Insead/Logica: are you innovation ready


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Insead/Logica: are you innovation ready

  1. 1. Are you innovation ready? Plotting your journey on the Innovation Readiness Model
  2. 2. Message from Andy Green CEO, Logica I believe that the future success of our global economy relies on building a dynamic and competitive environment through the promotion of innovation and enterprise, and ensuring people have the right skills and opportunities to succeed. Most of the pressing challenges we face returns. Conflicting priorities, such as today, such as revitalising global financial meeting financial targets, were the most services and slowing climate change, cited reason for Boardroom visions cannot be solved by one company, country of innovations not filtering through or NGO. Without collaboration organisations organisations. cannot realise their ambitions to compete effectively on a national, international or More telling perhaps is the finding that global playing field. while collaboration is universally accepted as essential to innovation it can fail in Collaboration is required to accelerate instances where there is a lack of trust speed to market and to create the right and cultural affinity between partners. skill sets. Collaboration also brings a The study uncovered a gap in the internal truly external perspective – essential for reward and recognition of innovation and organisations to understand and respond how organisations best structure and to rapidly changing market dynamics and manage themselves in order to foster a consumer needs. fertile environment for innovating. The study also highlighted a relative lack of maturity in in our clients’ businesses and across our This study conducted by INSEAD organisations’ ability to measure innovation, network of partners and suppliers. in partnership with Logica, explores and the fact that what is not measured collaboration within and among cannot be improved... We are privileged to have had the input of organisations: how it drives innovation in 200 senior business leaders and I would like today’s challenging economic environment, Through the findings of this study, we have to thank them personally for their time and and what companies should be doing developed in collaboration with INSEAD thoughtful contribution to this study. to position themselves to compete more an Innovation Readiness Model, which is a effectively. unique way of benchmarking organisations’ The debate has only just begun. We innovation readiness in four key areas: welcome you to join us in defining best The study sheds light on the lack of Leadership and ambition; Organisation practice for a common understanding of readiness in the approach to innovation and collaboration; People and culture and innovation management in this new world management. Business leaders recognise Implementation and measurement. economy. innovation as key to establishing or maintaining competitive advantage, All of this underpins Logica’s approach and make the necessary investments. to innovation, which we call ‘Applied But spending on innovation does not Innovation’ – a pragmatic approach to automatically translate into corresponding making innovation happen in our business, Andy Green, CEO Are you innovation ready? INSEAD Report 2009 4
  3. 3. Table of Contents 07 Executive summary 12 Innovation Readiness Model – explained 16 Innovation Readiness – measured 18 Survey results and highlights 18 Leadership and ambition 19 Case study: P-Direkt, Ministry of Internal Affairs, The Netherlands 20 Organisation and collaboration 22 Case study: Rabobank 23 People and culture 24 Case study: Portugal Telecom 25 Implementation and measurement 27 Case study: Consortium 30 Country & sector comparisons 30 Country comparisons 33 Sector comparisons 36 Conclusions 39 Contributors 39 The eLab team 40 The Logica team 5
  4. 4. Are you innovation ready? INSEAD Report 2009 6
  5. 5. Executive summary “ With the global economy slowly emerging recent flurry of changes in the governance from the throes of a deep recession, it is of global institutions such as the IMF and In the past, becoming evident that this crisis will be working groups such as the G8 (now success and a positive remembered as having changed our world expanded to the G20). Similarly, corporate forever. Business as usual is no longer an leaders realise that they need to work economic environment option. This is not just because economic collaboratively with their business partners, would sometimes hide and credit conditions have changed customers and governments to innovate smaller organisational dramatically over the last months, but also successfully for the future. Innovation ecosystems1 that span across the public inefficiencies. One of the because there is a growing realisation that we need to innovate to create new solutions and private sectors and extend to include benefits of the changing for a new world economy. citizens and societies have to be formed. environment has been Collaborative innovation is the name of the that it allows us to detect The global economy has become more game for future success. inter-connected. It is no longer possible to and address those craft a solution for one country or region But how well do organisations fare in inefficiencies much more in isolation while neglecting global inter- collaborative innovation? Do corporate quickly and effectively. connectedness. Sustainability has also leaders understand the imperative for come to the fore. What works as a short- collaborative innovation? Do organisations This has become a key term fix will no longer be a good long-term have appropriate processes and incentives priority for us. solution. Global challenges such as climate in place to ensure that innovation is change, energy shortages, food scarcity supported and managed effectively across Nikolaz Foucaud and health pandemics overshadow and their innovation ecosystem? Or is it the case Chief of Staff, influence our thinking about long-term that they leave innovation to chance - not EMEA Enterprise & Partner Group, solutions. Leaders from the public and possessing even basic measures to identify Microsoft private sectors are being challenged to and manage innovation? Are corporate rethink the interlinked relationships between cultures supportive of innovation and the business, government and society at large. stimulate creativity or dampen collaboration All in all, we are operating in a context across different partners? Or in short, what where fresh thinking and innovation have is the ‘innovation readiness’ of organisations become paramount. as they face the future. These questions are the focus of this unique research. The need for innovation is clear. However, the nature of the innovation required has In one of the most comprehensive studies changed in line with the current context. ever conducted on innovation2, eLab, in Collaborative innovation will be key for collaboration with Logica, surveyed two success in the future. The scale and scope hundred CxO level business leaders from of the challenges facing us is so large that blue-chip organisations from the public no one company or single country can as well as private sectors across Europe, solve them all. Even the developed world about their views on innovation, and more has realised that it requires the cooperation specifically on collaborative innovation. of emerging nations to create innovative The research shows that although they solutions for global challenges. Witness the claim to grant high priority to innovation, 1 2 A network of interdependent organisations, See annex for full detail on methodology and sample typically motivated to work with each other for base commercial; academic or altruistic gains 7
  6. 6. most companies5 are handicapped by low Definition of innovation Today’s knowledge economy levels of ‘innovation readiness’. This means that they are lacking in many of the key The term innovation refers simply Today we live in the knowledge elements required to create a successful economy. It is radically different from to the creation and application of a new idea to create value in a certain platform for collaborative innovation. Despite previous generations of economic context. Some of these ideas and value increasing their investments in innovation progress. Competitive advantage is creation applications may translate into in today’s challenging economic times, less derived from access to physical incremental changes – such as the organisations are not able to reap the full resources (as was the case with early introduction of additional features in a benefits of these investments due to such agrarian economies) and more from the ability of organisations and societies to consumer product - while others may low levels of innovation readiness. If leaders generate ideas and to translate them lead to radical or even revolutionary do not improve their innovation readiness, into economic and social value. changes - such as the launch of the PC their organisations will not rank among or the iPod. Contributors to scholarly the future winners of the global economy. In the fast moving global order, literature on innovation such as This is particularly true given the increasing knowledge and intellectual skills are Schumpeter (1934)3, typically distinguish competition from new competitors from critical to create and improve products between invention, an idea made and services, develop more efficient emerging markets such as China and India. manifest, and innovation, ideas applied distribution and marketing methods successfully in practice. The ultimate and ensure customer satisfaction. goal of innovation is positive change, New ways of information management to make someone or something and application are used to improve “ better. Innovation leading to increased competitiveness. A knowledge economy productivity is the fundamental source is not about accumulating information, of increasing wealth in an economy4. but using knowledge to improve 80% of performance. And that performance This research takes a broad definition organisations have can be enhanced with innovation. This of innovation covering innovation in maintained or increased has become the driving force behind expanding global commerce and the products, services, processes, business models and organisational structures. innovation investment in rise in living standards. There is growing consensus today that the downturn, however, innovation is a collective effort – with As global competition intensifies and innovation teams extending both across a lack of readiness or information-based innovation becomes silos of an organisation and across maturity in innovation more important, the business sector has been internationalising knowledge- different players in an ecosystem. management means this intensive business functions, including The term ‘collaborative innovation’ investment is effectively R&D. At the same time, companies are increasingly opening their innovation is used in this report to describe wasted. processes and collaborating with innovation that is performed by external partners including suppliers, individuals or teams from multiple Soumitra Dutta customers and universities. Creating organisations, such as companies, Roland Berger Chaired Professor of Business effective collaborative innovation academic institutions or government & Technology ecosystems is vital for enhancing bodies, as distinct from innovation INSEAD access to knowledge from around the performed within a single organisation. globe and speeding up the conversion of that knowledge into value adding products and services. 3 4 5 Schumpeter, Joseph (1934). The Theory of The overall Innovation Readiness score – as Economic Development. Cambridge, MA: Harvard described in the next section - for the aggregate University Press sample of organisations studied comes to 2.33, putting them in the Level 2 ‘Localised’ range. Are you innovation ready? INSEAD Report 2009 8
  7. 7. Key findings from this research management to the rest of the company is include the following: blocked or ineffective. ‘Innovation is viewed as essential Collaborative innovation does not succeed to success, but a lack of in a vacuum. Leadership has to create ‘innovation readiness’ is crippling a fertile foundation for collaboration and potential’ innovation to thrive. Just saying ‘innovation is important’ does not make it so. Simply There is possibly no stronger indicator of setting up an innovation function, and the importance that organisations attach allocating money to it, does not create “ to innovation than the fact that during the innovation. Innovation has to move beyond current economic crisis innovation spending the hype and be grounded in the reality of When collaborating, has been protected, and frequently the organisation. It is time for leaders to increased. Organisations clearly value the step up and meet the innovation challenge clearly IP is a challenge, differentiation that being innovative can head-on. co-creation and bring, and understand that not investing in it co-developement are would leave them at a serious disadvantage. Organisation and collaboration and change: together we can do more, more complex processes. At the same time, however, this research faster – winning three-legged We are learning by doing finds a startling lack of readiness in how races’ but it is early days. organisations manage their efforts in collaborative innovation. We characterise Companies face ever-increasing pressure Brigitte Laurent this as a deficiency in ‘innovation readiness’, to compete in the global marketplace. Group Innovation Champion, Solvay which creates a gap between the stated Collaboration has become a must. No innovation goals of an organisation and company can win alone – on a competitive its ability to achieve them. The Innovation and sustainable basis. Collaborating with Readiness Model (IRM), introduced in this other players in the market, sometimes research, is an attempt to quantify this gap even competitors, is the solution to keeping and help diagnose how best to close it. up with the skills, resources and speed required to successfully innovate in the face Leadership and ambition: of world-wide competition. ‘spending doesn’t make it so – it is time for leadership to step up and The research reveals that while collaborating make the difference’ with external partners is an important enabler of innovation, executing such Although companies have made the partnerships is difficult. This is akin to financial commitment, more is required. winning three-legged races. It is a game Leadership in this case goes beyond of balancing cooperation and competition making the money available, as the research while focusing on winning. Around the shows that short-term demands often world, organisations are struggling to crowd out innovation efforts, and suggest identify the best strategies and approaches that the communications channel from top to ‘win together’. The prize however can 9
  8. 8. be significant, such as achieving leading of investment or because there is a desire. Creating a project structure and applying market positions, entering or creating new Clearly, organisations need to create and old and analytic Return on Investment (ROI) markets or gaining world class efficiency in stimulate the right mindset, and this is methods is not enough. With innovation, operations. achieved through selective hiring, training value creation assessment needs greater and incentives. Ultimately, innovation will be flexibility. People and culture: ‘innovation driven by having people who thrive in your is a state of mind – creating an business ecosystem’s specific innovation However, without good measures, it is not innovation multi-culture’ multi-culture. easy to assess improvements in innovation performance. As a result, short-term Whilst culture is often emphasised as Implementation and measurement: priorities often trump the longer term view an important dimension of innovation, ‘no measurements, no when it comes to allocating resources the picture is more nuanced than simply improvement’ for innovation. This is particularly striking requiring cultural diversity per se. The in times of crisis. Organisations must act culture of sharing, of risk taking and of Effective implementation involves directing decisively and rapidly if they are to maximise working with diverse partners, employees resources appropriately to ensure that the value of their stated commitments to “ and goals are all aspects that touch on competing priorities are resolved effectively. collaborative innovation. successful innovation, and in particular, Getting the balance between innovation and collaborative innovation. Complementing managing the day-to-day demands of the cultures can be a strength; however, cultural business is one of the greatest challenges Innovation is only mismatches are frequently the stumbling respondents experienced. useful for our clients and block in designing effective collaborative teams where benefit can innovation. On measurement, it has long been be obtained through the dictum in management theory and This study shows that organisations need practice, that if you cannot measure, reduced costs, better an effective innovation ‘multi-culture’ where you cannot manage and improve. This delivery or customer different aspects of an organisation’s wisdom, however, does not seem to satisfaction improvements. behaviour are combined in varying have been adopted by organisations We try to identify low proportions, depending on the stage of the as far as collaborative innovation is innovation process. For example, diversity concerned. Our research shows that investment, high impact of experience and background is more very few companies have measures in process improvements, valuable in the idea generation phase, place and are yet to assess and improve and apply them on specific whereas common goals and working styles their innovation performance. While it is contracts. Then we move may be more important in the execution relatively straightforward to quantify and it to other contracts phase. measure innovation in a classic product or service development environment, it is (using an internal change It is also important that leaders recognise more challenging when companies look for advisory board) to improve that innovation management is a skill that, innovation within bids, ongoing projects and the performance of each as with many other business skills, does central functions – anywhere that innovation one. not always come naturally to all employees is needed as part of doing an everyday task. and therefore there is a need for training As the path innovation takes is not always Graeme Cross and support. The people within a business clear from the outset, the way it should be Head of Information Technology do not become innovative purely because measured is specific to its elusive nature. Morrison Utility Services Are you innovation ready? INSEAD Report 2009 10
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  10. 10. The Innovation Readiness Model – explained The research conducted by INSEAD in potential silos. It also demands a clear collaboration with Logica has identified identification of leadership’s objectives the ‘Innovation Readiness Model’ (IRM) and expectations across all levels of the as a way to rank organisations’ ability to organisation, and a strong alignment innovate successfully. The concept of a across its various areas of activity. ‘readiness’ ranking can be understood as the measurement of the ability of an Organisation and collaboration organisation to put into practice leading- Whilst a large majority of organisations edge thinking around a particular topic, in recognise that collaboration both this case, collaborative innovation. internally and with external partners is essential to thrive, these partnerships Based upon an in-depth analysis of the are not always managed in the most survey data and interviews with senior effective way. The thin line between executives from leading organisations, competition and cooperation is not the IRM has been designed to rest upon always perceived in the same fashion at four pillars and four levels of capability various levels of organisations and across achievement along each pillar. These various partners. The changing nature of four pillars - described below - form the relationships between consumers and four foundations on which successful producers, or between suppliers and collaborative innovation can be built: clients is often a source of confusion and controversy. This category includes the Leadership and ambition internal organisation, and how it is set Undirected leadership and inefficient up in order to contribute to an innovative communications can be detrimental for climate, as well as the involvement of translating a high-level vision of innovation external partners in innovation initiatives. into reality. In other words, innovation High levels of readiness along this second does not percolate from the boardroom pillar requires a better identification to the shop-floor without effective of best practices (as well as of their leadership. This category includes the benefits), and a greater ability to adapt overall drive, vision and ambition of the to changes in the innovation ecosystem. organisation with regards to innovation, Excellence in this pillar is vital for success and how this is reflected in its leadership in collaborative innovation. and strategy. Readiness along this first pillar requires excellent communication within the organisation and across its innovation ecosystem: top-down, bottom- up and horizontally, that is, across Are you innovation ready? INSEAD Report 2009 12
  11. 11. People and culture successful implementation. Large Organisations are failing to identify and organisations often have many brilliant harness the internal skills that are required initiatives that are simply not well-known for collaborative innovation to thrive. enough to create their full potential value. The expectation is that cultural diversity is a benefit to innovation. However, if it Integration of innovation with is not managed properly – diversity can day-to-day activities is essential for be counter-productive. This category companies to translate their innovation includes culture and human resources investment into business benefits. policies, relevant to the innovation Without proper integration, ideas are in capability of an organisation. danger of not being realised or optimised because of conflict with other business To drive higher levels of readiness in this priorities. Establishing the right types of third pillar, several key challenges must benchmarks is vital to track innovation be better understood and overcome. efforts, and steer them towards the right For example, ‘innovation skills’ are not levels and directions. This is also key produced by universities; innovation to providing the right incentives to the takes place in an organisation when it staff involved as well as to compare an brings together the right combination organisation’s innovation performance of talents, incentives and opportunities. to that of its competitors, at home and Also, ecosystems are increasingly less abroad. This category is focused on contained within the boundaries of an the actual innovation process, and the organisation, and even less so of a implementation of innovations. Without department. Putting teams together from adequate strength in this pillar, the varying backgrounds and disciplines, execution of organisations will be weak the ability to gear up to a new idea and and success in collaborative innovation take it rapidly to market, and the internal will be elusive. acceptance of failure and risk taking are all important ingredients that will be The four pillars are like the four legs of a reflected in both the structure and culture chair. Relying on strong legs enable one of an innovation-ready organisation. to sit comfortably and also to stand on the chair and reach high. However, it is also Implementation and measurement important that the legs are of the same An inability to properly apply innovation length – else the edges of the chair will practices, ill-adapted internal processes be uneven and it will not provide a level and poor measurement mean foundation to build upon. Thus, we need a organisations are unable to accurately mechanism to measure the achievement of assess the impact of innovation initiatives, an organisation along each pillar of the IRM. and to take the practical steps required We have reached out to the well-established to improve their innovation readiness. literature on software maturity models6 Simply identifying and correctly capturing to propose four levels of achievement for innovations is a first crucial step in organisations for each pillar. 6 13
  12. 12. Within the IRM, for each pillar, a ranking is awarded from Level 1 (least ready) to Level The Innovation Readiness Model: A unique contribution 4 (most ready) as defined below: The systematic study of product and process innovation has been documented over the last few decades. However, the definition of innovation has now evolved and • Level 1 (Ad-hoc) indicates that encompasses a broad range of elements from novel marketing approaches to new innovation activities are practiced to organisational structures and business models. Innovation research can no longer some extent but not in a planned or be restricted to narrow product or process parameters that can be manipulated in consistent manner. laboratories or studied on the manufacturing floor. There is a need to include a range • Level 2 (Localised) means that the of actors (employees at all levels and in all functions, customers, representatives from innovation activities are planned and the government and non-profit sectors, and so on) and issues (such as leadership, structured in a specific function or incentive design, communication, feedback and coaching) within innovation research. activity but not necessarily consistently Given the range and diversity of these actors and issues, it is not surprising that the performed or spread throughout the systematic study of collaborative innovation is still in its infancy. organisation. • Level 3 (Generalised) indicates that Through the findings, we have identified a unique research model to capture the innovation activities are consistently elements that are required for organisations to win at collaborative innovation. The IRM is a pioneering effort to jointly address the four critical dimensions for identifying the performed in a planned and repeatable overall readiness of an organisation to succeed in collaborative innovation: Leadership manner across all relevant parts of and ambition, Organisation and collaboration, People and culture and Implementation the organisation and its associated and measurement. innovation partners. • Level 4 (Optimised) indicates that There have been isolated attempts by some consulting organisations to capture innovation activities are not only innovation readiness7 or to create innovation maturity models8. However, none of successfully generalised across these prior efforts have the breadth or depth of the efforts presented in this paper. the organisation but also subject to continuous learning to optimise the full potential of an organisation and its innovation ecosystem. The IRM is a strong foundation on which further development can be launched. We believe that this research provides a starting point for the IRM to become an industry standard measurement, and a tool to help innovation practitioners improve over time. 7 8 Ansgar Zerfass, Innovation Readiness: A Framework for Enhancing Corporations and Regions by Innovation Communication, Innovation Journalism, Vol. 2, No. 8, May 23 2005. Are you innovation ready? INSEAD Report 2009 14
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  14. 14. Innovation Readiness – measured Figure 1 describes the achievements of the in an ad-hoc or localised manner, and for organisations. However, years of organisations surveyed along the four pillars 9 are particularly weak along the pillar of management experience have shown of the IRM. The shaded areas represent Organisation and collaboration. that you cannot manage what you do not the levels achieved in aggregate across measure. Therefore, without significant all respondents. An increasing level of This is most likely an indication of the improvements along this pillar, it is unlikely readiness extends the shading from bottom relatively recent focus on collaborative that organisations will make significant to top. For the survey group as a whole, innovation, recognising the changing progress in improving the effectiveness of the aspects of Leadership and ambition, dynamics of the business environment, their innovation investments. People and culture, and Implementation and and the importance of utilising all available measurement were all rated at resources in the wider network of the The overall Innovation Readiness Quotient Level 2, whereas Organisation and organisation, not just internal ones. (IRQ)10 (which is the average of the scores collaboration came in at Level 1. Achievement levels along the other across the four pillars) for the aggregate pillars are also not stellar and present sample of organisations studied comes to These results show that organisations still significant challenges as organisations 2.33, where 4.0 would be the top possible have a long way to go as far as improving seek to optimise their innovation efforts. score. This is a relatively low score, and their innovation readiness is concerned. For example, the low level of achievement supports the overall conclusion that the Despite widespread agreement that along the pillar of Implementation and organisations surveyed at an aggregate level innovation is important (only 8% disagreed measurement shows that thinking of have significant scope to improve. with the notion) the survey indicated that innovation as a structured process that innovation activities are managed largely can be measured and improved is new Level 4- Optimised Increasing level of readiness Level 3- Generalised Level 2- Localised Level 1- Ad-hoc Leadership ambition Organisation and People and culture Implementation collaboration measurement The four pillars of the Innovation Readiness Model Figure 1 9 10 See annex for sample base breakdown See annex for more details Are you innovation ready? INSEAD Report 2009 16
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  16. 16. Survey results and highlights As described in the Methodology section in This was backed up by financial the annex, respondents answered questions commitment: spending on innovation over via an online web-based tool. The first the last two years had increased for 51% question asked was whether innovation can of the respondents, and remained constant be defined as ‘The successful exploitation for another 29%. Since 40% of respondents of an idea leading to a positive business answered that the greatest challenge they benefit’. Respondents were asked to agree faced was the global recession, it seems or disagree with the statement, and if clear that despite the crisis, spending is they disagreed, to provide their alternative being protected. definition. Only 2% disagreed, and no one ‘strongly disagreed’ so it has been Surprisingly, despite recognising the assumed that innovation is understood by importance of innovation and putting all respondents in the same way. investment behind it, many organisations do not have a coordinating figure for innovation, The results of the survey have been an important role in communications and in presented in four sections below, the allocation of resources across projects. corresponding to the elements of the Only 36% of organisations surveyed Innovation Readiness Model. reported that they have a Chief Innovation Officer or equivalent. We believe, through Leadership and ambition11 findings covered later in the report, that this is because organisations are still coming Spending does not make it so – it is time to grips with how best to deploy their for leadership to step up and make the resources effectively. difference It is widely accepted that an environment The survey highlighted - and most studies where innovation thrives has to accept and would agree - the importance of top-level learn from failure; however the findings management support for innovation to be show that only 37% of respondents successful. thought that their organisations ‘encourage employees to learn from failures’. The importance of innovation was clear: Leadership has a crucial role to play here Only 5% agreed or strongly agreed with in fostering innovation – an inherently risky task that requires some tolerance of failures. the idea that ‘Innovation as a concept is While Country and Sector comparisons more hype than reality’. In addition, 75% are covered in a separate chapter later in agree or strongly agree that ‘Organisations the report, we note that this average of that invest in innovation are more likely to 37% masks some country differences; for outperform their peers’. example 50% of the British answered that 11 This category includes the overall drive, vision and ambition of the organisation with regards to innovation, and how this is reflected in its leadership and strategy. Are you innovation ready? INSEAD Report 2009 18
  17. 17. Our organisation encourages employees to learn from failures UK 50% Brazil / Portugal 44% Netherlands 40% Nordics 38% France 20% All 37% “ 0% 10% 20% 30% 40% 50% You need to Figure 2: Our employees are encouraged to learn from failure - responses by country demonstrate the real value of ideas so that they were encouraged, but only 20% of the government. P-Direkt processes salary the employees feel that French agreed. data, staff files, leave, sickness, financial they are making a real compensation, and education for While most organisations have taken the approximately 120,000 personnel. contribution. first steps in recognising the importance of their innovation, the challenge now is to P-Direkt has its origins in policy research Sylvia Bronmans capitalise on the resources allocated in the carried out in 2003, when the Ministry Director of P-Direkt most effective manner. of Finance was looking for efficiencies in the Human Resource Management Case study: P-Direkt, (HRM) space, having benchmarked Ministry of Internal Affairs, themselves and being unsatisfied with their The Netherlands performance. The Public sector demonstrates an The initial attempt to found P-Direkt in innovative approach to shared services, 2004 was a failure – it was too ambitious, it driven by an appreciation for how had too wide a scope and a lot of political communication and strong leadership pressure. But the team stepped back and make the difference took a year to learn the lessons of what went wrong, and re-submitted the idea. P-Direkt (started in 2007) is the shared By the start of 2007, they were up and service centre for twelve ministries of running again. Sylvia Bronmans, Director the Dutch government. It offers reliable, of P-Direkt, uses this as a cultural lesson modern, standardised and efficient for employees, a way to contrast their human resource management service current vision and goals: “You need good to the ministries (excluding defence) and communication and a good vision: that other organisations within the national makes the difference between management 19
  18. 18. / employees disappear. You need to In 2008, they did a reality-check on the demonstrate the real value of ideas so that cost-benefit analysis they had used to start the employees feel that they are making a the organisation. Having planned to save 280 real contribution”. million euro in total, a saving of 100 million euro had already been realised. Her approach to communications is simple – be realistic and totally transparent; Organisation and collaboration12 demonstrate what should and should not be “ done and what results are, and use multiple Together we can do more, faster – winning communications methods to reach people: three-legged races [The] major live meetings for dialogues, written, digital, reason to collaborate and so on. Across the four pillars of the Innovation Readiness Model, the surveyed organisations with partners is to go achieved the lowest score for this dimension, Wherever possible the leadership team to market. [We] prefer should try to create opportunities for people clearly highlighting that this is an important to build skills, but can’t to meet each other in various situations, area for future improvements. In particular, always because of a lack including creative environments, to receive respondents indicated significant room for and exchange information and ideas. A improvement on collaborative projects, of time; sometimes a clean culture of risk-taking and tolerance of failure judging that they were generally more difficult delivery of product x by has been created to facilitate this. Because, to execute and more difficult to successfully partner y for cost z makes as Sylvia observes, “innovation can often conclude. be unplanned, but it happens because sense. people communicate, generate ideas, and While organisations recognise that turn them into something new. Interesting collaboration both internally and with Huw Owen, innovations take place at the boundaries external partners is essential to thrive, these CEO, ATLAS Consortium of an organisation, not at the core. You partnerships can sometimes be counter- can encourage this by creating the space, productive if not managed effectively. In an time and money for ideas to be created. increasingly global world, only the largest of This includes cooperating with other organisations have the ability to do everything organisations to stimulate the process”. alone, but even they do not always choose to do so, often preferring a ‘buy the best, Metrics are also important to the build the rest strategy’. Of the organisations organisation. P-Direkt has goals based on surveyed, 64% agreed that most of their a full implementation by 2012. The most innovation projects include external partners. important metrics are customer reviews – a ‘baseline’ measurement has been Organisations can have both positive and done, against which they will now work to negative reasons to adopt open innovation measure progress. They also benchmark strategies. When asked why external partners regularly with other shared services centres were involved, ‘achieving speed to market’ focused on HRM (in both the public and was by far the top choice at 36% - this private sectors). represents more than 50% out of a total of eight possible answers. This choice was 12 This category includes the internal organisation, and how it is set up in order to contribute to an innovative climate, as well as the involvement of external partners in innovation initiatives. Are you innovation ready? INSEAD Report 2009 20
  19. 19. Innovation projects that include significant collaboration with external partners are more difficult to execute 22%agree 7% disagree 33% 1% strongly disagree somewhat “ 3% disagree 34% somewhat strongly agree A customer should agree be involved so that the idea can be piloted and Figure 3: Innovation with external partners is more difficult tested. The business followed by ‘lack of skills in a particular area’ within an organisation makes it easier to needs to also provide at 17%. collaborate with external partners. When asked, however, whether ‘innovation sales and marketing It is also interesting to note that 54% agreed projects that include significant collaboration commitment for it to work, with the idea that ‘collaborative processes with external partners are more successful’ not just technology. with external partners is an important only 29% fully agreed, suggesting that there enabler of innovation’, indicating that is further work to be done to maximise the organisations are looking for ideas, as well value these partnerships could bring. Olaf Larssæter as execution, from external parties. CEO, Synergi Solutions, Norway Collaboration between organisations However, while respondents felt that includes ‘co-opetition’, where organisations ‘innovation projects involving collaboration that often compete sometimes also find with external partners were more themselves collaborating on specific successful’, almost half agreed that projects. ‘executing such projects were more difficult’ than those that did not involve collaboration, Organisations clearly understand the suggesting that organisations do not yet importance of collaboration, consistently think of collaborative innovation as business ranking it as important to their businesses, as usual (see Figure 3). and even entrusting the generation of new ideas to external partners, but at the same For collaborative partnerships to be time, it is not yet a ‘natural act’. successful, clear goals need to be agreed. Clearly, respondents have understood and embraced the concept of collaboration: 55% believe that a culture of sharing 21
  20. 20. Case study: Rabobank Within the Bank, central management explains and justifies decisions to the local A classic example of how an internal banks at meetings known as ‘central circle structure steeped in collaboration meetings’ or Rabobank’s ‘Parliament’, translates to working with external highlighting the lack of hierarchy. The partners central team work for the local banks, not “ the other way around, and doing it this way Rabobank Group is an international allows them to present strategies that can financial services provider operating on the be adopted across the group and avoid Cultural issues basis of cooperative principles. It offers re-inventing the wheel. This process applies [between partners] are retail banking, wholesale banking, asset across the business of the group – marketing, not really relevant beyond management, leasing and real estate strategy, systems and so on. “Take the services. Rabobank Group is comprised example of social networks – it’s all about the the ability to trust them, of 152 independent local Rabobanks people – you get out of them what you put in” which is difficult to define, plus the central organisation of Rabobank commented Harrie, “you need the knowledge and have a lot of personal Nederland, and several subsidiaries. Overall, and experience gained internally to make it Rabobank Group has upwards of 60,000 work externally”. elements. If they have a employees, who serve about 9.5 million hidden agenda to grab clients in 46 countries. Harrie Vollaard, The Bank is careful to hire the right people, more for themselves than Innovation Manager at Rabobank explains the sort of people who are comfortable with the Bank’s open culture. This is the key to the collaboration group that the company’s unique structure has making the system work, and not everyone created a culture of sharing. Because the itself, it isn’t going to work group’s constituent local banks own the is happy in such an environment. When local out. company, the decision-making has to be banks get good ideas that are not applicable extremely cooperative and complex. to just them, they share them with the other banks. The group has deployed technology Harrie Vollaard to help this process, which is important, but Being familiar with cooperative decision- Innovation Manager, Rabobank making turns out to be a big advantage people need to buy in. Now they also share for Rabobank when dealing with external with external tools as well, such as Twitter parties. Says Harrie: “cultural issues with the necessary precautions around [between partners] are not really relevant security, but taking a pragmatic approach to beyond the ability to trust them, which ensure sharing flows smoothly. is difficult to define, and have a lot of personal elements. If they have a hidden The primary metric at Rabobank is customer agenda to grab more for themselves than value. While today, the Bank uses Web 2.0 the collaboration group itself, it isn’t going style tools to reach customers, creating to work out”. The Bank prides itself on a ‘virtual community’ to cooperate with engaging in open dialogues with all its customers as they do internally and with partners and uses the same, cooperative partners. Its approach to collaborative approach to work with external parties as innovation has always been part of its DNA. with internal constituencies. As Harrie puts it, “it’s a philosophy we have followed for 100 years”. 13 14 (This linkage between an organisation’s internal This category includes culture and human resources culture and how successful it is in collaboration with policies, relevant to the innovation capability of an external parties is explored more in X source). organisation. Are you innovation ready? INSEAD Report 2009 22
  21. 21. People and culture Our in-depth interviews with respondents revealed that although cultural fit was cited Innovation is a state of mind – creating as the most important factor in the success an innovation multi-culture of collaborative innovation efforts the ‘fit’ being referred to varied according to the Promoting particular desired behaviours stage of the project. When brainstorming within an organisation requires corroboration and seeking new ideas, working with from trainers or managers who have the others from diverse backgrounds, different right skill sets as well as reinforcement industries, and so on is seen as valuable. from senior management. Hiring people for their innovation and creative problem During the execution phase of a project, solving skills is an important element of this. however, sharing common values and goals Our survey respondents reported that just and a cultural affinity is seen as the most 27% of them emphasise creative problem productive way to success. Describing solving as a key criterion when recruiting or innovation culture as being ‘multi-culture’ promoting staff. If organisations are failing is therefore an attempt to capture a more to identify, harness and promote the internal subtle understanding of the importance skills that are required for innovation to of diversity and organisational culture in thrive, then clearly any results achieved will general. be sub-optimal compared to their potential. Over half of respondents agreed that diversity was a positive benefit to innovation, with only 1% disagreeing. Please rate in order of importance the top three factors in your organisation that enable the success of partnerships between internal teams and external partners Track record of success 6% Freedom of respective management 7% to take joint decisions Joint incentives 14% Complementary skills 19% Joint sponsorship from senior leaders 24% Culture fit between internal teams 31% and external partners 0% 5% 10% 15% 20% 25% 30% 35% 23
  22. 22. The interviews also highlighted differences Case study: Portugal Telecom of opinion on the willingness of different countries to be innovative: “We have tight Portugal Telecom (PT) is a global “ teams that can be disrupted. It is important telecommunications operator with a to develop and challenge our people, portfolio covering all segments of the [You] need to have to integrate new people and different market, personal, residential, SOHO / cultures in order to be more disruptive. This SME, corporate and wholesale and all industry expertise in [therefore] requires focus and intiatives in technological solutions, fixed, mobile, common. Beyond that, the HR area too”, noted Brigitte Laurent, multimedia, data and corporate. With 74 having different languages Solvay, Belgium. million customers, PT has a diversified and backgrounds can A noteworthy 64% of respondents reported portfolio of assets in 14 countries, including Portugal, Brazil and high growth help, if managed correctly, that they did not have a Chief Innovation international markets, including the sub- but this takes time. Doing Officer or equivalent. In view of respondents’ Saharan Africa. The company has 33,000 previous answers, there are different some projects in India interpretations of this: (a) respondents do employees of which 11,000 are in Portugal. for example, with brilliant not believe in such a centralised structure, In March 2009, PT launched the ‘Open’ people, but very different or (b) they are yet to put their Chief project with the aim of ‘industrialising’ Innovation Officer in place, or (c) there is a cultural values, [we] the innovation process, to accelerate the contradiction between their stated opinion roll out of novel services, and create the needed to work hard to and the reality of the situation. Organisations right conditions to leverage the power remove these barriers. must carefully prioritise the innovations they of creativity of its employees, according Western European culture fund, organising them according to both the to Rogério Canhoto, Group Manager for potential level of impact they might have, as Innovation. can be too complex, too well how difficult it might be to implement difficult sometimes, and them. Having a function to ensure this is The process has three streams, the short, mixing in others helps to done across the entire business is often a medium and long-term. The short-term big step in the right direction. counteract this. is aimed at innovations that can have immediate impact. The medium-term looks While respondents claim to have internalised three to five years out and is focused on the Olaf Larssæter innovation, there are further steps that can ‘next big thing’. The long-term is far ranging CEO, Synergi Solutions, Norway still be taken to better equip an organisation and involves external partners sharing for successful innovation, in the HR field for their vision of the future. The long-term example, and to help promote a ‘multi- strategy is fed back into the medium-term culture’ that brings the right resources to to generate the candidates for the ‘next big bear at each point in the innovation process. thing’. In its short life span it has already generated significant traction across PT’s employees through a comprehensive communications plan that challenges employees to come up with new ideas every five to six weeks, such Are you innovation ready? INSEAD Report 2009 24
  23. 23. as reducing cost in a particular area, or how Implementation and to capture the ‘millennial’ generation. measurement15 “Employees are encouraged to participate One of the most crucial findings in this in an ‘ideas market’” explained Rogério. category was a clash between ‘short-term “ “Everyone has credits that they can use to management performance priorities and ‘invest’ in ideas and also comment on them. long-term innovation priorities’, with 41% At the end of the period, the top 20 ideas of respondents noting that this was the OPEN has go to the Board for debate and approval”. top factor blocking successful innovation. unleashed the creative This was followed by 27% saying that potential of our team The Board and a group of internal experts ‘middle management focused on the examine each idea for ‘game-changing’ and is leveraging our potential and ease of implementation. Those delivery of projects rather than innovation beyond project scope’. Perhaps all very network architecture and ideas that are selected get assigned to a understandable, particularly during uncertain customer and supplier team made up of the inventor, someone times, but successful innovators need to be from the Open team, and someone from the relationships to generate Operations team. Follow-up happens every able to balance these competing aspects. new ideas. This innovation two weeks with the Board to ensure that The follow-up interviews confirmed this line programme has also obstacles are dealt with swiftly. of thinking: most interviewees indicated that allowed us to industrialise getting the balance right between innovation Credits can be won or lost according to and the day-to-day operations was the implementation of new what happens to the ideas that employees extremely difficult. Some respondents do ideas at our company and back or comment on. These can be have mechanisms to allocate and prioritise thus, significantly reduce converted to small prizes, such as a box resources and projects, but many have at a local football game, attending the TED a more ‘silo-ed’ approach to innovation our time to market. conference, or – the most eagerly sought – projects and how they are funded and shadowing the CEO for a day. His backing measured. Zeinal Bava and commitment to the programme is well CEO of Portugal Telecom understood by the employees. When it comes to measurement, it’s a well-accepted management practice: if you Backing up the project is a training cannot measure something, you cannot programme that has already been improve it. Innovation is no different. Clearly, attended by 5,000 employees. Moreover, measuring the value of a particular process a scorecard keeps track of participation in an organisation is not easy, but without at the departmental level, and has a direct metrics it is hard to accurately demonstrate impact on managers’ bonuses. There are the impact of innovation initiatives. Just also additional coaching sessions available 16% of respondents said they have good to managers who request them, as well as a metrics in place to evaluate the success roadshow to help departments who need to of innovation projects (a further 20% improve, or field-based employees that are somewhat agreed). When asked specifically unable to attend the training sessions. about ROI as significant mechanism of measuring innovation, only 9% used it. 15 This category is focused on the actual innovation process and the implementation of innovations. 25
  24. 24. “ Measurements will be complex, not simple; including perceptions of value added, not Please rate in order of importance the top three factors that block the success of your innovation efforts-first choices Middle management focused on delivery of projects rather than ‘innovation beyond project scope’ 15% straight economic value alone, mimicking the Lack of resources, either availability 27% competitiveness ranking in or skill set studies we see today. Short-term management performance priorities clashing with 41% long-term innovation priorities Bror Salmelin Adviser European Commission 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Information Society and Media Directorate-General Figure 4: Factors that block successful innovation Just 29% of respondents said they difficult or insufficiently useful to spend time succeeded in sharing best practices within on. Despite this view, it is critical to develop their organisation, an important aspect of and use such measures in order to increase improving how an organisation performs. innovation readiness. Organisations can Without effective processes and the ability then start to rank and rate themselves to learn from all parts of the organisation, against their peers; this alone will allow them it becomes harder to implement the steps to start improving, as these metrics will point needed to improve in an effective manner. to the practical steps that can be taken to streamline and enhance their processes. Currently, it seems that organisations mainly believe that measuring innovation is too Are you innovation ready? INSEAD Report 2009 26
  25. 25. Case study: ATLAS Consortium board which drives the investment portfolio, and an innovation board that reports on A measured approach to innovation progress on a frequent basis. The innovation allows for effective collaboration that board presents grassroots innovation ideas brings ‘win-win’ results for approval in a consistent and disciplined manner, focused on the business benefits, The ATLAS Consortium comprises five investment required and business demand. partner companies: EDS, Fujitsu, General He notes that too often innovation is “ Dynamics, EADS Defence and Security Systems and Logica with over 3,000 staff focused on a technology-based solution members. The consortium was formed looking for a business problem, seeking In a downturn, specifically to bid for a UK government a sponsor to create an opportunity. A innovation ought to be defence contract in 2005. As a consortium, collaborative approach with the client, part of the business, ring- managing the relationships between five starting from the needs of the business, partners to ensure goals are met is a always delivers better results and secures fenced from cuts, because key challenge. Huw Owen, CEO of the opportunities for both parties. He stresses if you don’t innovate you group, emphasises measurement as a that a focus on innovative processes and will be left behind when key principle. To assess and improve client delivery is every bit as important, as performance, the consortium has a is being grounded in the real world: “too the upturn comes, behind often it’s just a ‘science project’”. It is no scorecard that includes innovation metrics. not only your competitors, surprise to Huw Owen that the survey found but your customers too. Each area of the business has a senior that respondents are continuing to either executive in charge of driving the innovation maintain or increase their investment in agenda, and all senior executives get regular innovation: “in a downturn, innovation ought Huw Owen, to be a fundamental part of the business, digests of external activities, allowing them CEO, ATLAS Consortium to keep abreast of innovation happening ring-fenced from cuts, because if you outside the organisation. don’t innovate you will be left behind when the upturn comes, behind not only your Huw Owen describes their approach to competitors, but your customers too”. collaborative innovation as built around a well-understood need for external resources, and clear goals that are aligned. Huw also emphasises the importance of a common cultural approach to getting work done. “The major reason to collaborate with partners is to go to market. We prefer to build skills, but can’t always because of a lack of time; sometimes a clean delivery of product x by partner y for cost z makes sense”. The consortium has a management 27
  26. 26. Are you innovation ready? INSEAD Report 2009 28
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