Innovation+Change=Transformation

Slide 1: innovation + change = transformation Stephen Danelutti

Slide 2: Topics • Strategic Imperatives for the CEO • Strategic Imperatives for UK • Conclusions • Solutions • Research • Immediate Action Page 2

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organisational 2 percent fail to become change every 3 years, but 4 profitable and are in 10 reorganisations fail to withdrawn from the achieve objectives.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

Slide 4: Strategic Imperatives for UK • 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 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. Page 4

Slide 5: 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 Page 5

Slide 6: Solutions pro active Leveraging re active Opportunities Managing Innovation Change Crises The Transformation Tools Cycle ¬ Research and Knowledge Transfer ¬ Consultancy or Interim Built-in Creative Management (outside experts) Resilience Destruction ¬ Social Software ¬ Cultural Alignment Transformation ¬Locking-in Competence ¬Engaging Workforce Page 6

Slide 7: 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 Page 7

Slide 8: 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 Page 8

Slide 9: Research Framework - SD The Structural Equation Model Product Corporate Sophistication Ability Corporate Product Evaluation Evaluation Corporate Interaction Product Suitability Page 9

Slide 10: 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 Page 10

Slide 11: 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 Page 11

Slide 12: Research – Change Four choices of approach open to leaders to engage everyone in change a) Telling the many what has been b) Selling to the many what has been decided by the few decided by the few (instructional with little sell) (tell with a sell and entertainment) outcome hooligans or spectators compliant collaborators c) Driving accountability down by d) Co-creation: judging who will add implicating people as individuals value if included in front end decision forming and (giving people the time, space change/strategy development and process to apply the (not to be confused with a change/decision to their own laissez faire culture which is poor work, regardless of the degree at closure and ill disciplined. Co- of delegation) creation takes robust governance and skill) outcome willing collaborators personally committed reformers Source: McKinsey 2005 Page 12

Slide 13: 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) Page 13

Slide 14: Idea factors • 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 Goldenberg, Lehmann and Mazursky, 2001 looked at 197 product innovations, of which 111 were successes and 86 failures) Page 14

Slide 15: 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) Page 15

Slide 16: 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. Page 16

Slide 17: 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 Page 17

Slide 18: 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: stephen.danelutti@netociety.com Web site: www.netociety.com Blog: www.trans4mbiz.blogspot.com Page 18