Steps For Successful Innovation

CHAPTER
2
Steps for Successful Innovation
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ontrary to ancient myths, successful innovation does not depend on a ash of inspirationthe lightbulb going on over the inventors head. Taking effective steps greatly improves the odds for success. This includes clear recognition of the role of innovation within the enterprise.
THE ENTERPRISE CONTEXT

Effective innovation is part of product acquisition, which in turn is one of the four generic enterprise processes. All enterprise activities are carried out by one of these four processes. Financial success requires being good at all four. A breakdown in any one of the four can quickly throw the enterprise into danger of bankruptcy.
SU P PL Y
ETING K AR
CH
INTEGRATION AND DIRECTION

FIGURE 2.1 The four enterprise processes.
N AI
S A L ES
&
12 I EFFECTIVE INNOVATION
THE PRODUCT-ACQUISITION CONTEXT

Now we will delve further into the Product Acquisition process itself to better understand the role, context, and scope of Effective Innovation. Successful product acquisition is done as shown in Figure 2.2. Product acquisition, as shown in Figure 2.2, has ve steps: 1. 2. 3. 4. 5. Effective Innovation Business strategy/vision Product-portfolio architecture Product pipeline (Detailed development) Market feedback, and product support in the eld
Thus, Effective Innovation is one of ve steps for successful product acquisition. Effective Innovation provides new product concepts at the total system, subsystem, and component levels. These new concepts already have reliability designed into them. They make the large improvements in the performance-to-cost ratio. These new concepts can include new production and eld-support processes. Business strategy and vision denes the characteristics that new products need to have to be winners in the marketplace. This includes market forecasts, customer value propositions, and the competitive prole. This also provides information about which innovations will have the greatest business signicance. Product portfolio simply means all of the products that the enterprise has to offer. Each of the boxes in Figure 2.2 represents a product family, which consists of two or more products. The architecture defines the market; the characteristics of the products; the subsystem concepts; the packaging of the subsystems; the overall interactions such as the timing diagram, the flow of energy, material, and information; relevant standards; and the supporting value-chain plans. This includes modularity and reusability. The Product Pipeline represents the ow of each product through detailed design and development. In this activity a plethora of small decisions must be made quickly and correctly to apply the learning of many decades of experience.
GLOBAL ECONOMY
MARKET FEEDBACK
BUSINESS STRATEGY/VISION PRODUCT PIPELINE
PRODUCT PORTFOLIO ARCHITECTURE
OUTPUT METRICS Customer Value Customer Satisfaction Customer Loyalty Revenue/Profit Market Share
COMPETITION
ALL AVAILABLE TECHNOLOGIES
13
EFFECTIVE INNOVATION REUSE
Quality Cost Delivery
CORPORATE INFRASTRUCTURE AND CORE CAPABILITIES WORLDWIDE SUPPLIER BASE
FIGURE 2.2 The product acquisition process.3
3 Edited from the process rst developed within the Center for Innovation in Product Development at the Massachusetts Institute of Technology (CIPD/MIT).
The fth activity is Market Feedback. The voice of the customer is obtained to understand the reactions of customers to the new products, and learn what characteristics they would like to see in future products. Market Feedback also includes analyses of sales to determine what characteristics and features actually drive sales. In addition to the ve activities of product acquisition, there are two ambiance contexts that affect product acquisition. These are represented in Figure 2.2 by the outer rectangles that enclose the ve activities of product acquisition. The rst is the corporate infrastructure and core capabilities. If this is supportive, then effective innovation has a chance to succeed. That in turn is embedded in the world at large. Effective innovation cannot do much to change these contextual elements. It is important to be aware of them, and to act in accord with them.
EFFECTIVE INNOVATION PROCESS

Effective innovation has six steps: 1. Technology strategywhat to focus on. 2. Concept generationapply the historical patterns of invention for success. 3. Concept selectionpick the best before investing. 4. Robustness developmentearly achievement of reliability and integrability. 5. Technology readinessdont transfer any technology before its time. 6. Technology transfereffective delivery to portfolio architecture and the product pipeline. When each of these six steps is done well, innovation will be effective. In the current typical industrial practice at least one of the steps is not done well, and the effectiveness of the innovation efforts suffers. Often there is great emphasis on the step of Concept Generationthe invention itselfand the other ve steps are undertaken cursorily or not at all. The core of this book is a chapter on each of these six steps, beginning with the next chapter. First we concentrate on the context for Effective Innovation. Even when the six steps are effective, commercial success can
STEPS FOR SUCCESSFUL INNOVATION I 15
TECHNOLOGY STRATEGY
CONCEPT GENERATION
CONCEPT SELECTION
ROBUSTNESS DEVELOPMENT
TECHNOLOGY READINESS
TECHNOLOGY TRANSFER
FIGURE 2.3 Six steps for effective innovation.
easily be threatened by failures in the contextual activities. Forewarned is forearmed, so now we discuss the context for effective innovation.
INTERACTIVE ACTIVITIES FOR EFFECTIVE INNOVATION

There are three critical interactive activities that greatly inuence the successful performance of Effective Innovation. The three important interactive activities are focused on three questions: 1. What latent needs are unsatised? 2. Which technology integrations are important? 3. What are the important market segments?
GLOBAL ECONOMY
MARKET FEEDBACK
BUSINESS STRATEGY/VISION
PRODUCT PORTFOLIO ARCHITECTURE
COMPETITION
WHAT LATENT NEEDS ARE UNSATISFIED? WHAT INTEGRATIONS ARE IMPORTANT?

REUSE
IMPORTANT MARKET SEGMENTS?
PRODUCT PIPELINE
OUTPUT METRICS Customer Value Customer Satisfaction Customer Loyalty Revenue/Profit Market Share
ALL AVAILABLE TECHNOLOGIES
16
EFFECTIVE INNOVATION
Quality Cost Delivery
CORPORATE INFRASTRUCTURE AND CORE CAPABILITIES WORLDWIDE SUPPLIER BASE
FIGURE 2.4 Three important interactive activities.
WHAT LATENT NEEDS ARE UNSATISFIED?

The greatest opportunities for high-return innovation center around unsatised latent needs. Examples are Chester Carlsons invention of the xerographic copier and the Sony VCR. Chester Carlson realized that there was a huge latent need for a copier. Most businessmen were confused because the existing technology for making copies was terrible, so few copies were made. Therefore, businessmen who thought themselves prudent dismissed the innovation for making copies because the nancial news didnt report big revenues for copier companies. The crucial fact that the prudent businessmen missed was that there was a huge latent desire for a machine that would make copies efciently. One specic aspect that the prudent businessmen had overlooked was that the copies would be good enough to be used as originals to make more copies. Xerography enabled an explosion in the number of copies that were made. When there is a large unmet latent need, its characteristics can be summarized in a few characteristics. Carlson brilliantly perceived the three critical outcomes: 1. Dry processthe name xerography that was coined means dry printing. 2. Automatic processpush a button and get a copy. 3. Good image qualitythe copy is better than the original was the amazed reaction to the Xerox 914 copier when it was introduced in 1960. Another example is the Sony VCR. Ampex, an American company, rst demonstrated practical videotape recording in 1956. Ampex thought of the VCR primarily in terms of its use by professional recording studios. Therefore, their technology was big and expensive. At the same time RCA further demonstrated its loss of innovative culture. At a meeting in the late 1950s, the company debated the question: Can the Japanese possibly make a TV recorder for under $2,000. Sony saw that there was a large latent need for a VCR that was sufciently small and cheap that consumers could have one or more in their home to play and record TV programs. By meeting this latent need Sony got the rst-mover advantage for the important home VCR market.
To be rewarding, effective innovation activities have to be aimed at meeting needs that are important to customers. The opposite of this is the greatly feared playing around in the sand box. One of us (Clausing) played a role in bringing Quality Function Deployment (QFD) into the United States. Can QFD be used to focus effective innovation on technologies that will benet the customers and the enterprise? Notice that Chester Carlson did not need QFD. He wisely identied the three characteristics that were critical to satisfy the latent need for copiers. The Xerox 914 featured these three characteristics, which led to its phenomenal success. When there are only three characteristics that are critical for success, QFD is not needed to keep the team focused on the requirements. When QFD is needed it is because of Millers Law. Miller found that humans can deal effectively with seven items in short-term memory. The obsolete ad hoc development process required its practitioners to juggle hundreds of items in short-term memory. This attempt to violate a basic law of nature doomed the ad hoc approach to failure. The purpose of processes and methodologies is to avoid this failure by greatly reducing the demands on short-term memory, and also to benet from experience. However, Chester Carlson was not challenging Millers Law. When the latent demand is far from being met, only a few characteristics are needed for the initial success. As an industry becomes more mature, a plethora of detailed improvements are needed for competitive advantage. Many of these still require effective innovation. Now some form of QFD can be helpful to focus effective innovation. Basic QFD is used primarily to guide incremental improvements that dont require innovation. Most innovation opportunities fall somewhere between the watershed innovation of Chester Carlson and incremental improvements. For the vast majority of growth-innovation opportunities it is important to use the subtle tools that are associated with QFD, especially contextual inquiry, the Kano diagram, and the Master House of Quality (Cohen, 1995) In bringing in the voice of the customer we focus on the outcome that is desired by the customer. We dont ask the customer to innovate the solution that will provide the outcome. Rather, we learn how the customer would like the innovation to affect him. Then we can innovate a solution that will have strong business potential. This is the essence of
contextual inquiry. Using the marketplace to focus effective innovation on the rewarding opportunities is the subject of the article Turn Customer Input Into Innovation (Ulwick, 2002).
WHAT TECHNOLOGY INTEGRATIONS ARE IMPORTANT?

Innovation often occurs at the level of subsystems and components. Leveraging this type of innovation with the best technology integration is often critical to success. Innovations add their greatest values as integrated systems. All too often several innovations at the level of the subsystem and components, each of which is brilliant in the eyes of their champions, are integrated together with inadequate understanding. They do not play together elegantly, and the result is disappointing. The broad strategic aspects of this are well covered in the book Technology Integration (Iansiti, 1998). An example of one type of Technology Integration failure was reported by Henderson and Clark (1990) for the optical-aligner industry. These aligners are used to align the photolithographic components in the production of microchips. The architecture had four major changes, and the company that had been the previous leader lost out in each change. Leadership went from Cobilt (contact aligner) to Canon (proximity aligner) to Perkin-Elmer (scanning-projection aligner) to GCA (stepper aligner, Gen 1) to Nikon (stepper aligner, Gen 2). The basic components of the aligners remained the same, with incremental improvements, throughout these changes. The primary innovations were in the interfaces between the components. The previous leader always failed to appreciate the new signicance of these interface innovations. The improvements in the interface technology were called architectural innovations by Henderson and Clark. They contrasted this with component innovations. The previous leaders who lost out when the new architectural innovations were made still had good component technology, but it was not integrated in the best way. The TRIZ perspective on the technical aspects of this problem is presented in Chapter 3. Henderson and Clark found that the failure to appreciate the significance of architectural innovations was associated with the typical
organizational structure. Each company had good component teams, but inadequate attention to the interfaces. They looked at the new architectural innovations and concluded that the components were not innovative, so the new competition could not be a big threat. In the traditional organization, inadequate attention was paid to the interfaces. The process of overcoming these organizational problems is discussed in Chapter 9. Some of the difculties of technology integration are due to failures of technology readiness. Overcoming of these difculties is covered in Chapter 7 of this book.
WHAT ARE THE IMPORTANT MARKET SEGMENTS?

Sometimes good innovation does not ensure business success because it is not applied to the best set of market segments. A strong example is that of disk drives, which have been well described in the book The Innovators Dilemma (Christensen, 1997). In the early days of disk drives the storage density (information per unit area) was small, and so the battle was to increase the storage density. After a while this became a straightforward march up a curve similar to that of Moores Law. Storage density steadily and rapidly increased, which opened up an opportunity to create new market segments by making new trade-offs among product characteristics. Some disk-drive producers maintained their focus on maximum total storage capacity. They thought only of the customers who needed the maximum storage. Other enterprises saw opportunity. The storage density was now so large that some total capacity could be traded off to achieve smaller size and much lower cost. This t the needs of the users of smaller computers. The companies that did not recognize this opportunity suffered in the marketplace.
BARRIERS TO BEWARE OF
In the previous section we discussed the three interactions that can affect the performance of Effective Innovation itself. Beyond that, there are barriers to total success that can block the successful results of Effective Innovation from achieving commercial success. If any of the
other elements of product acquisition or the other enterprise processes are weakly done, the high-potential new technology that has been successfully developed during Effective Innovation will be blocked from success in the market. Here, we give a few case studies to illustrate the role of collateral innovations.
WATT AND THE STEAM ENGINE

In 1765 James Watt made a huge improvement to the Newcomen engine, which had been the dominant steam-engine technology for 50 years. Watt added a separate condenser, which reduced the coal consumption by 75%. This huge improvement changed the steam engine from a device that was economical in only a few applications to a technology that brought economical advantage in many applications, and powered the industrial revolution. However, initially Watt was hampered by problems of the supply chain and the enterprise infrastructure (integration and direction). He had neither, and did not tend to personally be strong at either. The number-one production problem was the difculty of boring the cylinder with precision that was sufcient to enable the steam to be sealed. By good luck Wilkinson had just invented an improved boring mill. Furthermore, he wanted an engine for his factory. That solved the major production problem. The remaining production problems and the infrastructure problem were overcome by Watts alliance with Matthew Boulton. Boulton was a leading manufacturer of the time. Also, he was good with politicians, and was able to secure a 25-year patent extension. Without the latter, the economics of steam-engine production probably would not have appealed to Boulton. So we see that Watts invention was able to become a huge commercial success because major changes in the supply chain and enterprise infrastructure became available to Watt.
CARLSON AND XEROGRAPHY

Chester Carlson found existing scientic effects, and integrated them into an architecture that did dry imaging. The photo-optical material had to be greatly developed, and it was 22 years from conception to the rst ofce copier.
The manufacturing cost of the early copiers was very high, which caused a potential problem. Ofce workers were not accustomed to making copies. Would ofce managers be willing to buy an expensive machine to do work in a new way? Here Xerox made a collateral innovation in sales and marketing by leasing the copiers. This gave potential customers the opportunity to try the new technology without paying a large amount of up-front money.
CANON COPIER INTRODUCTION INTO THE UNITED STATES

In the early 1970s, the primary Xerox patents were starting to expire. This led to discussion within Xerox as to what the new competitive environment would be like. It was recognized that some Japanese companies, such as Canon, were making good small copiers for the Japanese market, and were potential competitors in the United States. However, the Xerox executives were condent that they could easily defeat any threat from Canon: Xerox had a strong sales and service organization; Canon had none for copiers in the United States, which was seen as a hurdle that Canon could not overcome. Canon developed a very clever strategy by designing a copier with all of the frequent- service items in one module that could be easily changed by the user. Then they sold their copiers through dealers. They didnt need a strong sales and service organization. Xeroxs market share of small copiers went from 80% to 8% in four years.
CYLINDER-VALVE PAVING BREAKER

When I (Clausing) was a young engineer, I worked on a new paving breaker that technically was a radical departure from the previous technology. Both the old and the new paving breakers were driven by compressed air, but otherwise they were very different. When we started our project an analysis had shown that if the paving breaker worked as it was intended to function, it would take a 180-pound downward force from the operator to hold it down. Obviously no one could push down so hard for very long. The old-timers scoffed that it showed the analysis was not worth much.
Lo and behold, experiments proved that the analysis was correct! The average operator only provided half or less of the necessary force. The breaker compensated by hitting just one solid blow out of three. Armed with this knowledge, we designed and developed a new breaker that hit only half as many blows per minute, but each blow was very effective. We also designed in a vibration isolator and an exhaust silencer. The operators loved it because it was easier to hold and much quieter and it broke concrete much faster. Naturally it was a big commercial success, right? Wrong. The sales department was not ready for a radical departure. All existing breakers looked and performed the same. The salesman got orders by giving the best whiskey as a present. Confronted with a new technology that would require a change in their selling mode, the sales organization simply dug in its heels. So technological innovation was rendered ineffective by failure to make the necessary collateral innovation in the enterprise process of sales and marketing.
LESSONS LEARNED
If Watt had not obtained help on supply chain and enterprise infrastructure, we would never have heard of his great new technology. If Xerox had not made the sales and marketing innovation to lease their copiers, Carlsons invention would have languished. Canon made a great success by coupling the effective technical innovation with innovation in marketing and sales to circumvent the great Xerox advantage. The cylindervalve paving breaker was not a commercial success despite its great technical superiority, because sales and marketing did not make the necessary innovation in their process. These critical innovations in other enterprise processes are beyond the scope of Effective Innovation, and thus beyond the scope of this book. Our advice is to be alert, and exercise your inuence to the maximum to ensure that the necessary collateral innovations are being developed so that external barriers to the commercial success of the superior technical innovations are avoided. We will say a little more about this in the chapter on management, Chapter 9.
SUMMARY
Excellent innovation is done by a six-step process, which will be described in the core of this book. For effective innovation to pay off, it is important that all of the contextual activities be done well. Excellent innovation can be irrelevant if the focus is on unimportant needs, poor technology integration, and/or bad market segmentation. However, these pitfalls are widely recognized and have been much written about. In this book we concentrate on effective innovation itself. This is the hard core on which all else is based. In nearly all current innovation activities there are major opportunities to improve the six steps of innovation. We start in the next chapter with technology strategy.

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CHAPTER

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THE ENTERPRISE CONTEXT

INTEGRATION AND DIRECTION

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THE PRODUCT-ACQUISITION CONTEXT

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BUSINESS STRATEGY/VISION PRODUCT PIPELINE

PRODUCT PORTFOLIO ARCHITECTURE

ALL AVAILABLE TECHNOLOGIES

EFFECTIVE INNOVATION REUSE

Quality Cost Delivery

CORPORATE INFRASTRUCTURE AND CORE CAPABILITIES WORLDWIDE SUPPLIER BASE

FIGURE 2.2 The product acquisition process.3

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EFFECTIVE INNOVATION PROCESS

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