Organizing for Innovation

This will be a very short item this time, summarizing the third book of this course. I am actually done but I’d like to have some things online searchable so I can find them. There we go. This one is about innovation in general and how to set up a corporation for it.

First of you need to think about the fact that there is both radical and incremental improvement and if you remember the innovation pyramid, 85% of all innovation is incremental. There is very little radical innovation. Sources where innovation come from are dissatisfaction with the status quo, or at the managerial level a remedy for failure or at a strategic level a simple response to external events.

Two models existed early on. The technology push model (basic science -> design and engineering -> manufacturing -> marketing -> sales) neglected the role of the market and the expensive side of basic research. The market pull model (market need -> development -> manufacturing -> sales) is used for 80% of products but you will not be at the forefront and develop the new thing that will find a market.

Neither of the two did really seem to be the right thing which lead to the coupling model in the 1970s which coupled all steps with an ear to the market and underlying state of the art technical systems and development. This still looked at things sequentially though just incorporating connections and feedback. In the 1980s this led to the integrated model which is more parallel and overlapping. Today we are even moving to something Rothwell calls 5G, the system integration and networking model, which is modeled around integration, flexibility, networking and real time information processing as well as the ability to learn.

Then we have an innovation life cycle:

Innovation -> Product life cycle -> key features improved -> dominant design -> innovation diffused to a wider audience -> new innovation challenge.

Abernathy and Utterback found that first a wave of new firms come into a market and then something called the dominant design takes hold. This is a new product that is a mix between technological innovations introduced independently in previous products they argue. This is the point when true size is gained but also when the industry becomes more vulnerable again. Things become more standardized, mindsets get fixed and marketing-led management takes over from technology-led management. This is why you get vulnerable to disruptive technologies.

The rate of innovation goes up with product innovation, then process innovation takes over, more competitors get in and then the innovation shrinks. So how to become innovative? Can you copy. Of course! :) It’s called creative swiping and Kay argues that copying can be a lot more profitable. Then there is benchmarking which became the legal form of copying in the 1980s, with Xerox first establishing benchmarking for their products and then also for their processes.

But you still need to go through repeated failure and introspection, argues Soichiro Honda, and cooper and Kleinschmidt identified three key factors for success:

\- Product advantage — unique features

\- Proficiency of predevelopment activities — initial screening

\- Protocol / definition — target market

The idea screen needs to make clear that a good idea is not enough it needs to fit resources, capabilities, finances, structure and values of a company.

Keeping with value, the most of it is in the intellectual capacity of a company in these times, especially its tacit knowledge. How to get that out of people? One would be suggestion schemes but here you need to pay attention that you:

\- publicize the scheme

\- give feedback about all suggestions

\- act upon a subset of them

\- publicize what you have done

People like to be recognized and you might not even need financial rewards, 3M for example doesn’t.

So when do you go to market? You can be first to market (Intel) with strong R&D offering a temporary monopoly. You can be a fast follower (AMD) with nimble development and engineering capability. Then you can also be the one late to market (NEC) with product, process or economies of scale offering cost advantages. A niche specialist (Transmeta) will focus on special applications.

What will happen in the future is also important and scenario building will help you prepare. You will not be able to know what happens in the future anyway, but preparing is important.

Another important field are structures and boundaries. We are moving to more and more a projects based enterprise. Maybe in the future only the core of the company will really be fixed and the rest will be moving around. Projects are mostly interdisciplinary, co-operative and transient, normally a fixed thing in a fixed timescale. There are different structures:

\- basic relay structure: projects move from department to department

\- matrix organization: teams made up from different departments but this can be an extra stress

\- independent project: full time transfer for big projects

\- venture team: outside standard reporting structure

\- dual structure: routine tasks done by organization and then there is a project network.

I truly believe that the dual structure will have a huge future. Then you can also look outside of the company. You can do partnerships here or joint ventures, mergers or simply build up networks.

Quality is another important point mentioned, going from quality inspection, over quality control, on to quality assurance and finishes at TQM. It was greatly influenced by Deming who argued that people mattered and that it was management’s task to get out of the way. This brings us to the final point of the final point of the empowerment staircase. You move from informing, to communicating to consultation to co-determination to control. You just need to find the stage that fits your corporation.

So there you go, I told you it was short. :) Next course, Knowledge Management. Kick ass. Already setting up a Wiki at this time :)