innovation + change = transformation Stephen Danelutti

Topics Strategic Imperatives for the CEO Strategic Imperatives for UK Conclusions Solutions Research Immediate Action

Strategic Imperatives for the CEO

Strategic Imperatives for UK

Conclusions

Solutions

Research

Immediate Action

Strategic Imperatives for the CEO Sources: 1. Strategos Innovation Survey 2004 (N: 557) 2. 2005 Training and Development Survey CIPD, UK (N: 664) 3. The Innovator's Solution: Clayton Christensen & Michael E. Rayno 4. Winning at Change: John P. Kotter Barriers to Innovation Short-term focus/focus on operations-63% Lack of time, resources, or staff-52% Lack of systematic innovation process-33% Leaders expect payoff sooner than realistic-31% Incentives not structured to reward innovation-31% Innovation core corporate value – Yes 66% “ To be best-in-class we need innovation. Can’t be through continuous improvement of existing work. Without innovation, we’ll always be tactical tuners.” Main drivers for investing in leadership development are to successfully manage organisational change ! Organisations undergo some form of major organisational change every 3 years, but 4 in 10 reorganisations fail to achieve objectives. Over 60 percent of all new-product development efforts are scuttled before they ever reach the market. Of the 40 percent that do see the light of day, 40 percent fail to become profitable and are withdrawn from the market. Fewer than 15 of the 100 or more companies I have studied have successfully transformed themselves. 1 1 2 2 4 3

Success factors for Innovation performance, in which UK below avg. Sources of new technological knowledge The capacity to absorb and exploit knowledge Few firms show evidence of systematic adoption of the human resource practices typically associated with effective innovation Access to finance Competition & entrepreneurship Customers and suppliers The regulatory environment Networks and collaboration UK-based firms appear to have many, varied network relationships, but infrastructure patchy and relationships largely driven by short-term decisions Strategic Imperatives for UK Source: DTI Innovation Report December 2003, drawing on an extensive review of international innovation literature, aided by a panel of experts, analysis by the AIM Management Research Forum and the OECD.

Success factors for Innovation performance, in which UK below avg.

Sources of new technological knowledge

The capacity to absorb and exploit knowledge

Few firms show evidence of systematic adoption of the human resource practices typically associated with effective innovation

Access to finance

Competition & entrepreneurship

Customers and suppliers

The regulatory environment

Networks and collaboration

UK-based firms appear to have many, varied network relationships, but infrastructure patchy and relationships largely driven by short-term decisions

Conclusions Change is the only constant - constantly changing is key Constant innovation - good way of coping with change But … most change programmes and new innovations fail! Why? Innovation/change efforts often stand-alone and unstructured Work-force is not sufficiently engaged and do not collaborate effectively

Change is the only constant - constantly changing is key

Constant innovation - good way of coping with change

But … most change programmes and new innovations fail!

Why?

Innovation/change efforts often stand-alone and unstructured

Work-force is not sufficiently engaged and do not collaborate effectively

Solutions Change Transformation Tools Research and Knowledge Transfer Consultancy or Interim Management (outside experts) Social Software Cultural Alignment Locking-in Competence Engaging Workforce Leveraging Opportunities The Transformation Cycle Built-in Resilience Creative Destruction pro  active Innovation re  active Managing Crises

Tools

Research and Knowledge Transfer

Consultancy or Interim Management (outside experts)

Social Software

Cultural Alignment

Locking-in Competence

Engaging Workforce

Research - SD Influences on Corporate and Product brand evaluation? Image mostly. Other association types? No empirical link: association type  corporate/product evaluation One successful study - two association types Corporate Ability associations Company’s capability for producing products and affect on product evaluation/purchase Corporate Social Responsibility associations Company’s perceived social responsibility and affect on product evaluation/purchase

Influences on Corporate and Product brand evaluation?

Image mostly. Other association types?

No empirical link: association type  corporate/product evaluation

One successful study - two association types

Corporate Ability associations

Company’s capability for producing products and affect on product evaluation/purchase

Corporate Social Responsibility associations

Company’s perceived social responsibility and affect on product evaluation/purchase

Research - SD Investigation of Interactive Processes and their influence Various contexts discovered: Communication/information From broadcast to interactive Relationship Marketing: Using IT: listen to individuals continually and understand, interact, quickly respond to preferences Integrate marketing with design/manufacturing - involve customers early in development Customer becomes “co-producer” and loyal

Investigation of Interactive Processes and their influence

Various contexts discovered:

Communication/information

From broadcast to interactive

Relationship Marketing:

Using IT: listen to individuals continually and understand, interact, quickly respond to preferences

Integrate marketing with design/manufacturing - involve customers early in development

Customer becomes “co-producer” and loyal

The Structural Equation Model Research Framework - SD Product Sophistication Product Suitability Corporate Ability Corporate Interaction Corporate Evaluation Product Evaluation

The Structural Equation Model

Associations of Corporate Interaction can be created Can influence product evaluations More interaction: more suitable products, more favourable corporate evaluation, more products purchased Use in: Corporate positioning strategies Corporate identity and reputation building Corporate communication platforms Implications - SD

Associations of Corporate Interaction can be created

Can influence product evaluations

More interaction: more suitable products, more favourable corporate evaluation, more products purchased

Use in:

Corporate positioning strategies

Corporate identity and reputation building

Corporate communication platforms

Research – Innovation and Change Innovation requires experimenting and prototyping Leonard-Barton, 1995 Innovation arises from knowledge creation in firm Nonaka & Takeuchi, 1995 Innovation on a regular basis can prevent inertia. Tushman & O'Reilly, 1997 Ambidextrous Organizations celebrate stability and incremental change as well as experimentation and discontinuous change simultaneously Innovation relies on recognition of opportunities O'Connor & Rice, 2001 The Idea Itself and the Circumstances of Its Emergence as Predictors of New Product Success Jacob Goldenberg, Donald R. Lehmann and David Mazursky, 2001

Innovation requires experimenting and prototyping Leonard-Barton, 1995

Innovation arises from knowledge creation in firm Nonaka & Takeuchi, 1995

Innovation on a regular basis can prevent inertia. Tushman & O'Reilly, 1997

Ambidextrous Organizations celebrate stability and incremental change as well as experimentation and discontinuous change simultaneously

Innovation relies on recognition of opportunities O'Connor & Rice, 2001

The Idea Itself and the Circumstances of Its Emergence as Predictors of New Product Success Jacob Goldenberg, Donald R. Lehmann and David Mazursky, 2001

Research – Change Four choices of approach open to leaders to engage everyone in change a) Telling the many what has been decided by the few (instructional with little sell) b) Selling to the many what has been decided by the few (tell with a sell and entertainment) hooligans or spectators c) Driving accountability down by implicating people as individuals (giving people the time, space and process to apply the change/decision to their own work, regardless of the degree of delegation) d) Co-creation: judging who will add value if included in front end decision forming and change/strategy development (not to be confused with a laissez faire culture which is poor at closure and ill disciplined. Co-creation takes robust governance and skill) willing collaborators compliant collaborators personally committed reformers outcome outcome Source: McKinsey 2005

Features of successful innovation Successful innovations had some, or all, of following features: They were moderately new to the market Based on tried and tested technology Saved money Met customers' needs Supported existing practices. By contrast, the products that failed were based on: Cutting-edge or untested technology Followed a “me-too” approach Were created with no clearly defined solution in mind Goldenberg, Lehmann and Mazursky, 2001 looked at 197 product innovations, of which 111 were successes and 86 failures)

Successful innovations had some, or all, of following features:

They were moderately new to the market

Based on tried and tested technology

Saved money

Met customers' needs

Supported existing practices.

By contrast, the products that failed were based on:

Cutting-edge or untested technology

Followed a “me-too” approach

Were created with no clearly defined solution in mind

Where ideas come from and why ensuing innovation succeeds/fails Need spotting - actively looking for answer to a known problem Solution spotting - finding new ways of using existing technology Mental inventions - dreamed up in head - little external reference Random events - serendipitous moments - no effort, large outcome Market research Trend following Idea factors Goldenberg, Lehmann and Mazursky, 2001 looked at 197 product innovations, of which 111 were successes and 86 failures)

Where ideas come from and why ensuing innovation succeeds/fails

Need spotting - actively looking for answer to a known problem

Solution spotting - finding new ways of using existing technology

Mental inventions - dreamed up in head - little external reference

Random events - serendipitous moments - no effort, large outcome

Market research

Trend following

Success-to-failure rate Trend following and mental inventions Three times as many failures as successes Need spotting Twice as many successes as failures. Market research Four times more successes than failures Solution spotting Seven times more successes than failures Taking advantage of random events Thirteen times more successes than failure Goldenberg, Lehmann and Mazursky, 2001 looked at 197 product innovations, of which 111 were successes and 86 failures)

Trend following and mental inventions

Three times as many failures as successes

Need spotting

Twice as many successes as failures.

Market research

Four times more successes than failures

Solution spotting

Seven times more successes than failures

Taking advantage of random events

Thirteen times more successes than failure

Bases for additional research Specific correlation between organisational factors and success? Capitalising on random events most successful method of innovation Effective change managements role? Its nature? Other “idea factors” imply systematic approach Correct? Its nature? Can all-encompassing approach be identified and described? Processes, technology and culture? Replicability with high success rate? Difference in approach between different factors of innovation? Product innovation, biz concept innovation, biz process innovation, etc.

Specific correlation between organisational factors and success?

Capitalising on random events most successful method of innovation

Effective change managements role?

Its nature?

Other “idea factors” imply systematic approach

Correct?

Its nature?

Can all-encompassing approach be identified and described?

Processes, technology and culture?

Replicability with high success rate?

Difference in approach between different factors of innovation?

Product innovation, biz concept innovation, biz process innovation, etc.

Wiki for collaborative environment Involve grass roots in Innovation and Change (needs management endorsement) Positively leverage trends in blogging and P2P collaboration/activisim Site becomes centre of expertise (knowledge base) in and of itself Core philosophy Everyone wants to make a difference, change faults, be creative, innovate in their work Focus where change effectively happens, where great ideas reside - workforce System of qualification Evaluate solutions posted External network of experts - payment if necessary Peer review – no charge but no way to verify expert involvement Company sponsorship useful endorsement Immediate Action

Wiki for collaborative environment

Involve grass roots in Innovation and Change (needs management endorsement)

Positively leverage trends in blogging and P2P collaboration/activisim

Site becomes centre of expertise (knowledge base) in and of itself

Core philosophy

Everyone wants to make a difference, change faults, be creative, innovate in their work

Focus where change effectively happens, where great ideas reside - workforce

System of qualification

Evaluate solutions posted

External network of experts - payment if necessary

Peer review – no charge but no way to verify expert involvement

Company sponsorship useful endorsement

Thank you! There are costs and risks to a programme of action, but they are far less than the long range risks and costs of comfortable inaction John F. Kennedy The idea that is not dangerous is unworthy of being called an idea at all Elbert Hubbard Stephen Danelutti Mobile: 0044 (0)7786 115 227 E-mail: [email_address] Web site: www.netociety.com Blog: www.trans4mbiz.blogspot.com