STRUCTURINGFORINNOVATIONUNDERSTANDING HOW COMPANIES CANBEST APPROACH INNOVATIONTERM PAPER ANALYSIS FOR MANAGEMENT OFTECHNOLOGYBy Mike Johnson – Spring Semester 2012
Agenda Why I chose this topic My experience and observations Innovation in Todays Companies Incremental, Radical and New Products Attitudes towards how to create innovation Typical structures to create innovation Examples of Success Key Insights A proposed model Additional Considerations
Why I chose this topic My experience on innovation projectsInnovation Funnel Leadershi R& p Support D Innovatio n Team Meeting s (a lot) Ideas Radical Incremental Incremental (low impact) (High impact)Output Never Usuall Rarely
How Companies View Innovation My experience confirmed What Companies Often What Companies Say Typically Do Only 27% state innovation is Innovation is top 3 priority formally integrated into their towards growth strategic planning process. Focus primarily on developing View “breakthrough” innovations new products and services would most impact performance (Incremental) Remain risk adverse at the top Believe that accepting failure is a which cascades down the necessary means to innovation organization Believe that people and culture Don’t incorporate innovation are core drivers towards metrics into performance reviews innovationSource: McKinsey Survey on Innovation 2007 (1)
Various Innovation Structures And their characteristics Centralized Decentralized Hybrid 26% 41% 32% May have core Innovation embedded innovation team that Core Innovation Team in business pushes innovations units/functions through business units Budgets may be Dedicated innovation Budget are business shared between budget unit specific innovation team and business unit More focused on Less focused on Strategic direction “game changing” “game changing” typically centralized innovations innovationsSource: Innovation Industry Pulse Poll (5)
Common Sources of Innovations Ethnography Technology External Research Changes Sources Internal Sources Internal Employees Brainstormin g Reactive Customer Sales Solutions Market Structure Macro Changes Trends and ShiftsFew companies create structures, processes and expertisearound innovating around external sources of innovation – the typical source for break through innovations
The People Side of Innovation 40% of top managers state they do not have the right kind of employees to foster innovation (1) The IdealInnovation Talent How many individuals like this“Intrapreneur” mentality gravitate towards large organizations? Ability to turn ideas into How many large organizationscommercialized products provide a culture and capability (innovation) for this person to thrive? Risk taker
Innovation Traits and MethodsWhat companies value Key Skill Sets Key Activities Forward-thinking (visionary) Brainstorming Highly strategic and creative Collaboration Big picture oriented Research Cross communication Project management (knowledge sharing)Are these truly the best skill sets and activities to harness innovation?
Examples of Success Compan Their Strategy y Integration of R&D into the business units to remain close to the market. Develop “pull” based solutions Everyone is an innovator – Allowing employees to dedicate 20% of their time to self-directed projects to spark innovation. Super centralized approach dedicates funds and decision making to dedicated innovation teams. Speed to market is their aim. Pure passion, focus and excellence. The long benchmark for innovation, Apple has succeeded in innovation with a formula hard to duplicate. A founding CEO’s passion and vision, focus on excellence and the next big thing. At Apple, Radical innovations are the expectation, not a “nice to have”.Source: The Organizational Structure of Innovation (4)
Innovation Traits and MethodsKey Insights Research has called into question the value ofcollaboration and teams as a means to innovation creation (7)“Work alone. Not on a committee, not a team” – Steve Wozniak onInvention Key Insight #1 Innovation is the commercialization of an invention. Companies may need to rethink the approach of attacking both of these components as a team sport. There may be tremendous value of singular focus on the invention of potentially innovative solutions.
Innovation Traits and Methods Key InsightsThe sources and risks of radical innovations are very different than those of incremental ones. Key Insight #2 Radical Increment al If companies wish to do a better Externally Internally job of identify and leveraging Driven Driven radical innovations, they must Competency Competency acknowledge how different they Mitigating Enhancing are from incremental ones. This Outside may warrant structuring Internal expertise innovation resources for radical expertise OK need innovations differently. Higher risk Lower risk tolerance tolerance
Innovation Traits and MethodsKey Insights The skill sets needed to identify, invent and commercialize an innovation may be notably different. Key Insight #3 Companies may need to structure their innovation approach around the three very different phases of innovation. Identification. Development and Commercialization. Many companies center their innovation teams around forward thinking, customer oriented professionals. These teams may be strong at identifying research/ethnography based innovations, but weak at recognizing technology driven.
Innovation Traits and Methods Key Insights Asking internal innovation teams to identifytomorrow’s disruptive technologies that will mitigate the competencies they’ve built around can create blinders. Key Insight #4 Companies serious about identifying and leveraging disruptive (radical) innovations may have to adopt spin off or isolation strategies to ensure current competencies do not interfere with future innovation opportunities.
The Solution A Model Structure (proposed) External Inputs Technology and Market Changes Macro Trends and Shifts RadicalBusiness Innovation IncrementalUnit Level Team Innovation Team Inputs Internal Location External Location Independent Budget Independent Budget Report direct to C- Customer Internal development Suite needs Internal reporting External structure DevelopmentNew products Company Level Inputs Innovation a part of all associates responsibility Self directed projects (Google 20% rule)
The SolutionA Model Structure (proposed) Benefits • Multiple sources of innovation • Focused innovation teams based on differing sources and needs for radical and incremental innovation • Innovation embedded in culture at all levels • Radical innovation externally focused • Centralized decision making and budget to encourage speed to market • Customer needs remain in forefront for incremental innovation and BU teams • Dedicated resources to innovation teams
Additional considerations Additional Considerations when Structuring for Innovation No one size fits all Industry considerations (Mature vs. Emerging) Resources and capability (financial, people, culture) Company size Competitive landscape
Sources1. Barsh, Joanna, Marla Capozzi, and Lenny Mondonca. "How CompaniesApproach Innovation: A McKinsey Global Survey." Mckinseyquarterly.com. TheMcKinsey Company, Oct. 2007. Web. 29 Apr. 2012.<https://www.mckinseyquarterly.com/How_companies_approach_innovation_A_McKinsey_Global_Survey_2069>.2. Bessant, John, Kathrin Moslein, and Bettina Von Stamm. "In Search ofInnovation."WSJ.COM. Wall Street Journal, 22 June 2009. Web. 29 Apr. 2012.<http://online.wsj.com/article/SB10001424052970204830304574133562888635626.html>.3. "8 Ways to Foster Innovation in Your Company." Inc.com. Inc Magazine, 16 Apr.2010. Web. 29 Apr. 2012. <http://www.inc.com/guides/2010/04/fostering-innovation-in-companies.html>.
Sources4. Wentz, Dr. Rolf Christian. "The Organizational Structure of Innovation: HowToyota, Procter & Gamble , GE, 3M, IBM, Google, Microsoft, Sony, Hewlett-Packard, DuPont, Honeywell, Whirlpool." The-innovation-machine.com. 20 Apr.2007. Web. 29 Apr. 2012. <http://www.the-innovation-machine.com/?p=83>.5. "Survey Reveals Corporations with Centralized Innovation Departments MoreLikely to Have Focused Efforts." Pitchengine.cm. InnovationEdge, 2011. Web. 29Apr. 2012. <http://www.pitchengine.com/innovationedgellc/survey-reveals-corporations-with-centralized-innovation-departments-more-likely-to-have-focused-efforts>.6. Christensen, Clayton M. The Innovators Dilemma: When New TechnologiesCause Great Firms to Fail. Boston, MA: Harvard Business School, 1997. Print.7. Cain, Susan. Quiet: The Power of Introverts in a World That Cant StopTalking. New York: Crown, 2012. Print.