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Transcript of Research on Disciplined Innovation
MTM SYMPOSIUM:MTM SYMPOSIUM:
The commercial value of disciplined innovation The commercial value of disciplined innovation in fastin fast--moving highmoving high--tech ICT Businessestech ICT Businesses
Marius van der Leek
Mobyl Design
GSTM2010 Symposium:
Mobyl Designwww.mobyl.com
Supervisor: Prof L Pretorius
� Sel: +27 83 458 4120
� E-mail: [email protected]
Copyright © 2011 mobyl design / University of Pretoria
StructureStructure
� Introduction
� Research Problem, Objective, Questions and Proposition
� Research methodology
• Exploratory theory application, testing and building
– Small sample with low variability
� Proposed model or Conceptual method
• Initial model: Exploratory theory application and testing
• Emerging concept: Theory building
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• Emerging concept: Theory building
� Results
• Literature Review Summary: Initial proposition
• Research Questionnaire Summary: Second round proposition
� 6. Conclusions and recommendations
• Extend research of emerging concepts towards theory building
Copyright © 2011 mobyl design / University of Pretoria
Introduction: The more things change, the more Introduction: The more things change, the more they stay the samethey stay the same
� Tough economic times raise sensitivity about shareholder value where investments must follow returns.
� Modern businesses have to display good governance and practice which requires structure and is interwoven in their decision-making fibre.
� ICT Managers are always searching for practical guidelines on IT investment decision-making.
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decision-making.
� Some believe that effecting change through disciplined innovation efforts can have far reaching benefits.
� The need to find appropriate innovation concepts, models, methods, approaches and theories are greater than ever.
Copyright © 2011 mobyl design / University of Pretoria
Challenge: What are those appropriate Challenge: What are those appropriate innovation constructs offering real valueinnovation constructs offering real value
� Problem Statement:
• An unstructured management approach does not properly filter ICT proposals effectively enough to ensure sustained systems performance and high ROIs
� Objective:
• To quantify if a more structured approach translate an improvement in the likelihood of performance and shareholder value
� Questions:
• What are the innovation constructs, criteria and performance indicators or
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• What are the innovation constructs, criteria and performance indicators or measures
� Propositions:• Appropriate innovation constructs, criteria, indicators and measures offer insight
into economic viability and is representative of key business issues related to fast-moving high-tech environments
Problem
Objective
Questions
Propositions
Copyright © 2011 mobyl design / University of Pretoria
Facing the Challenge: Facing the Challenge: Translate findings into Translate findings into practical daypractical day--toto--day day application by designapplication by design
� The research study will comprise of the following components (relative weights of the components are indicated in bold):
• Theory building research – 20%
• Theory testing research – 10%
• Theory application research – 20%
• Exploratory research – 50%
– Some theory in advance but have a hunch
– Aimed at formulation of propositions, and at theory development
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– Cause-effect dynamics, and difference and correlation open questions
� The research method covered the following:
• It is based on executing a survey research coupled with findings from a literature review covering text books, journals and papers creating a consensus view
• Although variability between innovation constructs and business areas surveyed, there are common themes across these study units
• Motivating consensus as feasible, consistent also with experience and observation, forming some basis for reasonable deductions and generalisation
Copyright © 2011 mobyl design / University of Pretoria
Exploratory application research and theory Exploratory application research and theory testing and building a challenge in itselftesting and building a challenge in itself
Review of established innovation and investment systems, criteria & valuing methods
Propose a new method with associated valuing / scoring system
Identify gaps in the established innovation and investment systems and criteria and
indicators methods
Follow a critical review, analysis and evaluate existing and established innovation and
investment decision- making practices
Position and profile practices associated with the objective
of successful commercialisation
Identify the characteristics of environments associated with
innovation and investment decision- making practice
Review of established innovation and investment systems, criteria & valuing
methods
Identify gaps in the established innovation and
investment systems and criteria and indicators
methods
1 2
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Conclude on the appropriateness of the
developed model for valuing of purposeful vs emergent
innovation and quantified vsintuitive investment decision-
making
Establish weighting values for the investment criteria – AHP / workshop approach
Evaluate the new innovation method with actual case studies
Positioning of existing and established innovation and investment decision-making
practice and its alignment towards promoting qualitative vs quantitative decision -making
and purposeful vs emergent innovation processes
Identify business profiles associated with the position of existing and established innovation and investment decision-making practice
Description of two major distinctions between environments as each relates to implementation of existing and established innovation and investment decision-making
practice
Identify initial findings as to the successful application of innovation and investment decision- making practice realtedto each of these
distinctive environments and how it relates to modern IT
projects
Copyright © 2011 mobyl design / University of Pretoria
Study outcome: Predictable results elude IT Study outcome: Predictable results elude IT investment decision makersinvestment decision makers
� The findings of this study include:
• Conclusions from the Literature Review and Research Questionnaire:
– Due to the nature and eventual results emerging from the research study, we provide empirical support for correlation between performance and innovation behaviour typically present in large local corporate environments.
• The concepts of linear and non-linear environments (Author, 2010):
– Due to time constraints and deviation from initial planning this avenue is not pursued. It does however introduce a controversial and fresh view on performance parameters
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does however introduce a controversial and fresh view on performance parameters applied to IT projects that stem from manufacturing which is deeply rooted in industrial era paradigms. The details are available in the final research report.
• Positioning and profiling management techniques (Author, 2010):
– Due to time constraints and a deviation from the research plan, an initial description of the evaluation matrix and associated profiles associated to the various innovation practices evaluated, are offered. No empirical evidence is presented for this qualitative assessment and resulting adoption profile. The details can be found as part of the final research report.
Copyright © 2011 mobyl design / University of Pretoria
Literature review: A process for critical review Literature review: A process for critical review of a subset of constructsof a subset of constructs
Observations
Decision-making
Predictability
Uncertainty
Investment
InnovationConcepts Theories
Total Factor Productivity.
Five Disciplines of Innovation ™
Seven Sources for
Trade-off Studies.
TRIZ and TOC.
Function
Capital Investment
Decision-making.
Business Cost-Benefit Analysis.
OutcomeStudy
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Research Objectives for: Commercial
Value of Disciplined Innovation
Methods
Approaches
Models
Constructs
Sources for Innovation
Opportunity. Technology Market Strategy.
Multi-dimensional Feasibility Analysis.
Sound Reasoning and Decision-
making.
Rational Actor Model.
Incremental Processes in unstable environments.
Consensus Based Decision-making in high uncertain
environments. Quantitative IT Portfolio
Management.
Multi-criteria Analysis.
Development Decision-making for optimum thinking and best practice.
Innovate on Purpose™
Innovation Metrics –Measurement to Insight.
Integrated Innovation Management .
Product Innovation Scorecard.
Function based Value Analysis. Systems
Engineering and Analysis.
Decision-making.
Creative Thinking in the Decision and Management
Sciences.
Quantitative Decision Making.
Information Economics.
Copyright © 2011 mobyl design / University of Pretoria
Literature review: Promoting a disciplined Literature review: Promoting a disciplined innovation approach towards delivering valueinnovation approach towards delivering value
� Industrial era business cost-benefit analytics do not fit modern knowledge era innovation efforts and require a review of overall performance measures especially due to the uncertain nature of IT investments.
� Positioning an IT investment is to obtain the right balance between desired information systems performance and benefits realisation. (Swinkels, 1997:2)
� Successful innovation is the result from conscious, purposeful search for opportunities (Drucker, 2006).
� Improved probability of success with purposeful innovation and sound
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� Improved probability of success with purposeful innovation and sound reasoning based on the availability of relevant data and information. (Bourgeois and Eisnehardt,1988)
� The Rational Actor model (Allison 1971) suggests that strategic success depends on careful analysis and planning before action is taken.
• At best, viability of the rational model is seen as contingent upon a stable environment and bureaucratic organization (Mintzberg 1973)
� Management sciences have always exhibited a bias against quantitative techniques (Brugha 1998),
Copyright © 2011 mobyl design / University of Pretoria
Literature review: Promoting a disciplined Literature review: Promoting a disciplined innovation approach towards delivering valueinnovation approach towards delivering value
� Support the idea of creating repeatable, quality outcomes in the innovation process. (Genrich Altshuller, 1946)
� TOC focuses on improving the value adding performance of an organisation with minimal increase in cost.
� Sustainable innovation requires defined, repeatable business processes and tools to become part of the business operations breaking down traditional barriers. (Phillip and Hering,2005)
� Successful implementation of a disciplined approach to innovation process
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� Successful implementation of a disciplined approach to innovation process is dependent not only on the availability and application of the appropriate technologies and tools, but also on the proper planning and management of activities required to accomplish overall objectives. (Blanchard and Fabrycky, 2006:50)
Copyright © 2011 mobyl design / University of Pretoria
First round propositions: A disciplined First round propositions: A disciplined commercialisationcommercialisation approach have real benefitsapproach have real benefits
� P1: Value creation is an incremental process (Fredrickson, 1984) which requires review of quantitative business benefits at each stage of the innovation life cycle on all business contexts.
• Managers need predictable results. A set of process steps (Jolly,1997) offer to monitor progress towards successful commercialisation which can be aborted where the value seem to be inadequate measured against the cost of resources required to realise it.
� P2: Disciplined innovation result in the efficient and effective utilisation of resources and is critical to sustainable business development.
• Management stake their reputation and careers on their decisions. An innovation process (Morris) in the form of a project pipeline offer managers a dashboard of activity throughout the
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(Morris) in the form of a project pipeline offer managers a dashboard of activity throughout the innovation life cycle and is a useful tool in monitoring effective and efficient resource utilisation.
� P3: There is correlation between innovation behaviour and financial performance confirming success or failure can be managed through a diligent process of evaluation (Swinkels, 1997).
• Managers are willing to be measured on their contribution towards business performance. Improved probability of success with purposeful innovation and sound reasoning and decision-making is based on the availability of relevant data and information.
Copyright © 2011 mobyl design / University of Pretoria
Literature review outcome: Disciplined Literature review outcome: Disciplined innovation should not be too rigidinnovation should not be too rigid
� Both quantitative and qualitative analytics offer valuable insight into innovation efforts across the life cycle but accurate results presupposes reliable, accurate and feasible input data.
• Quantitative analytics do not necessarily support a successful innovation effort and the results would not be more accurate than implementing qualitative analytics on specifically IT investments.
• IT investment decision-making is often the result of business context and less so of initial cost-benefits due to the highly uncertain nature of IT projects – ‘we don’t know what we don’t know’ then make a call based on best effort and an educated
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know what we don’t know’ then make a call based on best effort and an educated guess.
� After initial data collection and analysis, empirical evidence indicates the revision and introduction of new propositions.
Copyright © 2011 mobyl design / University of Pretoria
Research Questionnaire: MultiResearch Questionnaire: Multi--dimensional dimensional data items offer insight on value achieveddata items offer insight on value achieved
� A set of data items was selected to offer emergent correlations or relationships between innovation management practice and specific contexts:
• Performance: Financial results
• Technology and Business: Innovation initiatives and business life cycle
• Innovation: Approach to innovation purposeful or emergent; and
• Decision-making: qualitative vs quantitative practices.
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� 20% of 31 past corporate colleagues in top performing corporate companies in South Africa participated in the questionnaire. This offer a level of insight that resonate with observation and experience allowing a basis for generalisation.
� No direct correlation between contexts to conclude sustainable business is reliant on diligence of IT investment decision-making.
Copyright © 2011 mobyl design / University of Pretoria
Research Questionnaire: DecisionResearch Questionnaire: Decision--making making context offer light on the processes followedcontext offer light on the processes followed
� 87.5% respondents indicated that they are diligent and possibly disciplined incorporating good governance and quantify their investment decisions.
� 62.5% agree that no proper evidence can be presented why decisions are made regarding investments.
0
0.5
1
1.5
2
2.5
3
3.5
Strongly
agree
Agree Neutral Disagree Strongly
disagree
No opinion
Disciplined innovation processes are followed
Qualitative decision-making
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investments.
� Drucker (1996) also suggest that practices co-exist especially within non-linear environments as qualitative decision-making is as critical in highly uncertain environments where quantitative measures do not offer all the answers.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Strongly
agree
Agree Neutral Disagree Strongly
disagree
No opinion
Copyright © 2011 mobyl design / University of Pretoria
Second round propositions: Investment Second round propositions: Investment decisiondecision--making is supported by proper datamaking is supported by proper data
� P1: IT investment decision-making requires more consideration of the nature of knowledge era type dynamics and innovation efforts, specifically the application and relevance of decision and management sciences developed from the industrial era.
• Managers are reluctant to commit to performance measures set against their innovation targets due to its highly uncertain nature.
� P2: Concepts, models, methods and theoretical constructs comprising modern management science are inadequate to deal with the management of innovation efforts within the new knowledge era
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within the new knowledge era
• Decision and management sciences evolved to address predictability in traditional linear environments and not more non-linear knowledge era environments
• Managers are not committed to follow a particular decision practice.
� P3: Performance measures created for linear environments are being applied loosely to non-linear problems and may no longer be relevant to IT investments.
• Managers are not necessarily equipped to distinguish between linear (predictable) and non-linear (highly uncertain) environments.
Copyright © 2011 mobyl design / University of Pretoria
Recommendations: Extend the study and units Recommendations: Extend the study and units although multiple sources are usedalthough multiple sources are used
� Extend exploration into the characteristics of linear and non-linear environments for the purpose of establishing appropriate performance measures for each environment type.
� Review the subjective assessment on the positioning of innovation constructs within the evaluation matrix.
� Extend the study to better match organisation type or characteristics to
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� Extend the study to better match organisation type or characteristics to adopt the appropriate set of innovation constructs to enable commercial value from innovation efforts.
� Launch a full blown case study involving local industries over and above the financial and telecommunications sectors to extend the sample size and obtain proper unit measure to achieve an appropriate representation of innovation and value creation activities within IT departments.
Copyright © 2011 mobyl design / University of Pretoria
QuestionsQuestions
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Meandering exploration outcomeMeandering exploration outcome
Finding nr2:SWOT and
Profile
Finding nr1:Linear and Non-Linear
Environments
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Conclusion: Context based
innovation behavior
contributes to ROIE
Copyright © 2011 mobyl design / University of Pretoria
Three Horizons of Growth Three Horizons of Growth –– Near, MidNear, Mid-- and Long Term and Long Term Profit TargetsProfit Targets
Horizon 2
Horizon 3
Focus
Create viable options
Strategy-Orientated
Tactics-Oriented
GTB*
TTB*
*Running, growing and transforming the business, translates into the building /
Source : Adapted Horizon Growth Model, SystemicLogic, 2004 (Ref : The Alchemy of Growth)
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Horizon 1
Horizon 2
Extend and defend core capabilities
Focus
Time
Build emerging capabilities
Target-Oriented
Tactics-Oriented
RTB*
into the building / extending internal / external IT Service provider capabilities in order to help achieve profit and growth goals set by the business, within the specific horizon.
6 – 24 months 2 - 5 years > 5 years
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Three Horizons of Growth Three Horizons of Growth –– Near, MidNear, Mid-- and Long Term and Long Term Profit TargetsProfit Targets
Commitment
Innovation Life Cycle
Adapted from Systems Engineering and Analysis , Figure 2.12 (Blanchard and Fabrycky, 2006:46)
75%
100%
Value Add
High
Significant
Commitment to technology or
solution direction
Commitment to funds
Commit to costs incurred
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Commitment
Conceptual
Design
Detailed
Design and
Development
Build and
Production
Operations and
End-of-life
Idea or
Need
25%
50%
Value Add
Low
Medium
Commit to costs incurred
proportional to value add
Commit to ease of change
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Three Horizons of Growth Three Horizons of Growth –– Near, MidNear, Mid-- and Long Term and Long Term Profit TargetsProfit Targets
Risk and Uncertainty
Adapted from Systems Engineering and Analysis , Figure 2.12 (Blanchard and Fabrycky, 2006:46)
75%
100%
Confidence and
BenefitHigh
Significant
Reducing levels of uncertainty
through the phases of the life
cycle
Increasing levels of confidence
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Risk and Uncertainty
Innovation Life Cycle
Conceptual
Design
Detailed
Design and
Development
Build and
Production
Operations and
End-of-life
Idea or
Need
25%
50%
Confidence and
Benefit
Low
Medium
Increasing levels of confidence
Interim points or gates for
critical review
Copyright © 2011 mobyl design / University of Pretoria
Three Horizons of Growth Three Horizons of Growth –– Near, MidNear, Mid-- and Long Term and Long Term Profit TargetsProfit Targets
Percentage of life
cycle cost committed
Adapted from Systems Engineering and Analysis , Figure 2.12 (Blanchard and Fabrycky, 2006:46)
75%
100%
System analysis, evaluation of
Detailed design and development
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Percentage of life
cycle cost committed
Innovation Life Cycle
Conceptual
Design
Detailed
Design and
Development
Build and
Production
Operations and
End-of-life
Idea or
Need
25%
50%
Market analysis, feasibility study, operations requirements, maintenance concepts, etc.
System analysis, evaluation of alternatives (trade-offs), systems definition, etc.
Copyright © 2011 mobyl design / University of Pretoria
Lucas, H.C. Jr., 1999. Information Technology and the Productivity Lucas, H.C. Jr., 1999. Information Technology and the Productivity Paradox: Assessing the Value of Investing in IT. Oxford University Paradox: Assessing the Value of Investing in IT. Oxford University Press, New Press, New YprkYprk Oxford. 1999.Oxford. 1999.
Investment type Notes Benefit Probability of
return (margin)
Evaluation
Infrastructure Support the business – mayinclude future investments
Allows new initiatives 0.2 – 1.0 (0.5) Option for future applicationsInitial investment cost
Required Managerial Control (No return)
Cost of doing business Stay in business 0 – 0.5 (0.2) Lowest-cost route to enable features of the application
No alternative Enabling new task or process
Improves customer experience
0.5 – 1.0 (0.75) Cost reduction against potential benefits realisation
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Direct return from IT
Structure, cost-benefit, NPV and IRR
Marginal if IT investmentnot leveraged
0.7 – 1.0 (0.9) Linear quantitative plus real OPM (non-linear evaluation)
Indirect returns from IT
Potential return but qualitative benefits
Substantial but not easilyquantifiable
0 – 1.0 (0.5) Evaluate non-linear
Competitive necessity
Ticket to the match – cost of not investing?
Follower / Reactive model offer marginal benefit
0 – 1.0 (0.2) Business value vs cost benefit analysis
Strategic application
Return or benefits realization after implementation
High potential Leader model high risk
0 – 1.0 (0.5) Future benefit non-linear investment evaluation (OPM)
Transformational IT
Combined with changes in company philosophy
High potential Innovator model high risk
0 – 1.0 (0.5) Change impact cost-benefitnon-linear evaluation
Copyright © 2011 mobyl design / University of Pretoria
3 1
4 2
Purposeful
Innovation Approach Evaluation
Matrix, Author 2011
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4 2Emergent
QuantitativeQualitativeIT Investment Decision-making
Approach
Copyright © 2011 mobyl design / University of Pretoria
Linear Linear vsvs NonNon--Linear Environments, Author Linear Environments, Author 20112011
Investment Decision-making continuum extreme: Qualitative
Investment Decision-making continuum extreme: Quantitative
Innovation Approach continuum extreme: Purposeful
Quadrant 3: The innovation process is institutionalized however, analytics and data collection happen in an ad-hoc fashion with investment decision-making based on some future benefit aligned to immediate business needs
Quadrant 1: The innovation process is institutionalized and diligence exist in analytics and data collection with formalized investment decision-making methods offering insight into realistic investment returns
Innovation Approach continuum extreme: Emergent
Quadrant 4: Innovation is driven by need and happens from necessity coupled to intuitive decision-making based on future
Quadrant 2: Innovation is driven by need and happens from necessity coupled to decision-making based on analytics and
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extreme: Emergentintuitive decision-making based on future benefits timed to match business needs that may exist at the time
decision-making based on analytics and data collection with formalized investment decision-making methods offering insight into realistic investment returns
Copyright © 2011 mobyl design / University of Pretoria
Linear Environments Non-Linear Environments
Characteristics and nature
•Industrial era•Manufacturing and production•Process oriented rigour•Disciplined engineering approach•Measurable•Benchmarked
•Knowledge era•Service and software development•Process maturity•Flexible and adaptive approach•Measurable•Benchmarked based in available data
Linear Linear vsvs NonNon--Linear Environments, Author Linear Environments, Author 20112011
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•Benchmarked•Predictable•Manageable and simple•Repeatable•General and broad application•Fixed period project portfolios•Commoditised•High levels of liquidity i.e. low entry and exit barriers
•Benchmarked based in available data•Unpredictable and fluid•Highly uncertain•Intuitive and future orientated•Fuzzy and complex•Highly contextual and narrow application•Variant period project portfolios•Disruptive•Low levels of liquidity i.e. low entry barriers and high exit barriers
Copyright © 2011 mobyl design / University of Pretoria
Linear Environments Non-Linear Environments
Associated evaluation and assessment
techniques
•Capital Investment Decision-making•Business cost-benefit analysis•Quantitative decision-making techniques i.e. linear programming•Systems engineering and analysis following a disciplined approach to innovation•Trade-off studies for application design•Theory of constraints removing bottlenecks in the process to streamline production that translate in increased levels of performance
Creative thinking in decisions and management sciencesEntrepreneurshipAnalysis-intensive decision-making i.e. future studies, trends and competitor analysisBusiness value pricingFuture benefit-based analysis i.e. Real Option calculations, NPV, IRRQualitative decision-making techniques i.e. fuzzy logicApplying innovation metrics i.e. qualitative and quantitative innovation measures through the phasesSoftware engineering and analysis following a structured approach to innovation i.e. specific life cycle phases activitiesTrade-off studies for application design in feasibility
Linear Linear vsvs NonNon--Linear Environments, Author Linear Environments, Author 20112011
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Trade-off studies for application design in feasibility stageTransformation techniques for translating non-linear into linear problems in order to apply quantitative techniquesIT portfolio managementBalanced scorecard approach i.e. management by deviation from objectiveIntegrated approach to innovation i.e. CMMI for services incorporating product development, systems and software engineering practices to manage innovationSupporting management techniques i.e. change management, project management, etc.Gated innovation approach i.e. IBM framework a) BRR, b) CDR, c) TRR, and d) PRR review process or IT value chain or funnel and gatesProduct line practice
Copyright © 2011 mobyl design / University of Pretoria
3 1
4 2
Purposeful
Innovation Approach
2.
3.
4.
5.
6.8.
9.
10.
11.
13.
14.
15.
16.
17.
19.
20.
21.
22.
23.
24.
25.
26.
30.
Populated Evaluation Matrix, Author 2011
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4 2Emergent
QuantitativeQualitativeIT Investment Decision-making
Approach
7.
12. 27.
28.29. 31.
1.
Copyright © 2011 mobyl design / University of Pretoria
2011
3 1
4 2
Purposeful
Innovation Approach
2.
3.
4.
5.
6.8.
9.
10.
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30.
A
A
BC
D
Populated Adoption Matrix, Author 2011
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4 2Emergent
QuantitativeQualitativeIT Investment Decision-making
Approach
7.
12. 27.
28.29. 31.
1.
BCD
Copyright © 2011 mobyl design / University of Pretoria
3 1
4 2
Purposeful
Innovation Approach
A
A
BC
D
Adoption Matrix, Author 2011
GSTM2010 Symposium:
4 2Emergent
QuantitativeQualitativeIT Investment Decision-making
Approach
BCD
Copyright © 2011 mobyl design / University of Pretoria