APPLIED INNOVATION
Transcrição
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 Rua de Salazares, 842 4100-442 PORTO 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: NET – BIC Porto Portugal http://www.net-sa.pt/ ADI – Agência de Inovação, SA Portugal http://www.adi.pt IDIT Portugal http://www.idit.up.pt WestBic Ireland http://www.westbic.ie Technopole France http://www.tech-quimper.fr BIC GIPUZKOA BERRILAN Spain http://www.bicberrilan.com TEKNIKER Spain http://www.tekniker.es Co-financed by: Avec la participation de l'Union Européenne Programme co-financé par le FEDER Interreg IIIb Atlantic Area http://www.interregatlantique.org European Commission http://www.europa.eu 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 pp le m e nt nts en an D is po ce sa l Buyer Life Cycle Purchase Delivery Use Supplements Maintenance Disposal M ai Su rc Pu De l ha se iv er y U se 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 Su pp le m M e ai nt nts en an D is po ce sa l Pu rc ha se D el iv er y U se 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. 46 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. 50 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’. 72 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