Demystifying corporate innovation. Releasing creativity.


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We examine the management practices which contribute to innovation and set out measures for tracking whether innovation is working. The idea is to remove barriers to creativity in a corporate setting.

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Demystifying corporate innovation. Releasing creativity.

  1. 1. Corporate Innovation OnlineIn this presentation we de-construct and re-build anorganization’s management practice to focus on innovation.We set out measures which can be used to assess whetherinnovation is working. Releasing creativity from its‘surrounds’ is the challenge!Web site: 1
  2. 2. The ‘surrounds’ ofcorporate innovation Table of Contents Leadership Overview De-constructing Organization and management of innovativeness day-to-day affairs Management practices Idea generation and realization impacting innovativeness Measurements of innovativeness Creativity Stages of innovation management 2
  3. 3.  Creativity, as a key part of the innovation process, remains mostly a mystery, and will likely remain so for some time to come. Creativity is at the centre of innovativeness and yet is the least understood. While creativity remains much of a mystery, other aspects of corporate innovativeness are much better understood and yet, remarkably, often missed in practice. De-constructing a corporation’s innovativeness can be part of a process which ultimately provides an opening for creativity. 3
  4. 4.  The toughest nut to crack is creativity and there is no solution to this aspect of innovation except for having the right people and more specifically, their brains. The ‘surrounds’ of creativity are, however, more amenable to understanding and therefore able to be restructured and improved upon. Measurement is the best way to start to really understand if innovativeness is working. 4
  5. 5.  Other aspects of innovativeness are much more open to modification than creativity. There are at least three themes to understanding the management practices which encourage innovativeness – the ‘surrounds’. First, obviously is leadership, nothing happens unless top level support for innovation at Board and CEO level is evidenced. Secondly, there are better and worse ways of organizing and managing a corporation and each practice, by itself or with other practices, can impact innovativeness. Thirdly, and specifically concerning the movement of ideas within the corporation, there are practices which can stimulate or retard the flow of ideas. Without ideas - the only evidence of creativity at work - there is no innovation. Innovativeness becomes marginalized. 5
  6. 6.  A recent study has shown that innovation per se cannot only be studied and measured but also nurtured and encouraged. Creativity, as Einstein put it ‘is the residue of time wasted’. Examples provided are drawn from the corporate practices of highly-innovative companies such as 3M; which we have researched at length (see 3M profile on the web site). Part of measurement – and nurturing – is to know which management practices lead to innovations. The Economist, March 17, 2012, a review of a new book by Jonah Lehrer, Imagine; How Creativity Works, published by Canongate 6
  7. 7. ManagementpracticesimpactinginnovativenessWe segmentmanagementpractices into threethemes;• Leadership•Organization andmanagement of day-to-day operations•Idea generation andrealization 7
  8. 8.  Emphasis on short versus longer-term profits – F#1 Extent to which management explicitly looks for innovation – F#2 Planning emphasizes opportunities and not just cost reduction – F#4 Use of career ladders and recognition of innovators – F#7 Tolerance for risk in the planning process – F#9Leadership plays the key role in setting the ‘surrounds’. Five managementpractices, if recognized, can make a big difference to setting the climate - theculture – for the organization. 8
  9. 9.  Emphasis on management of people and their interactions – F#6 Degree of formal communications in the organization – F#10 Use of independent work groups – F#11 Management decisions with input from a broad cross section of employees – F#12 Formality of the decision process – F#13 Planning versus action orientation – F#15 Decentralization versus centralized hierarchy – F#18 Staff versus line involvement in the decision process – F#20 Simple practices ,which are well known, can be improved upon to create a climate which encourage people to share, trust, and engage in the process of innovation. Finding the right balance is the key! 9
  10. 10.  Tolerance for mavericks – F#3 Tolerance for failure – F#5 Tolerance for variation from a corporate norm – F#8 Mechanisms in place to reward innovators – F#14 Resources generally available for new ventures – F#19 R&D budget levels above the competition – F#23 Priming the ‘innovation pump’ is brought about by demonstrating tolerance on a number of fronts and by judiciously funding new ideas whether big or small. 10
  11. 11. What happens whenmanagement and the Board F#19; availability • F#5;tolerance for failure takes a hit of resources for and the company becomes more riskshift emphasis to profit new projects is averseimprovement – short term! seen to be • F#23; R&D budget put under heavyThe degree of ‘shift’ is as constrained scrutiny and likely constrainedimportant as the new focus. • F#12; management restricts input from staff overall in order to make difficult decisions • F#18; organization becomes more heavily F#15; managements centralized focus shifts to more • F#13; decision process taken to a new careful analysis - level of scrutiny and formality less action • F#11; authority granted to independent groups is curtailed • F#10; communication within the organization becomes more carefully spun and less frequent F#4; management • F#2; employees question managements shifts emphasis to real interest in being innovative rationing resources and less on looking • F#9; tolerance for uncertainty in the for opportunities planning process drops 11
  12. 12.  By breaking down the 19 management practices which impact innovativeness and innovation, we can assess the relative importance of each Factor and whether the organization has best practices in place; i.e. understanding the ‘surrounds’. The climate for change is dictated by the focus and statements from management and the Board. - stimulating innovation – because it is missing? - creating shareholder value – if the shares have been depressed? Knowing the current situation is basic to making a decision on what to improve and what to leave alone. The next step is to measure, as best one can, whether innovation is working – or not. 12
  13. 13.  Many corporations use as a measure of innovation the percentage of new products which have been introduced over the last 5 years and seek to keep this figure at 25% or better (see P&G profile on the web site). The hypothesis is that the product line is continually being refreshed, new business platforms established (See DSM profile on the web site), and that change will bring about growth and profit. The percentage of new products is an indication of product-inspired innovation but is, in reality, only one part of the answer to the question; is my corporation’s innovativeness in place and working well? Innovation goes beyond the introduction of new products! 13
  14. 14. • New Products • Business • New business Process models/platforms Continuous Improvement High risk Low risk Investment in Investment in creativity in reward systems new and to capture andEvery innovation emerging implement new technologies ideasrequires aninvestment of Low riskfunds, time, and Medium risk Investment inemotion and common Investment in technologies andcomes with risk. technologies to creativity to keep up to date differentiate a product or service • Product Line • New Extensions industries and penetrated Enhancements 14
  15. 15. New products, business Business Process andmodels and platforms continuous improvement•Patent applications •Reduction in cost per unit•Patents achieved •New technologies adopted•Ability to hire SMETS personnel •Service levels improved•Number of ‘breakthroughs’ •New customers added in existing markets•Rewards from external sources •Revenue per employee•Publications in prestigious journals •Revenue per units of production•Licensing fees derived •Measurable quality improvements• New products as a % of current offerings•Dropping under- performing products Product line extensions and New Industries penetrated enhancements •Number of collaboration linkages •Stakeholder (employees, suppliers, customers) surveys •Ideas generated and in the pipe-line •Results of ‘exit’ interviews with innovators •Ideas generated and implemented •Risk profile at target level •New markets entered 15
  16. 16.  Surveys that provide customers opinion of your company’s innovativeness and its brand image – as compared to the competition. Financial analyst rankings and feedback from investor relations broadcasts to the media. Stakeholders’ (in this case suppliers, investors, etc.) opinions on the ‘innovativeness’ of your company compared with their opinion of the competition. New sales to new customers - marks the rate of new customer acquisition reflecting the efforts to enhance the brand. Measurements of incidence, or rate of increase, of attractive, internally generated investment opportunities (the size of the pipe line) which come under review by senior management and the Board. Increase in the value of intellectual property generated from internally-sourced ideas; augmented by acquisitions of IP from other organizations. The information could be broken out by IP for existing versus new product initiatives. Share price premium attributed to the company’s reputation for innovativeness. Conducting an analysis focused on employee retention and ease of attraction. Collaborations and partnerships reflecting the company’s reputation for its innovativeness The percentage-of- time key executives/Board members spend on innovation as a specific topic of a meeting, seminar or workshop. 16
  17. 17.  The on-line survey, one of the tools used to measure innovativeness, addresses employees and stakeholders’ opinions regarding 25 Factors which provide metrics for corporate innovativeness. Respondents are asked to provide their opinion on what would be an ‘Ideal’ situation and then asked for their opinion on their ‘Reality’. The difference is a measure of their concern The answers to three of the 25 Factors can indicate the presence of a problem. The answers to the remaining Factors provide a direction for making changes. Factor # Means of measurement Explanation Innovators are leaving the company – or not. Factor #21 – a huge gap between the ‘Ideal’ and ‘Reality’ 21 indicates the presence of an issue. Company has an innovative tradition – or not. Factor #22 – a tradition established and still exists? Establishing a 22 tradition is more difficult than keeping one! A sense that innovation is increasing or Factor #24 – probing in which direction innovation is trending? 24 decreasing. 17
  18. 18.  Do all or most employees appreciate the importance of innovation to the future of the company? Is management’s message regarding innovation getting through? Is what we do as managers, encouraging innovation thinking? What is the employee attitude to innovation? Are innovative people leaving the firm? Why? Is the starting point that the company already has an innovative tradition or is the view that this has yet to come? How do we identify our innovativeness? How broad and how deep is our innovativeness?In summary, the idea is to remove constrictions which interfere with therelease of ideas for improving productivity and shareholder value. 18
  19. 19. Stages of innovation and innovation management characteristics Innovation Start Up Rapid Growth Growth Mature Aging management Establishing credibility Developing a strong Management’s competitive position Maintaining a strong Maintenance of profit Exiting the business overall attention Entrepreneurship competitive position and market position Ongoing survival Survival Market share Specific new product development tasks Business model establishment Product enhancements Innovation effort Setting in place the New product quality and support and modifications Opportunistic only seeds of a culture for Customer feedback for success Search for innovation innovation Simple idea Non existent management system Full-fledged idea management system System maintenance Innovation Reward is skewed to Rewards migrate to Sophisticated reward system for full range ofmanagement systems share value other forms of innovation spectrum appreciation recognition Loose and informal, Some organizational Group performance Management lack of definition of definition required Decentralized structure responsibilities Individual and group Well defined responsibilities and accountabilities Individual performance performance Management’s Bordering on Open and non- Open and ad hoc Formal, delegation and control innovation style participative hierarchical Seeking outside Collaborative Virtually none outside collaborators; research Mainly Internal effort Managing outside collaboration initiatives the enterprise institutions etc. for new ideas Risk profile shifts from Likely casualty Cost reduction and continuous improvement, cost risk taking to more New products No new products during stage containment conservative 19
  20. 20. Revenue Per Employee/StoreUnleashing creativity $800,000 $700,000 John Deere (per Revenue per unit $600,000 employee)is the goal $500,000 $400,000 Starbucks (per $300,000 store NR/Total $200,000 Stores) $100,000 3M (per $- employee) 2007 2010 2009 2011 2008 2006 Leadership Organization and management of Selecting the appropriate day-to-day affairs measure(s) is a most important step. The choice will dictate the Idea generation approach taken at all levels in and realization the organization and impact the climate and the culture for innovation. Creativity The measures chosen then become the target for objective setting. 20
  21. 21. Benchmarking innovativeness Building and sustaining innovation Articulating innovation 21