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Chapter 3

Processing Innovation

© David O’Sullivan

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Reflections Explain the relationship between change and

innovation. In his change management method, Kotter talks

about creating a sense of urgency. Explain what this means.

List a number of traits of excellent organizations. Explain some of the main traits of innovation culture. List a number of barriers to innovation. What is the fifth-generation innovation model? Explain the dangers of having too much routine.

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Activities

[Discussion of selected student ‘Activities’ from previous chapter]

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Learning Targets Show the main reasons why organizations

invest in innovation Understand some of the reasons why

innovation fails Discuss the key stages in the innovation

process Understand the importance of opportunity

recognition in the innovation process Explain the innovation funnel Apply an innovation method to building an

innovation plan

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Innovation Investment

Organizations invest an average of 4% of turnover on Innovation

Budget typically spent across various functions e.g. Computer Services Product Design Process Improvements Training etc.

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Innovation InvestmentInnovation Expenditure as % Turnover in Western Europe

Manufacturing 3.7% Services 2.8%

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Goals of Innovation1. Improved quality2. Creation of new markets3. Extension of the product range4. Reduced labor costs5. Improved production processes6. Reduced materials7. Reduced environmental damage8. Replacement of products or services9. Reduced energy consumption10. Conformance to regulations

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Goals of Innovation

Improve Quality 65% of organisations surveyedCreate New Markets 50%Extend Product Range 46%Reduce Labour Costs 40%Improve Production 35%Reduce Materials 25%Reduce Environ. Damage 23%Replace Products/Services 21%Reduce Energy Consumption 18%Conform to Regulations 18%

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ProblemBetween 50-70% of all Innovation fails to impact on

organisational goals

Implications … Wasted resources – time, people and money Loss of morale Higher resistance

*Various. See: Paul Strebel in Harvard Business Review on Change 139-157 (Harvard Business Review, Boston, 1999)

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Failure of Innovation Various reasons Common reasons across all

organizations: Poor goal definition Poor alignment of actions to goals Poor participation in teams Poor monitoring of results Poor communication and sense of

community

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75% of Ideas Fail

Three possible outcomes for you ideas: You continue with idea (25% chance of

success) You stop idea but start a new idea

(Increase chances of success!) You stop the idea and so save time and

money

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Failures

Survey of 13,000 new products 14% made it to market 65% of these succeeded i.e. 91% new products failed

representing almost 50% of investment Success factors

Fit with market needs Fit with company strengths Technical superiority

Booz Allen and Hamilton 1981

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Failure

Survey of 200 Failed Products Better ‘mousetraps’ 28% ‘Me too’ products 24% Technical ‘dogs’ 15% Competitive pricing 13% Too expensive 13% Ignorance 7%

Calantone and Cooper 1979

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Idea Attrition

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Metric System Metric available since 17th Century Customers reluctant to adopt Mars Climate Orbiter Disaster (1998)

NASA reveals some calculations were ‘Imperial’!

Yes, these were ‘rocket scientists’ U.S. Aerospace Industry prefers ‘Imperial’ Where else has ‘Imperial’ remained?

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Scurvy Fatal disease on voyages Half of all sailors died on

long voyages! Simple and cheap cure

found in 1601: Citrus Fruits In 1795 Navy finally adopted

cure Not adopted in merchant

fleet for another 70 years

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Sanitation Greatest innovation in history Saves millions of lives! 40% of current world

population lack sanitation! Half Million children die in Asia

each year (2008) MRSA in Irish Hospitals

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Primary Causes

Poor definition of goals Poor alignment of actions to goals Poor participation by employees in

teams Poor monitoring of results Poor communication and participation

in communities

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Process of Innovation

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Applying Innovation

Better definition of goals Better alignment of actions to goals Greater participation of individuals in

teams Better monitoring of results Greater communications and building

of communities

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Goals

“Objective of an Effort”

Examples: Vision Statements, Stakeholder

Requirements, Conformance Standards, Development Strategies, and Indicators of Performance

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Actions

“Expenditure of Effort”

Examples: Solving Problems, Generating Ideas,

Developing Proposals, Managing Projects

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Teams

“Resources of Effort”

Examples: Leaders, teams, pay reviews, …

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Results

“Outcome of an effort”

Examples: Status of Goals, Actions and Teams Relationships between

goals and actions goals and teams, etc…

Exceptions, Reports

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Communities

communities refers to all people who share a common purpose of supporting innovation in the organization organization and leadership, communications, and knowledge management.

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Leaders in Industry Tom McCabe, M.D., Boston Scientific

Setting Goals

Michael Welch, M.D. Fidelity Investments Managing Portfolios

Lionel Alexander, M.D. Hewlett Packard People and Teams

Frank O’Connor, M.D., Ingersoll-Rand Monitoring Results (Scorecard)

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Innovation Funnel

ACTIONSRESULTS

GOALS

TEAMS COMMUNITIES

CreateIdea

RecogniseOpportunit

y DevelopIdea

RealisePotential

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Innovation Funnel

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Innovation Knowledge

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Innovation Team

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Summary Show the main reasons why organizations

invest in innovation Understand some of the reasons why

innovation fails Discuss the key stages in the innovation

process Understand the importance of opportunity

recognition in the innovation process Explain the innovation funnel Apply an innovation method to building an

innovation plan

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Activities

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Search Online

http://www.youtube.com Henry Chesbrough on Open Innovation Michael Porter on Strategy Innovation at Google Tom Peters: Innovation is Actually Easy! Sun's 25 years of innovation