with corresponding training too) Pocket guide to ‘Poor Innovation Management’ Here is choice of actions or omissions which will guarantee ‘The Poor Innovation Management Prize’: Do not communicate with employees about Innovation objectives, goals, etc. Make clear to staff that Innovation is the task of R&D only and everyone else should just ‘work’. Give R&D even more money, but because they are ‘creative’ they can’t be held to tight deliverables or transparent After-Action Reviews. Don’t permit ideas to surface because they may threaten the existing business Close your eyes to the costly habits of ‘gilding the lily’, over- perfection and over-specification, all in the name of ‘good quality’. Innovation is all about products; not services or processes. Do believe that NIH - the ‘not invented here’ disease - has been cured! Pocket guide to ‘Poor Innovation Management’ Send the Wrong signals “It’ll Never Work” “We Explored That Thoroughly 10 Years Ago” “OK, If We Can Get Somebody Else to Pay for It” “We’re Too Shorthanded to Work on Blue Sky Ideas” “It’s Not in the Business Plan” “It’s Not Your Job to Talk to Customers” A.C./ McD/3M Pocket guide to ‘Poor Innovation Management’ Rules to avoid Innovation • Be Suspicious of Every Idea that Originated Below You • Insist that People Go Through All Levels With a New Idea • Express Criticism and Withhold Praise • Make a Decision to Reorganise in Secret and Maximise Surprise • Be Control Conscious • Never Forget that People at the Top Know Everything A.C./ McD/3M Pocket guide to ‘Better Innovation Management’ Rules to improve Innovation • • • • • • • • • Increase base of knowledge upon which innovation can be based Education should not focus on specific skills Make change based on what you want Blur distinctions between jobs Base salary on what someone can do (potential) Don’t shield information - good or bad Daily team meetings Give logical and compelling reasons for change Establish favorable workplace climate for change and trust A.C./ McD/3M Pocket guide to ‘Better Innovation Management’ To activate Innovation • You need to know where you want to go - VISION • You need to know where the rest of the world is going - FORESIGHT • You need ambition - STRETCH GOALS • You need freedom to achieve your goals - EMPOWERMENT • You need to draw from and work with others COMMUNICATION, NETWORKING • You need to be rewarded for your efforts there is nothing more rewarding than RECOGNITION from your peers A.C./ McD/3M BEST PRACTICES IN INNOVATIION Inspiring Innovators Innovation in Manufacturing Trends Was focused on products, NPD processes and time-to-market Now moving to more flexible NPD processes (faster less formal); auditing innovation performance Greater focus on choosing the right innovation projects (portfolio management) Clever use of process and service innovation to strengthen competitive advantage Innovation in Service Industries Trends High level of interest in improving performance Focusing on better/documented “living” processes Conducting innovation audits to determine current performance levels Moving to look at other types of innovation - not just product and delivery Attempting to implement more effective cross-functional teams Inspiring innovators – 3M 3M The company: 3M is dedicated to the innovation of products in over 28 sectors – from adhesives to products for cars. 3M is an American company with global offices. Most employees are hired locally because they know their markets, customs and culture better than anyone – their global network helps bring customers innovative and useful products. Just some of 3Ms’ products (picture) (picture) The post –it notes. The inhaler Inspiring Innovators – 3M The culture of innovation Innovation is encouraged from the top – 3Ms motto is “we are forever new”. Cross-functional teams work in the products sectors, e.g. automotive products, office products. New ideas are encouraged within those sectors Constant tweaks are made to those products to fulfil customer needs Ideas are sought from outside 3M to improve the quality of upstream innovation There is continual measurement of the innovation process through the 6th Sigma software system Give it a go attitude Give a person a job &the freedom to do it Recognition Tolerance of mistakes Teams 3M Defiant role models Tolerance of bootlegging THE CUSTOMER Self appointed innovators Management by walking around 15% rule Growth with the business 30% new product rule A.C./ McD/3M Inspiring innovators - DYSON The company Dyson emerged during the 1990s as one of the leading vacuum cleaner manufacturers through the creation and production of the paperless bag vacuum cleaner – no other manufacturer’s vacuum cleaner came close. The Products (picture) The most powerful upright 45% more suction than a Dual Cyclone (picture) The only 2-drum wash action Inspiring innovators - Dyson The Culture of Innovation Leadership: James Dyson, the creator of the dual cyclone vacuum cleaner and founder of Dyson gives sets the tone for innovation at Dyson. The teams: Design staff work in teams and wear casual clothing, so that they have nothing to hide behind. Ideas are continually brainstormed and then built accordingly. Every member of staff when they join Dyson has to build one of the vacuum cleaners. Design teams are within easy reach of the production lines, so they can walk over and talk with those manufacturing the vacuum cleaners to ensure that any problems are countered early on. Inspiring innovators: Dyson Control Mechanisms Dyson vacuum cleaners are constantly taken to homes and users are asked what their likes and dislikes are. Changes are mad to the vacuum cleaners in accordance with the customers wishes. Design changes are made in the cross-functional teams. New products and New ideas In the words of James Dyson, you know the feeling when some everyday product lets you down. “I could have designed this better myself”. Each employee is encouraged to think in this manner. The product is then designed and redefined accordingly. Inspiring innovators: Convergis The Company Convergis is a world-wide leader in innovative billing systems. The billing software is used by large organisations to bill their customers. Convergis is renowned for the scalability of its products. In the fast moving telecom sector constant innovation is vital. Organisations that do not innovate will die. The Products Software for billing. The products and business to business Inspiring Innovators: Convergis The culture A vision of innovation comes from the top Cross functional teams Trusting culture in a market area where there is constant breakthrough innovation The products are constantly tried and tested by customer and the product is tweaked accordingly The Control Convergis get constant feedback from customers, market research teams, such as the Yankee group. Speaking at conferences gives them the opportunity to discuss their products with others in the sector Inspiring Innovators: MBNA The Company MBNA (Maryland Bank National America) is an American company specialising in lending credit card lending to the consumer markets. Over the last 9 years MBNA has captured over 13% of the market in the UK and is still growing strongly. MBNA has been truly innovative in the way it has developed the customer service processes and channels to customer Products MBNA Credit Card Insurance Inspiring Innovators: MBNA The Culture MBNA believe that “employing the right people leads to acquiring the right customer” Employees are given career path Salaries are well above the local and industry norms Customer service staff are empowered through training to give customers the right advice and solve their problems 55% of customer service staff’s time is spent in training The Control Mechanisms MBNA monitors the activities in the customer services department on a daily basis Customer service department know how they are performing on a daily basis. Excellent service is rewarded accordingly by the company Customers are constantly asked their opinion, MBNA’s 5% customer attrition rate is the lowest in the business, it speaks for itself. Inspiring Innovation in Insurance First-to-market? Commercial Innovation +? New Insurance Policies New services + Customer Profiling Pre-sales + + Use of 3rd Parties + Channels Software for innovation Case studies of software support Software-based innovation • • • • • • Software provides the critical mechanism through which managers can lower costs, compress time cycles, decrease risks and increase the value of innovations. Software can be used to: Define how people interact Dictate the information they use Determine what they communicate about Identify where they can be located Enhance the skills It can become integral to the organisation Innovation software What type of innovation software exists: Innovation software exists to support the innovative thought and processes of the company. Usually software can only support one part of the process, either the initial ideas creation, the portfolio management or the new product development phase. Creative and New Ideas: Software exists to assist a small team bouncing ideas of one another. Generating new ideas is very often the biggest challenge for companies so, having software gives the teams support and a structure. Portfolio Management: Developing new ideas, then leads to having to create a selection process by which only the best ideas get through. An example of this type of software is at Oxford Assymetry where software has been developed by Steve Davies to identify new compounds which are more likely to be made into drugs. Innovation software Knowledge Management: Managing data and ideas within a company is another means to improving the quality of innovation in a company. Software gives employees access to other employees documented findings. Companies such as PA consulting, Cap Gemini and McKinsey specialise in developing and implementing such software. Measuring software: Software also exists for companies to pinpoint their progress on specific projects. Such software is developed by such companies as Q Management, Fishbone and Kaiser. New Product Development: The stage gate process usually requires various teams working in parallel and a considerable amount of resource allocation. Such software provides information on who is working on which project and also gives a cross comparison. Innovation software - selection There is a wide selection of software available, each has the potential to help with a different part of the innovation pathway. Some of the software is only suited to a particular size of company. A website giving you a list of different types of software is as follows:www.zdnet.com How to decide to purchase software: Identifying why you need the software Listing the costs versus the benefits What are the advantages of using software rather than other nonsoftware processes How long will the implementation take Is the software suited to the size of the project Innovation software: KODAK The company Kodak produces films and cameras for both the commercial and industrial markets. Such a company constantly needs to evolve. The software: Kodak have a worldwide system, WIN. This is a database which generates cross-functional ideas. The company wanted to stimulate ideas in an informal manner 96% of the ideas generated through WIN were unusable Innovation software: KODAK What was the problem with WIN? 96% of the ideas generated through WIN were unusable WIN was modified by installing “idea focus”, this served as an early filter. It focussed on real customer needs, advocates and short proposals Innovation software: Hewlett Packard Hewlett Packard Computer company that constantly seeks develop new products for this ever burgeoning market. The software: To assist new concepts and ideas Hewlett Packard use the intranet. This system enabled employees to exchange ideas and the email was programmed so that if one employee wrote an email on a specific subject they would be put in touch with another employee who had written an email on a similar subject. Innovation software: CGEY The Company: CGEY CGEY is one of the largest management consultancy firms in the World providing effective solutions through every part of the business cycle from first ideas to long term operations. The Software: Knowledge Management Employee Structure: Professions divided into communities Community Portal: Discussion forum set up where community members can share knowledge.Primarily used to integrate and implement gain access to knowledge on projects and clients. Components are generally purchased off the shelf from existing partners. Practical Innovation Knowledge Starting with the Mindset The innovation mindset Effective innovation management starts with you and your mindset. Here are some ‘Lessons Learnt’ from practitioners who have developed many new businesses and products. • Innovation is a company wide process and involves all aspects of the Value Chain on an on-going basis. Too many managers have a very narrow view of Innovation, i.e. it only concerns New Product Development or R&D. • Marketers carry the ‘Duty of Initiative’ for innovations. The key driving force for innovations are customer benefits and, therefore, it is the Marketer who should identify and galvanise the business to seek new solutions. The innovation mindset “Life is too short to wait for Eureka”. New thinking, idea generation, innovations do not, for the most, rely on sudden flashes of brilliance. A disciplined, creative innovation process will yield surprisingly effective results and will usually involve a multitude of people. As with most things, its about smart, hard work rather than ‘hope’. Specialist Innovation Consultants can be valuable catalysts during a specific process. Constraint is the essence of creativity. In order to gain effective results from an innovation process, managers must clarify ‘essential constraints’, not just budgets. Most innovation teams will find solutions to the most difficult challenges if the ‘road map’ is clear from the outset. Moving goalposts several times during a process will usually kill spirit and outcome. The innovation mindset A generous budget is no substitute for poor or indifferent top management. Disunity amongst senior managers about the direction or the priority of a given innovation project will sink any effort by the innovation team. It is essential, therefore, to ensure that consensus exists within the management team prior to project commencement. Essential Innovation Ingredients: ‘Hard Fun’, inspirational leadership, internal and external people with different skills and outlooks, a clear brief, reasonable funds against reasonable deliverables, some training about idea generation and effective creative processes and..customer focus. Mindset: A New Spiritual Goal In a world of rapid and continuous change, we must have the courage and vision to challenge our traditional assumptions, defy prevailing business currents, identify opportunities and go after them, changing the rules of the game, to bring unlooked-for benefits to customers A.C./ McD/L.Burnett Mindset: A New Spiritual Goal The Way Forward… Put imagination before experience (innovation not optimisation) “Go against the flow” Create the future that we want A.C./ McD/L.Burnett Mindset: A New Spiritual Goal To Create Our Future We Must Be Prepared to... Challenge industry conventions Challenge our own assumptions about the nature of the business we are in Learn from others A.C./ McD/L.Burnett Mindset: A New Spiritual Goal To Create Our Future We Must Be Prepared to... Create alternative pictures of the future Create new customer needs rather than merely satisfying existing ones Leverage the inherent power of our brand A.C./ McD/L.Burnett Measuring innovation A frequent weakness of management is to think through and set realistic expectations for a project. Good projects can thus be damned to failure before they even got off the ground and prevent the spreading of a positive innovation culture. There are four categories of Innovation Measurement: measuring the internal skill base / efforts e.g. patents per employee; R&D expenditure in relation to competitors, etc measuring the results e.g. New Product share of total profits; Time to Market, Break Even Time, etc Measuring innovation measuring innovation culture e.g. Response Times to competitor action, cross-functional projects as % of total, etc management accounts e.g. R&D costs as % of revenue, etc; Innovation costs dedicated to core business, new business and early trials, etc Protecting innovation Intellectual Property Rights (IPR) come in many forms, e.g. patenting a technical invention, protecting a design, trade marking a logo, product or service and / or copyrighting of a piece of creative work. The following sources can provide further assistance: Patent Office www.patent.gov.uk Chartered Institute of Patent Agents, London, 020 7405 9450 IPR helpdesk www.ipr-helpdesk.org Government www.intellectual-property.gov.uk EU registrations Lovells-Boesebeck-Droste, Alicante, Spain +34 96 514 41 05 Outsourcing innovation The basic premise of Innovation Outsourcing is the fact that no single company can hope to possess all the resources, skills, eyes and ears and, especially, time, to grow the business successfully. The decision to outsource is preceded by a strategic process in which the company examines their Value Chain, their processes and activities in order to determine the scope for Innovation Outsourcing. The basic objectives are to: lower innovation costs speed up development cycles gain untapped knowledge spread risks know more and act faster than competitors Outsourcing Innovation The most popular avenues for outsourcing are in Basic Research and Supplier Integration. Cisco Systems is a much quoted example. Johnson Control has led the car industry in forward integration, delivering ever more complex sub-systems to car assembly lines. Some ‘golden rules’: Give and Take; the partner must benefit, too A chance for talented intrapreneurs to head the process A cross-functional approach; superior communication facilities, accessible software process tools. Respect the ‘centres of gravity’; be very clear about the ‘what & when’, but be tolerant about the ‘how’. Scanning for feasible New Opportunities or the management of certain elements of the Innovation / New Product Development is provided by specialist Innovation Consultant firms or universities. Some very large companies finance their own ‘scanning unit’. New Product Development Detailed descriptions of NPD processes exceeds the scope of this Canon, save to say that the task remains one of the constant battles for improvements for most companies, however here are some useful hints for ‘Best Practices’: The Stage / Gate process is still amongst the most popular methods There is increasing focus on fast prototyping and accelerated exposure to customers Cross-functional teams are de rigueur, however, accountability problems have dogged some teams. One response is to extend the responsibilities of the Project Team beyond the launch period. New Product Development NPD processes are notoriously ‘individual’, even undisciplined to the point of amateurish. Companies are now looking to invest in the ‘very best practices’, increasingly supported with software, and then insisting on standardising the process throughout business divisions. Innovation Directors, heading Project Offices are new organisational positions to facilitate this development. Reflect on the study that it takes 3000 raw ideas to equal 1 commercial success (G.Stevens). Intrapraneurs Defined as ‘entrepreneurs within a larger business’, Intrapreneurs are people who provide a strong stimulus to the innovative (and/or commercial) activities of a company by leveraging the might of a big business with the skills and nimbleness of a self-employed business creator. Consider a company-wide programme to create a intrapreneur culture (but with transparent objectives, reward systems, exit conditions). It may be more important to search first for latent entrepreneurial individuals than for ideas, because it is their tenacity and commitment which may make the real difference. Intrapraneurs . Train senior managers to recognise, tolerate and enjoy the potentially unconventional consequences of giving Intrapreneurs a lead role. It is usually better to form teams of Intrapreneurs, as they are likely to support and stretch each other. Critically, allow ‘good failures’, recovery and the re-start of another project. Protect Intrapreneurs from the iron disciplines (and monkey rules?) of Big Business, whilst insisting on disciplines foe money and deliverables. Internal PR for Innovation Innovation activities are not automatically welcomed by everybody! Emotions can range from the Fear of Change, Envy, Disagreement about priorities to potential ‘Turf Wars’. Here are some actions to minimise such potential sentiments: Clarify / classify all stakeholders Briefly introduce the project / inform about rough purpose / time Ask for advice Invite visits / make visits (esp. some prior to milestones) Create an internal P.R. Plan Subtle ‘Low to no cost’ Friendly tone; beware of arrogance, self-promotion, etc. Share ‘Lessons Learnt’ …what to know about creativity To be completed via the Design Institute