APPLIED INNOVATION

APPLIED
INNOVATION
APPLICATION DE L'INNOVATION
ANWENDEN DER INNOVATION
APPLICAZIONE DELL'INNOVAZIONE
APLICACIÓN DE LA INNOVACIÓN
APLICANDO A INOVAÇÃO
Applied Innovation
Written by: David O’Sullivan
Foreword by: José Álvaro Gomes da Silva
Copyright © 2007 David O’Sullivan
Produced by:
Constructing an Inter-regional Innovation Network.
An Interreg IIIb Atlantic Area project.
For more information see: http://techlink.idit.up.pt/
Managed by: NET, SA – BIC Porto
NET – Novas Empresas e Tecnologias, SA.
Business & Innovation Centre
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PORTUGAL
Acknowledgements
The producers wish to thank members of the project
consortium for their contributions and in particular the
European Commission for supporting this work. The producers
also thank the author and the National University of Ireland,
Galway for their kind permission in using some figures and
text in this booklet.
Creative Commons
You are free to copy and distribute this work under the
following conditions: (i) Attribution. You must give the
original author credit. (ii) Non-commercial. You may not use
this work for commercial purposes. (iii) No Derivatives. You
may not alter, transform or build on this work
Techlink Partnership:
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Portugal
http://www.net-sa.pt/
ADI – Agência de Inovação, SA
Portugal
http://www.adi.pt
IDIT
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WestBic
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http://www.westbic.ie
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France
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Co-financed by:
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Programme co-financé
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2
Foreword
Few topics have exercised our minds so much, as the term
innovation, and yet it continues to remain a mystery for most of us.
For many of us the application of innovation remains difficult to
understand and stubbornly difficult to apply. Despite the many
books and articles published on innovation, managers continue to
face the same persistent question: ‘How can innovation be applied
in my organisation?’
There is a new urgency around why companies need to innovate. In
a global economy there are great opportunities, if companies can
anticipate the needs of customer’s and introduce new products,
processes and services that meet these needs. On the other hand, if
companies do not innovate, then there are many competitors
around the world, who will.
The aim of this booklet is to give you some important insights into
how innovation management can be put to work in your
organisation. It contains a systematic approach to managing
innovation. The author has brought together a number of practical
tools and techniques that can be used to improve the innovation
process. He includes a range of ideas that are easy to implement
and have worked very successfully in leading companies throughout
the world.
Key Question
How can innovation be
applied in any organisation?
Aims & Objectives
To give managers important
insights into how innovation
can be put to work in any
organisation.
I invite you now to explore the ideas presented in this booklet. I am
confident that you will find some ideas that will improve the way
you currently manage innovation. You will also find guidelines for
exploring the topic of innovation in more detail. I hope that
through this publication some of the mystery surrounding
innovation can be solved.
José Álvaro Gomes da Silva
Techlink Project
December 2006
3
Contents
Introduction .............................................................................5
Defining Innovation.....................................................................6
Managing Innovation.................................................................. 14
Defining Innovation Goals ........................................................... 22
Managing Innovation Actions ........................................................ 30
Empowering Innovation Teams ..................................................... 43
Monitoring Innovation Results ...................................................... 56
Building Innovation Communities .................................................. 66
Conclusions ............................................................................ 79
Bibliography ........................................................................... 81
Click on page number above to hyperlink to that page
4
Introduction
Innovation is an important force in creating and sustaining business
growth. Effective innovation can mean the difference between
leading with a particular product, process or service and simply
following the ‘pack’ with the risk of stagnation and decline.
Innovation transforms mediocre companies into world leaders, and
ordinary businesses into stimulating environments for employees.
Innovation is an imperative for all organisations — profit and non
profit. It is as relevant for a hospital as it is for a bank or a
manufacturing company. Innovation occurs at various levels within
an organisation, from management teams and departments to
project teams and even individuals. Innovation is often viewed as
producing a new product or service. In fact it is about making all
kinds of changes, both radical and incremental, throughout an
organisation.
Innovation is defined as the process of making changes to
something established by introducing something new. These
changes can be both radical and incremental, and can happen to
products, processes or services. Innovation management is about
putting tools, techniques and methods in place that can encourage
individuals to work together in defining innovation goals, managing
ideas and projects, and monitoring results. Innovation management
is about building a community within an organisation whose
common purpose is to change products, processes or services so
that they can add value to customers and exceed their demands.
Þ Web Link
More detailed information
on the ideas covered in
this booklet can be found
at: http://www.owl.ie
This booklet contains a systematic approach to developing highimpact innovation in any organization. High-impact innovation
requires close attention to the five key areas — goals, actions,
teams, results and communities, and perhaps of equal importance,
to the relationships between them.
High Impact
This booklet contains a
systematic approach to
developing high-impact
innovation in any
organization.
Learning Targets
When you have completed this booklet you will be able to:
Explain the theory and process of innovation
Describe how to manage innovation
Use explicit skills for defining goals, generating ideas,
empowering teams and monitoring the results of innovation
Apply what you have learned to managing innovation in any
organisation
Learning Target
Develop a simple
knowledge management
system for innovation
management
5
Defining Innovation
Defining Innovation
Introduction
All organisations need to change in order to sustain their current
activities and develop growth. Some changes are positive and lead
to increased efficiency and revenue, while others are negative and
risk stagnation and decline for the organisation. The principal
mechanism for change in any organisation is innovation. Innovation
occurs to products, processes and services. This part of the booklet
defines the main concepts behind innovation. Innovation is the
process of making changes to something established by introducing
something new. Innovation is classified according to its impact on
products, processes or services. The difference between radical and
incremental innovation is discussed, with a particular focus on
disruptive technologies.
Learning Targets
When you have completed this section you will be able to:
Define innovation and explain the difference between
innovation and invention
Explain the difference between product, process and service
innovation
Explain radical and incremental innovation
Give examples of disruptive technologies
Definition of Innovation
Innovation is defined as ‘Making changes to something established
by introducing something new’1. This definition does not suggest
that innovation needs to be radical or that it needs to happen
exclusively to products. Innovation is often mundane and
incremental and can happen to products, processes and services at
every level within an organisation.
The term ‘innovation’ is often confused with the term ‘invention’.
Invention is defined in the dictionary, as ‘Creating something new
that has never existed before’. Invention is often about creating
something that has yet to be desired by a customer.
1
Invention
Creating something new
that has never existed
before.
The New Oxford Dictionary of English. 1998: Oxford University Press.
6
Defining Innovation
Sample: The old tube television was an invention. Before it
existed people had no desire for it. It did not make changes to
something already established. When it was created, it established
something new that had never existed before. The new flat-screen
television, on the other hand, was an innovation. It met a desire
from customers to have flatter, more high-definition television
sets. It made changes to the already-established tube television.
When Philips introduced the ‘Interactive TV’ in the 1980s, some
analysts viewed it as another innovation by a company renowned
for its innovation processes. They argued that it could destroy the
traditional tube television market. However, customers found the
new interactive TV too expensive and too cumbersome to use. The
Interactive TV itself was ultimately destroyed by the innovation
process and replaced by more successful ideas.
In innovation, destroying poor ideas is often as important as
nurturing good ones. To express positive innovation, we need to
add an important addendum to our definition: ‘Innovation is the
process of making changes to something established by introducing
something new … that adds value to customers.’ This addendum is
important. By classifying an innovation as ‘adding value to
customers’ we assume that customers who experience the added
value will continue to purchase or use the product or service. This
is turn will lead to greater revenue and growth for the organisation.
Today’s innovation will become obsolete in the future. For
organisations to sustain innovation, they must learn how to
continuously replace existing products, processes and services with
more effective ones. This learning element adds a further extension
to our definition: ‘Innovation is the process of making changes to
something established by introducing something new … that adds
value to customers … and then learns from that process so that
innovation can be repeated continuously.’
Innovation management is the process of managing innovation
within an organisation i.e. managing ideas, goals, projects and
initiatives, improving communications, managing innovation teams,
and so on. Innovation management is the process of managing
information, people and changes associated with innovation so that
value can be added to customers.
Innovation
Making changes to
something established by
introducing something new
… that adds value to
customers.
Innovation Management
Innovation management is
the process of managing
information, people and
changes associated with
innovation so that value can
be added to customers.
Alternative Definition
There are numerous alternative definitions to innovation. One
popular alternative is to present innovation as an invention that has
been exploited commercially. In this alternative definition, the
term ‘innovation’ means exploiting the invention and making it
7
Defining Innovation
commercially successful. We can denote this alternative definition
of innovation with the following expression:
Innovation = Invention + Exploitation
Innovation management therefore, is a systematic approach to
creating an environment based on discovery, invention and
commercial exploitation of ideas that meet unmet needs. This
definition fits very well with many of the high- profile examples of
innovation that we are familiar with, such as the invention of the
transistor used in computers, or radio frequency identity tags used
on credit cards. However, it also hides the millions of innovations
that are often much smaller in scale or not necessarily exploited in
the same commercial sense. This alternative definition also has a
strong technology focus. This booklet focuses on the tools and
techniques necessary for radical and incremental innovation as
described earlier. The issues surrounding the definition in this
section such as invention and exploitation are beyond the cope of
this booklet but the reader is referred to a number of excellent
books on this subject in the ‘Bibliography’ at the back of this
booklet.
Þ Web Link
Visit
http://www.wikipedia.org
for a number of alternative
definitions from experts in
the field
Product, Process and Service Innovation
The term ‘innovation’ is often associated with products. When we
think about innovation we think about a physical product e.g. a
television. However, changes can also be made to processes that
make products, and to services that deliver products. There are
also many examples of innovation applied to restructuring the
organisation. We can say that innovation makes changes to:
Product Innovation
Product innovation is about
making changes to physical
products.
Products
Processes
Services
Product innovation is about making changes to physical products.
For example (i) introducing a new screen size in television sets, (ii)
changing from the old tube television to flat screen televisions or
(iii) adding functionality such as internet access to televisions.
Process innovation is about making changes to the processes that
produce products or services. For example (i) building new
machines that assemble televisions, (ii) redesigning the assembly
line so that televisions can be manufactured more cheaply and (iii)
outsourcing the production of the plastic covers on televisions so
that those costs can be reduced, and quality improved.
Process Innovation
Process innovation is about
making changes to the
processes that produce
products and services.
Service innovation is about making changes to services that
customers use. For example (i) changing the way dealers sell new
8
Defining Innovation
televisions in order to keep costs low, (ii) changing the way
customers get rid of their old televisions by introducing a ‘take
back’ policy and (iii) changing the way customers purchase
televisions over the internet. Clearly, services do not necessarily
involve products. Services can also be developed around needs for
government information, health services and so on.
Sample: Low cost airlines Ryanair and EasyJet grew dramatically
in the 1990s because of innovations they adopted in their online
purchasing and ‘no frills’ approach to air transportation. Giant
rivals such as British Airways were quickly overtaken in terms of
company value on the stock exchange, so much so, that they had
little choice but to adopt the same no frills innovations in order to
compete. Customers no longer expected meals. They were
attracted by the low cost and high efficiency that came with buying
their own tickets online.
Service Innovation
Service innovation is about
making changes to services
that customers use.
Radical and Incremental Innovation
The definition of innovation does not refer to the size and scope of
the change to the product, process or service. For example
introducing a new flat-screen television is clearly a major or radical
change to the older established television market. On the other
hand, a change such as changing the colour or the size of the
screen is relatively small or incremental. Innovation can be:
Radical
Incremental
Radical innovation is about making major changes in something
established. The term ‘radical’ often refers to the degree of change
in the efficiency or revenue of the product. For example by
introducing the flat-screen television, manufacturers radically
increased the demand for such televisions. We can visualise radical
innovation as a ‘step change’ in some measure of performance such
as revenue or efficiency, see Figure 1. Most organisations engage in
some radical innovations during the lifetime of their innovation or
development plans.
Incremental
Innovation
Making small changes that
have short-term impact on
growth.
9
Defining Innovation
Incremental
Innovation
Revenue/
Efficiency
Radical
Innovation
Radical Innovation
Making changes that have
large ‘step’ changes in
growth.
Time
Figure 1: Radical and Incremental Innovation2
Incremental innovation is about making small continuous changes to
a product, process or service. These changes are often more
numerous and less risky than radical changes but they also often
have lower impact on growth. Some organisations such as
manufacturing and more established service organisations rely
totally on incremental innovation and deploy techniques such as
‘Total Quality Management’, ‘Continuous Improvement’ and ‘Lean
Manufacturing’ to make many small changes to the organisation.
Organisations engage in many incremental innovations during the
lifetime of their innovation or development plans. Innovative
organisations will typically have many incremental changes and a
small number of radical changes occurring in the same planning
period.
Sample: Philips invested significant resources — time and money
— into the development of its Interactive TV. Customers did not
purchase the interactive TV in sufficient quantities to allow Philips
to reach their revenue targets i.e. the innovation failed. Not only
did Philips lose money, but they lost time in coming up with a
better innovation. If interactive TV had succeeded, then certainly
Philips would have had an enormous head-start over their
competitors and would almost certainly have created a step-change
in their revenues.
Disruptive Innovation
Every now and then a radical innovation is introduced that disrupts
business practice. In other words, business practice changes
radically. These disruptive innovations often occur mainly through
new sciences and technologies. For example, many years ago the
television depended on a technology called the ‘vacuum tube’ for
its operation. Owners of these televisions waited for up to a minute
for the tubes to heat up and produce an image on the screen. In the
1970s, research into electronics produced the ‘transistor’ which
Disruptive Innovation
Innovations, typically
technical, that change
business practice across an
entire sector of business.
2
Adapted from Managing Creativity and Innovation. Harvard Business Essentials.
2002, Boston: Harvard Business School Press.
10
Defining Innovation
offered much lower production costs, lower energy consumption,
higher reliability and the screen on the television ‘lit up’ in
seconds. The transistor dramatically changed or disrupted business
practice around the design and manufacture of televisions. Early
adopters of transistors made significant increases in market share.
Slow adopters went out of business.
There are many examples of disruptive technologies introduced in
recent years including:
Digital Photography
Radio Frequency Tags
Digital Media (Music and Video)
Internet and World Wide Web
Arguably the largest disruptive technology to emerge has been the
internet and World Wide Web. The web has radically disrupted
huge ranges of products, processes and services across many
business sectors. Products such as televisions can now be web
enabled, allowing customers a host of new services such as video
download and internet browsing. Processes such as the
manufacturing of televisions regularly use the web to source
materials and receive orders from customers. Services such as film
rental now use the web to offer customers the latest films that are
then downloaded directly to their television on demand.
Sample: Radio Frequency Identity Detection (RFID) tags are now
being used as a replacement for bar codes on products in
supermarkets. The current process of purchasing goods in a
supermarket is well known to most of us. We wait in line at the
supermarket checkout and scan the bar code of each individual
item before paying. Waiting times to pay for goods can be long.
RFID tags can be detected remotely by receivers. If all of the items
in our basket have RFID tags, then all we need to do is push the
shopping basket under a radio frequency receiver. It will remotely
detect every item in the basket. The value for customers is shorter
times at the ‘check out’ or the replacement of ‘check outs’
altogether. Suppliers and supermarkets who adopt RFID tags will
clearly add value to customers, and hence attract new customers
over their slower rivals.
Summary
Disruptive Technology
Often developed in
laboratories of large
organisations, but it can
also be the result of
collaboration between
many small organisations.
Search
Search the internet using a
popular search engine using
the following key words:
Invention
Innovation
Innovation Management
Disruptive Innovation
Radical Innovation
Incremental Innovation
Disruptive Technology
Innovation is the process of making changes to something
established by introducing something new. Innovation is not to be
confused with invention. It can be radical or incremental and it can
apply to products, processes and services. Disruptive innovation is
radical innovations that disrupt forever the way business is normally
11
Defining Innovation
conducted. All changes, large or small, to an organisation are
classified as innovation.
For more information on innovation in your own language why not
try: http://www.wikipedia.org
Case
Clearview Pharmaceuticals is a small manufacturing company. The
innovation team is responsible for mainly process innovations and
includes key personnel from all of the main functions in the
organisation — all managers and some specialists. They meet bimonthly to discuss the progress of their goals and review the status
of various projects – both radical and incremental projects. They
also review any ideas that have been generated by employees that
match organisation goals. The innovation team has representatives
from a number of departments (see Figure 2).
Figure 2: Innovation Team at Clearview Pharmaceuticals
Activity
Throughout this booklet you will be asked to complete a number of
simple activities. All of these activities combine to create a simple
innovation plan for your organisation. This plan can later be
expanded.
12
Defining Innovation
For this activity, create a list of the individuals in your innovation
team. You can select your entire management team plus some
specialists or perhaps key players from your department or perhaps
your project team. Think about your innovation team as the
maximum number of individuals you can comfortably sit around a
table to discuss and make decisions about your innovation plan.
Individuals can be members of more than one innovation team. For
example, a department manager will be a member of the
department innovation team. He or she will also be a member of a
higher-level management team that looks at innovation across the
entire organisation. The same individual can also be a member of a
number of large project teams. Each of these organisations can
have its own innovation plan.
Copy the worksheet below into a spreadsheet application. More
worksheets can be added later for other aspects of your innovation
plan.
Individuals
Title
Role
Title = Name of the individual
Role = Role or position of the individual in the organisation
Reflections
Explain the difference between innovation and invention
Give one example of each of the following types of
innovation:
(i) product, (ii) process and (iii) service
Give one example each of a radical innovation and an
incremental innovation
What is a disruptive technology?
13
Managing Innovation
Managing Innovation
Introduction
Every organisation invests to a larger or lesser extent in innovation
— making changes to something established. Organisations invest a
proportion of turnover to make changes to its products, processes
and services. There are particular reasons or goals that should be
achieved because of this investment. However, research has shown
that a very large percentage of innovations fail to meet these
goals. The reasons behind failure give us clues on how avoid failure
in the future. This section looks at investments that organisations
make in innovation and the goals they most frequently want to
achieve. It then looks at the reasons why many innovations fail to
achieve their goals.
Learning Targets
When you have completed this section you will be able to:
Give reasons why organizations invest in innovation
Measure the amount of investment that organizations make
Learn why organizations make these investments i.e. their
goals
Give reasons why most innovation fails.
Investment in Innovation
Each year, organisations spend a significant amount of turnover on
innovation i.e. making changes to their established products,
processes and services. The amount of investment can vary from as
little as a half a percent of turnover to anything over twenty
percent of turnover for organisations. The average investment
across all types of organizations is four percent3. For an
organisation with a turnover of, say, one billion euros, this
represents an investment of forty million euros annually. This
budget will typically be spread across various departments
including marketing, product design, information systems,
manufacturing systems, quality assurance and so on.
Innovation Investment
The average investment
across all types of
organizations is four
percent.
The principal goals to be achieved in return for this investment vary
across organisations. The following have been found from a
European survey3. They are ranked in order of popularity:
3
http://cordis.europa.eu/itt/itt-en/99-7/innov3.htm (14th December 2006)
14
Managing Innovation
Improved quality
Creation of new markets
Extension of the product range
Reduced labour costs
Improved production processes
Reduced materials
Reduced environmental damage
Replacement of products/services
Reduced energy consumption and
Conformance to regulations.
These goals include improvements to products, processes and
services and dispel a popular myth that innovation deals mainly
with new product development. Most of the goals could apply to
any organisation, be it a manufacturing facility, a marketing firm, a
hospital or a local government organisation. None of the goals
suggest any particular solution or technology e.g. computer
technology. Technology, for example, may be a means to a goal,
but is not the goal in itself.
Failure of Innovation
Most innovation fails to meet organisational goals. Figures vary
considerably depending on the research. Some research quotes
failure rates of fifty percent while other research quotes figures as
high as ninety percent4. From another perspective, one survey
regarding product innovation states that out of three thousand
ideas only one will become a success in the marketplace5. Failure is
an inevitable part of the innovation process, and most successful
organisations factor this into the change process. The impact of
failure goes beyond the simple loss of investment. Failure can also
lead to loss of morale among employees and an increase in cynicism
and higher resistance to change in the future.
Innovation Failure
Failure can also lead to
loss of morale among
employees and an increase
in cynicism and even
higher resistance to change
in the future.
The causes of failure have been widely researched. They can vary
considerably between organisations. Some causes will be external
to the organisation and outside its influence of control. Others will
be internal and ultimately within the control of the organisation.
Internal causes of failure can be divided into causes associated with
the cultural infrastructure and causes associated with the
innovation process. Failure in the cultural infrastructure varies
from one organisation to another, but the following are common
across all organisations at some stage:
4
Strebel, P., Why Innovation Fails, in Harvard Business Review on Change. 1999,
Harvard Business Press: Boston. p. 139-157.
5
Strategic Management of Technological Innovation by Melissa Schilling, McGrawHill, 2005.
15
Managing Innovation
(1)
(2)
(3)
(4)
(5)
Poor Leadership
Poor Organisation
Poor Communication
Poor Empowerment
Poor Knowledge Management
Common causes of failure within the innovation process can be
distilled into five types:
(1)
(2)
(3)
(4)
(5)
Poor goal definition
Poor alignment of actions to goals
Poor participation in teams
Poor monitoring of results
Poor communication and sense of community
Tackling poor goal definition requires that organisations state
explicitly what their goals are in terms understandable to everyone
involved in the innovation process. This often involves
communicating goals in a number of ways. Poor alignment of
actions to goals requires linking explicit actions such as ideas and
projects to specific goals. It also calls for effective management of
action portfolios or groups of projects. Poor participation in teams
refers to the behaviour of individuals and teams and the explicit
allocation of responsibility to individuals. It also refers to the
payment and rewards systems that link individuals to goals. Finally,
improving poor monitoring of results requires simple and effective
monitoring of all goals, actions and teams involved in the
innovation process.
High Impact Innovation
Every organisation would like to achieve a return on their
investment. The causes of failure outlined above give us an
indication of what areas most organisations need to improve to
increase the impact of innovation. The five main areas are:
1.
2.
3.
4.
5.
Better definition of Goals
More effective alignment between Actions and goals
Greater participation of individuals in Teams
Better monitoring of Results
Great communications and building of Communities
Goals: A goal is the defined as ‘the objective of an effort’. There
are a number of ways of defining goals. These include:
(i) Statements such as the mission and vision statement
(ii) Requirements of stakeholders such as customers and
shareholders
(iii) Objectives such as strategic plans and
16
Managing Innovation
(iv) Indicators of performance such as output and profits
Defining these goals is a key factor in creating high impact
innovation. We will deal with Goals in more detail in the section
on: Defining Innovation Goals.
Actions: An action is defined as ‘the expenditure of effort’. Actions
include such activities as:
(i) Problem identification and solution
(ii) Idea generation
(iii) Managing initiatives and projects
(iv) Balancing project portfolios
A key issue is that actions are in some way aligned with the goals of
the organisation e.g. ideas have goals. We will deal with Actions in
more detail in the section on: Managing Innovation Actions.
Teams: A team is the defined as ‘resources for an effort’. Teams
are made up of individuals and there are a number of issues related
to greater participation by individuals in teams. These include:
Definition: Goals
The objective of an effort
Definition: Actions
The expenditure of effort
Definition: Teams
Resources for an effort
Definition: Results
The outcome of an effort
Definition:
Communities
Individuals with a common
(i) Assigning responsibility
(ii) Building structure in teams
(iii) Improving participation by individuals
(iv) Appraising performance of individuals
We will deal with Teams in more detail in the section on:
Empowering Innovation Teams.
Results: The term result is defined as ‘the outcome of an effort’.
The principal results that an organisation needs to concern itself
with are the results of:
(i) Goals, such as objectives and indicators
(ii) Actions, such as ideas and projects and
(iii) Teams, such as their contribution
There are clearly many things going on at once and organisations
must learn to use techniques such as the ‘traffic lights’ system that
allows them focus on critical activities. Organisations also need to
learn about meeting management. We will deal with Results in
more detail in the section on: Monitoring Innovation Results.
Communities: The dictionary defines community as ‘individuals
with a common purpose’. That common purpose is the goals of the
organisation but may also reflect the personal goals of the
individuals in it. Building community is a time-consuming process
and involves key issues such as:
17
Managing Innovation
(i) Organisation and Leadership
(ii) Benchmarking
(iii) Communications
(iv) Knowledge Management
We will deal with Community in more detail in the section on:
Building Innovation Community.
Innovation Funnel
The innovation funnel provides a solution for explicitly defining the
information requirements for managing goals, actions, teams and
results used in the innovation process. The funnel illustrates how
goals, actions, teams and results interact with each other to create
change in any organisation — see Figure 3.
The innovation funnel can be visualised as containing four arrows
flowing around a funnel. Each arrow represents the flow of goals,
actions, teams and results. Actions enter the wide mouth of the
funnel and represent, among other things, alternative ideas for
change. These actions flow towards to the neck of the funnel where
many will be eliminated. The neck of the funnel is constrained by
two arrows — goals and teams. These constraints loosen or tighten
depending on the availability of teams and definition of the goals.
Tightly-defined goals can be visualised as closing the neck of the
funnel, allowing fewer ideas to flow through. The availability of
more teams or other resources such as funding, on the other hand,
can be visualised as opening the neck of the funnel, and allowing
more ideas to be worked on. The final arrow, results, flows from
the narrow end of the funnel and represents information concerning
the results of execution of goals, actions and teams. This arrow
flows back towards goals, representing the impact of results on the
process of defining and redefining goals.
Innovation Goals
Tightly defined goals can
be visualised as closing the
neck of the innovation
funnel allowing fewer
ideas flowing through.
GOALS
ACTIONS
RESULTS
COMMUNITIES
TEAMS
Figure 3: Innovation Funnel
An important aspect of the innovation funnel is the relationships
created between actions and goals. Ideas, for example, that cannot
18
Managing Innovation
be associated with goals will find it difficult to proceed into the
funnel. This has two effects. Firstly, the individuals or teams
generating the ideas will study the goals more closely in order to
generate an idea that matches better. Secondly, good ideas that
are not easily associated with goals will begin to impact on the
definition of the goals. This will ultimately lead to a redefinition of
goals in order to allow the good ideas through. This is a natural
learning process within an innovation community. When goals
change, there is a knock-on effect in the generation of ideas that
meet these goals, because the innovation community in now tuned
to having new ideas meet organisational goals. The process offers
the innovation community the ability to change the innovation
process in response to changing demands of stakeholders.
Ideas
When goals change there is
a knock-on effect in the
generation of ideas that
meet these goals.
Best Practice
In the 1980s, the airline industry was characterised by high ticket
costs and high operating costs. The aviation industry then
experienced a downturn because of the worldwide recession and
the Gulf War. Capacity overload became a common problem in
most companies. Many airlines started focusing on cutting costs,
reducing capacity growth, and increasing load factors. New airline
companies emerged (e.g. Southwest, Ryanair, EasyJet) to radically
change the basis of competition from high cost to low cost.
Goals: To maximise seating utilisation, to increase passenger
numbers, to dramatically reduce operating costs, to make air travel
like a ‘flying bus’, to streamline ticket purchase, to increase
destinations, to simplify baggage handling.
Actions: Removal of travel agents, electronic booking of tickets,
point-to-point, dramatic reduction of seat prices, baggage fees,
online seat allocation.
Results: Major increase in passengers, very high turnover, very low
operating costs, word of mouth marketing, growth in ancillary
products such as car hire and hotel bookings.
Summary
Organisations spend on average just under 4% of turnover on
innovation, trying to achieve goals such as better quality, lower
lead times, more product variety and increased market share. Most
innovation fails to achieve these goals and some analysts argue that
failure could be as high as 90%. The causes of failure are varied,
but some causes are common across most organisations. These
causes can be divided into cultural and process failures. Cultural
Search
Search the internet using a
popular search engine using
the following key words:
Innovation Failure
Innovation Funnel
Knowledge Management
19
Managing Innovation
failures, such as poor leadership and organisation, are clearly
important but take time to improve. Process failures such as
definition of goals and aligning actions with goals are also
important but can be remedied in the shorter term through better
information and knowledge management. The innovation funnel
offers organisations a structured approach to managing innovation
that reduces the effects of the main cause of failure, while
simultaneously achieving goal attainment.
The rewards for
adopting such a simple yet effective system can be significant, not
only in terms of more cost-benefits but more importantly in terms
of the morale and skills developed by participants in the innovation
process. Reducing failure by just fifty percent provides potential
savings of twenty million euros annually for a one billion euro
turnover company. The benefits from goal attainment mirror the
common goals mentioned earlier — improved quality, better
productivity, better product ranges and so on.
Case Study
SwitchIt Ltd. Is a self-owned design and manufacturing company of
electrical switch gear. All managers form a team that reviews their
innovation plan weekly. The management team has identified six
stakeholders for the company including ‘Employees’ and the local
‘Community’. Their existing customer requirements are for greater
product variety, increased product availability and reduced order
lead times. As part of the creation of their plan they initially
created statements around their strengths, weaknesses, threats and
opportunities. They have also created statements for mission,
vision, quality, safety and core competencies. Core competencies
that the company would like to maintain include their design
process, and the injection moulding process. Their statements are
published on an internal web site for all employees to review on
demand. Statements are updated annually following a detailed
review of results for the organisation.
Activity
Conduct an analysis on your organisation to determine the
strengths, weaknesses, threats and opportunities. You can do this
with your innovation team or with the help of outside facilitators.
Copy the table below into a new worksheet in the spreadsheet file
you started for the previous activity.
20
Managing Innovation
Statements > SWOT
Statement
Strengths
Weaknesses
Opportunities
Threats
Question
What are your organisations advantages?
What are your core competencies?
Where are you making the most contribution?
What are you doing well?
What areas are you avoiding?
Where do you lack resources?
What are you doing poorly?
Where are you lacking contribution?
What needs improvement?
Any trends in similar organisations?
New technologies?
New needs of customers (internal or external)?
Statements
Obstacles to overcome?
Competiting organisations?
Negative economic conditions?
Government regulation?
Changing business climate?
Reflections
List some of the main reasons why organisations invest in
innovation
What are main causes of failure in achieving innovation?
What are main issues that every organisation addresses
regularly to achieve better impact from innovation?
What are the key stages in the innovation process?
21
Defining Innovation Goals
Defining Innovation Goals
Introduction
Defining innovation goals is the first and perhaps the most
important activity in creating an innovative organization. Welldefined goals inspire ideas and guide activities towards the
achievement of performance targets. A number of goals need to be
defined. These include statements, stakeholder requirements,
strategic objectives and performance indicators. This section looks
at a number of ways for defining goals. A road map for defining
goals is presented. The roadmap outlines a number of steps that
need to be taken for developing a comprehensive set of goals. The
first step looks at defining various types of statements. Some of
these statements i.e. SWOT have been presented in the previous
section. The next step looks at defining stakeholder requirements
that are used to inform the strategic planning process. Strategic
planning involves a number of key elements including the
identification of strategic thrusts and defining strategic objectives.
The final step looks at defining key performance indicators.
Together, these various types of goals form a comprehensive
definition of the innovation goals of any organization.
Learning Targets
When you have completed this section you will be able to:
Explain the drivers of innovation goals
Outline a process for defining goals
Explain the various types of goals that can be created
Outline the process of creating performance indicators
Create a simple chart for monitoring indicators
Defining Goals
Goal planning is now a common technique for most organisations.
This was not always the case. In the past, goals resided only in the
minds of owners and senior managers who communicated them to
subordinates through verbal instructions. Today’s complex business
and service environments require employees to understand and
share common goals in order to engage in idea generation and
change. Few owners and managers now have the ability to set goals
for an organisation, and simultaneously generate and manage the
actions required for innovation. The principal approach in modern
management is to define high-level goals for change and innovation
within the organisation. These goals then guide individuals and
Defining Goals
The goals of the
organisation inform the
imaginations of individuals
and set indicators of
performance that projects
and initiatives need to
achieve.
22
Defining Innovation Goals
teams in generating actions such as ideas and projects. The goals of
the organisation inform the imaginations of individuals and set
indicators of performance that projects and other actions need to
achieve.
The main drivers of innovation goals are emerging new
technologies, the more innovative activities of competitors, best
practice by similar organisations, new ideas from customers and
employees, stakeholder requirements and exceptional performance
(negative or positive) from within the organisation. Added to these
drivers are general changes within the organisation’s environment.
All of these drivers help to create a ‘sense of urgency’ around the
need to create new innovation goals. A number of types of goals
can be created. Figure 4 illustrates five primary types of goals for
any organisation. As stated earlier many organisations will only
require a subset of these goals to be defined in the short term (e.g.
indicators).
GOALS
ACTIONS
TEAMS
Statements
Requirements
Objectives
Standards
Indicators
RESULTS
COMMUNITIES
Figure 4: Innovation Goals
Statements: Typical statements include mission and vision
statements. Statements are high-level goals that inform individuals
in the organisation and their customers about what the organisation
is doing or aims to do in the future. Mission statements are
informed by the philosophy, history, core values and core
competencies of the organisation. Statements in turn inform the
process of generating strategic objectives. Other types of
statements include Strengths, Weaknesses, Threats, Opportunities,
Health and Safety, Quality, Core Values and so on.
Requirements: There are requirements of the various stakeholders
for an organisation. Stakeholders can be seen as the ‘customers’ in
the broadest sense of the term. Typical stakeholders include
customers, shareholders, employees, suppliers and so on. A list of
requirements from stakeholders is a powerful form of goal setting
activity. These can be worked on as goals directly or they can be
translated into strategic objectives or performance indicators.
23
Defining Innovation Goals
Objectives: Strategic objectives are a more detailed list of goals
typically divided into groups called strategic thrusts. The
development of strategic objectives is informed by stakeholder
requirements. It is also informed by the drivers of innovation
mentioned earlier. Strategic Objectives are a list of typically
between 10 and 30 very specific statements for where change and
innovation needs to take place in the future over a planning period.
Standards: Standards are sometimes used in place of strategic
objectives. Many standards used for developing an organisation
contain statements that must be met by an organisation. For
example the ISO9000 standard is a set of objectives that must be
met by an organisation. EFQM is a variation of a standard that
presents organisations with a standard set of objectives. There are
other standards around issues such as products, health and safety,
environment and so on.
Þ Web Link
Visit http://www.efqm.org
for an explanation of the
EFQM objectives.
Indicators: Performance indicators are measurable targets of
performance. They are linked with the strategic objectives in that
each strategic objective should be measurable directly or indirectly
by a performance indicator. Selecting performance indicators is
informed by such activities as benchmarking and environment
analysis. Indicators in turn, inform the actions that need to be
generated, managed and executed to make changes physically
happen to the organisation.
Goals need to be kept general. They should be used to guide
change for between one and five years into the future rather than
suggest explicit and specific types of changes to be performed.
They need to leave room for individuals to make their own
decisions regarding specific ideas or projects. It is typical to see a
planning period appended to the title of innovation plans e.g. ‘ABC
Corp Strategic Goals 2007-2009’. Various terms are interchangeable
with the term goals, for example ‘strategic plan’, ‘development
plan’, ‘innovation plan’ or ‘team objectives’. For the remainder of
this section we focus on one of the more popular types of goals —
performance indicators.
Goals vs. Ideas
Goals need to kept general
and leave room for
individuals to make their
own decisions regarding
specific ideas for change.
Performance Indicators
Performance indicators are a measurable way of defining goals.
Performance indicators include a number of measurable elements.
They include targets for the future, current progress towards those
future goals and they provide a historical perspective on
performance in the past. Indicators can be financial and nonfinancial. Financial indicators such as measures of revenues and
cost have been popular in the past. An organisation’s worth is often
measured by financial measures such as turnover and profits. This is
24
Defining Innovation Goals
no longer the case, with almost every organization worth
significantly more or less than its current financial figures suggest.
This is because organisations are now increasingly measured in
terms of their potential. A knowledge-based organization, for
example can innovate — change its products, processes and services
— in response to changing market demands. Because of this, its
value is often far greater than its present financial value. Most
innovation indicators are non-financial.
Indicators show progress towards defined performance targets, and
motivate people towards achieving goals. Key questions for a
performance indicator process are: What has happened? Why has it
happened? Is it going to continue? What are we going to do about it?
Understanding indicators promotes problem solving, idea
generation and other forms of corrective action.
Indicators have the following attributes:
•
•
•
•
•
•
•
•
•
•
Directly related to strategic objectives
Repeatable over time, allowing comparisons
Foster improvement rather than monitoring
Measurements are reliable and verifiable
Primarily non-financial
Maximum number of measures (<7)
Change over time as conditions change
Simple and easy to use
Provide fast feedback
Leading rather than lagging
Sample: One of the first steps in choosing indicators is to look at
macro indicators. All indicators stem from one of three macro
indicators: cost, time and accuracy. In recent years, other macro
indicators have been added to this list. They include flexibility,
culture and environment. Below are a number of samples of
indicators that are popular in some organisations.
1.
2.
3.
4.
5.
Seven Indicators
Define no more than seven
indicators for your
organisation. These seven
may be ‘children’ or
‘parents’ of other
measures in the wider
organisation but your focus
is only on your seven.
Þ Web Link
Visit http://www.owl.ie
for more information on
performance
measurement.
Process e.g. Productivity (hours/unit); Throughput (units per
day); Utilisation (output/capacity)
Marketing e.g. Sales per region (units/region); Sales per
model (units/model); Marketing costs (€/year)
People
e.g.
Attrition
(individuals/year);
Overtime
(hrs/month); Absenteeism (days/month)
Design e.g. R&D Expenditure (€/year); Warranty Costs
(€/month); Revenue Created by New Products in last five
years; Value Analysis Savings (€/unit)
Environment e.g. Emissions (CO2/month); Scrap and Wastage
(tonnes/month); Accidents (lost days/month); Litigation
(€/year)
25
Defining Innovation Goals
Every indicator must have a unit of measure e.g. €/year. Each
indicator consists of three major measurements — its ‘origin’ or
what it measured at some point in the past, its ‘current’
measurement and its ‘target’ performance, or what it should
measure at some point in the future. Many Organisations like to add
the fourth measurement — ‘stretch’ target. The stretch target is a
target performance beyond some point in the future. It allows
individuals to consider stretching beyond the current target and
achieve breakthrough performance for the current period.
Performance Charts
Performance indicators are measurable and therefore can be
represented graphically using a performance chart. The key
attributes of the performance chart are illustrated in Figure 5. Each
indicator has an origin with an origin date and an origin value. This
is typically the beginning of a particular year. Each indicator also
has a target with a target date and target value. Performance
charts may also have stretch values and stretch dates. Another
characteristic of a performance chart are the record of values over
the planning horizon. These are illustrated as small stars in Figure
5. Finally, the performance charts may also have upper and lower
control limits. Values that fall outside these limits may be treated
differently, i.e. if the value is out of control it may be coloured
red, and draw attention to this indicator for remedial action.
Charts should be kept simple.
Charts
Charts should be kept twodimensional and simple.
Stretch
Value
Target
Value
Origin
Value
Lower
Control
Limit
Origin Date
Target Date
Figure 5: Performance Chart
Best Practice
The US based Motorola Inc. lost business to its Japanese
competitors in 1981 principally due to poor relative quality.
Japanese firms had become known for high quality products and
processes. To address the problem of falling quality, Motorola
introduced a system called Six-Sigma.
Þ Web Link
Visit http://icmr.icfai.org
for best practice cases
used in this booklet and
many more.
26
Defining Innovation Goals
Goals: To achieve a ten-fold improvement in the quality of its
products and services.
Actions: An ambitious and innovative quality drive. Six-Sigma, was
launched in 1981.
Teams: Bill Smith (Smith), a Motorola engineer, was responsible for
linking the term of Six-Sigma with the company’s quality initiatives.
Results: Motorola’s Six-Sigma quality target achieved not more than
3.4 defects per million products. It also achieved customer
satisfaction by providing the best quality products and services, and
significantly increased in company’s sales. Motorola acquired the
reputation of being the quality leader, not just in manufacturing
but in every process including customer relations. Between 1986
and 1988 alone, Motorola received 50 quality awards, and became
the only company in the world to have received the Malcom
Baldridge National Quality Award twice.
Summary
Performance indicators are a measurable goal for an organization.
They provide a tangible incentive for employees to generate ideas,
evaluate progress and take remedial action as required.
Performance indicators are primarily non-financial. They foster
improvement and innovation rather than simply present historical
financial data. Indicators can either lead or lag innovation
expectations and typically only seven are necessary for any team
within an organization. These seven can be linked hierarchically to
other indicators within the organization so that any one group is
focused on no more than seven. Performance indicators are
typically illustrated using performance charts and tables.
Þ Web Link
Visit
http://www.quality.nist.gov
for more information on
Search
Search the internet using a
popular search engine using
the following key words:
Key Performance Indicators
Strategic Objectives
Balanced Scorecard
Innovation Measures
Metrics of Innovation
Case Study
LCIT Solutions is an IT service organisation. The organisation’s goal
is to provide high quality IT services and products that satisfy
customer needs. Its innovation team consists of personnel from
various functional departments including the managing director, all
managers, and some experts from the technical group, human
resources and finance. The team meet monthly to discuss the
execution of its innovation plan and in particular the performance
of its indicators. In addition, various groups in the organisation
meet weekly to review lower-level indicators and agree actions for
keeping them on track. Figure 6 shows the status of its current
performance indicators.
27
Defining Innovation Goals
Figure 6: Performance Indicators at LCIT Solutions
The team has chosen eight performance indicators. For example,
the ‘Defects per Installation’ measures the errors in each IT
installation. A record of errors is kept to stop them happening in
the future. All these indicators are performing well except one that
need attention — training. On closer examination the training
target of ten hours per quarter for each employee is not being met.
Activity
Define a list of no more than seven performance indicators for your
innovation plan. Keep the details of the indicators to a minimum
but make sure you capture all of the critical information. Try to use
an active verb in the title of the indicator e.g. Increase, Decrease,
Maintain, etc. Copy the table below into your spreadsheet
application and share the information with your innovation team.
Indicators
Title
Unit
Origin
Target
Stretch
Title = The title of the indicator
Unit = Unit of Measurement e.g. defects/unit or %
Origin = Original Value at start of period e.g. beginning of year
Target = Target Value at end of period e.g. end of year
Stretch = Stretch Value e.g. Target + 20%
28
Defining Innovation Goals
Reflections
List five ways of defining a set of innovation goals
List five key attributes of a good performance indicator
Explain why seven indicators are better than thirty
Indicate the key data points in a simple performance chart
29
Managing Innovation Actions
Managing Innovation Actions
Introduction
Actions are the activities that an organization carries out to make
change physically happen to products, processes and services.
Actions are usually carried out in response to a stimulus such as a
problem or a goal. There are a number of different types of actions
including solving problems, generating ideas, managing projects
and balancing project portfolios. The terms project and initiative
are interchangeable. They are unique non-permanent activities that
require resources — time, money and labour. Problems and ideas
can be either proactive or reactive. They can react to an existing
problem or they can be proactive in responding to a potential
problem or goal in the future. Ideas that don’t require significant
resources can be implemented as ‘quick wins’. Ideas that require
significant resources can become initiatives or projects. A typical
organization will have many ideas and projects active at once and
at various stages of implementation. These ideas and initiatives
should have a strong relationship with the goals of the organization.
The entire portfolio of projects needs to be balanced to maximize
short-term and long-term benefits while simultaneously optimising
scarce resources.
Actions
Actions are unique nonpermanent activities that
often require resources —
time, money and labour.
Learning Targets
When you have completed this section you will be able to:
Describe the problem solving process and a number of tools
for solving problems systematically
Explain idea generation and use tools for generating new
ideas
Identify broader aspects of project management appropriate
to the innovation process
Explain the procedure for project portfolio management
where a group of projects are chosen to meet short- and
long-term goals
Managing Actions
There are four common types of actions illustrated in Figure 7 –
problems, ideas, projects and initiatives. The terms ‘initiatives’
and ‘projects’ are interchangeable. Innovation management
typically involves many of each type of action. For example,
organisations will have a number of projects ongoing at once. Some
of these may be radical while most may be incremental. Some
Stimuli
Ideas can be stimulated by
problems or goals. They
can also be stimulated by
more knowledge e.g.
attending conferences,
networking, training,
benchmarking, etc.
30
Managing Innovation Actions
projects will deal with changes to processes, while others will deal
with products. Project management of an individual project is one
issue that needs to be addressed in organisations. Of equal
importance is balancing the portfolio of projects. Problems are
often regarded as the seed of innovation e.g. a problem exists with
a particular product when compared with a competitor. On the
other hand ideas or goals are viewed as stimulating innovation. We
begin this section by looking a problem solving. Later we explore
idea generation and project portfolio management.
GOALS
ACTIONS
RESULTS
Problems
Ideas
Projects
Initiatives
TEAMS
COMMUNITIES
Figure 7: Innovation Actions
Solving Problems
From time to time, problems occur with products, processes and
services. Problems are identified by employees, customers and
other stakeholders. Customers are an excellent source of problem
identification. Not only do they experience problems but they can
often predict problems in the future. They use products, processes
and services to add value to their own activities and have a strong
focus on any problems they encounter. The solution to a problem
can be either reactive or proactive. Reactive problem solving
occurs after a problem has been identified. Proactive problem
solving occurs before a potential problem has occurred. The terms
‘problem solving’ and ‘corrective action’ are interchangeable.
Problems
Problems can be reactive
or proactive.
A large number of tools can be used for documenting, analysing,
ranking and illustrating problems and later identifying solutions for
solving them. Table 1 below illustrates a number of problem solving
and idea generation tools.
Table 1: Problem Solving Tools/Techniques
Activity Network, Affinity Diagram, Bar Charts, Brainstorming,
Cause-Effect Diagram, Checklist, Control Chart, Decision Tree,
Design of Experiments, Fault Tree Analysis, Failure Mode Effects
Analysis, Flowchart, Flow Process Chart, Force-Field Diagram,
Gantt Chart, Histogram, IDEFo, Line Chart, Matrix Diagram, Matrix
Data Analysis Chart, Nominal Group Technique, Pareto Diagram,
31
Managing Innovation Actions
Prioritisation Matrix, Process Capability Diagram, Process Decision
Program Chart, Relationship Diagram, Scatter Diagram, String
Diagram, Surveys, Triz, Tables, Tree Diagram, Value Analysis,
Voting…
It is not possible to discuss each of these tools and techniques
individually. You are encouraged to visit the internet and search for
information on any tools or techniques that catch your interest.
What follows is a discussion on some popular tools: (i) Cause-Effect,
(ii) Brainstorming (iii) Affinitising and (iv) FMEA.
Search
Search the internet using a
popular search engine using
the key words in Table 1
Cause-Effect: This graphical technique identifies the effect or
effects of a problem. It then looks for possible causes of the effect.
Causes can be grouped into key areas. One popular grouping
technique is to use (i) man, (ii) machine, (iii) method or (iv)
material. The possible cause can be the person, the equipment or
machine that they use, the method in which they use the
equipment or any materials in the process.
Brainstorming: Brainstorming is a technique that relies heavily on
group creativity. It is particularly effective in looking in the broad
direction of a problem and in developing solutions to problems that
cannot be logically deduced. Brainstorming encourages the use of
divergent thinking. Two basic rules apply to creative thinking, these
are: (i) suspended judgement during the creation of ideas and (ii)
all ideas put forward are considered.
Affinitising: Once ideas have been generated, the next step is to
rank them. A simple technique for ranking or affinitising is to rank
them according to risk and impact. Each individual can be asked to
place a number from one to five for both risk and impact on each
idea. Alternatively, an open discussion between groups of
individuals can attempt to reach a consensus on the ranking. Once
the ideas have been ranked, perhaps the top three or five can be
discussed further in detail. Pareto Analysis indicates that 20% of the
problems cause 80% of the effects (the 80/20 rule).
FMEA: Failure Mode Effects Analysis is a technique for predicting
future problems or failures and them allocating a score to each
problem. The technique then identifies actions that can be carried
out to prevent the failure occurring. The technique is popular in
product design and in processes. The technique is highly successful
in assuring high quality and greater reliability of products that in
turn give organisations a competitive advantage over their
competitors.
Sample: Customers and employees at a computer chip
manufacturing company complained of long delays in releasing new
chips. A group of employees including managers, designers, and
32
Managing Innovation Actions
lead customers developed a solution using cause-effect,
brainstorming and affinitising. Figure 8 illustrates the cause-effect
diagram that indicates the most likely causes of the long delays.
This was followed by brainstorming which identified ideas for
addressing the key causes and affinitising which ranked the ideas in
terms of their risk versus impact.
Figure 8: Cause-Effect Diagram
Generating Ideas
Ideas occur during the problem solving process, or when goals are
defined that motivate individuals. Some ideas occur because of
serendipity i.e. an idea suddenly arises without any prompting.
Most ideas are planned. They occur because of a planned set of
activities. Good ideas go on to become initiatives and projects that
require resources — time, labour and money — and need to be
scheduled. Some ideas can be implemented immediately with very
few resources. These are sometimes called ‘quick wins’. Creativity
is one of the first steps in the idea generation process. Creativity
begins by identifying a problem or a goal. Individuals or teams with
the right expertise, motivation and creative thinking skills work on
the problem or goal, generate ideas, test the ideas and ultimately
implement the ideas as quick wins, corrective actions, incremental
improvements or projects. The vast majority of ideas will be
scrapped, recycled, merged with other ideas, or postponed.
Perhaps one idea in one hundred will progress to become a
solution. There are a number of ways of encouraging the ideacreation process in any organization. Some of the more popular
ways are listed below:
1.
2.
3.
4.
5.
6.
7.
Serendipity
Some ideas occur because
of serendipity i.e. an idea
suddenly arises without
any prompting. Most ideas
are planned.
Providing a diverse information service
Employing staff with diverse interests
Having a supportive management style
Allowing failures to be willingly tolerated
Allowing individuals room to pursue their own ideas
Rewarding success
Providing idea suggestion programs
33
Managing Innovation Actions
8. Providing good strategic direction
9. Benchmarking and access to external stimuli
10. Providing a challenging environment
Individuals will become creative if they are motivated, competent
and possess problem solving and idea generation skills in an
environment that provides well-defined goals and supports for the
innovation process.
Sample: A number of tools can be used in the idea creation
process. Some of these were listed in Table 1: Problem Solving
Tools/Techniques. Mind mapping has become a popular tool in
recent years for a wide variety of problem-solving and idea
generation tasks. Mind mapping which takes its ideas from the
original ‘spider diagram’ can be used to create concepts or
thoughts, associations between concepts, and hierarchies of
concepts. These are also called tree diagrams and topic maps. Mind
maps can be used for a number of problem solving techniques
mentioned
earlier
including
cause-effect
diagrams
and
brainstorming. Figure 9 illustrates a mind map for the concept of an
‘Innovation Team’. The diagram suggests that to understand an
innovation team the reader needs to understand an number of
associated concepts such as ‘creativity’, ‘problem solving’ and so
on.
Figure 9: Mind Map
Sources of Ideas
There are many sources of ideas. Sources of ideas can be divided
into six areas6: (i) new knowledge, (ii) ideas of customers, (iii) lead
6
Managing Creativity and Innovation, Harvard Business Essentials, Harvard
Business School Press, 2003
34
Managing Innovation Actions
users, (iv) empathetic design, (v) invention factories and, (vi) open
market innovation.
New Knowledge: These are ideas from employees, suppliers,
distributors and individuals in the organisation. Ideas are typically
generated from new knowledge and insights gained from books,
magazines,
competitive
benchmarking,
collaborative
benchmarking, practice and experience. Many sources of new
knowledge can be used to generate new ideas.
Ideas of Customers: Customers are a main source of new ideas for
products, processes and services. Customers are useful for
identifying problems and weaknesses. Market research of large
customer bases can also identify future trends in customer buying
behaviour. One weakness of using customers solely is that
customers often defend the products they purchase and hence
usually have poor ideas regarding future products, processes or
services.
Customer Ideas
One weakness of using
customers solely for
generating ideas is that
customers often defend
the products they
purchase.
Lead Users: Some customers are particularly interested in engaging
in the innovation process and ‘push the barrier’ of usage for
particular products, processes and services. These are called lead
users. Lead users are important for collaborative benchmarking, codesign, and testing and validation of new ideas.
Empathetic Design: This design process involves observing users of
the products, processes and services. Users are observed often by
camera over a prolonged period. Their usage pattern often shows
up pleasure, frustration, and so on that can guide designers
regarding people’s potential likes and dislikes of a particular
product or service.
Invention Factories: Invention factories are special laboratories
within organisations, and those shared between organisations and
universities. Laboratories such as Bell Labs hire experts from
diverse backgrounds to work on ideas for the future. These ideas
are principally scientific in nature with solutions often only possible
in the long term.
Open Market Innovation: This approach to generating ideas
involves purchasing and taking over other organisations that have
already generated complementary innovations. The combination of
skills and ideas from both organisations is blended and mixed to
generate new opportunities for the expanded organization.
Evaluation of Ideas
The most direct way of evaluating an idea is judging its merits with
respect to its impact on meeting the goals of the organization
35
Managing Innovation Actions
versus any risk of not achieving its impact. Score each idea on a
scale from one to five on its ‘impact’, and then score each idea on
a scale from five to one on its ‘risk’. Multiply both scores and you
get an overall ‘score’ for the idea. Other factors that need to be
considered are the technical and business competencies available
in the organization. There is little point in choosing a good idea if
the competencies to implement and exploit the idea are not
available in the organization. Cost benefit analysis is another direct
way of evaluating an idea, although it is often difficult to
determine benefit from an idea that has not been tested in the
marketplace.
Utility Levers
Productivity
Simplicity
Convenience
Risk
Fun and image
Environmental friendliness
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Buyer Life Cycle
Purchase
Delivery
Use
Supplements
Maintenance
Disposal
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Another approach to evaluating ideas is the buyer-utility map7. The
buyer-utility map is a two-dimensional matrix with six utility levers
on the y-axis and six stages of buyer experience on the x-axis, see
Figure 10. The approach suggests that every customer measures the
utility of a product, process or service according to the criteria on
the map. The six utility levers are productivity, simplicity,
convenience, risk, fun and image, and environmental friendliness.
If a comparison of product, process or service shows that your idea
is better than competitors, then the idea is a good one. All six of
these utility levers can then be applied for each stage in the buyer
experience life cycle from purchase, delivery and use to
supplements, maintenance and disposal. Again, if the comparison
with competitors shows your idea is better, then the idea is a good
one. An alternative approach to using the buyer-utility map is to
use it to compare customer requirements with the idea.
Collective Productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental Friendliness
Figure 10: Buyer-Utility Map (Kim and Mauborgne, 2000)
Sample: A low cost airline recently completed a buyer-utility map for its
innovative service to airline passengers. They later contrasted this map with the
map developed following an analysis of requirements by airline passengers. The
map is illustrated in
Figure 11.
7
Kim and Mauborgne, Knowing a winning business idea when you see one.
Harvard Business Review, 2000. September-October: p. 129-136.
36
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Managing Innovation Actions
Collective Productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental Friendliness
Figure 11: Buyer-Utility Map for Low Cost Airline
During the purchasing stage, the Internet contributes towards lower
cost (i.e. collective productivity), convenience, lower risk (since
the customer interacts directly with the airline), and fun and image
(since customers often boast about the price of their tickets with
friends). Simplicity is not seen, as an advantage since interacting
with a web site is less simple than perhaps interacting with a travel
agent. During the delivery of tickets stage the use of the Internet
as a delivery mechanism provides numerous advantages. During the
use of the service customers viewed the no frills model as
advantageous in almost all utility levers. Finally, in the
supplements phase activities such as changing dates and repurchase
due to missed flights again lead to a more productive service since
new tickets purchased on the spot are also not expensive. The
maintenance and disposal stages were not relevant for this service.
Project Portfolios
Most ideas transform into projects that demand scarce resources
that need to be managed so that the organisation can optimise its
return on investment. A group of projects is called a portfolio. Most
organisations have a group of projects that they are working on as
part of their innovation program. These projects will have various
start dates, durations, due dates and so on. A portfolio of projects
is sometimes called a program or a plan. One of the key issues in
managing a portfolio is scoring and ranking of projects. As
investment budgets increase or decrease, the position of the
project in the overall ranking determines whether it would be
implemented or not. There are four key approaches for portfolio
management:
Project Portfolio
Most organisations have a
group of projects that they
are working on as part of
their innovation program.
Maximising Value of Portfolio
Creating the Right Mix of Projects
Maximising Alignment with Goals
Optimising Resources
Maximising Value of Portfolio: This approach involves placing a
value on each of the projects in the portfolio. ‘Payback’ is a simple
37
Managing Innovation Actions
yet effective way to place value on a project. This approach
suggests reviewing projects simply in terms of their cost versus
revenue potential. An alternative approach is to include both
financial and non-financial criteria. Projects can be scored on a
number of criteria, for example: Strategic alignment, Product
advantage, Market attractiveness, Ability to leverage core
competencies, Technical feasibility, Reward vs. risk, Payback and
so on. The total scores for each project in the portfolio are then
compared.
Creating the Right Mix of Projects: The previous approach
‘maximizing value’ often leads to only low-risk projects in the
project portfolio. Low risk projects have predictable but often
medium benefits. A complementary approach is to develop a mix of
high-risk and low-risk projects. Risky projects can fail but they may
also provide significant benefits. The bubble chart is a simple tool
for visualizing a mix of projects and providing decision support for
managing a project portfolio (see Figure 12).
Project Mix
Develop a mix of high-risk
and low-risk projects.
Risky projects can fail but
they may also provide
significant benefits.
Risk
Low
Pearls
Bread and Butter
High
Low
Reward
Oysters
White Elephants
High
Figure 12: Bubble Diagram
This bubble diagram maps projects according to their impact on
either reward or risk. The size of the bubble in this instance
represents the capital cost of the project. The position of the
bubble indicates whether the project has a high or low reward, or a
high or low risk. This presents the user with a visual decision
support tool that allows them to rank projects in the portfolio.
Each of the quadrants has been given a name representing their
relative meaning.
Maximising Alignment with Goals: Maximising Alignment is an
objective that selects projects that are aligned with particular
goals. A powerful but simple technique used here is the matrix
diagram (see
Figure 18). The matrix diagram places the portfolio of initiatives or
projects on the y-axis and a list of the other variables on the x-axis.
38
Managing Innovation Actions
A mark is then placed on the intersection between two variables if
a relationship exists between them.
Optimising Resources: This is the process of balancing funds,
people and skills required by the portfolio of projects. There is
often a finite amount of money available for investment. In
addition, the funding available can change. For example if revenues
are particularly low for the organisation, then overall expenditure
on innovation can be suddenly reduced. This can mean shelving
particular low-ranked initiatives. The total number of person-hours
and skills available for executing initiatives is also finite, and can
vary significantly as people move within and between organisations.
A major cause of variation is the amount of time individuals have
for spending on innovation activities versus their ‘day-to-day’
operations activities.
All four approaches discussed above can be used together to
generate knowledge that can be used to decide which projects to
pursue. Once a portfolio has been chosen there are two approaches
for reviewing a portfolio while it is in the process of being
executed: (i) the Gates Dominate approach and the (ii) Portfolio
Dominates approach.
Gates Dominate: This review approach focuses on reviewing each
stage gate within the individual projects in the portfolio. At each
stage gate, a decision is taken regarding future actions for the
individual project. A regular portfolio view is sacrificed in favour of
in-depth review of individual projects. The approach is suitable
where portfolios are relatively static and unchanging and is
typically found in large mature businesses.
Portfolio Dominates
The portfolio as a whole
and the organizational
goals as a whole are
reviewed regularly rather
than detailed evaluations
of individuals projects.
Portfolio Dominates: This review approach favours a portfolio view
over an in-depth review of individual projects. The portfolio as a
whole, and the organizational goals as a whole, is reviewed
regularly. The approach is particularly suitable in fast, dynamic
organisations where projects are changing regularly and where the
business environment is regarded as a fluid i.e. goals and projects
are changing regularly.
Best Practice
When Boeing announced the development of a new airplane model
— Boeing 777 — in the late 1980s, many aviation experts wondered
about the rationale behind the decision. They questioned the need
for a new model since Boeing’s highly successful 747 models had
been flying successfully for over 30 years.
39
Managing Innovation Actions
Goals: To make the 777 model technically superior as compared to
other competing models during the time of its launch.
Actions: The 777 was designed and developed in close collaboration
and involvement of Boeing’s customers, fellow aircraft
manufacturers, airline users, engineers, finance experts,
technicians and computer experts. Various computer based
technologies like CAD, CAM and CATIA were used in designing the
777.
Teams: Boeing and Boeing’s customers, fellow aircraft
manufacturers, airline users, engineers, finance experts,
technicians and computer experts
Results: The 777 has the distinction of the first paperless designed
aircraft in the aeronautical history. The Boeing 777 family came to
be known as the builders of the most technologically advanced
aeroplanes. The 777 design, innovative features and approach to
manufacturing established a benchmark for development of aircraft
in future.
Case Study
Sheet Metal Industries is a manufacturing company that produces
metal panels for the automobile industry. Its mission is
‘Manufacturing Excellence through Teamwork’ and it has produced
a five-year Manufacturing Development Plan that outlines a set of
strategic objectives and expected performance targets. One of its
primary goals is cost reduction. Figure 13 illustrates its current
portfolio of projects.
Figure 13: Project Portfolio for Manufacturing Firm
40
Managing Innovation Actions
The full portfolio of projects currently has a capital expenditure of
over 1 million euros (€1.118m). The most expensive project is a
‘high tech upgrade’ of its sheet metal machinery (€400k). This
particular project will also have additional recurrent costs of €100k
annually. However, the saving in terms of quality improvement,
additional capacity and improved productivity will be €300k
annually. The project has a payback of two years. All of the
projects except one in the portfolio pay for themselves within two
years. The ‘recycling process development’ project has a poor
payback of over five years but it is ranked high in the portfolio
because of its significance in meeting the company’s goal of
environmental conformance.
Summary
Problems occur to products, processes and services regularly now
and in the future. When these problems are identified either by
employees, customers or other stakeholders, they need to be
recorded and managed. Not all problems are important. Typically
20% of problems cause 80% of the negative effects. Ranking
problems helps. Ideas evolve from problems and well-defined goals.
Various stimuli can initiate the creativity process including new
knowledge, ideas from customers and research laboratories. Most
ideas are planned and many ideas are merged, postponed or
rejected. The principal way to measure the potential success of an
idea is to compare it with the goals of the organization.
Organisations typically implement ideas through a portfolio of
projects. The primary objective of portfolio management is to
create a balance around issues such as cost-benefit, risk versus
reward, and goal attainment. In dynamic organisations, where goals
are changing, portfolio management is often more important than
managing individual projects.
Search
Search the internet using a
popular search engine using
the following key words:
FMEA
Creativity
Idea Generation
Project Portfolio
Buyer-Utility Map
Bubble Diagram
Activity
Create a list of ideas or projects for your innovation plan. You can
generate a list of ideas using techniques such as brainstorming.
Record only the critical information about the projects in a simple
spreadsheet application. The form below contains all of the critical
information necessary for managing a simple portfolio of innovation
projects.
41
Managing Innovation Actions
Projects
Title
Start Date
Due Date
Risk
Impact
Cost
Payback
Impact = Impact on Indicators (with 1 for very low and 5 for very high)
Risk = Level of Risk (with 5 for very low and 1 for very high)
Cost = Capital Costs in currency units
Payback = Cost / Annual Savings or Revenue
Reflections
List three tools for problem solving or idea generation
What are the six principal sources of ideas for any
organization?
Name the six utility levers that can be used by customers
in evaluating the value of a product, process or service
What are the four key overlapping strategies used in
selecting projects in portfolio management?
42
Empowering Innovation Teams
Empowering Innovation Teams
Introduction
In previous sections we looked at the first two of five key areas
surrounding the innovation funnel — goals, actions, teams, results
and community. Goals set the objectives for the generation of
actions by various individuals in the organisation. In this section we
will look at the role that teams play in the innovation process. The
first part looks at building teams — how to create team structure
and foster team behaviour that leads to more effective innovation.
Next we look at some of the concepts of leadership and the process
of creating an innovation culture. We then explore some ideas
around motivation and reward, and in particular we look at ways to
tie an individual’s goal into the overall goals of the organisation.
The final part of this section looks at organisational learning, where
organisations can learn from mistakes and continue to improve the
innovation process itself.
Learning Targets
When you have completed this section you will be able to:
Define innovation teams structure and behaviour and explain
how to build a team culture within the organisation
Explain the importance of leadership in innovation
Explore various ways of increasing motivation through
intrinsic and extrinsic rewards
Explain the need to create a learning organisation for
sustainable innovation
Empowering Teams
There are two major resources used in the innovation process. The
first is funding, which was described very generally in the previous
section. The second are individuals, and in particular teams.
Individuals are necessary for setting goals, generating ideas,
relating ideas to goals and executing projects. Individuals have
many different skills and perspectives to bring to the innovation
process. They also have differing levels of engagement and
motivation. There are a number of key techniques for increasing
the engagement and motivation of individuals in the innovation
process. Some of them involve managing the information and
structure surrounding teams. The most important techniques
address the behaviour and motivation of teams. In terms of
information and structure, we can visualise the innovation funnel as
Innovation Resources
There are two major
resources used in the
innovation process: funding
and individuals or teams.
43
Empowering Innovation Teams
comprising a number of knowledge elements as illustrated in Figure
14. These are Individuals, Responsibilities, Teams, Workgroups and
Appraisals. Other knowledge elements can be easily added in Figure
14 and include the ‘Skills’ of various individuals and training
‘Courses’ available for individuals to complete. This section looks
at each of these knowledge elements in four separate but
interrelated discussions on leadership, teams, motivation and
learning.
GOALS
ACTIONS
TEAMS
RESULTS
COMMUNITIES
Individuals
Responsibilities
Teams
Workgroups
Appraisals
Figure 14: Innovation Teams
Leading Innovation
Leadership is the ability to influence a team towards the
achievement of well-defined, communicated and accepted goals.
Many actions occur from the bottom up, i.e. ideas are generated by
engineers, specialists and users of a particular product, process or
service. What stimulates this activity is a combination of leadership
skills that include creating a culture of innovation, keeping the
focus of the strategic goals of the organisation, empowering others
to act on the goals and resolving conflicts as soon as they arise.
These skills are not easy to attain and often require many years of
training and experience. Over the years, leaders will develop a
specific style that can foster and promote innovation.
Leadership is clearly important for good innovation. What is not so
clear is what attributes a good leader needs to have. The following
is a list of attributes identified as being important for successful
leadership8:
Leadership
Leadership is the ability to
influence a team towards
the achievement of well
defined, communicated
and accepted goals
Ambition and energy
The desire to lead
Honesty and integrity
8
Robbins, S., Organisational Behaviour: Concepts, Controversies, Applications.
8th ed. 1998, New Jersey: Prentice Hall.
44
Empowering Innovation Teams
Self-confidence and intelligence
Job-relevant knowledge
Highly self-motivated
It is generally agreed that good leadership requires skills in three
areas: tasks, relationships and organisation. Leadership depends on
the ability to manage tasks, manage relationships within the team
and with other stakeholders and equally importantly it depends on
the organization. A good leader in one organization may not be a
good leader in another. It is this latter issue —organization and in
particular how an organization changes — that suggests that good
leadership requires dynamism and the ability to change.
Table 2 illustrates two main styles of leadership — transactional
and transformational. Transactional leadership is typically used in
established organisations. The style emphasises attention to shortterm goal attainment, the need for formal structures, problem
solving, and maintaining the status quo that has served the
company over many years. Transformational leadership on the
other hand emphasises attention to long-term visions,
empowerment and trust and a continuous focus on the need to
change products, processes and services and the innovation process
itself.
Table 2: Leadership Styles9
Transactional Leadership
Transformational Leadership
Clarify goals & objectives to obtain
immediate results
Establish long-term vision
Create structure & processes for
control
Create a climate of trust
Solve problems
Empower people to control
themselves, manage problem
solving
Maintain & improve the current
situation
Change the current situation
Plan, organise & control
Coach & develop people
Guard & defend the culture
Challenge & change the culture
Transactional leaders are often regarded as conservative
bureaucrats who abide by the rules of the organisation. A
transformational leader is viewed as a maverick that challenges
established authority, attempts to seize every opportunity,
question every rule and motivates and controls individuals through
personal loyalty.
9
Jones, P., et al., Delivering Exceptional Performance. 1996, London: Pitman
Publishing.
45
Empowering Innovation Teams
Leadership Culture
Setting goals and generating ideas are two elements of a complex
environment for innovation. New ideas will only succeed if the
organizational culture is right to allow them to grow and prosper.
There are many factors necessary for developing an effective
innovation culture in any organization, including the following:
Risk taking is encouraged and accepted
New ideas are welcomed
Information exchange is open and shared
Extensive and uncontrolled access to new knowledge
Good ideas are supported
Innovations are rewarded and recognised
Risk Taking: Taking risks is a necessary part of creating new ideas.
Many ideas will fail but a few will succeed that will more than
justify the entire effort. The risk-benefit relationship needs to be
integral part of the skill-set of every innovation leader.
Risk Taking
Taking risks is a necessary
part of creating new ideas.
Welcome New Ideas: Welcoming new ideas is consistent with the
transformation management approach where any ideas that will
lead to positive change are welcomed. This is not to be confused
with welcoming any ideas. Poor ideas, or ideas which have an
unacceptable level of risk, will need to be terminated swiftly.
Information Exchange: Information and knowledge within an
organisation is the life-blood of innovation. Who is responsible for
what goal? Who is working on a particular idea? Who has skills in a
particular area? Who recently visited a particular conference?
Access to New Knowledge: The internet has recently created an
explosion in new knowledge sources. In the past, organisations
relied on expensive libraries, subscription to a few magazines and
trips to conferences and trade shows. New knowledge is the raw
material for creative thought. Access to new knowledge needs to
take place within an environment where goals are well defined and
understood.
Support for Ideas: Ideas and the individuals who create them are
like young seedlings — if they do not receive support and
encouragement, they can wither and die. Innovation leaders need
to learn how to support ideas and protect the often delicate egos
and sensitivities of the individuals who create them.
Reward and Recognition: Innovation and creativity demand
appropriate reward and recognition for the individual or team that
creates an idea. Creative energy is easily dissipated. Reward and
recognition replenish this energy in the minds of individuals.
Knowledge Access
The internet has recently
created an explosion in
new knowledge sources.
Reward
Creative energy is easily
dissipated. Reward and
recognition replenishes
this energy in the minds of
individuals.
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Empowering Innovation Teams
Rewards can be either intrinsic (e.g. self actualisation) or extrinsic
(e.g. a bonus) or both.
Empowerment and Responsibility
Empowerment is about giving individuals the necessary power to
make appropriate decisions. Empowerment is similar to delegation
in that it increases autonomy and discretion in individuals and leads
not only to more effective innovation, but also better job
satisfaction. Autonomy and discretion together are one of six
psychological job criteria identified that empower individuals and
lead to better job satisfaction. The full list of criteria is10:
Autonomy and discretion
Sense of meaningful contribution
Opportunity to learn and continue learning on the job
Optimal variety
Opportunity to exchange help and respect
Prospect of a meaningful future
Empowered individuals not only want an appropriate increase in
autonomy and discretion, they also need to feel that their
contribution is meaningful and valued. They want the option of
continuing learning on the job i.e. increase their enablement and
knowledge that in turn can lead to more empowerment.
Empowered individuals want optimal variety in their job tasks and
they would like the opportunity to exchange help and respect with
colleagues. Finally, empowered individuals need to know that they
have the prospect of a meaningful future with the organisation.
Empowerment or the discretion to take decisions needs to be
appropriately balanced with enablement i.e. the ability and skills
to take decisions. If that enablement is not present in the
individual, then it needs to be supported through more training and
experience.
Empowerment
Empowered individuals
want not only an
appropriate increase in
autonomy and discretion,
but they also need to feel
that their contribution is
meaningful.
One of the first steps in empowering individuals is to assign them
responsibility for something i.e. put their name on a particular task
or goal and ask them to take ownership. The level of ownership can
vary considerably. Putting their name of a particular goal may
mean that if the goal is not met then they are held personally
responsible. On the other hand, they may simply be responsible for
reporting to the organization the status of the goal. They may have
responsibility for communicating the goal to other individuals and
collecting information on how the goal is progressing. The level of
responsibility needs to be worked out in advance.
10
Pava, C., Managing new office technology: An organisational strategy. 1983,
New York.: The Free Press.
47
Empowering Innovation Teams
Building Teams
Most organisations now operate a type of matrix organizational
structure where individuals report on a permanent basis to
functional departments but also report on a temporary basis to
project organisations. Functional departments are examples of
permanent teams. Once they are formed and structured, they can
last for many years. Project organisations, on the other hand, are
non-permanent teams. Project organisations only last for the
duration of the project. The Innovation process requires both types
of teams. The terms ‘team’ and ‘organisation’ are interchangeable.
Teams
There are two types of
teams:
Permanent (e.g.
department)
Non-Permanent (e.g.
project teams)
A team is a group of people with a common purpose. This common
purpose is typically expressed by a set of goals. There are two
types of teams — permanent and non-permanent. Management
teams, departments, committees and work groups are examples of
permanent teams. Permanent teams do not change significantly
over a long period. A project team, on the other hand, is an
example of a non-permanent team. The project team has a start
date and an end date, both defined by the project to be executed.
Each time a non-permanent team forms to execute a particular
initiative, it has an entirely new set of goals. As we learned earlier
each new project is unique, i.e. it has never been done before.
Therefore each non-permanent project team needs to define and
understand a new set of goals each time a project is started.
Innovation is often seen as an individual act where one person
creates an idea and perhaps another validates and implements the
idea. Most innovations, however, are the result of group or team
behaviour. Teams can create greater innovation because they bring
together different competencies, insights and perspectives. Team
composition means a diversity of thinking styles and skills. This
diversity has a number of advantages:
Diversity creates ‘creative friction’ between individuals that
can spark new ideas
Diversity is a safeguard against groupthink where a group of
individuals has a tendency over time to allow their thinking
to converge
Diversity creates an environment where different
perspectives are developed and where good ideas can be
identified and supported
Innovative organisations have high employee involvement in teams.
The attributes of such organisations include:
employee involvement ‘policy’
clear organisational strategy towards involvement
formal measures of ‘involvement’
internal consulting staff
Involvement
Innovative organisations
have high employee
involvement in teams.
48
Empowering Innovation Teams
team champions
large training activity
external consultants
Innovative organisations have a formal policy for engaging
employees in teams and regularly create strategic objectives whose
aims are to enhance involvement. They have formal measures of
team involvement such as how many ideas are being generated and
how much time is being spent on project activities by individuals.
Innovative organisations often have internal consulting staff that
can consult and train various teams in an effort to increase
effectiveness and participation. Team champions or mentors are
assigned to teams. These mentors are often senior members in the
organisation and can act in the interests of the team at senior
board meetings. Innovative organisations have a large training
activity and use external consultants for training and facilitation on
various team-building activities.
Motivating Performance
One of the most practical ways to tying individuals into the
innovation process is to link their personal performance with the
performance of the organisation. The performance of the
organisation is articulated through such goals as strategic
objectives and performance indicators. If the individual is made
responsible for achieving these goals, then it can act both as a
motivator and later on as a reward. There are many intrinsic and
extrinsic means of motivating individual performance. Intrinsic
techniques, such as giving the individual autonomy and discretion
are generally deemed the most productive. Extrinsic techniques,
such as linking performance to pay and other rewards, are also
necessary incentives for the individual and help them to take more
risks for the organisation.
Motivation
One of the most practical
ways to tying individuals
into the innovation process
is to link their personal
performance with the
performance of the
organisation.
Extrinsic Motivation: Intrinsic motivation, such as job satisfaction
is clearly important however, a number of forces act against it.
These forces include:
Individuals are risk adverse, loss averse, and tend to remain
content rather than ‘stretch’ their efforts.
Individuals need to see a clear link between their effort and
the resulting performance.
Individuals already receiving a guaranteed reward in return
for reasonable performance are unlikely to stretch further.
To counteract these forces, extrinsic motivation remains present in
most innovative organisations. There are three principal techniques
used for providing extrinsic motivation and linking reward with
performance:
49
Empowering Innovation Teams
(i) Gain Sharing,
(ii) Profit Sharing and
(iii) Performance Appraisal.
The ideal scenario for many organisations is to maximise the factors
that provide intrinsic motivation and optimise extrinsic-based
systems.
Performance Appraisal
Performance appraisal is a very common way to reward individuals
through annual salary increases. It is a structured interaction
between an individual and their superior to formally appraise the
individual’s progress on a number of goals, both organisational and
personal. In many organisations — but not all — appraisal results are
used, either directly or indirectly, to help determine reward
outcomes. Similarly, appraisal results are used to identify the
poorer performers who may require some form of counselling, or in
extreme cases, demotion, dismissal or decreases in pay.
Appraisal
In many organisations —
but not all — appraisal
results are used, either
directly or indirectly, to
help determine reward
outcomes.
Researchers and managers disagree on the need to link appraisal
with reward. Advocates argue that it can lead to significant
increases in innovation and productivity. Critics argue that
increases in productivity do not require a link with rewards and
that linking both can ultimately be damaging for team morale. One
compromise argues for a performance appraisal system for
individuals with no reward, coupled with a group-based reward
system (similar to gain sharing) when a reward is shared equally
across a team.
The performance appraisal system is typically constructed around a
range of organisational and personal development topics. In the
context of the approach adopted in this booklet, individuals can
find themselves motivated to contribute to specific goals within the
following areas:
Contribution to specific Objectives
Contribution to specific Indicators
Development of specific Technical/Management skills
Development of specific Interpersonal Skills
Development of specific Personal Skills
Specific Objectives: The individual is given a number of objectives
that they take responsibility for achieving either individually or as a
team. These are typically the same objectives or a subset of the
main objectives for the organisational as a whole. Individuals are
usually measured on up to three of the most important objectives.
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Empowering Innovation Teams
Specific Indicators: The individual is given up to three performance
indicators that they take responsibility for achieving either
individually or as a team. These are typically the same indicators or
a subset of the main indicators for the organisational as a whole.
Individuals are usually measured on up to three of the most
important indicators.
Technical/Management Skills: The individual agrees to develop
specific technical and management skills over the course of the
appraisal period e.g. computer programming skills, project
management skills and so on. These skills may be achieved simply
through the completion of particular training programmes.
Interpersonal Skills: The individual is assigned a number of
interpersonal skills to develop either independently or through
attendance at particular courses of study. The list of potential skills
include: Articulating Ideas; Coaching; Customer Orientation;
Delegation; Developing Others; Giving Recognition; Good Listener;
Handling Pressure; Initiative and Risk Taking; Mentoring; Monitoring
Performance; Motivating; Open and Ethical Communication;
Organisation; Personal Integrity; Problem Solving; Responding to
Feedback; Self-confidence and Teamwork.
Personal Skills: The individual is assigned a number of personal
skills to develop either independently or through attendance at
particular courses of study. The list of potential skills include:
Commitment; Communication Skills; Emotional Resilience;
Encouraging Motivation; Future Scanning; Listening to Others;
Managing Conflict; Networking; Positive Self-regard; Responsibility;
Self-Awareness; Self-development; Support; Training; Personal
Integrity; Problem Solving; Responding to Feedback; Selfconfidence and Teamwork.
The performance appraisal system also typically involves an
opportunity for the individual to add other achievements outside of
the objectives agreed. The whole process is formally recorded and
entered into the individual’s employment record.
Learning Organisation
A Learning Organisation is an organisation skilled at creating,
acquiring, and transferring knowledge, and at modifying its
behaviour to reflect new knowledge and insights. A learning
organisation facilitates the learning of all of its individual members,
and continually transforms itself through better knowledge and
understanding. Consider it in the context of the innovation funnel
presented earlier — organisational learning is the process by which
the organisation carries out some actions in response to given goals;
after some time it reflects on the results of the actions towards
Learning Organisation
A Learning Organisation is
an organisation skilled at
creating, acquiring, and
transferring knowledge,
and at modifying its
behaviour to reflect new
knowledge and insights.
51
Empowering Innovation Teams
achieving those goals, and if necessary alters its behaviour towards
creating new goals and new actions. The cycle continues
indefinitely.
Learning organisations are skilled at five main activities: systematic
problem solving, experimentation with new approaches, learning
from their experiences and the best practices of others, and
transferring knowledge quickly and efficiently throughout the
organisation. Five conditions have been given for the development
of a learning organisation11:
A perception of learning as an important and cyclical
process
An acceptance of the different roles of innovation
A free flow of information
The ability to value people as the key asset
The ability to reframe information to the strategic and
innovation perspective
A learning organisation is one that values learning, and this includes
learning from mistakes. The organisation allows risk taking,
experimentation, benchmarking and so on. The learning
organisation differentiates between the roles of operations and
innovation. Operations are the process of selling, manufacturing
and delivering products and services. Innovation is the process of
changing products, process and services to meet the new demands
of customers.
Operations
The learning organisation
differentiates between the
roles of operations and
innovation. A learning
organisation helps its
members to understand
this difference
Best Practice
Federal National Mortgage Association (known popularly as Fannie
Mae), achieved recognition not only for its financial performance
but also for its progressive human resource (HR) policies.
Goals: To recognise and
class/gender/nationality.
retain
talent,
irrespective
of
Actions: New HR policies were developed and implemented to offer
a wide variety of financial, health and career benefits. Some of
these policies were: ‘healthy living’ day off; paid child adoption
leave; elder care and childcare programs; flexible work options;
Assistance for Collegiate Education (ACE) Program; Corporate
Mentor Program, mandatory diversity training; 10 hours of paid
time off each month for volunteer activities; and Employer-Assisted
11
Garvin, D., Building a Learning Organisation. Harvard Business Review, 1993.
July-August.
52
Empowering Innovation Teams
Housing (EAH). The Office of Diversity was created in 1992 to
promote diversity at the organisation.
Results: The organisation earned the reputation of being one of the
best companies to work for. The company had been included in
Fortune’s Best Companies for Minorities list every year since 1998.
Summary
Innovation leaders are driven by vision, ambition and energy. They
are transformational, prepared to takes risks and constantly change
the status quo. Innovation leaders foster a culture of innovation
within the organisation that encourages appropriate risk taking,
welcomes new ideas, shares information openly and recognises the
contributions of individuals. Each organization consists of
permanent and non-permanent teams. Individuals can be members
of more than one team. Teams have a number of attributes, but in
particular they are a group of individuals with a common purpose.
Extrinsic reward involves developing a system where the
individual’s performance can be linked to the performance of the
organisation. The ability to learn faster than your competitors may
ultimately be the only sustainable competitive advantage.
Sustainable competitive advantage requires continuous innovation
by organisations where individuals change regularly and innovations
are planned regularly. Organisations need to create a learning
culture that allows individuals take risks, conduct experiments,
implement actions and most importantly reflect on the lessons
learned. Organisations need to become more learning centred.
Search
Search the internet using a
popular search engine using
the following key words:
Learning Organisation
Performance Appraisal
Tiger Teams
Leadership
Case Study
ADO Pharmaceuticals is a US company with a subsidiary in Ireland.
The Irish company currently manufactures drug products mainly for
the European market. There are currently 200 employees at the
Irish manufacturing facility. Over the last 15 years the company has
built up a state-of-the-art research and development department
concentrating on Biotechnology products. The company has created
a plan for development of its R&D department and defined a set of
performance measures and projects. Individuals are reviewed
annually for their contribution to the performance indicators of the
organisation. They are also reviewed on personal development
around technical skills, interpersonal skills and leadership skills.
Figure 15 illustrates the appraisal form for each individual in the
organisation.
53
Empowering Innovation Teams
Figure 15: Appraisal Form for ADO Pharmaceuticals
Activity
Create a simple relationship diagram to compare two lists of data
against each other. Copy the table below into a new worksheet in
your spreadsheet file. Create a relationship matrix for (i) Indicators
vs. Responsibilities and (ii) Projects vs. Responsibilities. Project
managers should have a strong relationship (+) with the project.
Team members should have a weak (-) relationship with a project.
54
Empowering Innovation Teams
Relationships
<List 1> vs. <List 2>
Lists
Results Row and Column
List 2 = Individuals or Initiatives, etc.
:) :( :|
List 1 = Objectives or Indicators, etc.
Progressing Well
Progressing Poorly
Neutral
Matrix
Place a + character in the cell to indicate a strong relationship
Place a - character in the cell to indicate a weak relationship
Reflections
Why is transformation leadership more desirable for
effective innovation?
What are the two basic types of team?
Name three techniques for rewarding individuals with
money.
What is a learning organisation?
55
Monitoring Innovation Results
Monitoring Innovation Results
Introduction
One of the primary causes of failure in the innovation process is
‘poor monitoring of results’. Results are defined in the dictionary as
the outcome of an effort. Earlier sections discussed three types of
efforts — the definition of goals, the management of actions and
the empowerment of teams. This section continues from these
three discussions but now focuses on closing the loop in the
innovation funnel i.e. monitoring the results of goals, actions and
teams and equally importantly the relationships between them. The
first part of this section looks at some simple techniques for
reporting results. The ‘traffic lights’ system is now a simple and
popular technique for indicating the status of goals, actions or
teams. Then we look at ways to map the relationships between
different sets of information. The matrix diagram is a powerful yet
simple decision support tool for assuring alignment between goals
and actions. Finally, we look at various issues around managing
innovation meetings.
Learning Targets
When you have completed this section you will be able to:
Illustrate a number of ways that results of goals, actions and
teams can be highlighted
Map the relationships between different sets of innovation
information
Use techniques for managing innovation meetings
Monitoring Results
The innovation funnel describes the innovation process as
comprising four flows of structured information — goals, actions,
teams and results. Results represent the outcome of goals, actions
and teams activities. When monitoring the progress of goals,
actions and teams, three key types of information become
important — exceptions, relationships and reports (see Figure 16).
Results
Results represent the
outcome of goals, actions
and teams activities.
56
Monitoring Innovation Results
GOALS
ACTIONS
RESULTS
Exceptions
Relationships
Reports
TEAMS
COMMUNITIES
Figure 16: Innovation Results
Relationships: All of the activities described in earlier sections
(e.g. individuals, indicators, ideas, projects, etc.) can be related to
each other. For example indicators can be paired with projects
illustrating which indicators are linked to which projects, and visa
versa. The relationship diagram or matrix can also indicate which
projects have no indicators and which indicators have no projects.
Building relationship matrices is a powerful way to indicate the
results of the innovation activity and to decide what activities need
to be executed. Relationship matrices will be discussed in detail
later in this section.
Reports: An innovation report is a report on the Goals, Actions,
Teams and Results from an innovation funnel. By keeping a focus on
elements around the funnel, the report is a snapshot of the plans
for the future, the actions currently being executed and a history
of what happened in the past. A simple report consists on a set of
tables similar to the ‘Activities’ presented in this booklet. An ideal
report is a full knowledge management system that users can
explore online.
Ideal Report
An ideal report is a full
knowledge management
system that users can
explore online.
Exceptions: All of the activities described in earlier sections (e.g.
indicators, ideas, projects, etc.) can be monitored for status and
progress as they are being executed. There are various ways to tag
status on an activity. A popular technique is to indicate the status
of an activity in terms of red, amber or green signals. Positive
exceptions are those activities that have a green signal only.
Negative exceptions have a red signal only. The ways in which
exceptions can be indicated and interpreted can be agreed by the
innovation team. Meetings can be managed in such as way that
focus is always kept on positive or negative exceptions.
Results Signals
There is a wide variety of techniques to signal the status of an
activity and consequently exceptions to normal behaviour. Two
57
Monitoring Innovation Results
simple and easy-to-deploy techniques are status fields and traffic
lights.
Status Fields: Status fields indicate various aspects of the status of
an activity. The table below lists a number of common approaches.
The ‘% Complete’ field is an indication of how complete an activity
is. O% indicates that the activity has not started and 100%
represents full completion. The ‘Progress’ field is a visual signal for
indicating various states of progress e.g. ‘In Progress’ and
‘Waiting’.
Table 3: Status Fields
Data Field
% Complete
Priority
Progress
Status
Value
0-100%
High, Normal, Low
Not Started, In Progress, Completed, Waiting,
Deferred, Abandoned
(See Traffic Lights example below)
Traffic Lights: The traffic lights system of signalling the status of
an activity has become very popular in organisations for its
simplicity and visual impact. The meaning of each traffic light state
(i.e. green, amber or red) varies between organisations. Table 4
illustrates the three states and their possible meaning.
Traffic Lights
Indicates the status of an
activity using visual signals
such as red, amber and
green.
Table 4: Traffic Lights
Image
Interpretation
Green
Activity
progressing well
inside control
limits
Activity entering or Discussion required
leaving ‘out of
if time available
control’ area
Activity out of
Discussion required
control
Amber
Red
Alternative
Interpretation
Activity progressing
well
Alternative
Image
Green smiley
face
Amber neutral
face
Red unhappy
face
Some organisations have a control perspective on the meaning of
each state. If the light is red, then the activity is seen as ‘out of
control’ and the individual responsible needs to report on the
causes and remedies. This interpretation can lead some individuals
to hide the true status, since they equate a red signal with their
own personal failure even if the activity is a group event. A softer
interpretation is to equate each signal with the need to discuss the
Watchdog
The individual labelled as
responsible for an activity
takes on the role of
‘watchdog’ and brings the
activity to the attention of
the team when necessary.
58
Monitoring Innovation Results
activity. If the light is red, then the individual responsible is
signalling a need to discuss the activity within the team and not
that the activity is performing poorly. The culture within the team
in this case is one where the team takes ultimate responsibility for
the activity being ‘in’ or ‘out’ of control. The individual labelled as
responsible takes on the role of ‘watchdog’ and brings the activity
to the attention of the team when necessary. A criticism of the
traffic light system is how to address the issue of individuals with
colour blindness. A simple way of overcoming this is to provide an
additional graphic element e.g. the traditional red circle becomes a
red circular unhappy face or ‘smiley’ (see
Figure 18: Matrix Diagram).
Relationships
There are a number of ways of showing the relationship between
two or more sets of information. Table 5 shows various types of
relationships than can exist between sets of data.
Table 5: Types of Relationships
Relationship
One to one
One to many
Many to one
Many to many
Parent-Child
Explanation
Where one data element is related to another data
element e.g. Initiative3A is being led by Individual4B
Where one data element is related to a number of other
data elements e.g. Initiative3A has team members
Individual4B, Individual5C and Individual2E
Where many data elements are related to one data
element e.g. Initiative3A and Initiative4D are managed by
Individual4B
Where many data elements are related to many other
data elements. This is the same as One to Many and Many
to One but represented together in a matrix
Where one data element is the parent of another data
element. There is a hierarchical relationship between the
data elements e.g. Indicator2A is a subset or child of
Indicator3S.
The first three types are easy to implement in a knowledge
management system. The representation of many to many
relationships can be achieved with a simple matrix diagram. The
diagram illustrates where relationships exist and where they do not
exist. Matrix diagrams are used to identify the relationships
between pairs of lists. Representation of parent-child relationships
can be achieved using a tree diagram. Both of these diagrams are
good at illustrating the ‘many to many’ relationships that exist
when comparing two lists. They can also be used to describe the
strength of relationships between pairs of data. Both diagrams are
illustrated schematically in Figure 17 below.
59
Monitoring Innovation Results
Figure 17: Matrix Diagram and Tree Diagram
Matrix Diagram
The matrix diagram is a decision support tool that facilitates
systematic analysis of the relationships between two or more sets
of data. It typically consists of a table whose first column and top
row contain the data sets. The cells that form the matrix between
the data sets can contain symbols or numbers that denote the
strengths of relationship between the data sets.
Figure 18 illustrates a simple matrix diagram for two data sets —
goals and actions. It also illustrates an additional row and column
for indicating the results of each element in the data sets. The
matrix consists of cells that can contain symbols that donate the
strength of a relationship between a pair of data elements. This
provides a strong visual signal that is easy to interpret quickly. The
symbols can be simple dots or they can be assigned values that can
be summed up to give a numeric indication of the strength of a
relationship. The data list on the left-hand column can be
interpreted as representing the ‘what’ of a problem, the data list
on the horizontal row then represents the solution or ‘how’ to the
problem. The basic questions that the analyst can ask of the matrix
are:
Matrix
The matrix consists of cells
that can contain symbols
that denote the strength of
a relationship between a
pair of data elements.
1. What is the relationship between any two data elements?
2. Why particular row elements are not related to particular
column elements?
3. Why particular column elements are not related to particular
row elements?
Key Questions
Why do some goals have no
actions? Why do some
actions have no goals?
60
Monitoring Innovation Results
Figure 18: Matrix Diagram
Types of Diagram: There are a number of types of matrix diagram
depending on the lists selected. Table 6 illustrates most of the
possible matrices that can be created among all of the knowledge
elements illustrated in the innovation funnel.
Table 6: Types of Matrix
Goals versus Goals
Objectives versus Indicators
Indicators versus Requirements
Objectives versus Requirements
Etc.
Goals versus Teams
Objectives versus Responsible
Indicators versus Responsible
Etc.
Teams versus Teams
Individuals versus Skills
Individuals versus Courses
Leader versus Teams
Etc.
Goals versus Actions
Objectives versus Initiatives
Objectives versus Ideas
Indicators versus Initiatives
Indicators versus Ideas
Etc.
Actions versus Teams
Initiatives versus Responsible
Initiatives versus Team
Initiatives versus Creator
Etc.
Actions versus Actions
Ideas versus Ranking Criteria
Problems versus Risk
Projects versus Schedules
Etc.
Relationships between Matrices: Matrices can also be related to
each other in a parent child relationship. Focusing on the matrix in
Figure 18, the row or top list of the matrix can be transposed into
the first column of a new matrix. A new list can then be related to
these data elements. For example, customer requirements can be
related to, say, design features in the first matrix. Design features
can then be related to, say, performance indicators in a second
matrix. Performance indicators can them be related to project
initiatives in a third matrix and so on.
61
Monitoring Innovation Results
Meeting Management
Meetings can be an expensive waste of time and potential source of
conflict. On the other hand, they can be a powerful way to
communicate goals, solve problems and motivate participants. To
achieve positive results, meetings need to have a focus that
appeals to participants and who feel they can make a meaningful
contribution. Participation and engagement of each individual is
one of the keys to success in a meeting. Other issues include (i) the
roles that certain individuals play at meetings, (ii) meeting agenda,
(iii) opening and closing a meeting and (iv) time management.
Roles: There are a number of potential roles at each meeting.
Meetings will typically have a chairperson, a reporter and
sometimes a facilitator. The purpose of the chairperson is to lead
the meeting and make sure that the agenda is implemented and
adjusted accordingly. The chairperson is ultimately responsibly for
conducting the meeting in a timely fashion. It is good practice for
each person at a meeting to ‘talk through the chair’ initially rather
than address other individuals at the meeting.
Agenda: There can be fixed agenda, suggested agenda, hybrid, or
exceptions only. Typical fixed agenda for an innovation team
include: (i) Previous Minutes, (ii) Matters Arising, (iii) Goals, (iv)
Actions, (v) Any Other Business. ‘Matters arising’ refers to the
status of actions agreed in the minutes that will not otherwise arise
under the normal agenda. Since many actions will arise under the
normal agenda it is important that this item be managed sensibly.
Meeting Agenda
1. Previous Minutes; 2.
Matters Arising; 3. Goals;
4. Actions; 5. Any Other
Business
Opening and Closing a Meeting: Always start a meeting on time.
This respects those who showed up on time and reminds latecomers
that punctuality is important. Meetings should begin by reviewing
the agenda and giving participants a chance to understand all the
major items to be discussed.
Time Management: This need not be a major challenge. Consider
the time requirements in advance of a meeting and once a time slot
is decided, communicate this in advance of the meeting with the
agenda. Each item then needs to be allocated time within this time
slot. A good chairperson will judge where allocated times can be
shortened or lengthened during the meeting. Largely, meetings
should be kept formal regarding timekeeping and always finish on
time except in exceptional circumstances.
Chairperson
Ground rules need to be
articulated through the
deeds and actions of the
chairperson.
Best Practice
The rapidly improving business environment in China and its entry
into the World Trade Organisation in 2001 attracted many multi62
Monitoring Innovation Results
nationals to the country. DHL was among those who recognised the
potential for growth in the country's express logistics industry.
Goals: To become an integrated ‘one-stop’ supply chain solutions
provider, offering services in express, air & ocean freight and
overland transport.
Actions: A massive expansion program was initiated called ‘China
Domestic’. An international express service was launched, as a part
of the DHLs strategy to respond to the fast-changing customer
requirements. A door-to-door delivery service particularly for
parcels and freight items was offered.
‘Track-and-Trace’
technology was implemented.
Results: DHL was able to offer shorter delivery and pick-up times,
besides better customer service and shipment visibility. DHL soon
emerged as the world’s leading logistics company.
Summary
Tracking information on the results of activities is a critical part of
effective innovation management. Status signals allow individuals
to draw attention to poorly performing activities and encourage
views on discussing corrective actions. Matrices are a simple yet
powerful decision support tool for understanding relationships
between two or more lists of data e.g. Goals vs. Actions. In its
simplest form, the matrix is a visual representation of where
relationships exist, where they don’t exist and perhaps where they
should exist. Proper meeting management is a basic yet
fundamental technique for communicating goals, actions and
results. Face-to-face meetings are a rich form of communication,
motivation and understanding. Conducting effective meetings
requires attention to creating the agenda, selecting the right
people to attend, effective time management, and creating
meeting minutes. It is important to follow up on actions agreed at a
meeting.
Search
Search the internet using a
popular search engine using
the following key words:
Traffic Lights
Balanced Scorecard
Meeting Management
DHL Case Study
Case Study
Moneypits Banking monitors and discusses the status of its
performance indicators each month. It uses two data fields to signal
status — ‘%Complete’ and ‘Status’. Any indicators with a red light
are automatically discussed as its monthly meeting. Amber (yellow)
lights can also be discussed if they are in transition from green to
red. It is up to the individual responsible to indicate the status of
the indicator. He or she voluntarily switches a signal based on their
own perceived status of the indicator. Turning a signal red is an
63
Monitoring Innovation Results
indication of concern and an indication that the individual
responsible wants the activity discussed in the meeting. Figure 19
illustrates the status of their strategic objectives at a moment in
time.
Figure 19: Status of Objectives at Moneypits Banking
Activity
Create a simple relationship table to compare two lists of data
against each other. Copy the table below into a new worksheet in
your spreadsheet file. Create a relationship matrix for (i) Indicators
vs. Projects. You can create many other relationship diagrams, for
example ideas vs. indicators and problems vs. indicators, and so on.
Relationships
<List 1> vs. <List 2>
Lists
List 2 = Individuals or Initiatives, etc.
Results Row and Column
:) :( :|
List 1 = Objectives or Indicators, etc.
Progressing Well
Progressing Poorly
Neutral
Matrix
Place a + character in the cell to indicate a strong relationship
Place a - character in the cell to indicate a weak relationship
64
Monitoring Innovation Results
Reflections
1. Why do you feel it is important to have fewer status signals?
2. Name all of the possible matrix diagrams that can be
constructed for a list of indicators, a list of projects and a
list of individuals.
3. Review documentation available on the internet for
managing meetings more effectively.
65
Building Innovation Communities
Building Innovation Communities
Introduction
In previous sections, we explored the meaning of innovation
management for a single community who share common goals,
actions, teams and results. In many large organisations there are a
number of such communities. Each community deals with various
aspects of innovation to products, processes and services. There
are even communities for large single projects. Every individual can
also have their own independent innovation funnel for how they
will manage personal and professional change in their own lives.
Within manufacturing alone there may be separate communities
(funnels) for manufacturing, computer services, health and safety,
environment, quality, maintenance and so on.
We can visualise each of these communities as a unique funnel with
its own goals, actions, teams and results. Many of these funnels will
be directly related to a particular department, for example product
design, operations or materials. Other funnels will be related to
senior management teams that together manage a number of
departments. Other funnels still will be built around large project
teams. Finally, there will be funnels for various strategic partners
of the organisation such as suppliers and distributors. In this section
we will look at some general knowledge around how innovation
knowledge can be managed. We will look at how funnels can utilise
knowledge management systems to allow individuals manage and
share critical information.
Learning Targets
When you have completed this section you will be able to:
Describe how organisations can contain a number of
innovation communities with unique but interrelated
innovation funnels
Discuss how to design and implement a knowledge
management system for the management of innovationrelated information
Describe the technologies used to create virtual teams
Innovation Communities
The fifth common cause of failure in the innovation process
presented earlier was ‘poor communication and sense of
community’. Communities are groups of individuals who share a
Communities
Communities are groups of
individuals who share a
common purpose.
66
Building Innovation Communities
common purpose. This common purpose can is attention to
organisation goals but it can also be much broader and include such
issues as social interaction, policies and culture, support for the
local community, family, sports and leisure. In any one organisation
many such communities will exist within projects, departments,
management groups, suppliers, sports and social clubs and so on. In
this section we look at some issues around building more effective
communities within an organisation. We also look at how to develop
a simple knowledge management system for storing and sharing
community-based innovation information. Figure 20 illustrates some
knowledge elements associated with communities. These
knowledge elements range from notice boards (Notices) and online
libraries (Libraries) to tools for increasing communication such as
Blogs and Wikis. Before looking at knowledge management we will
first look at some issues around innovation culture within large
organisations.
GOALS
ACTIONS
TEAMS
RESULTS
COMMUNITIES
Policies
Forums
Blogs
Wikis
Notices
Clubs
Libraries
Figure 20: Innovation Communities
Understanding Culture
In striving to become innovative, organisations need to look within
themselves and assess what takes the organisation forward and
what holds it back. Four key factors are found to either stimulate
or depress the innovation community:
People
Culture
Structure
People: Individuals and teams are a key resource in idea generation
and implementation and ultimately in making sure that customers’
requirements are met and exceeded. Leaders are responsible for
leading the task of identifying requirements, settings goals for the
organisation and ultimately taking decisions that ensure that good
67
Building Innovation Communities
ideas are executed efficiently. The structure of teams can vary, but
more important is the behaviour of individuals in the team.
Effective teams have effective leaders, autonomy and discretion,
appropriate mix of skills sets and a commonly understood set of
objectives.
Culture: Organisational cultures change continuously. However, at
various points in time particular cultures can be identified that
promote effective innovation. Organisations can also contain subcultures within departments, particular management groups and
project teams that can sometimes conflict with the overall culture.
There are four types of culture: (i) Role, (ii) Power, (iii) Task and
(iv) People cultures 12.
(i) Role culture is a classical bureaucratic model dominated by
formal rules, regulations and procedures to ensure that
everyone knows who is responsible for what. Individuals rarely
think outside of their responsibilities or interfere with the
responsibilities of others.
(ii) Power cultures are generally found in organisations that
have developed around one individual, and typically in smallto medium-sized enterprises. Unlike the role culture, decisions
may be made on an ad-hoc basis by one or two strong
individuals.
(iii) Task cultures are generally associated with matrix
structures in large organisations. Individuals report to
different managers depending on the task being executed.
Task or Matrix cultures are flexible and adaptable with high
value placed on individual and/or group performance.
Task Cultures
Task cultures are generally
associated with matrix
structures in large
organisations.
(iv) People cultures appear in organisations comprising a
number of highly skilled individuals. Such organisations are
often highly de-centralised and contain informal structures.
Examples include Architects and General Practitioners. People
cultures can generate a high level of innovation for the
individuals involved.
Structure: Organisational structures can be mechanistic or organic.
Mechanistic structures have deep and narrow hierarchies between
management and staff. Responsibilities are well defined and rigid
and communication is principally through the formal hierarchies.
Power and authority are typically based on seniority. Organic
structures, on the other hand, have flat and group-based
hierarchies. They communicate both through hierarchies and
laterally across hierarchies. They have flexible job descriptions.
12
Organic Structures
Organic structures have
flat and group-based
hierarchies, communicate
through hierarchies and
laterally across
hierarchies, have flexible
job descriptions and base
power and authority on
ability.
Handy, C., Understanding Organisations. 1985, Harmondsworth: Penguin.
68
Building Innovation Communities
Power and authority Is based on ability. Large innovative
organisations have a tendency towards the organic structure.
Creating Structure
Organisational structure is a system for dividing people and their
roles and responsibilities into more manageable parts. The most
common form of structure is to divide an organisation into
departments, as illustrated in Figure 21. Departments allow teams
of individuals to specialise and manage one particular aspect of an
organisation’s activity. Specialisation allows organisations to
develop experience and share knowledge among individuals in
manageable numbers. Individuals are typically assigned to one
department that also contains its own overall manager. Structure
leads to a functional hierarchy where each department understands
its role in meeting the overall objectives of the organisation. The
structuring of departments and sub-departments varies
considerably between organisations and even within the same
organisation.
Corporate
Corporate
Board
Board
Division
DivisionI I
Board
Board
Divisional
DivisionalIIII
Board
Board
Design
Marketing
Finance
Personnel
Marketing
Finance
Personnel
Design
Operations
Operations Department Department Department
Department
Department Department Department
Department
Plant
PlantAA
Board
Board
Materials
Materials
Dept
Dept
Plant
PlantBB
Board
Board
Engineering
Engineering
Dept
Dept
Assembly
Assembly
Dept
Dept
Machining
Machining
Dept
Dept
Cell
CellAA
Team
Team
Cell
CellBB
Team
Team
Figure 21: Departmentation
In addition to individual departments or sub-departments, there
will be other types of innovation teams present in the organisation.
The most important of these are management teams. Other types
of teams will include project teams, cross functional teams and
strategic partners in the extended organisation.
Management Teams: These functional managers and specialists
meet regularly to discuss goals and actions for the functions they
represent. In this context, functional managers are members of at
least two teams or innovation funnels. They are members of their
own functional team and the higher-level management team. Each
manager will attend two types of meeting and discuss two sets of
goals, actions, teams and results. However, there will be
69
Building Innovation Communities
hierarchical relationships between the two innovation funnels. For
example some of the objectives of the management team will
become the stakeholder requirements of the functional team. On
the other hand, many of the objectives and projects of the
functional team will be represented at the management team as
actions.
Virtual Teams
Virtual teams are groups of individuals who work together on
common objectives, but mainly use mobile and online
communications services to collaborate and share information.
These types of organisation are becoming more commonplace
because of the increasing globalisation of organisations, highs rates
of organisational change and the availability of technologies that
facilitate communications. Mobile and online communications mean
that individuals can work together from anywhere in the world and
even at different times of the day. Traditional teams are usually
co-located in the same building for the same working hours and
share the same language and culture. Virtual teams dissolve these
boundaries out of necessity, by utilising such technologies as online
collaborative workspaces, mobile phones and mobile computing and
video-conferencing.
Virtual Teams
Virtual teams are groups of
individuals who work
together on common
objectives but mainly use
mobile and online
communications services to
collaborate and share
information.
While many advantages can come from the adoption of virtual
teams, new challenges also arise for the organisation. The main one
involves satisfying the need for sharing, collaborating and
exchanging information. There are some key requirements that
have to be fulfilled so that the successful implementation of the
virtual team can be realised. These requirements include:
Greater collaboration: The ability for co-authoring,
document version control, group editing, report annotation,
etc.
More communication: emails, virtual notice boards, phone,
faxing, teleconferences meeting and online white boards,
WIKIs and Blogs.
Improved co-ordination: online project management,
corporate calendar, group meeting schedule.
More
training:
training
in
better
interpersonal
communications, cultural diversity, and virtual teamwork
tools and so on.
Innovation teams can be virtual or at least can adopt many of the
technologies that support virtual teams such as (i) collaborative
workspaces including content management systems, information
portals, Wiki’s, Blogs, and so on, (ii) teleconferencing and video
conferencing and (iii) mobile technologies including the voice and
text messaging. A number of the more popular of these
Knowledge
Knowledge is defined as
information plus
judgement that leads to
informed decisions.
70
Building Innovation Communities
technologies will be discussed in the section on managing
knowledge.
Managing Knowledge
Knowledge is defined as information plus judgement that leads to
informed decisions. Organisations utilise less than twenty percent
of their knowledge. Most knowledge remains trapped inside the
minds of individuals and increasingly in the various data stores that
an organisation uses, such as databases, email systems, files in
personal computers, filing cabinets, libraries and archives. Many
organisations now realise that to succeed in innovation they need
to harvest and utilise their innovation related knowledge more
effectively. They need to develop processes that increase
knowledge sharing among individuals.
It is clear that knowledge requires both information and individuals
or people. The expression ‘knowledge management’ refers to
processes that facilitate individuals in managing and sharing
information that may later be translated into knowledge. In this
context the term ‘knowledge management’ is in effect about
‘information management’ but only that information specifically
aimed at facilitating individuals in making decisions. This is
different to information management that allows machines to share
information. There are two types of knowledge: tacit and explicit.
Tacit knowledge is knowledge typically within the minds of
individuals that has not been shared or written down in any
way. Tacit knowledge can also exist within organisations as a
whole.
Knowledge
There are two types of
knowledge:
Tacit (e.g. skills and
expertise)
Explicit (e.g. forms and
manuals)
Explicit knowledge on the other hand is explicitly known
because it is perhaps written down or commonly expressed
through advice or training programmes.
One of the key objectives of an organisation is to translate tacit
knowledge into explicit knowledge e.g. translate useful information
in the minds of individuals into easily accessible information that
can be used by anyone.
Codification and Personalisation
There are two broad approaches to translating tacit knowledge into
explicit knowledge and then sharing this knowledge among
individuals in the organisation. These are personalisation and
codification.
71
Building Innovation Communities
Personalisation of knowledge: This approach involves the personal
exchange of knowledge and experience between individuals through
face-to-face meetings — both formal and ad hoc, presentations,
lectures and other information exchange forums. The emphasis in
this approach is on human contact with one another. Many
organisations create physical environments where individuals will
meet each other regularly and can get together to have formal and
ad-hoc meetings.
Knowledge
Management
There are two strategies
for managing and sharing
knowledge:
Codification (e.g. forms)
Personalisation (e.g.
meetings)
Codification of knowledge: The second approach involves codifying
knowledge using forms and databases. Each individual is expected
to complete specific tables and data fields about their information.
This information is then stored and retrieved from the
organisation’s computer and filing systems. Organisations use
systems such as ‘content management systems’ and ‘case based
reasoning’ to store as much information as possible that may be
reused in the future.
Codification
Minimum Critical
Codification
& Team Based
Personalization
Personalization
Figure 22: Codification and Personalisation of Knowledge
Figure 22 illustrates the relationship between personalisation and
codification of knowledge. Two paths can be followed. The first is a
major increase in the codification of knowledge. This means
codifying every available piece of information in the organisation.
This can lead to significant effort and inevitable complaints from
individuals about ‘keying in’ information that they already know.
The second path is to dramatically increase the personalisation of
knowledge allowing more time for meetings — both formal and
informal — more presentations and so on. This also has its
disadvantages, in that it not only uses up a considerable amount of
time, but can also bore and demoralise individuals who would
rather complete a task than talk about it.
A compromise clearly exists where organisations agree to only
codify information that is critically necessary for the organisation
as a whole to share. More detailed information can be found if
necessary from the individuals involved. Personalisation can also be
limited to specific team-based activities, thereby reducing informal
and ad hoc meetings. These complementary approaches are called
‘minimum critical codification’ and ‘team based personalisation’.
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Building Innovation Communities
Collaboration
Four types of collaboration can be classified, based on the space
and time of the collaboration taking place13. These are illustrated
in Figure 23 and are: (i) Face-to-Face Collaboration, (ii)
Asynchronous
Collaboration,
(iii)
Distributed
Synchronous
Collaboration and (iv) Distributed Asynchronous Collaboration.
Same Time
Same
Place
Different
Places
Different
Times
Collaboration
There are four types of
collaboration:
Same Time Same Place
(e.g. meetings)
Face-to-Face
Collaboration
Distributed
Synchronous
Collaboration
Asynchronous
Collaboration
Distributed
Asynchronous
Collaboration
Same Time Different
Place (e.g. phone)
Different Time Same
Place
(e.g. notice boards)
Different Time Different
Place (e.g. email, KM
system)
Figure 23: Four Types of Collaboration
Face-to-face collaboration involves exchanging information at the
same time and in the same place. Meetings in a common venue
such as a meeting room, office, café or even corridor are examples
of face-to-face meetings.
Asynchronous collaboration involves exchanging information in the
same place but at different times. This can be done using
communication media such as physical notice boards.
Distributed synchronous collaboration involves exchanging
information in different places but at the same time. This involves
real-time exchange of information between individuals who are
located in different geographical areas. There are various
techniques available such as telephones, video-conferencing, and
voice over IP (VOIP).
Distributed asynchronous collaboration involves exchanging
information at different times and in different places. This involves
exchange of information where individuals are located in different
geographical locations and where they can access the same
information at different times. This mode of communication
involves communication via the post, fax machines, voice mail,
pagers, email and increasingly, collaborative workspaces.
13
Anuba, C., et al., A Multi-Agent System for Distributed Collaborative Design.
Logistics Information Management, 2001. 14(5/6).
73
Building Innovation Communities
An organisation by its very nature, involves many types of
collaboration. As teams become virtual and individuals become
more flexible and mobile in completing their tasks, there needs to
be a marked increase in collaboration that is both distributed and
asynchronous. Email, collaborative workspaces and mobile phones
are now normal modes of exchanging information in addition to
traditional face-to-face meetings.
Collaborative Workspaces
Collaborative workspaces are computer-based systems used to
generate, represent, store, access and retrieve information by an
organisation. Collaboration systems typically contain forms, reports
and other structured information that the organisation shares. They
can also contain discussion forums, bulletin boards and links to a
variety of other resources. They are sometimes referred to as
portals or gateways, since they potentially provide organisations
with a portal to vast amounts of information.
There are two major types of portal. Horizontal portals serve large
communities with a wide variety of information. Examples include
Google, AOL and MSN. Vertical portals serve specific communities
and provide specific types of information. For example there are
portals for finding suppliers involved in the car industry and
internal enterprise information portals (EIPs) for topics such as
innovation management. Our interest in this booklet is in the use
and development of collaborative workspaces or enterprise
information portals that support the innovation management
process.
The major functions of portals include the following:
Creating portlets or information containers
Search and navigation
Document management
Personalization of interfaces
Automatic alerts
Task management and workflow
Integration of applications
These functions allow individuals to share information by uploading
and editing their own information through the portal, and then
accessing everyone else’s information as required. Many vendors
provide collaborative workspaces that allow teams to easily
configure a portal site for innovation management.
Sample: SharePoint Team Services is a product from the
Microsoft Corporation bundled with its main server product.
SharePoint provides a team website that allows teams to set up an
74
Building Innovation Communities
easily configurable portal or content management system for
storing and sharing information. The tool allows the user to create
a full-featured website with built-in functionalities such as
announcements, meetings, discussion management, email
notification, address books, surveys and tasks. Each user is
allocated a username and password. The basic components of the
system are ‘web parts’ which can be positioned dynamically on the
main portal page. Figure 24 illustrates a screen shot from the main
page that allows users to define and configure a particular web
part.
Figure 24: Sample of Web Parts
This sample of the web parts available allows users to create
document, form and picture libraries that can be used for files.
Also illustrated are web parts for creating a list of links,
announcements and contacts. Not illustrated in this figure are web
parts for creating so called lists for records such as ‘statements’,
‘objectives’ and ‘projects’.
Sample: Outlook is a primarily a mail client product from the
Microsoft Corporation but also contains a module for helping
individuals and teams shared information relating to various kinds
of ‘tasks’. The Tasks module can be easily configured to manage
various types of innovation and project related information in
predefined formats. Most of the activities in this booklet for
example can be carried out in the Tasks module. The ‘Matrix’
activity however cannot be carried out since this functionality is
not present in Outlook. Outlook can be a cheap and attractive
alternative to more expensive Portal servers. It can also be
synchronised with hand held devices such as personal digital
assistants and cell phones.
75
Building Innovation Communities
Best Practice
The retail sector, especially in the United States, was not known
for being employee-friendly. Many large retailers paid low salaries
and offered negligible benefits while expecting employees to work
long hours. Consequently, it suffered from high human resource
(HR) costs, as companies had to recruit and train replacements at
frequent intervals. In this context, IKEA stood out for its employeefriendly policies and generous benefits, which made it the
preferred employer in the retail sector.
Goals: To promote life balance and diversity in the company.
Actions: Several human resource management practices were
adopted, including flexible work design, comprehensive benefits,
quality of work life, and employee training and development. The
company also created unique work culture that supported coworkers and encouraged creativity and diversity.
Results: IKEA’s committed workforce has become one of the
sources of the company’s innovative concepts. IKEA North America
(IKEA) was in the annual list of the Fortune ‘100 Best Companies to
Work For’.
Case Study
ABC Health Care is a hospital that provides various health care
services to public and private patients. It has developed an
innovation management system to manage its innovation
information. The various information modules are divided into
Goals, Actions, Teams, Results and Community. For example the
‘Requirements’ module lists the various requirements of its key
stakeholders — patients, staff, regulation bodies and so on. The
‘Problems’ module records current corrective actions, their status,
and who is responsible for fixing them. The ‘Suppliers’ module lists
the main supplier details for the organisation. Their innovation
management system is available online to all employees in the
organisation who can add, update, edit and share innovation
information. Figure 25: ABC HealthCare illustrates the information
portal used to manage all of the innovation data used by the
hospital.
76
Building Innovation Communities
Figure 25: ABC HealthCare
Summary
In any organisation there can be a number of innovation teams each
with its own innovation funnel. A large organisation will have many
such teams responsible for various aspects of product, process and
service innovation. The common approach to organisational design
is to divide the organisation into functions or departments. Each
department can have its own innovation funnel. Virtual teams allow
individuals from different locations and time zones to collaborate
on common objectives. Many technologies support virtual
collaboration, the most common of which are internet-based
technologies and the mobile phone. Knowledge is information plus
judgement that can lead to informed decisions. Most knowledge
remains trapped inside the minds of individuals or on their personal
computer. This can be released for use by others through two
strategies — codification and personalisation. Collaboration is a
process that allows individuals to share knowledge and make
decisions together that achieve common objectives. There are a
number of technologies that support collaboration. Web portals are
content management systems for a wide variety of information that
can be stored in different types of knowledge management system.
Search
Search the internet using a
popular search engine using
the following key words:
Sharepoint
Plumtree
37signals
Content management
Collaborative Workspace
Innovation channel
Activity
Go on the internet and find a number of links that may be useful
for sharing with your innovation team. Find three types of links: (1)
similar organisations to your own; (ii) competitor organisations to
your own; (iii) useful tools for creating a simple knowledge
management system for your innovation plan i.e. can you find a
tool that can replace the use of simple spreadsheets? Place the
name of the links and their URL address in the table below.
77
Building Innovation Communities
Links
Title
Hyperlink
Title = Title of the link
Hyperlink = The URL or http:// address
Reflections
What is an innovation team?
List a number of easily-available technologies that allow
teams to practice virtual collaboration
Explain the difference between tacit and explicit knowledge
What is codification of knowledge?
78
Conclusions
Conclusions
Innovation is the process of making changes to something
established by introducing something new. Innovation applies to
every organisation — profit and non-profit. Many innovation teams
can exist within an organisation, from management teams and
departments to project teams and even individuals. Innovation can
occur to products, processes and services. The degree of change
can be incremental, radical or disruptive.
Innovation management is about putting a process in place for
managing innovation. Every organisation, large and small,
department or project team, will develop its own process. Common
features of every process will include elements for defining goals,
managing actions, empowering teams, monitoring results and
building communities. Defining innovation goals can be seen as the
starting point for innovation that informs individuals about the
direction of change the organisation is willing to take. It leads to
goal-centred ideas and projects.
Innovation actions such as ideas or projects are about discovering
ideas for innovation that meet goals continuously. Problem solving
that includes both small and large changes to existing products and
processes are an important part of this process. Idea generation can
come from a number of sources including lead users and
employees. Project portfolio management is a process of balancing
the portfolio of projects between potential risk and potential
benefit. Individuals staff the innovation effort in organisations both
at a leadership and operational level. Managers increasingly depend
on other staff to generate and realise ideas. A key mechanism for
engaging and motivating staff is linking the goals of the individual
with the innovation goals of the organisation.
Monitoring innovation results is a critical part of effective
innovation management. Status signals allow individuals to draw
attention to poorly performing activities and encourage views on
discussing corrective actions. Matrices are a simple yet powerful
decision support tool for understanding relationships between two
or more lists of data e.g. Goals vs. Actions. Face-to-face meetings
are a rich form of communication, motivation and understanding.
In any organisation, there can be a number of innovation funnels
for product, process or service innovation. Each department can
have its own innovation funnel. Many technologies support
collaboration. The internet provides access to many of these
collaborative technologies. Knowledge management systems allow
individuals to share knowledge and make decisions together online.
79
Conclusions
A simple knowledge management system can be created for
managing innovation, using the spreadsheets presented in this
booklet for creating, editing and sharing innovation information.
A combination of effective innovation management tools and
techniques, a good knowledge management system and adopting
best practice in innovation management offers any organisation an
effective way to create sustainable growth.
Þ Web Link
More detailed information
on the ideas covered in
this booklet can be found
at: http://www.owl.ie
80
Bibliography
Applying
Innovation
by David
O’Sullivan and
Lawrence Dooley,
Sage Publishing, Due for Publication in
Summer 2007.
Managing Innovation, by Joe Tidd
and John Bessant, Wiley, 2006.
Innovation Management by Keith Goffin
and Rick Mitchell, Palgrave, 2005.
Building the Innovative Organisation
by James Christiansen, MacMillan,
2000.
Strategic Management of Technological
Innovation by Melissa Schilling,
McGraw-Hill, 2005.
Mastering the Dynamics of Innovation
by James Utterback, HBS Press, 1996.
Managing Innovation, Design and
Creativity by Bettina Von Stamm,
Wiley, 2003.
Managing Creativity and Innovation,
Harvard Business Essentials,
Harvard Business School Press, 2003.
Innovation Management and New
Product Development by Paul Trott, FT
Prentice Hall, 1998.
Innovation and Entrepreneurship
by Peter Drucker, ButterworthHeinemann, 2005.
81
Appendix
Sample Innovation Plan for Manufacturing Firm.
The following innovation plan illustrates an innovation plan for a
manufacturing firm. It demonstrates many practical aspects of the
innovation management introduced in this booklet. It also
illustrates a number of ways that goals, actions, teams and results
can be documented and shared by team members.
The various activities you have been asked to complete in this
booklet, are demonstrated in the plan. Various other activities, not
explicitly discussed in this booklet, are also demonstrated.
Together these activities combine to create a comprehensive
innovation plan for the manufacturing firm.
This applied innovation approach can easily be adapted to any type
of organisation including your own, and for any type of innovation
process – product, process or service.
Other samples are available at http://www.owl.ie
82
SwitchIt Innovation Plan
2005-2008
24th January 2006
[email protected]
[email protected]
Contents
1
Introduction ...................................................................... 84
2
Team............................................................................... 84
3
Mission ............................................................................. 84
4
Processes.......................................................................... 85
5
Statements........................................................................ 86
6
Benchmarks ....................................................................... 86
7
Requirements..................................................................... 87
8
Objectives ........................................................................ 87
9
Indicators ......................................................................... 88
10
Problems ....................................................................... 90
11
Ideas ............................................................................ 90
12
Projects......................................................................... 91
13
Skills............................................................................. 93
Appendix................................................................................ 95
83
Introduction
SwitchIt Ltd. is a manufacturing company and part of the SwitchIt corporation in the
U.S.A.. SwitchIT manufactures electrical switch gear. Marketing is the responsibility
of a sister organisation based in Brussels and Design is mainly concentrated in the
U.S.A. There are currently 200 employees at the manufacturing facility. Over the
last 15 years the company has built up a mature manufacturing facility for the
European and Asian markets. The company is responsible for generating a turnover
of €500m. This years investment in process innovations and related cost
improvements, engineering improvements, information systems development and
capacity adjustments is €12m.
This plan outlines the status of development goals and current actions (ideas and
projects) for development of the manufacturing facilities over the next three years.
Team
This plan has been developed by a senior team chaired by the general manager.
This team initially met for one week off-site to generate the goals of the
organisation. The team now meets weekly on Fridays for one hour to review the
status of the company’s goals, and the status of various actions such as projects
and new ideas. This meeting often focuses exclusively on ‘exceptions’ (i.e. activities
that are showing a ‘red’ status signal). In addition to the members shown in Table 7
other members of the company are invited to attend as required.
Table 7
Individuals
Name
Andrew Kelly
Breda Mooney
Danny Mulryan
David Noone
Gary O'Halloran
James Fogarty
John Sheehan
Mary Roche
Michael Clark
Stewart O'Neill
…
Job Title
IT Analyst
HR Manager
General Manager
Engineering Manager
Training Manager
Purchasing Manager
Quality Coordinator
Finance Controller
Manufacturing Supervisor
Materials Manager
…
In addition to this team there are also a number of other teams – one for each
department and project teams. Although related hierarchically, the goals and action
for these teams are outside the scope of this report.
Mission
The mission of SwitchIt is the ‘Efficient Manufacture of innovatively produced
switchgear solutions’. SwitchIt is focused on manufacturing switch gear at low cost,
84
high productivity and high quality. We are also focused on continuously improving
our manufacturing processes. Our main contribution to operating revenue and profit
is through lowering overall total cost of production.
Processes
A list of manufacturing processes identified in the organisation is presented in Table
8. These are labelled using the IDEFo modelling technique and illustrate only the top
layers of the model. The model illustrates that there are three major activities at the
top level:
Manage SwitchIt Ireland
Plan and Control Manufacturing
Support Operations
‘Manage SwitchIt Ireland’ represents the activities of the senior management team
both in terms of day to day operations and development. ‘Plan and Control
Manufacturing’ represents the main activities of producing switch gear in response
to customer demand. ‘Support Operations’ includes the activities of finance,
engineering, computer services and human resources.
Table 8
Activities
Group
A0
A1
A2
A21
A22
A23
A3
A31
A32
A33
A34
Title
Operate SwitchIt Ireland
Manage SwitchIt Ireland
Plan & Control Manufacturing
Plan & Control Materials
Plan & Control Production
Assure & Control Quality
Support Operations
Provide Personnel Systems
Control Accounting Systems
Provide Engineering Systems
Provide Information Systems
The ‘Plan and Control Manufacturing’ activity is further detailed into three children
activities:
Plan and Control Materials
Plan and Control Production
Assure and Control Quality
These three primary activities add value to customers and are the focus of much of
the development in this plan. Most goals and actions detailed later focus on these
three activities. The full model is appended to this report.
85
Statements
As part of the goal generation exercise a number of statements were initially noted. These
include statements of mission and core competencies but also of weaknesses and strengths.
Table 9 illustrates a number of these statements including their status.
Table 9
Statements
Title
Efficient manufacture of innovatively produed switchgear solutions
Machinests and Machining expertise
Low tax location and ease fo market access
Global Organisation
World Class Manufacturing Facility
Skilled Workforce
Low Employee Turnover
High Insurance premium
Lack of inter department communication
Frequent product returns due to quality issues
Increasing Manufacturing Costs
Competition from new low cost entrants
Lack of capital for new projects
Global downturn continueing
New government design grants
E-Commerce Opportunities
University Graduates
…
Status
…
…
…
:) :( :) :| :) :| :) :( :) :| :) :| :) :(
Group
Mission
Competencies
Competencies
Strengths
Strengths
Strengths
Strengths
Weaknesses
Weaknesses
Weaknesses
Threats
Threats
Threats
Threats
Opportunities
Opportunities
Opportunities
…
…
The principle weakness is the high rate of product returns through the warranty process due
to process related quality issues. A number of projects are currently underway to replace
some old machines and improve operator training. One of the strengths noted as the
beginning of the planning period that the plants status as a ‘world class manufacturing’
facility. It is currently felt by some managers that this status is under threat from recent
results. ‘Increasing manufacturing costs’ was initially identified as a potential threat – with
rising inflation this now appears to becoming a reality. Finally, one of the opportunities
identified at the beginning of the planning period was the availability of ‘University
graduates’. Due to a number of factors including high cost of living this opportunity may be
becoming a threat.
Benchmarks
The competitors currently lead the market and are ones to watch regarding new product
innovations. Although not part of the mission, new product innovation intelligence can
influence process innovation decisions and information can be fed back to the design
department in the U.S.A. Two organisations GE and Philips are watched closely in terms in
new process innovations. Our organisation learns much from three associations, the SME,
NAM and the National Electrical Manufacturers Association.
86
Table 10
Benchmarks
Group
Product
Product
Product
Process
Process
Association
Association
Association
…
URL
www.siemens.com
www.abb.com
www.royalswitchgear.com
www.ge.com
www.philips.com
www.nema.org
www.sme.org
www.nam.org
…
Requirements
The company has a number of key stakeholders. Preliminary requirements from these
stakeholders are illustrated in Table 11. One of our principle stakeholders is our parent
company who is demanding a €300k cost improvement in the current year. Another key
stakeholder, Customers, is requiring improved lead times, greater quality and reliability of
our products. They are also requiring greater flexibility in the event of order changes with
less ‘red tape’ in changing order quantities and due dates.
Table 11
Requirements
Title
Improve Cost Structure (300k)
Greater Utilisaton of Assets
Pilot Corporate ERP System
Reduced Lead Times
Increased Flexibility
Greater Quality and Reliability
Opportunity to Learn on the Job
Greater discretion and responsibility
Health and Safety Compliance
Environmental Compliance
Local Sponsorship
Faster Payment Times
More Accurate Forecasting
…
Responsible
Status
Mary Roche
Danny Mulryan
Andrew Kelly
Michael Clark
Michael Clark
Stewart O'Neill
Gary O'Halloran
Breda Mooney
Luke Davenport
David Noone
Breda Mooney
Stewart O'Neill
Stewart O'Neill
…
…
:) :( :) :| :) :| :) :( :) :| :) :| :|
Group
Parent
Parent
Parent
Customers
Customers
Customers
Employees
Employees
Regulations
Regulations
Community
Suppliers
Suppliers
…
Other stakeholders not illustrated above include the Design department in the U.S.A and
marketing function in Brussels. The Warranty department has also identified a number of
requirements in particular low reliability on some products.
Objectives
The strategic plan adopted by the company at the beginning of the planning period is
illustrated in part in Table 12. The main decisions for change over the next three years
have been divided into eight strategic thrusts (or groups): Capacity; Responsiveness;
Organisation; Workforce; Supplier Chain; Technology; Information; and Quality.
87
Table 12
Objectives
Title
Employ low risk strategy towards capacity expansion
Improve capacity analysis techniques
Improve man-power flexibility towards capacity changes
Explore Make vs Buy Opportunities
Collaborate on development of more accurate forecasts
Explore manufacture-to-order processes
Reduce order delivery times
Improve dealer and supplier partnerships
Migrate towards flatter and leaner organisation
…
Responsible
Status
Mary Roche
David Noone
Michael Clark
Stewart O'Neill
Danny Mulryan
Michael Clark
Stewart O'Neill
Stewart O'Neill
Danny Mulryan
…
…
:) :( :) :| :) :| :) :( :)
Group
Capacity
Capacity
Capacity
Capacity
Responsiveness
Responsiveness
Responsiveness
Responsiveness
Organization
…
Table 13 illustrates the relationships between objectives and activities i.e. where changes
are required within the activity model.
Table 13
Relationships
Provide Information Systems
Provide Engineering Systems
Control Accounting Systems
Provide Personnel Systems
Assure & Control Quality
Plan & Control Production
Plan & Control Materials
Objectives
Plan & Control Manufacturing
Activities
Employ low risk strategy towards capacity expansion
Improve capacity analysis techniques
Improve man-power flexibility towards capacity changes
Explore Make vs Buy Opportunities
Collaborate on development of more accurate forecasts
Explore manufacture-to-order processes
Reduce order delivery times
Improve dealer and supplier partnerships
…
Indicators
The status of key performance indicators is illustrated in Table 14. Defects per Unit
continues to be a major concern due to a number of old machines and practices among
some employees. John Sheehan Quality Coordinator, is satisfied that machine age and
operator training are the main causes of low quality.
88
Table 14
Indicators
Unit
Current
$
120k
%
89%
days/month
45
defects/unit
23
$
23k
days
5
…
…
Target
300k
95%
30
10
20k
4.5
…
Responsible
Mary Roche
Michael Clark
Breda Mooney
John Sheehan
David Noone
Danny Mulryan
…
Status
:) :| :) :( :) :|
Title
Improve Cost Savings
Increase Delivery Performance
Reduce Absenteeism
Defects per Unit
Reduce Warranty per 1000 units per month
Reduce Manufacturing Lead Time
…
…
Cost savings of 300k for the current year are progressing well. A chart of status for ‘Improve
Cost Savings’ is illustrated in Figure 26.
Improve Cost Savings
Cost Savings
300
200
Origin
Value (k)
Target (k)
100
0
1
2
3
4
5
6
7
8
9
10
11
12
Origin
0
0
0
0
0
0
0
0
0
0
0
0
Value (k)
45
67
80
95
110 170 171 193 215
Target (k) 300 300 300 300 300 300 300 300 300 300 300 300
Month
Figure 26
Relationships between Indicators and Objectives are illustrated in Table 15 in part. All
objectives can be measured by the indicators defined.
89
Table 15
Relationships
Reduce Manufacturing Lead Time
Reduce Warranty per 1000 units per month
Defects per Unit
Reduce Absenteeism
Objectives
Increase Delivery Performance
Improve Cost Savings
Indicators
Employ low risk strategy towards capacity expansion
Improve capacity analysis techniques
Improve man-power flexibility towards capacity changes
Explore Make vs Buy Opportunities
Collaborate on development of more accurate forecasts
Explore manufacture-to-order processes
Reduce order delivery times
Improve dealer and supplier partnerships
…
Problems
The are currently over 230 problems on the ‘Reactive Problem’ list and sorted according to
Impact, Risk and Priority. Every machine and assembly station has a ‘Proactive Problem’ list
with identified tasks for avoiding the problems occurring. Table 16 illustrates a sample of
the currently live Problems.
Table 16
Problems
Title
Switch housing difficult to assemble
Similar switches interchanged by accident
Omission to place decals on sub-assembly
Pins shearing turing tightening
…
Impact Risk Priority Due
Responsible
4
3
5
06/2007 David Noone
5
3
5
07/2007 David Noone
3
3
5
06/2007 John Sheehan
5
4
5
04/2007 Stewart O'Neill
…
…
…
…
…
Status
:| :) :( :)
Group
Proactive
Proactive
Proactive
Reactive
…
…
Ideas
Every employee is encouraged to generate ideas that can lead to goal attainment.
Employees have full access to the objectives and indicators of the organisation. Ideas have
been grouped by the ‘Source’ of the idea (e.g. Goals, Problems, New Knowledge,
Benchmarks, Employees, Customers, etc.). Table 17 illustrates some sample live ideas.
90
Table 17
Ideas
Title
Machine Replacement Programme
Staff Magazine
Implement FMEA on Machines
Lean Project Management
…
Impact Risk Priority Due Responsible Status
5
3
4
2
1
3
Breda Mooney
4
3
5
4
5
4
…
….
…
…
…
…
:)
Group
Goals
Goals
Problems
Knowledge
…
Projects
The top seven approved projects are illustrated in Table 18 and Table 19. Table 18 shows
the current progress of the projects. The ‘Investigate ERP System’ project is currently
waiting for new information from head quarters. The ‘Develop Workgroup Procedures’
project is also waiting for clarification of participation from worker representatives.
Table 18
Projects
Title
Install Robotic Welding
Redesign Assembly Line
Investigate ERP System
Develop Workgroup Procedures
Restart Sports and Social Activities
Implement Innovation Training
Implement eAuctions on selected items
…
Start Due Responsible
%Complete
3/06 3/07 David Noone
45%
6/06 12/06 Michael Clark
35%
3/06 6/06 Danny Mulryan
90%
1/06 3/06 Breda Mooney
30%
5/06 9/06 Breda Mooney
50%
10/06 12/06 Gary O'Halloran
100%
4/06 10/06 Stewart O'Neill
0%
…
… …
…
Status
In Progress
In Progress
Waiting
Waiting
In Progress
Complete
Not Started
…
Table 19 illustrates the cost benefit analysis carried out on the current portfolio of
projects. There is currently a high priority on the ‘Install Robotic Welding’ and ‘Redesign
Assembly Line’ projects.
Table 19
Projects
Title
Install Robotic Welding
Redesign Assembly Line
Investigate ERP System
Develop Workgroup Procedures
Restart Sports and Social Activities
Implement Innovation Training
Implement eAuctions on selected items
…
Cost
120000
200000
10000
10000
50000
25000
120000
…
Benefit
60000
10000
1000
2000
5000
12000
300000
…
Impact
5
3
4
4
2
5
5
…
Risk
3
1
2
5
2
1
2
…
Priority
5
5
3
2
3
4
4
…
A bubble diagram illustrating the Impact versus Risk for the current project portfolio is
illustrated in Figure 27. The ‘Restart Sports and Social Activities’ project may have a low
impact on achieving our overall goals but the risk is low and other benefits will accrue.
91
Install Ro bo tic Welding
6
Redesign A ssembly Line
5
Investigate ERP System
Impact
4
3
0
22
4
1
0
Risk
Develo p Wo rkgro up
P ro cedures
Restart Spo rts and So cial
6A ctivities
Implement Inno vatio n
Training
Implement eA uctio ns o n
selected items
Figure 27
The relationships between Projects and Objectives is illustrated in Table 20 in part.
Table 20
Relationships
…
Implement eAuctions on selected items
Implement Innovation Training
Restart Sports and Social Activities
Develop Workgroup Procedures
Investigate ERP System
Redesign Assembly Line
Objectives
Install Robotic Welding
Projects
Employ low risk strategy towards capacity expansion
Improve capacity analysis techniques
Improve man-power flexibility towards capacity changes
Explore Make vs Buy Opportunities
Collaborate on development of more accurate forecasts
Explore manufacture-to-order processes
Reduce order delivery times
Improve dealer and supplier partnerships
…
The relationships between projects and performance indicators is illustrated in Table 21.
All projects can be measured through the top seven indicators.
92
Table 21
Relationships
…
Implement eAuctions on selected items
Implement Innovation Training
Restart Sports and Social Activities
Develop Workgroup Procedures
Investigate ERP System
Indicators
Redesign Assembly Line
Install Robotic Welding
Projects
Shipped Weight per Employee
Delivery Performance
Absenteeism
Defects per Unit
Warranty per 1000 units per month
Manufacturing Lead Time
Cost Savings
…
Skills
The skills or training programmes adopted by the team are illustrated in Table 22. One new
skill has been added this year – ‘Delegating to Others’ and a customised course for this is
currently being developed by a sub contractor.
Table 22
Skills
Group
Personal
Personal
Personal
Personal
Interpersonal
Management
Personal
Interpersonal
Management
…
Title
Managing Time
Negotiating Skills
Communication and presentation
Project management
Managing conflict
Innovation Management
Leadership
Delegating to others
Monitoring Performance
…
The relationships between skills and individuals on the team is illustrated in Table 23. The
dark shaded cells indicate courses competed. The light shaded cells indicate that a course
is planned.
93
Table 23
Relationships
…
Leadership
Innovation Management
Managing conflict
Project management
Communication and presentation
Negotiating Skills
Individuals
Managing Time
Skills
Andrew Kelly
Breda Mooney
Danny Mulryan
David Noone
Gary O'Halloran
James Fogarty
John Sheehan
Mary Roche
…
94
Appendix: IDEFo Process Model
95