The I Word: Moving Innovation from Research and Development (R&D) to Ideation and Realisation (I&R)

Alan McSweeney

Innovation Has Become a Ubiquitous and Meaningless Word

The word Innovation is being used and misused pervasively without clear definition, meaning or understanding Every organisation claims to be pursuing and driving innovation or offering innovation development services But are they? Innovation is not just about ideas Innovation is about driving the generation of good ideas and ensuring their appropriate adoption in order to generate value Innovation is or can be a process (that can be measured) Innovation is about generating business value an idea without implementation has little meaning
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Innovation =
Good Idea That is Defined and Validated + Appropriate Implementation and Adoption + Generation of Value

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Innovation Can Be
A new idea

OR
An existing idea or process that is improved

OR
An existing idea or process implemented or applied elsewhere

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Innovation

Is not necessarily one big idea

It can be lots of little ideas

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Innovation Is All About Value

Sometimes

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Value
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Value

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Innovation Extends Creativity To Implementation And Generation Of Value

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Its All About The Value

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Innovation Means

Acceptance of change innovation implies and requires change Innovation exposes an organisation to change A secondary affect of successful innovation is the willingness of an organisation to change To be good at innovation means to be good at change Innovation means welcoming change and being able to successfully deliver change Innovation means continuously challenging accepted conventions If you cannot change, you cannot innovate
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Being Good At Innovation Creates a Positive Feedback Loop (Virtuous Circle)

Better Experience, Greater Satisfaction, Greater Loyalty

Customers
Greater Recognition of Contribution, Greater Satisfaction, Greater Experience, More Interesting Place to Work

Employees Shareholders
Greater LongTerm Value Growth, Increased Market Share, Improved Perception, Increased Revenue and Margin, Customer and Employee Loyalty

Organisation
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Being Good At Innovation Creates A Positive Feedback Loop

Being Good At Innovation Means Accepting Change

Accepting Change Reinforces, Fosters And Encourages Innovation

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Strengths Of Being Good At Innovation

Organisation leadership has a personal role in fostering a culture of openness and risk tolerance toward innovation Use external partners and open sourcing to expand the pool of innovation ideas Use simple low-cost awards and recognition to encourage and reward innovation Ensure security policies do not inhibit innovation Set performance expectations for leadership traits that drive innovation Use lightweight, non financial criteria for initial evaluation of ideas Early-stage idea evaluation must rest on business judgement and not just quantitative criteria Ensure there is a fast, lightweight process for testing innovation ideas Focus on generating learning when making early-stage investments in innovation ideas Sequence the project to fail fast by testing for the most valuable learning first

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Classification Of Areas To Look For Innovation

Business Model
How Do You Make Money? How Do You Work With Other Organisations For Mutual Benefit? How Do You Create and Add Value To Your Products And Services? How Are Core Processes Supported And Enabled? How Do You Design Your Core Products And Services? How Do You Connect Or Provide A Common Platform For Your Products And Services? How Do You Provide Value To Your Customers Beyond Your Core Products And Services? How Do You Get Core Products And Services to Market? How Do You Communicate Your Core Products And Services? How Do Customers Feel When They Interact With Your Organisation And Your Products And Services?
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Finance Processes Products and Services

Networking and Alliances Core Processes Enabling Processes Product Performance Product System Service

Provision and Delivery

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Channel Brand Customer Experience

Classification Of Areas To Look For Innovation

Innovation can be pervasive across all aspects of the organisation Opportunities for innovation exist everywhere Innovation can be a structured process that can be learned, practiced, developed and improved

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Types Of Innovation
Radical Innovation Incremental Innovation Innovation By Reapplication

Fundamental Change Or Fundamentally New Categories Of System, Process, Concept, Device Disruptive, Radical, Discontinuous

Incremental Improvement Existing Of System, Process, Concept, Device

Application Of Existing System, Process, Concept, Device In A New Domain

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IT Innovation And Business Innovation

IT innovation can drive business innovation Innovation is important to IT because of the very high rate of change IT innovation can fundamentally change the way an organisation operates IT can support business innovation
Provide information and other support services Develop new systems, platforms, applications

IT can be a catalyst to innovation IT can also innovate within itself

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Analysis Of Volume Of Investment In Innovation Across Innovation Areas Investment In Innovation Area
Business Model

Finance
Networking and Alliances Core Processes

Processes
Enabling Processes

Products and Services Provision and Delivery

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Product Performance Product System Service Channel Brand Customer Experience

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Analysis Of Volume Of Investment In Innovation

Traditional R&D areas dominate Investment skewed in favour of products Narrow focus, especially on pure product

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Analysis Of Return Of Investment In Innovation Across Innovation Areas Value From Investment In Innovation Area
Business Model

Finance
Networking and Alliances Core Processes

Processes
Enabling Processes

Products and Services Provision and Delivery

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Product Performance Product System Service Channel Brand Customer Experience

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Analysis Of Return Of Investment In Innovation Across Innovation Areas

Returns do not match investment Small investment in non-traditional R&D areas Much greater return from smaller investments outside traditional R&D areas

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Comparison Of Investment And Return Across Innovation Areas

Business Model
Return Return Greater Than Investment Investment

Finance
Networking and Alliances Core Processes

Processes
Enabling Processes

Products and Services Provision and Delivery

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Product Performance Product System Service Channel Brand Customer Experience

Investment Greater Than Return

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Comparison Of Investment And Return Across Innovation Areas

Significant gap in returns across innovation areas Small investments in non-traditional areas yield significant returns Large investment in traditional R&D areas yield small returns Some of this can be explained by sustained pattern of investment in traditional R&D and history of low investment in improvements outside these areas
Latent available improvements achieved easily Nonetheless demonstrates innovation can be successfully applied outside traditional product-oriented areas to yield significant value

Need a wider definition of R&D to I&R - Ideation and Realisation

Identifying and implementing innovative ideas across the entire organisation

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Eliminating The Disconnect Between Innovation Investment And Value Generated

Develop Structured Approach To Innovation Decision-Making To Maximise Returns From Investment Decisions

Innovation Approach Now

Future Innovation Approach

Identify And Develop Innovation From Non-Traditional Areas Outside Standard R&D Activities
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Where And What Are The Innovation Ideas?

Innovation Area Business Model Networking and Alliances Core Processes Enabling Processes Product Performance Product System Service Channel Brand Customer Experience
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Radical Innovation

Incremental Innovation

Innovation By Reapplication

Innovation Metrics Measure Along The Innovation Process Revenue

Number of Innovation Projects By Type People Involved Speed of Innovation Projects and Change of Speed Cost of Innovation Projects Estimated Value of Innovation Projects and Change of Value Generate New Business Cost Reductions

Innovation Inputs
Budget Allocated

Innovation Process

Innovation Outputs

Number Of Ideas Generated %Age Of Ideas Piloted %Age Of Successful Pilots %Age Of Pilots Commercialised %Age Of Product/Services Launched
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Innovation Training Provided Innovation Library Size

Publications/ Patents

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Innovation Model For Ideation and Realisation (I&R)

Ideas Enter Innovation Process From Multiple Sources

Innovative Ideas Validated and Distilled

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Successful Ideas Implemented

Ideas Discarded Or Implemented In Other Ways

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Innovation Model For Ideation and Realisation (I&R)

Ideas analysed, validated and distilled as they move through the process Ideas exit the process appropriately
Not valid, not proven Not appropriate for the organisation but can be used or applied elsewhere Partially implemented Fully implemented

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Define Stage Gates For Ideation and Realisation (I&R) Process

Idea Prototype Business Case

Launch

Implement

Detailed Design

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Innovation Is About Value Obtained

Value = Return - Investment

Minimise Investment

Point of Best Value

Maximise Return

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Achieving A Balanced Approach To Innovation

Innovation needs to be balanced against run-the-business activities Too much innovation and associated organisation change can be disruptive and inefficient

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Achieving A Balanced Approach To Innovation

Ability of Organisation to Change

Decide on your innovation profile

Cost of Support

Industry Profile Budget Constraints Cost of Organisation Change Resource Constraints Risk/Reward Profile Total Investment Project Load Maintenance of Operations

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Attitude Inhibitors To Innovation And Change

Adopting innovation requires learning, training and management

Im not in product development. Why are you talking to me? Ive been here for 20 years and I dont see why we should change now. I am willing to support innovation 100% as long as it does not affect me. This is the way its always been done and its worked well up to now. Ive got 15 minutes to talk to you. Im very busy with important things. Belief that you know best Focus on short-term returns with no long-term focus Innovation is not the job of senior management Process will slow us down

Attitudes that require change

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Organisation Process Models Common Structure High-Level

At their core, all organisations have a common structure

Operational Processes With Cross Functional Linkages Vision, Strategy, Leadership, Business Management Management and Support Processes

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Organisation Process Models Common Structure High-Level

Innovation Leadership Comes From Here Direct Innovation New and Updated Products and Services - Comes From Here

Operational Processes With Cross Functional Linkages Vision, Strategy, Leadership, Business Management Management and Support Processes
Indirect Innovation New and Updated Support Processes Comes From Here

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Mapping Innovation Areas To Organisation Model

Business Model Networking and Alliances Core Processes

Operational Processes With Cross Functional Linkages

Vision, Strategy, Leadership, Business Management

Enabling Processes Product Performance Product System Service Channel Brand Customer Experience

Management and Support Processes

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Organisation Process Models Common Structure More Detailed

Vision, Strategy, Business Management
Vision and Strategy

Operational Processes With Cross Functional Linkages

Develop and Manage Products and Services Market and Sell Products and Services Deliver Products and Services Manage Customer Service

Management and Support Processes

Business Planning, Merger, Acquisition Human Resource Management Information Technology Management Financial Management Facilities Management

Governance and Compliance

Legal, Regulatory, Environment, Health and Safety Management

External Relationship Management

Knowledge, Improvement and Change Management

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Core Cross Functional Processes

Three cross-functional processes that are common to all organisations

Product/service delivery
From order/specification/design/selection to delivery/installation/implementation/provision and billing

Customer management
From customer acquisition to management to repeat business to up-sell/cross-sell

New product/service development

From research to product/service design to implementation and commercialisation

These processes cross multiple internal organisation boundaries and have multiple handoffs but they are what concern customers Cross-functional processes deliver value
Value to the customer Value to the company

Integrated cross-functional processes means better customer service and more satisfied and more customers Innovation works best when it crosses organisational functions
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Every Organisation Has Three Core Cross-Functional Processes

The customer sees across the structure and is not concerned with but is all too often aware of the operational elements, their complexity and lack of interoperability 1. Product/Service Delivery: from order to completion 2. Customer Relationship Management 3. New Product/ Service Development

The organisation sees the structure vertically and in a compartmentalised view and all to frequently does not see the customer viewpoint
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Organisation Value Chains

Value Chains

Value chains add value and confer competitive advantage when defined and linked Innovation needs to be cross-functional to add real value Cross-functional innovation team sees the complete picture and generates greatest value
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Projects And Innovation

Projects are about change and innovation

Innovations or changes to existing processes, systems, applications, structures

Organisations need to be good at two sets of skills

Running the Business (RTB) business as usual operations Change the Business (CTB) changing existing operations to survive or compete

Projects are the way of introducing innovation and change into organisations Projects tend to be multidisciplinary, involving some or all of:
Requirements gathering Solution design Hardware installation Product selection Software development or modification Testing Process change Organisation change Data conversion Implementation Parallel operation

Organisations need to be good at projects in order to deliver innovation and change

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Dimensions Of Being Good At Innovation And Change

To be good at innovation and change, three dimensions must come together within the organisation:
A clear vision for the organisation and the set of projects needed to deliver on the vision A proven capability to deliver projects quickly and effectively Focus on the realisation of expected business benefits and business value associated with the implementation of investments
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Ability to Execute Projects

Completeness of Organisational Vision

Effective and Proven Benefits Realisation Approach

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Dimensions Of Successful Innovation

Innovation Capability tools, techniques, methodologies for identifying and assessing innovation Innovation Process and Project Management being able to manage portfolio of innovation projects Implementation of Innovation being able to adopt innovation Value Management understanding and articulating business value of innovation Innovation Within IT being able to drive innovation within IT Innovation Measurement being able to measure innovation activities, skills and successes

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Innovation Value Management

Value management means being able to articulate the business value of innovation and communicate in the language of business Connect innovation activities to business value Use standardised measurements and metrics Create effective, appropriate and accurate business cases based on accurate understanding of costs and value

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Innovation Business Case

Impact Low High

Limited Extent of Adoption Pervasive

Simple Business Case

Complex Business Case

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Challenges Of Developing Good Cost Estimates

Requires detailed, stable, agreed requirements Agreed assumptions Access to detailed documentation and historical data for comparison Trained and experienced analysts Risk and uncertainty analysis Identification of a range of confidence levels Adequate contingency and management reserves

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Reasons For Good And Bad Cost Estimates

Effect i ve Unce Risk and r ta Ident Analy inty ificat s is Rang ion of a e of Confi De dence Docu tailed Level m s and H entation Adeq Train istor ua Conti e Data ical ngen te Exper d and cy an ien Mana Detai Analy ced geme d led, S nt sts Reser ves Agree table, d Requ ireme Agr n ts Assum eed ption s Unfa Techn miliar First- ology or Time Use Unre Unre alistic or liable Data No o Comp r Limited ariso Avail n Data able Proje ct Ins t abilit y Ineffe and U ctive Risk ncer Analy tainty s is Probl em Acces s Getting s to D ata Unre Assumalistic ption s New Pr ocess e

Unre Proje asonable ct Bas elin e Overo ptimi

sm

Comp le or Te x Project chnol ogy

Untra Inexp ined and er ie Analy nced sts Unre alistic Savin Project gs

Lost of reasons for and causes of inaccurate cost estimates

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Sources Of Risk and Uncertainty In Estimating Costs

Lack of understanding of the project requirements Shortcomings of human language and differing interpretations of meaning of project Behaviour of parties involved in the cost estimation process Haste Deception Poor cost estimating and pricing practices

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Specific Risks

Sizing and Technology

Overly optimistic developers Poor assumptions on the use of reused code Vague or incomplete requirements Not planning for additional effort associated with packages integration, testing

Capability
Mixed skills of team Optimistic assumption on development tools Optimistic assumption on productivity Geographically dispersed team making communication and coordination more difficult

Complexity
Tools Applications: software purpose and reliability Hardware limitations Number of modules affecting integration effort

Management
Managements dictating an unrealistic schedule Incorporating a new method, language, tool or process for the first time Not handling creeping requirements and change proactively Inadequate quality control, causing delays in fixing unexpected defects Unanticipated risks associated with package software upgrades and lack of support
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Market And Organisation Capability Analysis

Organisations need to understand what the opportunity from an innovation is and what is needed to exploit it fully Analyses
Growth-Share Matrix Analysis Marketing Strategy and Diversification Analysis SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis PEST (Political, Economic, Social, and Technological) Analysis

Quick analyses that will define what is possible and achievable

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Growth-Share Matrix Analysis

Market Growth

Stars
High
c

Question Marks

Value of Product/ Service

Relative Market Share

c High

Low

Cash Cows
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Low

Dogs
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Growth-Share Matrix Analysis

Cash Cows business units/products and service offerings with high market share in a slow-growing industry Dogs business units/products and service offerings with low market share in a mature, slow-growing industry Question Marks business units/products and service offerings growing rapidly, consume cash but with low market shares and not generating much cash
Have the potential to gain market share and become a star and eventually a cash cow when the market growth slows

Stars business units/products and service offerings with a high market share in a fast-growing industry
Stars become cash cows
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Growth-Share Matrix Analysis For Innovation

Where does innovation ideas fit into the Growth-Share Matrix Analysis Where does the potential lie? What has to be done to actualise the potential?

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Marketing Strategy And Diversification Analysis

Present New

Existing Markets

Market Penetration

Product and Service Development

New Markets

Market Development

Diversification

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Marketing Strategy And Diversification Analysis

Four possible growth strategies based on existing and new markets and products and services
Market Penetration - focuses on selling existing products and services into existing markets Market Development - sell its existing products and services into new markets Product Development - introduces new products and services into existing markets Diversification develops and markets new products and services in new markets

What approaches should the organisation take? What are the risks? What are the requirements?
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Organisational Capabilities To Create And Sustain Innovation

Set of core capabilities within an organisation to create and sustain an innovation function Being good at innovation means being having strong, welldeveloped and well-functioning capabilities in these areas Use this as a check-list for creating and managing innovation

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Organisational Capabilities To Create And Sustain Innovation

Innovation Vision Innovation Innovation Strategic Planning Vision, Innovation Funding and Strategy And Resource Allocation Management Innovation Portfolio Management Innovation Management and Leadership Acceptance and Tolerance of Risk Taking Innovation Collaboration and Openness Organisation, People And Innovation Capability Culture Development Innovation Organisation Roles and Responsibilities Innovation Recognition and Rewards Innovation Processes Innovation Frameworks and Innovation Tools Process, Tools, Innovation Value and Measurement Metrics Communication of Innovation Value
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Creation definition, communication and realisation of a vision for innovation Definition of the scope and nature of Innovation in line with business strategy Definition of sources of funding for innovation and appropriate allocation of resources based on prioritisation Management of the portfolio of innovation projects and activities Management and leadership support for driving innovation activities throughout the organisation Definition of appropriate attitude towards taking creative risks Level and scope of collaboration and maintenance of good behaviour, processes and practices that enable an environment of sharing, interaction and openness, fostering the open exchange of creative information Development of innovation skills and performance management for employees including defining career paths and implementing innovation training programs Definition of innovation roles/organisational positions and penetration of innovation activities as part of everyday work for all employees Creating a scheme for recognising and rewarding people based on contribution to innovation Integration of innovation processes within the lifecycle of innovation Identification and use of methodologies and tools for innovation Measurement of the impact from innovation through definition and use of innovation metrics that align with business priorities Communication of the impact from innovation to the business and to external partners/organisations
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Innovation Organisational Capabilities - How Do You Measure Up?

Innovation Vision Innovation Strategic Planning Innovation Funding and Resource Allocation Innovation Portfolio Management Innovation Management and Leadership Acceptance and Tolerance of Risk Taking Collaboration and Openness Innovation Capability Development Innovation Organisation Roles and Responsibilities Innovation Recognition and Rewards Innovation Processes Innovation Frameworks and Tools Innovation Value Measurement Communication of Innovation Value

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Mapping Organisational Capabilities To Dimensions of Successful Innovation

Innovation Capability Innovation Vision Innovation Strategic Planning Innovation Funding and Resource Allocation Innovation Portfolio Management Innovation Management and Leadership Acceptance and Tolerance of Risk Taking Collaboration and Openness Innovation Capability Development Innovation Organisation Roles and Responsibilities Innovation Recognition and Rewards Innovation Processes Innovation Frameworks and Tools Innovation Value Measurement Communication of Innovation Value
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Innovation Process and Project Management

Implementation Value Innovation and Operation Management Within IT of Innovation

Innovation Measurement

Summary

The word Innovation is becoming devalued through meaningless use Innovation is about moving ideas to appropriate completion and implementation Innovation is about generating value Innovation potential exists everywhere Innovation is not just about the one big disruptive idea Innovation is a process that can be implemented, measured and monitored Innovation can be learned Innovation means change so to innovate effectively you must be good at or get good at change
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Next Steps

Understand what you want to achieve from innovation and define an innovation vision Establish a cross-functional innovation team and an innovation progamme Measure where you are now to establish a baseline against which progress can be quantified Develop the organisational capabilities that will make you good at innovation Define a set of innovation metrics/KPIs and measure innovation activities Understand your innovation strengths and weaknesses Learn from lessons such the strengths of being good at innovation
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More Information
Alan McSweeney alan@alanmcsweeney.com

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