Describe the stages and activities that enable innovation in a company in general and in the case company specifically. What are the strengths and weaknesses of the current situation In the company? 2. Design an initiative, which can strengthen incremental and radical innovation in the company. This new process should enable the use of innovation management techniques. For Task (2) you should provide not only a description and rationale of the new innovation management process and the supporting innovation management techniques but also a proposal outlining how the company should Implement this ewe Innovation management process.
As a strategy designed to help companies succeed, innovation is rising to the top of organizations’ agenda. For the first time, according to PC’s 14th Annual Global CEO Survey, COOS say they are as Likely to focus on Innovation to achieve growth, as they are to exploit existing markets. In this paper I will define innovation, outlining Its importance in modern business and describe Innovation enablers. I will then discuss the strengths and weaknesses of Alonzo, the organization outlined in the case study.
Finally, I will present how I live Alonzo can develop, implement and embed radical and incremental Innovation within its business so that it, like many organizations as described by PWS, can achieve growth. “Innovation is driven by the ability to see connections, to spot opportunities and to challenge is not simply identifying opportunities, but making these work technically and commercially – it’s the “successful exploitation of new ideas” that counts (Innovation Unit, Department of Trade and Industry, 2004).
Companies that do not innovate put their future at risk – they are unlikely to prosper ND will eventually be unable to compete (Australian government). New, innovative products and services are essential to retain market share, increase profitability and build credibility. Schumacher (1950), described as the Godfather of innovation studies, states that entrepreneurs seek new products and services to gain strategic advantage. Initially they will get ‘monopoly profits’ but soon after, their innovation will be imitated and so the cycle will repeat itself.
He describes ‘creative destruction’ as new innovations destroy the old rules and create entirely new ones. This is why innovation cannot be viewed as a single activity: it must be an on-going process even if it is made up of individual projects. The types of innovation that exist can be summarizes in three main categories: I. Technical revolution, where a completely new product is brought into play (new-to- the-world: this is very rare, according to Title (1999) and is Just 6-10% of all projects) it.
Radical innovation, where a major new development is made. “Radical innovations create such a dramatic change in products, processes or services that they transform existing markets or create new ones” says Lifer et al(2000) iii. Incremental innovation is where an improvement is made to an individual product. Studies of incremental development (e. G. Hollander famous study of DuPont rayon plants,) suggest that cumulative gains can often be greater over time than those, which come from occasional radical ideas.
Continuous improvement programmed such as ‘lean’ thinking and six sigma have received a lot of attention due to their success in supporting business efficiency and growth, however they are very different to the methods that lead to radical innovation. When considering how innovation happens and its enablers, many models describe he process in terms of a funnel. Tied ; Peasant (2009) use a very simple funnel process, starting with the initial search which may involve dedicated research and development teams or a ‘eureka moment’.
They then move to the selection stage where strategic decisions need to be made, considering marketability, profitability, costs etc. Finally there is the implementation stage where ideas are turned into reality and where resources must be managed and risk factors accounted for. If innovation is a process then it follows that any organization should be able to evolve a process and become an innovative organization. But to enable innovation to happen, first the organization must analyses where it currently stands in terms of existing innovation, where it can move to and examine the challenges it will face.
Francis and Peasant (2005) described the ‘Four Dimensions of Innovation Space’ as a model that helps an organization define its situation and where it can go. The model Process Innovation – changes in the ways things are created or delivered * Position Innovation – changes in the context in which products are introduced * Paradigm innovation – changes in the underlying mental models which frame what an organization does. Using this model, Alonzo can examine its current strengths and weaknesses and determine where it wants to be.
It can also examine where its competitors are and identify whether there are gaps that it can fill and where its competitors are clustering their efforts. Using the Four Dimensions model, Alonzo’ s strength can be seen to be as being good at incremental product innovation and incremental process innovation, working closely with its customers and being highly customer focused (which has maintained its profitability). Its weakness is that it lacks radical innovation in all areas and has very low paradigm and position innovation in both incremental and radical innovation.
Whilst this model gives a broad picture of the innovation space, there is need for Alonzo to go into more depth and examine the characteristics of innovation which might shape the strategic decisions about how, when and where Alonzo can develop its capability. These include: The degree of novelty it is aiming for, from incremental or radical. The platforms or families of innovations it might wish to use: building on existing developments. How repaper is it for ‘discontinuous innovation ideas’: new innovations that change the ‘rules of the game’.
And the level of innovation and timing required: is the business willing to accept a 5 – 10 year plan which is not unusual when working in the radical innovation sphere? As seen, Alonzo currently exercises incremental product and process innovation. A key strength is that they customize their offerings to meet the specific needs of their customers. Whilst they wish to move into a radical innovation space, it is important that they maintain their existing, successful customer focused incremental innovation.
It is possible for organizations to have a healthy incremental as well as radical innovation lines, however, according to Chris Watson, MD at PC’s advisory practice focusing on innovation, “as a general rule, the existing capital budgeting and assessment systems of an organization are good at incremental innovation but terrible at radical ones. A new structure is therefore needed for radical ones”. Therefore this is one core aspect Alonzo will have to address: maintaining the incremental innovation activities that are already successful, but having a new structure to facilitate radical innovation.
To continue and develop its incremental innovation offerings, Alonzo may wish to look at ‘platform innovation’. Incremental innovation can be harnessed by using platforms: this is when a core component is built upon. In the example of Apple we see how the basic component of an I-pod developed into a phone, a tablet computer and many other variations on this theme. Platform innovation will allow Alonzo to re-coup high the initial customer focused innovations, for which they are successful, but then develop these beyond the specific needs of that particular customer.
This will allow hem to maintain success in the space they currently work and also develop this further in a low risk manner. Alonzo is known for listening to its customers and developing their products and processes to meet the needs of their customers. But a key weakness is that Alonzo is working very much with the same group of customers, over-relying on them to drive their innovation. This over reliance on a small group of customers is a high risk factor.
Abernathy and Turtlebacks (1975) model of the ‘innovation life cycle’ shows the process which highlights the risk for organizations such as Alonzo, that reach a specific phase’ whereby innovation is driven by customers’ demand. They say that at this stage it becomes hard for the organization to move to a new trajectory due to costs already input, technology invested in and also due to organizational and psychological barriers. Also, one or more of these organizations may take their business elsewhere or the field they work in may diminish.
It also means that the ideas Alonzo is getting from them is limited. These are all sources of discontinuity: others include, new technologies emerging – leaving their processes or products defunct, changes in the philosophy of customers e. . They may set new strategies or be driven by regulation or political issues. To reduce this risk Alonzo must broaden its customer base and look at developing its incremental innovations independently of its customers, as well as moving into the radical innovation sphere.
However, some research suggests that existing incumbents do badly when forced into radical innovation – but not all. Companies can build a new trajectory and deploy their knowledge and skills to develop new innovations. This is what Alonzo must do. Alonzo executives have committed to change and develop its radical innovation abilities, but a desire to innovate is very different from actual innovation taking place. Innovation is simply a component within a larger system and a change in any area will impact on the culture and potentially the results of the whole organization.
To begin with Alonzo must develop a clear innovation strategy. The illustration below from Tied and Peasant shows the questions that must be addressed to further develop an innovation business. This begins with a search for signals that change is needed or wanted. The ability to pick up these signals and be receptive to them is essential. Next, selection of the projects must take place, balancing risk with reward. In the third stage there is implementation: turning ideas into reality.
The nature of radical innovation is that no one knows the ‘right way and there has to be much experimentation and fast learning. But ideas will eventually converge around a dominant design, what Doss (1982) calls a technological trajectory. The dominant design brings increased focus and resources and the characteristics become stabilized. Next the emphasis shifts to differentiation and to deliver it reliably cheaply and with high quality. Gaining benefit from the innovation is the final stage and ultimate goal.
Lifer et al (2000) describe another linear approach to enabling innovation by describing the challenges that need to be overcome in order to develop a radical innovation organization. First, radical ideas must be captured in what they describe as the fuzzy front end’, (much like the Tied ; Peasants ‘search’ phase). The second challenge is having the skills to manage radical innovation projects. For this the company needs to be able to map capabilities, recruit champions, develop and follow learning plans.
Thirdly the company must be prepared to learn about markets and carry out extensive market research. Lifer et al says that resolving uncertainty in the business model is crucial, with the company remaining focused on the core plan but at the same time bridging the resources and competency gaps with minimal disruption to business-as-usual. The final challenge he describes is getting ‘buy-in’ and harnessing the abilities of senior management to support the initiative. Therefore we see that overcoming these hurdles is not easy but must be done to enable innovation to take place at Alonzo.
Van De Even suggests that the underlying structure can be described as an innovation journey. He explored the limitations of the linear model and identified some important modifiers to the basic models, which include: shock often triggers innovation, so something that may appear as negative may lead to fresh changes. Restructuring happens all the time and is likely to happen during innovations activities – this does not mean that innovation should not be disrupted. He described the importance of senior management support and how they must expect setbacks.
Finally he discussed how success changes over time and all parties should keep this n mind. So we see from the work of Tied ; Peasant, Lifer and Van De Even that as well as defining a strategy for innovation, the senior management team must be prepared for the significant challenges they will face in introducing a radical innovation line to their business. The next aspect Alonzo must consider is who will lead this initiative. Its organizational structure is currently built around customer focused business units but as discussed, this is not a structure that will support innovation.
Setting up new project teams is essential to take their plans forward. Clark and Wheelwright (1992) outline the types of development teams that can be used. For Alonzo, I recommend that an autonomous team structure be used. In this format the team is made up of cross- functional experts with a project leader (from a senior position – a weightier) who has full control of the resources. The team will have a ‘clean sheet’ to develop new innovations and be able to focus completely on the which the individual can return to their previous role or apply for promotion).
Finally the team must be made up of individuals from a mixture of Business Units and hereby strengthen synergies between the business units (a goal of Loan’s). Having only a fixed period of time in the team is important and ensures that the team does not become an out-of-touch group, and Alonzo has made it clear that they do not want permanent, internal corporate research units. To embed this, reward and remuneration strategies need to be developed to ensure the quality and motivation of this team is maintained.
Implementing this stage must be handled carefully with a thorough communications plan outlining why the organization wants to undertake radical innovation (perhaps sing Porters ‘5 Forces model’ to show how it expects to gain competitive advantage), how it plans to do this (outlining the strategy and the role of the new autonomous development teams) and what the benefits will be for the organization and the staff. The range of communication tools should be wide but all should be positive, reassuring and aim to generate excitement across the business.
Another simultaneous initiative that is essential if Alonzo is to develop its radical innovation capacity is to ensure it is looking externally for ideas – using ‘open innovation’. Cheeseburger (2007) recognizes that organizations cannot assume that all new ideas can be generated internally and must build links with external partners to grow. Alonzo should look to develop links with academic institutions as well as encouraging wider business networking for its senior team. This will allow external ideas into the business and offer support to the institution for further development.
As Alonzo currently does not have a culture of information sharing, the use of reward strategies needs to be developed to encourage the Business Unit Leaders to not only evolve these links but then use this knowledge and pass it to the autonomous project teams who can develop and implement these ideas. The autonomous project team will have a range of initiatives to deal with at any one time which will run in parallel with the existing incremental innovations taking place at customer level.
In order to ensure that the team is not overwhelmed, the project leader must ensure that tools are available to the team for use. Scenario planning is particularly useful for this. Scenarios should be selected and then fleshed out and then the implications examined. This allows the group to identify core areas for focus and identify where needs might exist and research needs to be conducted. This activity may however actually increase the amount of initiatives being undertaken. This is when the project leader needs to carefully manage the portfolio of initiatives.
Using a simple risk and reward chart will allow each of the initiatives to be ranked as high or low in terms of risks and benefits. The leader, probably with the senior management can then evaluate which initiatives to priorities. That safeguards be in place to protect Alonzo from unnecessary risk or pursuing enviable initiatives. To do this every project should be given an Executive sponsor who will have responsibility for the project. A useful tool they might use to keep track of the initiative is Coopers ‘Stage – Gate’ idea-to-launch system (see Fig 2).
The benefits of such a process that maps out what needs to be done, ‘hurdle-by-hurdle’, and how to do it, have been well documented in companies such as MM, ITT and Procter and Gamble (P&G). The Stage-Gate in its simplest form consists of a series of stages, to enable innovation initiatives to come to fruition. Each stage has a et of recommendations needed to move to the next stage/gate and each stage has clear goals and purpose. It is important to remember that each stage is cross- functional and R&D, marketing etc. Is included in each stage.
The structure of each gate is similar with clear deliverables being brought to the meeting by the team (which are determined at the output). These are then Judged against core criteria, which determine if the initiative should continue. Finally a decision is made to Go/ Kill/Hold/Recycle with an action plan for the next stage. Fig. 2 By using this model Alonzo can ensure that its innovation initiatives are being effectively managed in a timely manner. Once embedded in Alonzo, this process may also be used for its ‘open innovation’ activities.
Cooper and Gadget (2007) found that it is already being used in this way by some progressive organizations. At the ‘discover’ stage Alonzo can look for ideas from inventors, start-ups, small firms and other traditional external sources. At the ‘development’ stage it may use external scientists or use external intellectual property that is out of license to move an idea forward. Once ready to launch they can sell or out-license products where value can be found elsewhere or they can in- sciences, if it will assist immediate business growth.
In both situations, embedding an effective Stage-Gate system will allow new ideas to get to market efficiently and profitably. It is also relatively simple to embed by using interactive workshops to aid a full understanding of the process. In this paper I have outlined what innovation is, why it’s important and discussed a small sample of innovation enablers, such as having a clear process and strategy, an appropriate organizational structure, senior management support and an awareness of the obstacles and challenges, (during which time I mentioned the strengths and nakedness of Alonzo).