“Innovation makes the world go around because human needs are unlimited, and because human creativity is an abundant, and renewable natural resource.” W. A. Sussland
The management of innovation and the innovation of management may sound like a word play, but it is not. The former is the starting line, the latter the finish line of a long journey that enterprises take as they learn to manage innovation. That journey may start with a most promising innovative idea, a good first step, but then only a step of a marathon.
Innovations may light up a bon fire, but enterprises soon learn that they do not compete on the basis of a sparse and solitary innovation. They need it to build innovation-capabilities that will gush an almost continuous stream of innovations.
Let us take an overview of the levels of innovation-capabilities, and then see how the management of innovation may facilitate the innovation of the management. In Part Two of this paper, we will focus on the innovation of the management.
The different talents that drive innovation-capabilities
“Innovation” is the result of a project that comprises 5 different processes, namely: the ideation, the inspection, the imagination, the initiatives and implementation, and the follow up that may feature improvements – extensions - new innovations. (1) Each of the aforementioned processes involves a different cast of characters.
<> The ideation is an exiting and somewhat unpredictable process where motivated and talented creative people interact in the frame of a pluri-disciplinary team. Often, such teams are familiar with the creativity and with the team-management tools such as advocated by Total Quality Management. Proper training and good leadership can help ideation teams to operate fairly efficiently. Yet, excessive pressures of efficiency may strangle creativity.
<> Taking ideation a step further will require additional tangible and intangible resources. To allocate those resources, the management will ask for an objective outlook on the risks- rewards-timing. Analytical type of persons will be called upon to check the feasibility, and the profit potential of the ideation.
<> The imagination process combines the emotional/creative as well as the rational/result oriented perspectives in order to find the best way to bring the approved ideation to market, and to secure a sustainable success. This is a hyper-critical part of the whole project, because the innovators are very exited, and may underestimate the challenges that will follow.
<> The initiative & implementation as well as the following improvement-extensions- innovation phases are fairly self-explanatory.
Having outlined the innovation-capabilities of innovation-projects, let us now look at the 5 levels of increasing sophistication of innovation-projects.
The innovation-projects and the value-chain
It is important for the life-forces of the organization to see where, how, how much business- value is created/destroyed in the sequence of operations that start with the supply of materials that are transformed by the enterprise, and then delivered to the costumers.
Prof. Michael Porter developed in 1980 the model of the value-chain. It focuses on the value- added by the operations management and by the staff functions to the different processes of the supply-chain. (2) Oddly enough, Porter’s model omits the value added by the management ! Moreover, in practice, it can be difficult to figure out how much value that has been added and the costs that have been incurred by the links that take place inside the organization.
The Total Quality Management focused the attention on the processes. Today, we look at the management of projects, and every link on the value-chain is a project. Projects combine the inputs of strategy or policy, of the resources or powers, of the significant partners, of the processes in order to generate outputs or products. And so, for the evaluation of the value added by the projects, I propose to evaluate 5 <p>, i.e. the policy, the powers, the partners,
the processes, and the products.
The senior management focuses on the top 3 <p>, and it sets the objective and the resources allocation for the projects, it is involved in the management of the relations with the partners. The operations management focuses on the bottom 3 <p>. It manages the relations with the partners, runs the processes, and it takes responsibility for the quality of the products.
The estimation of the value added and of the costs incurred link-by-link on the value-chain is important in order to understand what links should be out-sourced, and what links should be improved or innovated. However, it is of critical importance that the enterprise establishes a good cohesion and coordination of all the key links on the value-chain.
The 5 levels of sophistication in the management of innovation projects
Companies develop their innovation-capabilities over different levels of sophistication in the management of innovation-projects. I propose the following classification.
<> The first level of innovation-projects is run by one or several groups in the operations. They focus on improving & innovating some products and/or some processes. Their action spans on just a few links of the value-chain. At this stage, most likely the senior management just keeps a distant watch.
<> The second level of innovation-projects should get the senior management involved in order to build awareness for the importance of innovation so as to spread the efforts company-wide over a broad spectrum of the value-chain. Increasingly, companies must control a large part of the value-chain in order to resist competitive attacks.
<> The third level of innovation-projects should involve the partners and mobilize the powers of the enterprise in order to sustain a flow of evolutionary innovations. Here, the senior management must work closely with the operations management.
<> The fourth level sees the leadership applying the 5 <p> to the management of the innovation-projects, and the senior management may launch projects that concern radical innovations.
<> The fifth level of innovation-projects sets a portfolio of innovation-projects. This portfolio enables the enterprise to synergize evolutionary and radical innovations, and, as a result, to optimize the overall balance of risks-rewards-timing. Building and continuing to strengthen a portfolio of innovation-projects is the key to sustainable success with innovations.
Companies do not compete with a single product or with a discrete innovation. They compete with their portfolio of products, and of innovation-projects !
Managing an innovation-portfolio entails the following advantages.
<> It optimizes the synergies among the different innovation-projects as well as the balance of risks-rewards--resources.
<> It optimizes the learning curve concerning the management of innovation-projects.
<> It heralds the achievements internally and externally; it celebrates the results and distributes the rewards; it promotes the development
of the innovation-capabilities company-wide, and it reinforces an innovative corporate-culture.
Progressing on the 5 levels of sophistication in the management of innovation-projects is not easy, but some of the biggest obstacles are created by the enterprise itself.
The disconnects that hamper innovation
According to executive surveys run by global consultants, the following shortcomings stymie the innovation and the organizational-capabilities of some of the Western companies. The following are excerpts from my book. (1)
<> A vast majority of the polled executives acknowledges the fact that innovation needs to integrate the corporate strategy in order to get the support of the senior managers.
And yet, only a third of the surveyed senior executives say that they set formal priorities concerning innovation during their planning process: Moreover, only few hold their managers accountable for innovation.
The disconnect between innovation and strategy
is the 1st of the key problems that hinder the management of innovation.
<> The operations management has to focus on their short-term financial objectives. Hence, they look to achieve organic growth through products and customers in the existing markets because this entails fairly predictable income.
As a result, most innovations are limited to the innovation of some of the products and possibly of some of the processes that concern the links at the end of the supply-chain. And so, without being clearly driven by corporate strategy, and without much support from the senior managers, innovation remains sparse, haphazard, and sporadic.
The limitation of the scope of innovations is the 2nd of the key problems that hinder the management of innovation.
<> Sometimes the senior management sets up special structures to work on a business breakthrough. However, separated from the core business, the special structures that handle the breakthrough projects may have difficulties getting the necessary resources from the business-units, and eventually they may also find it difficult to integrate the core business when the time has come to supplement the radical innovation with evolutionary innovations.
The disconnect between the innovation-projects in the operations and the business breakthrough is the 3rd of the key problems that hinder the management of innovation. (3)
<> Innovation is made by people, with people, and for people. And so, companies fight to get top talents in order to outperform. According to an executive survey published in 2012, talents are the number one issue on the mind of the polled business-leaders, and yet 75% of the
polled senior executives are unhappy with the management of talents and they find it necessary to modify the way their company manages talents.
Poor management of the talents is the 4th problem that stymie innovation.
<> The talents need the right culture to sparkle, just like plants need the right soil to grow. However, the corporate culture and the management of talents are merely two elements of a bigger framework that gets people to act and to interact so as to achieve the common goals, namely the organizational capabilities.
The disconnect between talents and the corporate culture is the 5th of the key problems that hinder the management of innovation.
<> The former Arthur Andersen Consulting published in 2000 an executive survey, which showed that over 80% of the respondents recognized the importance of investing in intangible assets, however less than 30% of them said they acted accordingly.
According to Kaplan & Norton, intangible resources now account for 75% of the value of companies. And so, the traditional organizations, which fixate the tangible assets, stare at the tip of the iceberg while missing out the bulk of the value of the organization. (4)
The disconnect between the tangible assets and the intangible resources is the 6th of the key problems that hinder the management of innovation.
<> Senior managers recognize that their enterprise must excel in creating superior value with and for their significant stakeholders. Yet, most of their innovation efforts are focused on the external value-chain, i.e. on the customers and on the supply chain. However, the internal value-chain of traditional organizations remains tightly trapped by traditional tenets, which stymie their innovation-capabilities. Thus, the business-value-added by the different hierarchical levels, and by the staff functions is under-managed.
The disconnect between the internal and the external value-chain, and between the senior and the operations management is the 7th of the key problems that hinder the management of innovation.
There is no lasting success without innovation, but there can be innovation without lasting success !
In the first part of this paper I have outlined some of the dos and don’ts concerning the building the innovation-capabilities in order to achieve sustainable competitive advantages.
In the second and last part of my paper, I will discuss the innovation of the management.
(1) Willy A. Sussland “The Innovative Enterprise – How to transform a traditional organization in an innovative networking enterprise” Beijing Xingshengle 2015 (simplified Chinese)
(2) Michael Porter “Competitive Advantage” Free Press 1985
(3) V. Govindarajan & C. Trimble “Beyond the Idea” Martin’s Press 2013 (4) Kaplan& Norton “The Balanced Scorecard” HBSP 1996