Whitepaper: Ingredients for innovation


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Geoff Waite, VP of Sagentia Inc, based in Boston, provides an in depth look at what the essential ingredients are which enable organisations to innovate.

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Whitepaper: Ingredients for innovation

  1. 1. Ingredients for innovationWhat an organization needs to be thinking about in order tobe at the top of the innovation gameGeoff Waite
  2. 2. Ingredients for innovationExecutive summaryCompanies often look at themselves anddeclare “We need innovation!” The truth is thatany company prospering in the global economyalready has innovation, so the quest is really:“We need to be better at innovation”.What is this innovation thing anyway?Definitions abound, and the central theme (inbusiness) is “Making money from creativity“.This brief article outlines some of the keyingredients that a company must have in orderto be more innovative. In summary: The scope of innovation is the entire business Increasing innovation requires a systemic approach Creativity is all about making connections A stable innovative business balances intrinsic and extrinsic pathways The job of innovation requires the correct toolkit Innovation must be efficient to remain competitiveSagentia has been researching and applying the“theory of innovation” for 20 years, both in ourown businesses and as consultants to the globalR&D community and we are pleased to sharesome of our insights. 1 © Sagentia 2011
  3. 3. Ingredients for innovation resulting stress will decrease the impact ofBig’ Innovation is more than products changes and, in the extreme, may even blow up. There are five basic components to examine,Innovation is easy! Just: the business’s ‘SPROC’:a) Find an opportunity; S-trategy; P-rocesses; R-esource; O-rganization; C–ultureb) create a winning concept; For example, it is no use putting in place a greatc) make it happen. “innovation process” if the organization is structured so that the BU managers are not ableActually, there is a pre-requisite which is “know to involve other key resources; or to adopt a setthe business need”. The opportunities and of leading edge interactive creative tools if theconcepts that satisfy a company that wants to resources are all narrow scientists in separategrow 15% may be very different to those that function specific labs; or to remodel theare needed to increase margins to 15%. If you organization, get the right resources, implementreally don’t know the business need, stop until leading edge tools, if the strategy is notyou do. articulated in terms that they can innovate Market-Business towards. Creation Business Opportunity Ideation Execution Business This systemic or holistic view is a recurring Need Discovery Strategy theme in every aspect of enhancing innovation. Product Creation So, all these aspects of the business must beFigure 1: examined and understood and the appropriate changes made. But what about Culture?So, now we know what we want to achieve, we Culture in innovative organizations is typicallycan start to find opportunities for new products, one of two things:right? Wrong! Let’s first find the opportunitiesand then look for how to address them with any Leadership drivenof three basic outcomes: A consequence of adopting a specific set of designs for the other aspects of the businessProduct, service, or process innovation – the (i.e. the S, P, R, O)most common and often exclusive focus of‘deliberate’ innovationMarket Innovation – maybe our basic ‘assets’ Culture Product / New marketcan be applied in new markets service innovation Processes, innovation tools &Business Innovation - same products, same systemsmarkets, but change the way we do business Organization Resources, & metrics people & environmentIt is important to remain somewhat agnostic tothe particular flavor of outcome during Strategyopportunity discovery. The real breakthroughmay turn out to not be in the pre-supposed area. Strategic / business model innovationThe Systemic Approach and ‘SPROC’When looking to increase innovation Figure 2:effectiveness, it is tempting for companies to Both are valid, and can support each other. It isfocus on something tangible, i.e. a businesslever that they can pull, such as processes or important to know which model the business is following and to support and reinforce ittools. The reality is that successful innovation accordingly. For example, don’t think you canenhancement requires that the whole system isexamined and adjusted in concert. If some change a leadership-driven culture by tweaking the business design.levers are pulled, and others ignored, the 2 © Sagentia 2011
  4. 4. Ingredients for innovationMaking Connections for Creativity spaces, decompression areas, cross-traffic, etc.Innovation and creativity are driven by White-boards in the rest-rooms are not unheardconnections. The business must seek to of! At Sagentia, we use various methods toencourage the good connections and trim the assess resources and optimize combinationsbad. and layouts. A good example is the Herman Brain Dominance model which we have used in Connections are a number of the cited cases (see appendix). people based, organization Organization: Teams play a central role. They based and must be designed, facilitated and empowered. information based. The structure and dynamics of teams is also Formal and ad- vital: know your resource profiles and team hoc channels are them accordingly. If rewards are given out just needed. Effective to the ‘winners’ then intra-organization connections will competition will stifle connections. If allow the insight departments run turf wars, then don’t expect that a delivery them to connect! Motivations must be aligned. driver has about A good example is the case of the global, multi-how a product is received by a customer to be category consumer goods company for whommarried up with a packaging materials Sagentia redefined both R&D organization andtechnology in which R&D has a curiosity technology platformsinterest. This connection may turn out to be the A Dgenesis of a major product innovation. Upper Left Upper Right Analyze StrategizeThe single most important connection for most Logical Holistic Analytical Intuitivecompanies is the connection between the Fact-based Integratingmarket (customers, sales) and the technology Quantitative Synthesisingbase (R&D, product development). This Organized Interpersonalconnection must be enhanced at all costs. Sequential Feeling based Planned KinaestheticOther important connection nodes can include Detailed Emotional B Csupply chain, manufacturing, outside Lower Left Lower Rightperspectives and so on. In fact there is not a Organize Personalizepart of the business that should not beconnected to innovation. Process: If your sales channel continuously collects feedback from stakeholders in the valueHow do we get this connection? Systemically, chain, then a process to capture and USE this –of course. For example and effectively communicate it – is a good idea. If your industry turns over new, improvedResources: the right mix of people is essential. products every 3 months then you’d better haveMost organizations need specialists, and a continuously driven creativity process.generalists are also needed to manage the bigpicture. The third profile is the polymath – a Balanced Intrinsic/Extrinsic Innovationspecialist in multiple areas – polymaths are Extrinsic Innovation happens when the businessvital as they provide the channel through which “contrives” to make it happen. For example,diverse experts communicate. running an “Innovation” program, or driving a periodic continuous improvement brainstorms. Expert It typically starts with a stated objective, proceeds according to some planned budgetDepth of Generalist Innovator and timeline and delivers an outcome. ExtrinsicExpertise Innovation is important to most businesses and provides periodic breakthroughs. Breadth of Expertise Facilities can encourage or kill connections:innovative organizations are open, have shared 3 © Sagentia 2011
  5. 5. Ingredients for innovationIt can be turned up, down, on of off. It is opportunities or strategic / business modelpredictable. Part of the reason that companies changes. Some tools focus on content andlike Sagentia exist is to boost Extrinsic rigor, while other focus on facilitation andInnovation, by doing it just when our clients enablement. This has been the second wave.need the boost. The case of Hornby is anexcellent example. The third wave of improvement is in the area of opportunity discovery. Techniques include trendIntrinsic Innovation happens all the time, without analysis / scenario planning to get ahead of theplan or trigger. It is facilitated by a having all the curve, value chain analysis to change the basisaspects of SPROC right and is leveraged by of competition, a next generation of voice of thehaving the ability to recognize, nurture and customer and voice of the market tools to elicitexploit the outcomes. It is not predictable. This finer and finer unmet needs and deliberateis a model that more and more companies techniques to disrupt the structure of markets.across sectors and regions have implemented Understand Createand encouraged over the last decade – from Emergent “P.E.S.T.” Trending Scenariosmall players to companies like P&G, Nestle etc. Trends PlanningIt is often referred to as the ‘Entrepreneurial Value Chain Technology Mapping Value Chain AnalysisModel’, as espoused by 3M and others. Disruption Structured Ideation Unmet Voice of the Customer InclusiveBoth forms of innovation are important and they Needs Design Day-in-are synergistic, one fueling the other. The Industry the-life Boundary Disruption Challengebusiness needs to manage the balance of thetwo Need Opportunity ConceptRight Tools for the Job It is important to have access to the full range of20 years .ago, the downstream process and tools throughout this process so that the righttools of innovative product development started ones can be applied to each situation (i.e.a metamorphosis with the creation of the stage- business need plus external influences). Agate process. NPD without some form of risk business may not need to “own” all of thosemanagement process is now pretty much non tools, but does need to know what is availableexistent. These advances have significantly and how to get them when they need them.improved the ability of business to delivercreativity successfully to market. While At Sagentia, we have a set of processes acrossimprovements are still being made to eliminate all three areas (i.e. opportunity, creativity,“innovation erosion”, the game now is about execution) flexibly built into an ISO9000 system.tweaking the system to be a point ahead of the Our processes have been assembled from thecompetition, while at the same time avoiding the best of the field and tuned over the years todulling of innovation by a dogmatic application of work fast and effectively in real-world situations.excessive rigor. This was the first wave ofimprovement to NPD. One final point on tools: When exploring and developing them, it is vital to remember that theThe front end of innovation is currently in that tools facilitate the process, but do not providesame state of NPD 20 years ago. Across the the solutions. PEOPLE provide the innovation,board from academia to corporate communities, and the tools just make them more effective andpeople are starting to codify the “Front End of more efficient.Innovation”. Fuzzy, no more! Making it EfficientThe subject of Innovation has received much At the end of the day, all of these things cost theattention over the last 15 years and many tools business money – whether it’s the 15%and process have been created, from creativity ‘innovation time’ that 3M allows its employees,techniques, to facilitation, to team building and or running ethnography programs, or usinganalysis, to ideas & knowledge management consultants to drive a specific piece of extrinsictools. Most of these tools have focused on the innovation. This investment must, of course,creativity part of the process and have improved provide the appropriate returns to the business.business’ ability to come up with the new ideas It would be easy to design a wonderful ‘no holds– be they product concepts, new business barred’ innovation system, but at what cost? 4 © Sagentia 2011
  6. 6. Ingredients for innovationAnd what if your competitor does the same Use a combination of qualitative and quantitativething, but at a lower cost? Efficiency in the research techniques, and use them to whateversystem is essential. depth of detail works in that specific case, to test the need, the opportunity, the concept. YourThis efficiency is about three things: objective is to avoid having your effective, but expensive creativity machine go to work on the using everything in your arsenal to drive the wrong thing (symptom: lots of good ideas in innovation engine R&D, but nothing at the end of the NPD validating early and often pipeline) managing the portfolio and weeding out the weak. Traded value Ease of useUsing everything means not allowing a NP Hig Vpotentially valuable thing (insight, connection, Comparables A B C U h s NP Videa, etc.) to drop through the cracks. This Rifle-shot Probabilit NPV3might be not acting on “whining from the sales NPV O P B y p success 2 NPVorganization” or missing the business relevance scenarios NP NPV1 Mod- V p success 1 p failure 2of a new technology in another sector. To make erat NPV NPV0 NPV4 e probabilitysure that you are using everything, the business distribution p failure 1 Decision NPV2must first get all the things discussed in this tree analysisdocument right and must, second, keep using NPVs Real options analysischecking that it is still right. Lo w Only Only in In many In allTo do this requires that the business has a approximatel certain situation situationcodified innovation system and has metrics to y situation s s s Accuracymeasure its ongoing performance. In just thesame way, there might be a manufacturing Managing the portfolio: success in Pokercontinuous improvement program – the only comes from minimizing the losses, more thandifference is that the innovation system is a from maximizing the gains. This is true in themeta-system that sits over the top of many other more uncertain front end of the innovationbusiness systems (remember SPROC). system. Portfolio management at the front end may be harder as quantitative data is harder to Discovery Evaluation come by. Never-the-less, it is important to see the portfolio and kill off, or park, the weaker Need Opportunity contenders. Qual. Quant. Ideation research research The choice of R&D portfolio management tools is broad, ranging from facilitated “committee Validation based prioritization to complex methods such as Real Options Analysis. Choosing the right tools at each stage of the process is about identifying execution the easiest approach to deliver the right answer – don’t use a hammer to crack a nut, but youValidating early and often. Before you start to need an axe to fell a tree!develop a concept, validate the opportunity.Before you start to work up an opportunity,validate the need. The Front End of Innovationgot the name “Fuzzy” for two reasons, one ofwhich is that thinkers at the time could not seehow to measure it (the other reason being thatpeople used to believe that you could notstructure it without breaking it – which we nowknow not to be true). 5 © Sagentia 2011
  7. 7. Ingredients for innovationGetting there from hereHow does a company move up the scale of Sagentia’s approach always starts with anInnovation Effectiveness? “Innovation Audit” of the current business, utilizing all aspects of SPROC (which includeTaking a “text book” (or consultants’ book) the strategic imperatives, which help select theapproach and implementing it is unlikely to future vision). From this point on, we can thensucceed. The answer lies in evolution, or define, from the business strategy perspective,adaptation: in classic change management what is working and what needs fixing. In somestyle, the business must first figure out where it cases, benchmarking against selected best-in-is right now; where it needs and wants to be; class is appropriate; in others, a future visionand then design a solution and evolutionary can be defined from just the internal view.change to get there. The attached case studies illustrate a variety ofIn our experience at Sagentia, which ranges outcomes of audit-initiated Innovationfrom small-caps to multi-billion dollar, multi- Effectiveness programs, ranging from ‘designingnationals in every market sector, there is no and teaching a custom toolkit’ to ‘a completeone-size-fits-all and a customized approach is SPROC overhaul.always necessary. Of course, there are someessential ingredients: There must be commitment (from the boardroom down) Geoff Waite, Head of Industrial US, Sagentia Inc There must be a champion innovation@sagentia.com There must be broad ownership (involvement, buy-in) 6 © Sagentia 2011
  8. 8. Ingredients for innovationAppendix – Case Studies11. Our approach: trend and scenario analysis – case studyWe helped identify radical new product development opportunities for an officeproduct manufacturer Our client wished to understand opportunities for radical product innovation with a time horizon of 6-10 years We assessed the key trends likely to impact on our client’s business by exploring the fundamental benefits provided by its products and assessing all the different ways in which these benefits could be provided in future We framed scenarios around the trends of highest impact and uncertainty to cover all future eventualities, and from these scenarios we determined the likely future needs of customers We prioritized the needs of most interest for product innovation assessing scenario coverage and fit with our client’s capabilities We agreed the future scenarios and prime areas for innovation and went on to create a portfolio of new product concepts – under current evaluation2. We helped identify radical new product development opportunities for an office product manufacturerPress announcement of new product launch on 8th January 2004 created a nearly$4m improvement on market capitalization Hornby required a step change in performance, without a compromising its core toy business Sagentia created and fully developed a portfolio of products and services in the area of digital and internet creativity for Hornby These new products demonstrate our ability to innovate at the boundaries between electronics, design and business The market response showed that Sagentia has created massive financial value for Hornby Sagentia has been instrumental in the development of innovative and exciting new products.” Frank Martin, CEO, Hornby :1 NB Scientific Generics, SG and Generics are old names for Sagentia 1 © Sagentia 2011
  9. 9. Ingredients for innovation3. Defining and embedding a customized innovation toolkit into a majorEuropean Media / Comms company The client had immediate need for some intrinsic innovation and also wanted to increase their own innovation effectiveness Sagentia has an on-the-job learning approach we applied to create a customized innovation programme to simultaneously embed the customized toolkit into the business The toolkit include everything from Voice of the Customer to Value Chain Innovation to structured creativity tools to validation templates The programme was highly interactive, much taking place in intensive off-site activities MECE Mapping $ Finer filtering $ What is it for? Output What is it for? Output • Identification of strong concepts • Ensuring that an appropriate innovation space is covered by a structured creative process MECE Maps • • Objective assessment of propositions according to a criteria relevant to you Also reveals ‘further research required’ needs where you can’t m ake a • Understanding why particular areas of the innovation space are of significant or little judgement call Proposition ranking Blue Lion NBO Scoring Matrix interest 1 • Identification of idea ‘white space’ to focus the creativity of the innovators 1 2 3 5.00 • Make data more accessible in a visual format 4 5 6 7 8 9 2 10 11 12 13 14 15 How does it work? Technology Factors 16 17 18 How does it work? 1. Consider the criteria for success in your setting and chose themes 3.00 19 20 21 1. Define the need/question being addressed (cover elements of business, consumer need & technology feasibility) 22 23 24 3 2. Pick filtering criteria which you can quantify (measurable) and assign bands 2. Brainstorm potential solutions and consider potential mutually exclusive clusters 25 26 27 which equate to a high, medium and low scoring. Include also a category 3. Generate potential axes of mutually exclusive and collectively exhaustive (MECE) ‘indeterminate’ 28 29 30 groups of clusters 1 3. Trial run the criteria with example concepts to check the filtering metrics can be 31 32 33 applied meaningfully (amend them if they can’t) 4. Map solutions onto matrix created by two of the selected axes 2 4. Assess concepts 34 35 36 5. Identify areas of white space – boxes where no ideas exist 3 37 38 39 6. Focus idea generation on filling white space (unless there is a good reason why it 1 cannot be filled) 1.00 40 Health warning: Axes should show an appropriate breadth of clusters 1.00 3.00 5.00 Market Factors 2 3 Why does it work? Why does it work? Self explanatory • Appropriate high level clustering is a relatively simple means of characterising the idea Technical Feasibility and Market Attractiveness and space. By combining multiple axes it is possible to explore a range of different idea spaces Commercial Aspects are Market profitability are at a relatively detailed level. combined into combined into “Market  Innovators are often able to create additional ideas that are fo cused in particular areas ”Technology Factors” Factors” once they have been guided to that part of the idea space Health warning: MECE mapping is typically most effective when a broad range of contributors are used D Wk % - 25 - © 2006 The Generics Group AG D Wk % - 15 - © 2006 The Generics Group AG4. Case study: opportunity to radically reduce development timesWe worked with one of the major European Aerospace & Defence organisationsto identify opportunities to radically reduce their product development times The client wished to examine ways in which the organisation could radically reduce system development times We worked wit the programme management team of a successful product development project to review the product development process. Our assessment focussed on the five underlying elements of the process; SPROC Using this assessment to characterise the programme we compared the programme with other industries to identify best practice and potential opportunities to reduce development times We made a number of recommendations ranging from a fundamental change to the product strategy to more effective use of resources – these are being implemented on a pilot project with a view to being rolled out across the organisation in the near future 2 © Sagentia 2011
  10. 10. Ingredients for innovation5. Improving Innovation Performance – SPROC assessmentBy collating our findings against each of the five SPROC criteria we cansuggest where improvements may be madeFigure 3: SPROC illustration 3 © Sagentia 2011
  11. 11. SagentiaSagentia is a global innovation, technology and product developmentcompany. We provide outsourced R&D consultancy services to startups through to global market leaders in the medical, industrial andconsumer sectors.With global headquarters in Cambridge, UK, and US headquartersin Cambridge, Massachusetts, Sagentia works with clients from frontend market needs analysis through to transfer to manufacture.We deliver innovation around new technologies and new generationproducts and services that provide commercial value and marketadvantage. The company also assists business leaders to createstrategies for technology, innovation and growth.www.sagentia.cominfo@sagentia.comSagentia Ltd Sagentia IncHarston Mill One BroadwayHarston 14th FloorCambridge Cambridge, MA 02142CB22 7GG USAUKT. +44 1223 875200 T. +1 617 401 3170