Firms need to carefully align the vision and strategy of the organisation at all functional levels and to encourage positive attitudes towards Innovation.

Ensuring staff motivation and empowerment is the key to the success of Innovation projects. Firms’ entrenched risk-aversion and their unwillingness to embrace failure as a means or learning can stifle Innovation.

Firms need better market intelligence, the early involvement of customers and stakeholders in ideas to ensure alignment of staff and customers’ or stakeholders' expectations, coupled with testing of new ideas and concepts in a realistic setting – and in collaboration with customers throughout.

The intrinsic complexity of service innovation due to the intangible, subjective nature of services and the physical environment – the service delivery method - is so critical in influencing the customers’ perceptions.

It is a complex task to increase the rate diffusion of Innovation whilst managing risk, resources, cost and quality to acceptable levels.

Innovation Strategy

Innovation is often introduced as an important (not fundamental) part of company philosophy. Yet, all too often, Innovation is not clearly linked to, or defined within, the business strategy/vision; there is no Innovation “roadmap.” Economic, rather than strategic value of Innovation is often measured; firms sometimes perceive technology in the context of Innovation merely as a cost-reduction vehicle.

In regard to the external environment, there is often no benchmarking of competitors and innovation is reactive to customers rather than proactive.

Innovation goals for new products and services are often not well-defined. There should be a balance of for example: creating new customer-focussed opportunities; eliminating non-value adding activities (e.g., inter-organisational Six Sigma initiative); improving existing products, services and processes; and re-use of existing success stories.

Topics to Consider

• Management leadership
• Market and competitor analysis
• Funding of innovation
• Innovation performance measures and results
• Innovation networking
• Technology management
• Market planning and review

Many organisations perceive that they simply cannot afford the time to spend on Innovation because they are either too involved in fire-fighting. Sometimes, they are simply not aware of what is possible. Don't let your organisation fall into this dangerous trap. The rate of change of Innovation today is astonishingly fast – firms cannot always take a step back and see what is going on both inside and outside the organisation. We provide this lens through which to find your optimum strategy .

IBM’s 2006 global CEO study, Expanding the Innovation Horizon (see sidebar) asked CEOs for their current views on Innovation. The key findings from the report showed that:

• Business model innovation is key
  
• External collaboration is indispensable
  
• Innovation requires orchestration from the top

Business model innovation is now viewed with the same importance as product/market/service innovation and operational innovation. And products and markets are the starting point to drive innovation in business models and Operations. Innovation in the structure and/or financial model of the business is where the real benefits accrue. Business model innovation helps organisations become more nimble and responsive, whilst lowering costs.

Benefits accrued under this paradigm include: cost reduction, strategic flexibility, focus/specialisation, rapid exploitation of new opportunities, sharing/reduction of risk, and lower capital investment e.g., migration from fixed, to variable cost. The biggest growth in operating margins is achieved through business model innovation, whereas a focus on operational or market innovation is more likely to sustain margins over time.

Within the Operations arena, the law of diminishing returns means that many of the cost savings have already been realised through, for example, the application of lean principles. But cost cutting is not a sustainable competitive strategy. The real focus is now on making operations more responsive.

Most common Operations Innovations include:

• Improved responsiveness customers (biggest impact on operating margins
  
• Application of new science/technology to operations
  
• Application of IT to automate processes
  
• Optimising a core process
• Reducing cycle time/complexity
• Integrating functional business processes

Some Searching Questions

1. Are there strong links between product, service and process development?
2. How are new operational processes conceived and developed?
3. Is there a formal operations strategy? Does this define the need for new operational capabilities and processs?
4. Is information on new process technology actively sought and are new processes tested to gain experience?
5. What is the process for ensuring effective implementation of new process technology?
6. Does the organisation run a continuous improvement program on all operational processes, including customer service, delivery performance, etc.?
7. How is process improvement integrated with day-to-day QC/QA?
8. Is internal data from SPC and external data such as customer feedback, competitive benchmarks and product performance used to improve process performance? How is this done?
9. How does the organisation keep informed of sources of new process technology?
10. How does the organisation determine when existing processes need to be upgaded?
11. Do implementation teams stay together into full production to ensure learning and improvement?
12. What is the organisation for implementation of new processes?
13. Are the resources, skills and flexibility available to support new product testing and ramp-up?
14. Is the choice of new process technology matched to the resources available for its operation?
15. Is a TQM programme in place, including a focus on achieving improved innovation performance?
16. How is quality assured in the design process and what methods are used to analyse and improve the quality of innovation processes?
17. Is ISO9001 used in product development and operations?
18. Do the operationd department make creative contributions to methods of inventory control, cost control and so-on?
19. Have investigations been carried out to check whether customers are happy with the quality improvements? (i.e. are improvements customer-oriented?)
20. Are"quality circles" used as a way of solving quality problems?

Ref: Innovation Pentathlon Framework (Goffin & Mitchell)

We welcome your experiences in these areas - perhaps you would like to share what you consider as best practice or submit a case study?

Pentathlon Framework Methodology

Building on the idea of the project funnel, this multi-dimensional tool builds a structured framework around the management of Innovation within your organisation.

One starts the process by conducting an Innovation Audit of your organisation, looking in detail at the five elements.

The audit findings are then reviewed against industry best practice, through an extensive literature search covering similar examples and the latest thinking on the subject. 

See a real-life example of a company where this amazing tool was used.

Traditional Innovation versus Customers as Innovators

People & Organisation

There needs to be a Human Resource’s presence with policies driving a culture of Innovation and stimulating a creative problem-solving working environment. Cross-functional Innovation teams should be encouraged.

Clear, individual Innovation targets should set and known by all employees. Incentive schemes should motivate and inspire all employees.

Areas to Cover

• Innovation culture
• Recruiting and job assignment
• Managing performance
• Development of employees
• Organisational structure

Ideas Generation

Creative ideas should be collected on a regular basis through brainstorming sessions for staff. External ideas – from other departments and, importantly from customers – should be collated. Hidden customer needs should be known or assessed – they should not be assumed or based on secondary data. Other techniques such as left-right brain alterations, attribute association, hidden needs analysis, repertory grid technique can be used. Outside, professional sources should consulted within the wider organisation, and should be cross-fertilised. An underlying attitude of risk aversion can stifle innovation.

Areas to Cover

• Culture of creativity and innovation
• Use of vreativity tools
• Knowledge management
• Enhanced market research methods
• Creativity levels in the organisation

Prioritisation

Projects should not be arbitrarily prioritised; they should scored/weighted using best-practice measures such as: strategic value, competitive advantage, market attractiveness, fit to existing supply chain, systems and processes; business risk; operational complexity; delivery cost; etcetera. Feedback mechanisms from actual product performance should be wholly appropriate to ensure appropriate efficacy of screening decisions. A broad, cross-functional decision-making authority would ensure decision-making efficacy, relevance and validity.

Areas to Cover

• Prioritisation process
• Analysis tools and approaches
• Current portfolio

Implementation

Implementation is often a bottleneck stage. Either too many projects are attempted or projects are not “killed” early. If firms are in the “coping zone” : perceived customer quality will therefore decline markedly with (ceteris paribus) step changes in throughput. Best-practice techniques such as simultaneous engineering can applied to remove the effect of bias. SA/SPC techniques can help validate hypotheses; outside expertise regarding measurements should also be sought. Sometimes, there is an opportunity to couple the methodology of Six Sigma with the Innovation Process (e.g. DMAIC - Define, Measure, Analyse, Improve, Control) and therefore potentially integrate process, service and organisational Innovation

Areas to cover

• The management process
• Structure and organisation
• Industrial design
• Transfer to operations
• Marketing and distribution
• Promotional mix
• Tools for innovation
• Process innovation