Innovation Management
What
is IM | Why IM | IM under CICM
| Main Goals | Requirements
| How-to of IM
What
is Innovation Management
Innovation management emerged as a discipline in the 1890s with Edison’s
innovation factory. Edison changed the image of the sole inventor by
converting innovation to a process with recognized steps practiced by
a team of inventors working together – laying the basic design
of the R&D department. These steps are streamlined to the major
extent in all industries and include idea generation, concept development,
feasibility studies, product development, market testing and launch.
Innovation management is thus corresponds to the development of new
products, processes and services. In cases where the organization does
not make or offer products (goods or services), innovation lies in improving
the way jobs are done to meet the organization’s mission (i.e.
process innovation).
Why
Innovation Management
The high demand for innovation in the knowledge economy – brought
about by shorter technology and product life cycles as well as the sophistication
of customers – increased the organizational demand for new ideas.
This meant two things first innovation has to be pushed down to the
frontline where knowledge of the customer is and where the number of
ideas generated are greater. Second, it meant that top management has
to adopt appropriate innovation strategies to lead the surge of the
innovative activity. As a result innovation needed to be systemized
as a business process into the way that the organization does business
– and hence the need for innovation management. Only organizations
that liberate the innovative spirit of their employees, tap into the
knowledge of their customers and partners, and manage innovation projects
as a portfolio are able to reduce time to market with successful products.
Examples of such companies are HP, 3M and Procter and Gamble.
IM
Under the CICM
The main goal of innovation management under the CICM approach
is to enable the organization to tap into its intellectual capital scattered
across a number of internal and external networks to get to the market
faster with a successful, if not a breakthrough, product. Being the
intermediate stage between knowledge and intellectual property management,
the innovation management stage is concerned with the processes that
convert knowledge resources into intellectual property and products.
It is also concerned with enabling management to employ the appropriate
skills and practices to manage the high surge of ideas and innovation
projects, such surge that is brought by the high demand for innovation.
Main Goals of Innovation Management
Effective innovation management requires the implementation of
a number of processes and the employ of a number of tools. At the outset
it is important that the culture of the organization empowers employees
and encourages them to submit their ideas. Most importantly management
should adopt the appropriate innovation strategy to lead the innovation
process and manage the innovation portfolio. The following summarizes
the various objectives that management should aim for under the innovation
management stage:
1.
Effect a shift in the way the organization sees itself where innovation
is recognized as the way of doing business
2.
Deciding upon the innovation strategy that best fits the organization’s
situation, and enable it attain its vision.
3.
Creating a portfolio of innovation projects to translate competitive
strategies and to manage risk across the whole organization.
4.
Define a criteria for the selection and prioritization of projects
within the portfolio to weed out less probable projects as soon as
possible
5.
Effect the necessary structural changes to arrange skills throughout
the organization in competence centers, to enable the formation of
the right team for the purposes of the innovation project.
6.
Arrange current and potential future alliances in a portfolio that
can be tapped when needed, and define when and how such alliances
are to be made (governing conditions).
7.
Foster an organizational culture that promotes innovation by allowing
employees time to innovate and the implementation of their own ideas
for improving job performance.
8.
Develop and implement methods that enable tapping into the organization’s
intellectual capital.
Main
Requirements
To create and implement an effective innovation management program it
is important for management to:
1.
Create and foster the right culture for innovation by allowing employees
time to experiment and to develop their own ideas. An example is 3M
which allows employees 15-20% of their time – using the company
resources – to work on projects of their own, where they may
own an equity later if the project grows into a new business. It is
important to empower employees by making it clear that their contribution
matters by allowing them to implement their ideas within certain budgetary
limits.
2.
Provide an infrastructure to support employee innovation either through
the creation of skunk works labs or venture capital units to capitalize
on the ideas that do not fit into the business plans or strategy.
This is important to avoid pitfalls that Xerox (the PC prototype and
Steve Jobs), Lucent (the transistor technology and Intel) and IBM
(the Windows idea and Bill Gates) suffered from by driving great ideas
and people out, when their ideas didn’t fit into the core business
areas of the organization.
3.
Adopt the appropriate strategies to lead the innovation process and
define what projects are to be included in the innovation portfolio.
How-to
of Innovation Management
Achieving the objectives of innovation management involves undertaking
a number of steps including the following:
A.
Innovation Portfolio – Managing innovation projects across
the whole organization as a portfolio enables management to diversify
the projects between low to high level of innovativeness, and hence
manage the risk involved with the innovation process. The innovation
portfolio should be divided into a number of strategic buckets to aid
the allocation of human and financial resources and enable the reallocation
of resources to respond to market changes.
B.
Selection & Evaluation Criteria – To effectively
manage the innovation portfolio it is important that management decides
upon the selection criteria used to decide which projects will be included
in the portfolio, as well as the evaluation criteria that will be used
to weed out the less performing projects. Such criteria should be incorporated
into a stage-gate process where the product under development doesn’t
pass into the next stage until it satisfies the requirements of the
gate, with centrally defined criteria and independent gate keepers.
C.
Idea Banks – Idea banks serve as databases for ideas
submitted by employees and customers that can be later reviewed by the
new product development or R&D department for new projects. To be
effective there should be a culture that encourages employees to submit
and pursue their ideas.
D.
Competence Centers (internal networks) – With the increased
decentralization of organizations and the specialization of various
business units or departments in certain areas of knowledge, specialized
centers started to form. Yet to reap the greatest benefit from employee’s
skills and expertise should be recognized and rearranged in defined
competence centers. This would facilitate the creation of internal networks
of R&D facilities and competence centers scattered across the whole
enterprise and the subsequent utilization of such networks to bring
the right team together according to the needs of the innovation project.
E.
Alliance Portfolio (external networks) – Based on the
network-based model of innovation, innovation networks extend outside
the enterprise to customers, partners and experts from industry and
academia. The growth in outsourcing of R&D research, joint ventures
and other forms of strategic alliances in support of the organization’s
innovation process resulted in a proliferated number of alliances that
can be best managed for innovation purposes through an alliance portfolio.
An alliance portfolio is a centrally kept portfolio where the reasons,
expected returns, skills to be tapped, purpose and performance and other
information is collected about the alliance and the alliances are managed
by a central unit with emphasis on building on the mutual strength of
the organization, and reducing time to market.
F. Competitive intelligence tools – Innovation
management is the main vehicle to materializing the organization’s
competitive strategies. This is because the products and services that
an organization offers in the market, as well as technology standards
it introduces or processes it develops, shape its competitive position
and business performance. Competitive and innovation strategies however
should never be forged in a vacuum but in direct response to the actual
or anticipated market condition or competition’s moves –
hence the need for competitive intelligence. The past few years have
seen a flood in competitive intelligence tools and software programs.
The choice of such tools or programs depends on the industry as well
as the strategy of the organization.
How to build an innovation management system is explained step-by-step
in the book: Comprehensive Intellectual
Capital Management
