Innovation Journey Study 2011 Summary


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Innovation Journey Study 2011 Summary

  1. 1. The Innovation Journey value for technology-rich product businesses Final study report - Summary February 2011 Alastair Ross Simon Bramwell Codexx Associates Ltd 3-4 Eastwood Court Broadwater Road Romsey, SO51 8JJ United Kingdom Company Registration No. 04481932 Tel +44-(0)1794-324167 ideasInnovation Journey Study – February 2011 1 of 53 ©2011 Codexx Associates Ltd
  2. 2. AGENDA • The landscape for product innovation • Study objectives, approach and participants • Taking the Innovation Journey – what did we find? - Initiation - Implementation - Into Market - Intellectual Property Management • Learning points for businesses in making their innovation journey • Phase 2 – the opportunity for Thomas Eggar value ACKNOWLEDGEMENTS Thanks to the following, without whose support this study would not have been completed: Professor John Bessant, Director of Research, University of Exeter Business School, UK David Stead, Marketing Director, Gill, Jennings & Every Professor Frank Gertsen, Center for Industrial Production, Aalborg University, Denmark Poul Henrik Kyvsgaard Hansen, Center for Industrial Production, Aalborg University, Denmark ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  3. 3. The landscape for product innovation value ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  4. 4. The Landscape for product innovation The seeds of failure for all too many products lie in the fuzzy front end of the innovation process when the ideas selected are weak in some way. This can result in effort expended on poor quality ideas with more innovative ideas rejected at too early a stage. Developing an effective and feasible value proposition around the original idea for new technology or new products, together with partners to provide complementing software, accessories and services, is core to successful innovation. But of course even strong value propositions can fall on rocky ground if the company has a poorly managed back end when the product is manufactured, delivered and supported in the market. Having a good NPI process is important but increasingly it is not enough. The importance and challenges of achieving appropriate IP protection is also growing. Effective IP management can provide strategic advantages in the market, protect revenue sources and also generate revenue through licensing and sale. There is increasing opportunity for learning from other sectors in the innovation journey. With the internet and global communication, business practices are much more visible and transferable. The growth of Open Innovation thinking means that there are new opportunities for getting new ideas from outside the business. This can help leverage customer knowledge and other external innovators. All the time companies face the threat – and have the opportunity – for market change through disruptive or radical innovation.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  5. 5. Study objectives and Approach value ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  6. 6. Study objectives and Approach This study aimed to answer the following question: What are the key practices applied in the journey from ideas to innovative products that determine success? This study does not look at the culture or general approach for innovation within an organisation – which we already know to be critical - instead it examines the innovation journey itself. Study Partners Study Timetable Develop goals and questionnaire October – December 2009 Study lead Data collection in UK January – May 2010 Data collection in Denmark August – October 2010 Academic lead - UK Analysis & reporting October 2010 – January 2011 Report Publication February 2011 IP Practices advice Academic lead - DenmarkInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  7. 7. This study focused on the key processes enabling the Innovation Journey Successful innovation requires an holistic system Our focus for this study The Innovation System Leadership Process Climate new products & Controls ng new services ni ar business models Le Ideas Select Implement Le process improvement ar nin g market positioning Strategy new markets Resources External Linkages Key innovation practices need to be effectively managed Foundations for Innovation (F4i) ©2006 Codexx Associates Ltd Commentary Research by Professor John Bessant at Exeter University has shown that effective innovation requires a number of factors to be in place to enable an innovation ‘system’. Codexx developed the ‘Foundations for Innovation’ (F4i) model together with Professor Bessant to assess organisations’ innovation systems and this showed strong correlation of these innovation practices with overall innovation performance. Our study on the ‘Innovation Journey’ focuses on one key part of this total innovation system - the design and effectiveness of the key processes used by businesses to make their ‘innovation journey’ for new products.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  8. 8. The study examined business innovation practices and challenges throughout the innovation journey from idea to market – using an end-to-end model The Innovation Journey for technology products Initiation ideas 2. Idea 1. Idea Exploration Generation 3. rn Se ea lec 9 .L t 4. Prototype 8. Launch value 6. Go/No-go & Support 7. Prepare Source: ‘Innovation Journey 5. Develop for Hi-Tech, Hi-Speed Organisations’ (unpublished paper) by Simon Bramwell and Alastair Ross. 2009 Implementation Into Market Commentary We believe that this study is unique; other studies of product innovation focus on some elements of the innovation journey, this study considers the complete ‘end-to-end’ journey. This journey starts with ideas and ends with products in the marketplace that deliver value to the product stakeholders – that is: users, customers, the business that developed it, together with its partners .Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  9. 9. The study participants were medium to large companies applying significant technology in their products – we identified innovation leaders for comparison Companies were invited to participate in the study by Codexx, Exeter and Aalborg Universities and GJE. 13 UK-based companies and 12 Denmark-based companies took part in the study. Participating company sectors included medical systems, semiconductors, business & consumer electronics, telecommunication systems, adventure clothing, engineering products, and high-value toys. Participants – who were typically the Engineering, Development or Innovation Director/Manager - completed a questionnaire and follow-up email interview. To enable companies to be open and frank in their response, participation was anonymous. The Innovation Leaders •We selected the top 1/3 of the participants (a total of 8) based on their innovation performance* and contrasted those against the total sample. •This enabled us to look for correlation between innovation practices and performance. •Of the innovation leaders, 6 were B2B (‘Business to Business’) and 2 were B2C (‘Business to Consumer’) compared to 21 B2B and 4 B2C overall. •6 of the innovation leaders were based in the UK and 2 in Denmark. •Given the study sample size, in making comparisons between the Leaders and others and between UK and Danish groups we only considered an absolute difference of >15% in a practice to be significant. •The innovation leaders were well spread across the sample as Revenue £m measured by revenue (see adjacent diagram). *Innovation performance was based on the following factors: Organic growth, time to market, revenue from products launched within last 3 years, quality of products and NPI performance to plan. This information was gathered from the study participants.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  10. 10. Taking the Innovation Journey – what did we find? value ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  11. 11. We found correlation between innovation practices and performance Commentary This shows that those companies that applied the highest level of innovation practices were more likely to show the highest innovation performance. This supports academic findings. We believe that the reason the correlation is not stronger, is that the innovation journey practices alone are not responsible for high innovation performance. The other aspects of the innovation ‘system’ in place within a business – covering key attributes such as culture, leadership and strategy – are also critical but are not covered in this study. Note: The alphabetic codes represent the companies that participated in the study. Each participant knows their code, but not the identify of other participants to enable them to determine their performance, but retain anonymity.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  12. 12. Idea Exploration, Market Preparation and Intellectual Property (IP) management were key to innovation performance Note: Performance Leaders were the top 1/3 of companies from the study sample with highest overall innovation performance. This produced 8 companies – 6 UK-based and 2 Denmark-based Commentary When we assessed the practices applied by participating companies across the innovation journey, we found that leaders were significantly ahead of the others in Idea Exploration, Market/Launch Preparation and in Intellectual Property Management. This points to these areas being critical to the success of an overall innovation journey – rather than those areas typically focused on such as Idea Generation and Product Development – which actually show little difference in our study.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  13. 13. Overall Danish & UK innovation practices were broadly similar other than in Idea Exploration and IP Innovation Innovation Comparative Practice Performance Scoring (Average) (Average) UK 60% 48% Denmark 58% 42% Commentary Due to the small sample size, we have only reported on significant differences between the UK and Danish groups in this report – anything less than a 15% relative difference in scoring we have ignored for this reason. On this basis, the only significant difference was in in Idea Exploration and IP Strategy & Management where the UK participants scored somewhat better. This showed that UK companies were using a more sophisticated approach to the exploration of new ideas and a higher focus on IP Strategy. These differences resulted in the UK companies scoring somewhat better in overall innovation practices and also higher in innovation performance in this study as is shown in the table.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  14. 14. Detailed findings: Phase 1 - Initiation Initiation 2. Idea 1. Idea Exploration Generation Effective Initiation creates concepts for new products with highest potential value. 3. rn Se ea lec 9 .L t Excellence in this phase requires a broad and 4. Prototype 8. Launch diverse approach to idea generation, a rigorous 6. Go/No-go & Support approach to idea exploration and a systematic 7. Prepare 5. Develop approach for selection. Implementation Into MarketInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  15. 15. Step 1. Idea Generation – where do new ideas come from? Now Future All Leaders Commentary Today almost 2/3 of new product ideas come from employees in the participating companies. However Leaders relatively get 50% more of their ideas from customers than do other companies. This shows that Leaders today are embracing ‘Open Innovation’ thinking more than other companies. However this average covers a very broad spread with some performance leaders getting 90% of their ideas from customers. Overall the participants expected that there will be a significant growth in the use external sources for new ideas (e.g. customers and suppliers) over the next five years, using open innovation techniques such as “Crowd-Sourcing”. However the Innovation Leaders do not see a growth in their use of external ideas – this is already comparatively high today and some of the leaders for example see the % of ideas generated from customers decreasing from 90% to 80%.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  16. 16. Step 2. Idea Exploration – how do companies explore new ideas? Average number of techniques regularly used for Idea Exploration UK 2.3 Denmark 1.8 Commentary Leaders used a wider set of methods to explore new ideas. This provides increased insight into both opportunities and challenges for new technologies and product concepts and so an increased likelihood of improving the likelihood of successful products. Prototyping was the most popular way of exploring new ideas, with more analytical Market Study and User Involvement approaches having less emphasis. Each of these three approaches has specific strengths for idea exploration: – Market Study enables quantitative judgment to be made regarding the size of the opportunity for a product based on the idea. – User Involvement is more qualitative but ensures that the idea is tested and refined for user value. – Prototyping can help bring the idea to live for user review and also test against manufacturability requirements. The Danish companies scored significantly lower in the level of effort applied to Exploring Markets and Exploring User needs than did the UK companies, resulting in a lower overall score in Idea Exploration. Note: Exploration techniques defined were: Market study, User Involvement, Prototyping, OtherInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  17. 17. Detailed findings: Phase 2 - Implementation Initiation 2. Idea 1. Idea Exploration Generation Effective Implementation produces products ready for market. 3. rn Se ea lec 9 .L t Excellence in this phase requires an effective use 4. Prototype 8. Launch of prototyping to test new product concepts 6. Go/No-go & Support against market opportunities and technical and 7. Prepare 5. Develop supply capabilities; it requires an effective development process and a robust decision point Implementation Into Market prior to release for market preparation.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  18. 18. Step 5. Product development – what methods are companies using? * * NPI Team decision NPI stage-gate review Commentary The overall score in the Innovation Journey for Development was a combination of the methods used and the effective use of Information technology (shown on next page). Leaders were not ahead in their use of product development techniques in most areas. Indeed Leaders were significantly less likely to be applying Agile techniques than other companies. Agile development methods are particularly prevalent in software companies with a focus on speed. Leaders use of formal Project Management techniques such as Prince2 was a little less than other companies, possibly indicating that lighter project management methods are more effective for those companies. But Leaders are significantly ahead in their application of end-user involvement and in separating out technology and product development. This makes sense in that user involvement in development will help ensure that there is more user value in the end product – and thus a greater likelihood of market success. Separating out technology and product development reduces risk of the new product being late to market or suffering from functional and quality problems – again increasing likely market success. Danish companies were significantly more active than UK companies in applying project management, Lean and Agile methods in their product development.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  19. 19. Step 5. Product development – how are companies applying Information Technology? Commentary Information Technology can provide major benefits in new product innovation – enabling internal and external collaboration, simulation, CAD/CAM for example. We asked companies how effective they believed their use of IT was in their end-to-end innovation process. Overall the UK companies scored significantly higher than the Danish companies and this was a key reason why the UK companies scored slightly higher overall in Product Development practices. Leaders assessment of their IT effectiveness is on average 30% higher than the other companies, indicating that this is an important area of practice differentiation – however only 6 of the 8 leaders answered this question, so the sample size is low. Whilst IT does not replace the value of face-to-face contact, it has a powerful role to play in enabling effective collaboration with users, suppliers and partners, and in enabling fast time-to-market through computer-aided design and simulation. The role of online collaboration tools such as web forums, virtual worlds (such as Second Life) and Facebook is increasing the ease by which companies can interact with their users and through which user communities can bring enhanced value to a product offering.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  20. 20. Technology Key challenges across the journey – Phase 2 (Implementation) – participant feedback Users Business Value Execution Ensuring design is frozen Ensuring firm cost-benefits visible Final subjective tests Selecting the right Feature creeping and Price and quality approval new products avoiding up-stream activities and work with Competitor product non-matured Technology Technical challenges Business Value offerings coming to market technologies with new features during our Specifications will need amending and the key development phase Product sign off to issue is changing the right ones and not the easy meet the launch timings ones - avoiding the risk of having a Availability of the key complete product that doesnt deliver technical resources Taking an end to end view (e.g. Balancing resources Buy in from all areas is including testing and maintenance) between product maintenance the most difficult as we have and new product development so many people and markets Keeping to schedule to satisfy Inappropriate project Implementing change at management Execution the same time as the existing Users product goes through the Getting production time factory. We dont have an automated engineering for test production Customer acceptance of change system. Customer Ensuring products. Typically a product is collaboration during customised for a specific manufacturing & To get attention and implementation customer. supply processes are Ensuring sufficient resources focus on product robust and dependable launching from to ensure fast time to market sales/marketing NOTE: The above information was provided by the participating companies when asked for the key challenges encountered in this phase. We have grouped these comments around our four identified critical journey activities.Innovation Journey Study – February 2011 20 of 53 ©2011 Codexx Associates Ltd
  21. 21. Detailed findings: Phase 3 – Into Market Initiation Effective ‘Into Market’creates 2. Idea Exploration 1. Idea Generation commercial and user value through the sale, support and enhacement of new products. 3. rn Se ea lec 9 .L Excellence in this phase requires an integrated t approach to market preparation involving the key 4. Prototype 8. Launch development, sales & marketing and supply 6. Go/No-go & Support functions together with partners; it requires an 7. Prepare 5. Develop effective launch to drive awareness and demand and ongoing support for users and the generation Implementation Into Market of additional revenue and user value through accessories and complementary offerings. Finally a Learning stage enables the organisation to capture experience and improve both its own methods and the value provided to users.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  22. 22. Step 7. Prepare – how do companies prepare for market introduction? Commentary The Leaders were again most user focused, with a high rating for how well they prepared user support for new products and in marking changes in the product to cope with market changes – but also with high focus on making engineering changes to address product issues – this is a surprising weakness, perhaps explained by the leaders’ lower scoring in some key product development practices compared to the other companies. Another reason may be a philosophy of launching products quickly to the market and then fixing issues (an ’80:20’ approach) – this is common and acceptable where much of the functionality is software based. However this can be a risky approach for a smaller business whose market position is not strong. Indeed enhancing products in market through software enhancements or fixes enables companies to increase the number of positive ‘touch points’ with users - this can actually improve the user perception of value. This approach is common for software-based products such as Smartphones, mp3 players and Personal Computers.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  23. 23. Detailed findings: Intellectual Property Management Initiation Effective management of 2. Idea 1. Idea Exploration Generation Intellectual Property (IP) is key to r n maximising the value of an idea. 3. ea Se L lec 9. t 4. Prototype Excellence in IP Management requires a 8. Launch 6. Go/No-go & Support strategy for IP - that is tailored for each 7. Prepare business and their own business strategy – 5. Develop together with a structured approach to IP Implementation Into Market capture, protection and exploitation. IP ManagementInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  24. 24. IP Management – how does IP management impact innovation performance? Key IP challenges identified by participating companies Costs & Complexity of IP process •Costs, knowledge •The cost of the process •Price and value of patents •Length of process, legalistic (so avoided by employees) - needs to be driven •Nothing is patented due to lack of knowledge/competences Effectiveness of IP management methods •Currently we do not actively protect our IP. •Only have one product under patent. •Bringing new innovation to market it is important to protect the idea that we can commercially exploit it and recoup investment and research costs. •That we have probable operability (non-infringement) and that key ideas can get the earliest priority date •How to be more proactive •Applying too late and losing opportunities/protection Commentary Other There is clear correlation between IP management practices and overall •Chinese copies •International Contract Law. Most of our IP is Know-How which is innovation performance. This means that companies that are more effective at not protectable by Patent, but is protectable by Contract. product innovation are more likely to have effective methods in place for their •No concern, we file about 100 patents per year Intellectual Capital (IP) management – covering for example an IP policy, patenting or •Due to the fact that our new products are based on very old design protection. ideas it is hard to find features that can be legally protected. •Potential copy from competitors However companies identified challenges in Costs & Complexity of the IP process •How to make the biggest problems for our competitors and weaknesses in their own IP Management methods. The cost of effective IP •Protecting innovative ideas management is a particular challenge for smaller companies, with the cost of defending patent infringements perceived as a major particular barrier to patenting NOTE: IP Management Practice score was the average of the 9 IP practice questions on both IP Strategy and IP management that in the first place. The plain fact is that an undefendable patent is tantamount to a study participants answered. business giving away its ‘crown jewels’.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  25. 25. IP Management – what’s the strategic role of IP? Commentary The innovation Leaders have a significantly higher view of the strategic benefits of IP than the other companies. This should help them justify the reason for investing in IP management – alternatively this view could be the result of their accepted investment in IP management. Less than half of the other companies saw IP as increasing company value. The UK companies have a better strategic view of the importance of IP than the Danish companies in the study. The results also highlight that IP is seen by the leading innovators as important in increasing company value, limiting new competitors and restricting the movement of existing competitors. This looks well understood but the bigger issue highlighted is the fact that so few see the importance or role of IP in generating income by licensing. It is more likely that companies would take a rounded strategic view if good foundations were in place to help them manage and monitor their IP. Leaders recognise the value of IP rights for limiting competitors’ activities and accept that the “temporary monopoly rights” granted by patents do create value for the company. But what proof exists that these measures are in fact increasing corporate value? Is it reported and required at Board level?Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  26. 26. IP Management – what are the key practices? Commentary The UK and global IP system is a complex one for companies to navigate through and use effectively – this was identified as a key challenge by the participating companies. For IP to be effectively managed a policy/strategy needs to be in place, together with a management system. Our study showed that the innovation Leaders have significantly better practices for the management of IP than the other companies. Although the Danish companies showed a lower strategic view of IP compared to UK companies, this was reversed when it came to their management approach to IP. Whilst they were less likely to set targets (perhaps a more Anglo-Saxon business approach) or rewards for generation of formal IP (e.g. patents) – which is consistent with their cultural focus on teams rather than individuals – Danish companies were ahead in all other areas of IP management – significantly in having a nominated IP Coordinator.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  27. 27. Learning points for businesses in making their innovation journey value ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  28. 28. We identified those innovation journey practices which were most strongly correlated with innovation performance Correlation of innovation journey practices v Innovation Performance Correlation with Innovation Performance Innovation Practice Commentary We examined the correlation of individual innovation practices with overall innovation performance and ranked the innovation practices accordingly. Four of the Top Ten ranked innovation practices related to IP Management and Three of the Top Ten related to the Prepare for Market stage. Interestingly, areas we might have expected to appear here, such as Product Development practices are absent. This tells us that idea protection and market preparation practices are the two areas with highest correlation with innovation performance – based on the findings from this study.Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
  29. 29. In conclusion, we made a number of key findings from the study 1. We are unaware of other studies that explore the innovation across the complete journey from ideas to value. 2. Overall our study found significant correlation between innovation journey practices and ultimate innovation performance. 3. The biggest gaps between Innovation Leaders and the others, in innovation journey practices were in Idea Exploration, Market/Launch Preparation and in IP Strategy & Management. This suggests that these three areas are the most critical in determining innovation success. This is an issue for many businesses whose existing New Product Development processes rarely cover these key front and back-end activities. 4. Leaders had a noticeably higher level of user focus across the innovation journey than did other companies and we would conclude that this is a key enabler to their higher innovation performance. 5. In contrast, practice areas that might have been expected to have high importance – such as Product Development – show little difference in practice between Innovation Leaders and the others. 6. Intellectual Property (IP) management practices had the highest correlation with overall innovation performance. We believe that this is as much an outcome of being an effective innovator as an enabler to becoming an effective innovator. 7. Overall, there was generally little overall difference between the UK and Danish participants. 8. The study also confirmed that those companies practicing significant Open Innovation today were more likely to have higher innovation performance than those who were not. value 9. The study sample was too small for valid comparisons between business sectors. ideasInnovation Journey Study – February 2011 1. As defined in the F4i innovation model on page 8 ©2011 Codexx Associates Ltd
  30. 30. We make the following recommendations for businesses, based on the findings from the study 1. Increase user focus throughout the innovation journey with the ‘voice of the user’ represented throughout the end-to-end innovation process. 2. Keep flexible to enable late changes from users - a key practice of innovation leaders. To enable this, ensure there is sufficient flexibility in the product architecture to enable changes and enhancements with minimal impacts on time-to-market and cost. 3. Focus on users not customers. They may well be the same, but in a B2B (business to business) relationship they are not. When it comes to product innovation, it is the users who are key. 4. Examine your current NPI/NPD process. A key learning point from this study is that it is in these front and back-end areas that are critical to innovation success. 5. Give more emphasis to the management of IP (Intellectual Property) in your innovation processes. IP can offer key strategic benefits if managed effectively. A key starting point is to develop a strategy for IP within the business. 6. Review your overall innovation system. Whilst the innovation processes as reviewed in this study are a key enabler to innovation success, there are other key factors such as Leadership, Culture and Strategy within the business that are major determining factors in innovation success. value To request a full copy of this report contact us via ideasInnovation Journey Study – February 2011 ©2011 Codexx Associates Ltd