Six hints for building an effective business innovation system

“Six Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua

Six Hints for Building an Effective Business Innovation System

Miguel Sáenz de Viguera Aizpurua 2007 PMI Distinguished Contribution [email protected]

November 2010


On August 6, 1991, Tim Berners-Lee (CERN) posted

a summary of the World Wide Web project on the alt.hypertext newsgroup.

This date marked the debut of the Web as a publicly available service on the

Internet.He wrote:

“The WorldWideWeb (WWW) project aims to

allow all links to be made to any information anywhere. [...] The WWW project was started to allow high energy

physicists to share data, news, and documentation. We are very interested in spreading the web to other areas, and having gateway servers for other data. Collaborators welcome!"

On August 6, 1991, Tim On August 6, 1991, Tim BernersBerners--Lee (CERN) posted Lee (CERN) posted

a summary of the World a summary of the World Wide Web project on the Wide Web project on the alt.hypertext newsgroup. alt.hypertext newsgroup.

This date marked the debut This date marked the debut of the Web as a publicly of the Web as a publicly available service on the available service on the

Internet.Internet.He wrote: He wrote:

““The WorldWideWeb The WorldWideWeb (WWW) project aims to (WWW) project aims to

allow all links to be made to allow all links to be made to any information anywhere. any information anywhere. [...] The WWW project was [...] The WWW project was started to allow high energy started to allow high energy

physicists to share data, physicists to share data, news, and documentation. news, and documentation. We are very interested in We are very interested in spreading the web to other spreading the web to other areas, and having gateway areas, and having gateway servers for other data. servers for other data. Collaborators welcome!"Collaborators welcome!"

The “New Economy”• On 1991 the humanity entered in a new era of

instantaneous, global diffusion of information and knowledge at practically no cost, the era of Internet

• The “WWW” is the main responsible of the dramatically fast globalization of the economy and of the appearance of an increasingly wild competition at any industry during the last years. The main responsible too of the economical growth of the emergent countries that ten years ago, practically, didn’t count in the economic arena and now are in the way of becoming the winners

• In the New Economy, for the Companies of the EU and USA, from now and for the future, it is not possible competing by cost. Competing by quality becomes more and more difficult each day for them. Business Innovation is, the only way that they have to get a sustainable competitiveness

1/30

Introduction: The Shift of the Economic ParadigmIntroduction: The Shift of the Economic Paradigm


When Speaking about Business Innovation, we refer ourselves to Product Innovation, Innovation

of Processes and Innovation of the Business Model, all together

The Innovation of the Business Model, many times the most critical Innovation, also called

Business Transformation, demands transforming the Key Processes of the Organization and/or its

Primary Infrastructure

Most of these Transformations are Enabled by the Efficient Use of the New Technologies

When Speaking about Business Innovation, we When Speaking about Business Innovation, we refer ourselves to Product Innovation, Innovation refer ourselves to Product Innovation, Innovation

of Processes and Innovation of the Business of Processes and Innovation of the Business Model, all togetherModel, all together

The Innovation of the Business Model, many The Innovation of the Business Model, many times the most critical Innovation, also called times the most critical Innovation, also called

Business Transformation, demands transforming Business Transformation, demands transforming the Key Processes of the Organization and/or its the Key Processes of the Organization and/or its

Primary InfrastructurePrimary Infrastructure

Most of these Transformations are Enabled by Most of these Transformations are Enabled by the Efficient Use of the New Technologies the Efficient Use of the New Technologies

2/30

What are we speaking about when we mention Business Innovation?What are we speaking about when we mention Business Innovation?

“Six Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua 3/30

“I define creativity as the entire process by which ideas are generated, developed, and transformed into value. Since it is a process, it can be planned and managed”

“Moreover, when we add information technology to the mix of creativity and knowledge, we get a particularly

potent combination: capabilities to represent, deploy and track knowledge coupled with technologies to promote

collaboration across divergent disciplines and perspectives. When properly managed, the combination

results in creative combustion”“Innovation is about implementation. Being creative and maybe even radical does not necessarily mean success”“The ambiguity, complexity and improvisation of creative

organizations require specially tailored managerial systems and processes, to transform creative ideas into

value and discipline for its implementation”

Professor John Kao

““I define creativity as the entire process by which ideas I define creativity as the entire process by which ideas are generated, developed, and transformed into value. are generated, developed, and transformed into value. Since it is a process, it can be planned and managedSince it is a process, it can be planned and managed””

““Moreover, when we add information technology to the Moreover, when we add information technology to the mix of creativity and knowledge, we get a particularly mix of creativity and knowledge, we get a particularly

potent combination: capabilities to represent, deploy and potent combination: capabilities to represent, deploy and track knowledge coupled with technologies to promote track knowledge coupled with technologies to promote

collaboration across divergent disciplines and collaboration across divergent disciplines and perspectives. When properly managed, the combination perspectives. When properly managed, the combination

results in creative combustionresults in creative combustion””““Innovation is about implementationInnovation is about implementation. . Being creative and Being creative and maybe even radical does not necessarily mean successmaybe even radical does not necessarily mean success””““The ambiguity, complexity and improvisation of creative The ambiguity, complexity and improvisation of creative

organizations require specially tailored managerial organizations require specially tailored managerial systems and processes, to transform creative ideas into systems and processes, to transform creative ideas into

value and discipline for its implementationvalue and discipline for its implementation””

Professor John KaoProfessor John Kao

Professor John KaoProfessor John KaoHarvard Business SchoolHarvard Business School

MIT Media Lab. MIT Media Lab.

Professor John KaoProfessor John KaoHarvard Business SchoolHarvard Business School

MIT Media Lab. MIT Media Lab.

Why Companies Need Innovation Management Systems? Why Companies Need Innovation Management Systems? Managing the Paradox between Creative Improvisation and DiscipliManaging the Paradox between Creative Improvisation and Discipline ne


Strategy Innovation is about challenging existing industry methods of creating customer value, in order to meet newly emerging customer needs, add additional value, and create new

markets and new customer groups for the organization

Strategy Innovation is about Strategy Innovation is about challenging existing industry methods challenging existing industry methods of creating customer value, in order to of creating customer value, in order to meet newly emerging customer needs, meet newly emerging customer needs, add additional value, and create new add additional value, and create new

markets and new customer groups for markets and new customer groups for the organizationthe organization

4/30

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””


• All countries and industries are now suffering the “New Economy” of wild, global competition

• Changes of the business environment and the competition are dramatically deeper and faster each day

• In the New Economy, the new paradigm, the old models for business strategic analysis and planning are not more valid

• But… Business Strategy should drive the Business Innovation Effort

5/30

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””Why Innovating the Business Strategy?Why Innovating the Business Strategy?

In the new economy, business strategy should be defined, evaluated and refined frequently, through the application of the

last best proven models, tools and techniques for business strategic analysis and planning

In the new economy, business strategy should be defined, In the new economy, business strategy should be defined, evaluated and refined frequently, through the application of theevaluated and refined frequently, through the application of the

last best proven models, tools and techniques for business last best proven models, tools and techniques for business strategic analysis and planningstrategic analysis and planning


Arnoldo C. Hax Dean L. Wilde IIMIT Sloan School of Management

“The Delta Project”

The “New Economy”Three Distinct Strategic Options

Best ProductTotal Customer SolutionsSystem Lock-in

The The ““New EconomyNew Economy””Three Distinct Strategic OptionsThree Distinct Strategic Options

Best ProductBest ProductTotal Customer SolutionsTotal Customer SolutionsSystem LockSystem Lock--inin

Michael PorterHarvard Business School

“Competitive Strategy”

Traditional EconomyTwo Generic Competitive Strategies

Cost LeadershipProduct Differentiation

Traditional EconomyTraditional EconomyTwo Generic Competitive StrategiesTwo Generic Competitive Strategies

Cost LeadershipCost LeadershipProduct DifferentiationProduct Differentiation

Generic Strategies

The New The New Strategic Strategic OptionsOptions

The “Delta Model”

System Lock-In

BestProduct

TotalCustomer Solutions

DistinctDistinctStrategic Strategic PositionsPositions

System Lock-In

BestProduct

TotalCustomer Solutions

DistinctDistinctStrategic Strategic PositionsPositions

1980 2001

6/30

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””Focus your innovation strategy on the new strategic options for Focus your innovation strategy on the new strategic options for your businessyour business


First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””The Delta Model: The Three New Distinct Strategic PositionsThe Delta Model: The Three New Distinct Strategic Positions

(Arnoldo C. Hax & Dean L. Wilde II, MIT Sloan School of Manageme(Arnoldo C. Hax & Dean L. Wilde II, MIT Sloan School of Management)nt)

System Lock-InBased on: System EconomicsStrategy: Market DominanceObjective: Achieving Complementors Share

Best ProductBased on: Product EconomicsStrategy: Best than CompetitorsObjective: Achieving Product Share

Total Customer SolutionsBased on: Customer EconomicsStrategy: CooperationObjective: Achieving Customer Share

Mostly Enabled Mostly Enabled through Effectivethrough Effective

Use of TechnologyUse of Technology


SystemSystemLockLock--InIn

Best Best ProductProduct

TotalTotalCustomerCustomerSolutionsSolutions

Emphasize Product Orientation

Key Driving Forces• Supply Chain Efficiency (Cost & Quality)• New Product Development Capability• Securing of Distribution Channels

ThreatCommodization

Its Aim is a Unique Value Proposition toIndividualized Customers by means of a

Customized Portfolio of Products and Services

Key Driving Forces• Careful Segmentation of the Customers’ Base• Joint Development Efforts with Customers and Key

Suppliers guided by the Individual Customer Expectations

Focus on the “Full System”as the Relevant Scope to get Power

(The Business, Customers, Suppliers and Complementors)

Key Strategic Driving ForceGaining Complementors Shared as the main objective because they are the Basis for the Consolidation of the PowerIncreased

Sustainability

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””The Three New Distinct Strategic Positions,The Three New Distinct Strategic Positions,Main Features and Compared SustainabilityMain Features and Compared Sustainability


Not Every organization has the possibility to reach the strategic position of “System Lock-In”

Not Every organization has the possibility to reach the Not Every organization has the possibility to reach the strategic positionstrategic position of “System LockSystem Lock--InIn””

Proprietary Standard

MicrosoftIntel




Low CostEasy Jet, ClickiairAir Berlin

DifferentiationBang & OlufsenSony Wega

Customer Integration

Indra, EDSAccenture

Redefining theCustomerRelationship

MCI

DominantExchangeYellow PageseBay

Exclusive ChannelTelefónicaNespresso

Horizontal Breadth

Fidelity

IncreasedIncreasedStrategyStrategy

SustainabilitySustainability

Proprietary Standard

MicrosoftIntel




Low CostEasy Jet, ClickiairAir Berlin

DifferentiationBang & OlufsenSony Wega

Customer Integration

Indra, EDSAccenture

Redefining theCustomerRelationship

MCI

DominantExchangeYellow PageseBay

Exclusive ChannelTelefónicaNespresso

Horizontal Breadth

Fidelity

IncreasedIncreasedStrategyStrategy

SustainabilitySustainability

Most of the organizations have

not a dominant exchange position,

cannot get the exclusivity of the

channels of distribution that customers use to

avail themselves of their products and

either, not have the possibility to develop and get

the ownership of the standards of

the industry

Most of the Most of the organizations have organizations have

not a dominant not a dominant exchange position, exchange position,

cannot get the cannot get the exclusivity of the exclusivity of the

channels of channels of distribution that distribution that customers use to customers use to

avail themselves of avail themselves of their products and their products and

either, not have either, not have the possibility to the possibility to develop and get develop and get

the ownership of the ownership of the standards of the standards of

the industrythe industry

9/30

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””Some Strategies towards the New Strategic Positions Some Strategies towards the New Strategic Positions


First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””““MCIMCI””, an Example of Strategy for Redefining the Customer Relationshi, an Example of Strategy for Redefining the Customer Relationshipp


First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””““FidelityFidelity””, an Example of Strategy for Expanding the , an Example of Strategy for Expanding the

Breadth of Products and Services provided to the CustomerBreadth of Products and Services provided to the Customer


The competencies required to successfully perform in the Best Product Strategy…

• A Strong Product Base• A Solid Supply Chain Infrastructure• Strong Internal Innovation Capabilities…

very often are not enough to create or defend sustainable competitive advantages in the new economy

“The transformation that any company should undertake to move away from a Product-Centered Mentality towards a Total Customer Solutions Position, and towards a System Lock-In

Position, if it has possibilities, is a mandatory challenge for all executives”

Professor Arnold C. Hax (MIT)

““The transformation that any company should undertake to The transformation that any company should undertake to move away from a Productmove away from a Product--Centered Mentality towards a Total Centered Mentality towards a Total Customer Solutions Position, and towards a System LockCustomer Solutions Position, and towards a System Lock--In In

Position, if it has possibilities, is a mandatory challenge for Position, if it has possibilities, is a mandatory challenge for all all executivesexecutives””

Professor Arnold C. Hax (MIT)Professor Arnold C. Hax (MIT)

CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the strategic alliance between IKUSI and ORMAZABAL are examples of Basque

Companies, strategically trying to move from a position of "Best Product" towards another one of "Total Customer Solutions", an intelligent strategic movement

CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the strategic alliance between IKUSI and ORMAZABAL are examples of Bstrategic alliance between IKUSI and ORMAZABAL are examples of Basque asque

Companies, strategically trying to move from a position of "BestCompanies, strategically trying to move from a position of "Best Product" towards Product" towards another one of "Total Customer Solutions", an intelligent stranother one of "Total Customer Solutions", an intelligent strategic movementategic movement

12/30

First Hint: First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””Business Strategy for the New Economy, ConclusionsBusiness Strategy for the New Economy, Conclusions


Implement an Efficient, Structured Process for:Implement an Efficient, Structured Process forImplement an Efficient, Structured Process for::

IEncouraging the

Generation, Capture and Refinement of Ideas for

Innovation from Customers, Employees

and other Stakeholders of your Organization

IIEncouraging the Encouraging the

Generation, Capture and Generation, Capture and Refinement of Ideas for Refinement of Ideas for

Innovation from Innovation from Customers, Employees Customers, Employees

and other Stakeholders of and other Stakeholders of your Organizationyour Organization

IIIBuilding an Efficient

Development Process that Provides Excellence in the

Development and Implementation of the Selected Innovations

Proposals

IIIIIIBuilding an Efficient Building an Efficient

Development Process that Development Process that Provides Excellence in the Provides Excellence in the

Development and Development and Implementation of the Implementation of the Selected Innovations Selected Innovations

ProposalsProposals

IIEvaluating, Prioritizing and Selecting the ideas that have the greatest

potential to add value to the Business

IIIIEvaluating, Prioritizing Evaluating, Prioritizing and Selecting the ideas and Selecting the ideas that have the greatest that have the greatest

potential to add value to potential to add value to the Businessthe Business

Second Hint: Second Hint: ““Implement an Efficient, Idea Management ProcessImplement an Efficient, Idea Management Process””


If no one believes that your firm is

serious about innovation, few

people will take it seriously

If no one knows about your ideas

campaign, no one will participate

Small rewards for ideas can be a

remarkably powerful means of promoting

participation

• Communicate that creativity and innovation have high priority in the organization. The High Management demonstrably should boost innovation

• Provide free education and training on creativity and creative problem solving

• Give to the people free time and other resources (mentoring, space, tools,...) to refine, test, developing the concept and presentation for creative ideas

• Reward rather than discourage creative thinking. Show that failures are tolerated, indeed they are seen as valuable learning opportunities.

• Set aside some additional budget for refining and testing the more radical ideas

• Implement and communicate a system to gather and process the innovation ideas. The goal: not one idea without answer from management

• Communicate your process, for assessing, filtering ideas and deciding which ones to invest in

14/30

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””Keys for Boosting the Generation of Innovation IdeasKeys for Boosting the Generation of Innovation Ideas


Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””Example of Practices for Boosting the Generation of Innovation IExample of Practices for Boosting the Generation of Innovation Ideasdeas

IN-HOUSE ENTREPRENEURSHIP PROGRAMMMESIN-HOUSE ENTREPRENEURSHIP PROGRAMMMES

15/30


The Most Innovative Companies, have a multifunctional, Innovation Steering Committee (“ISC”)composed by members of the top management with the mission of assessing, prioritizing and selecting the innovation ideasThe ISC meets periodically (monthly in most of the cases) to select the innovation proposalsThe ISC establishes and publishes, within the organization, the scoring system applied, that takes into account, at least the following criteria to evaluate the innovation proposals

• Their Strategic Fit• The Estimation and Availability of Investment

Funds, Human and other Resources required for their development and implementation

• A Qualitative and Quantitative (IRR, NPV, Pay Back,...) Estimation of their Adding Value to the Business

• Their Risks Evaluation• The Sustainability Analysis of the Advantage

Acquired by the implementation of the idea

SelectedInitiatives

RejectedInitiatives

InitiativesPortfolio

AllInitiative

Ideas

SelectedInitiatives

RejectedInitiatives


AllInitiative

Ideas

SelectedInitiatives

RejectedInitiatives


AllInitiative

Ideas

Once one innovation initiative has been approved by the Innovation

Steering Committee, an initial budget for its development is

assignedThe rejected ideas are recorded in an innovation ideas repository

where they can be revisited to be combined with other ideas or being applied for different

purposes than the original one

Once one innovation initiative has Once one innovation initiative has been approved by the Innovation been approved by the Innovation

Steering Committee, an initial Steering Committee, an initial budget for its development is budget for its development is

assignedassignedThe rejected ideas are recorded The rejected ideas are recorded in an innovation ideas repository in an innovation ideas repository

where they can be revisited to be where they can be revisited to be combined with other ideas or combined with other ideas or being applied for different being applied for different

purposes than the original onepurposes than the original one

DevelopmentFunnel

16/30

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””What are doing the Innovation Champions to Select which ones arWhat are doing the Innovation Champions to Select which ones are the e the

Innovation Proposals to be Developed?Innovation Proposals to be Developed?


The sustainability of the advantage achieved by an innovation depends onThe Replication Time• Its assessment requires an analysis of the

innovation project itself and the changes required in the infrastructure of the business.Some WEB-based innovations can be replicated in weeks but the changes in the primary infrastructure of the business required for its implementation can take years. Example Compaq against Dell

The Asymmetric Barriers• Their identification requires analyzing if our

advantage will be cancelled, when a competitor replicates our innovation. The cost of suppliers substitution is an example of asymmetric barrier

The Barriers of Preference • Their identification requires assessing if our

customers will remain loyal to our organization unless a competitor offers to them a better alternative. Example: Amazon has built up high barriers of preference

SustainabilitySustainabilityof the Advantage achieved of the Advantage achieved

by an Innovationby an Innovation

ReplicationReplicationTimeTime

Barriers of

Barriers of

Preference

Preference

Asymmetric

AsymmetricBarriers

Barriers

ProjectProjectAnalysisAnalysis

Customers

Customers

Analysis

Analysis

Competitors

Competitors

Analysis

Analysis

SustainabilitySustainabilityof the Advantage achieved of the Advantage achieved

by an Innovationby an Innovation

ReplicationReplicationTimeTime

Barriers of

Barriers of

Preference

Preference

Barriers of

Barriers of

Preference

Preference

Asymmetric

AsymmetricBarriers

Barriers

Asymmetric

AsymmetricBarriers

Barriers

ProjectProjectAnalysisAnalysis

Customers

Customers

Analysis

Analysis

Competitors

Competitors

Analysis

Analysis

17/30

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””A Model for Analyzing the Sustainability of Innovation InitiativA Model for Analyzing the Sustainability of Innovation Initiativeses

A Model for Sustainability A Model for Sustainability Assessment of Innovation Assessment of Innovation

InvestmentsInvestments


Management of the Development FunnelManagement of the Development Funnel

DevelopmentSteering

Committee

DevelopmentDevelopmentSteeringSteering

CommitteeCommittee

InnovationSteering

Committee

InnovationInnovationSteeringSteering

CommitteeCommittee

Phase I Phase II Phase III Phase IV

Frequent Prototyping

Multifunctional Project TeamsMultifunctional Multifunctional Project TeamsProject Teams

Program and Project

Managers

Program and Program and Project Project

ManagersManagers

Management of the Development FunnelManagement of the Development Funnel

DevelopmentSteering

Committee

DevelopmentDevelopmentSteeringSteering

CommitteeCommittee

InnovationSteering

Committee


CommitteeCommittee

Phase I Phase II Phase III Phase IV


Multifunctional Project TeamsMultifunctional Multifunctional Project TeamsProject Teams

Program and Project

Managers


ManagersManagers

The “Development Funnel”The “Development Funnel” is the graphical representation of the Development Process

A Development Steering Committee, (“DSC”) that can be the same or another committee, than the “ISC”, is responsible for:

• Providing Guidance during the whole Development Process

• Assigning Program Managers, Project Managers, Project Teams, budgets and other resources

• Approving Cycles Life for each Development Project, the Results to be Achieved at the End of Each one of their Phases, and the Project Plans

• Establishing and Leading the Phase Verification and Validation Meetings (Gates)

• Supervising the Management and Administration of the Resources and Program's Budgets

• Making Recommendations to the Top Management, Including Proposals for Program and Project Changes or its Termination

Project Management Professionalism and Frequent Prototyping are Key Success

Drivers for the Process of Development

Project Management Professionalism and Project Management Professionalism and Frequent Prototyping are Key Success Frequent Prototyping are Key Success

Drivers for the Process of Development Drivers for the Process of Development

18/30

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””How is the Development Process of the Innovation Leaders?How is the Development Process of the Innovation Leaders?


In the Model of “Winning Boost”, Business Strategy is driving:• The Management of the

Portfolio of Innovation Proposals

• The Management of the Development Process

• The Internal R&D• The HHRR Development

Programs• The Acquisition of External

Technology and Know How There is a unique, Innovation Steering Committee, responsible for Managing the Portfolio of Innovation Ideas and its Development Process

IIIIII IIIIII IVIV

ImplementedImplementedInnovationsInnovations

DevelopmentDevelopmentFunnelFunnel

NewCompetencies

InIn--Company R&DCompany R&Dand HHRR and HHRR

Development StrategyDevelopment Strategy

Technology Technology and Know and Know

HowHowAcquisitionAcquisitionNew

Technologies

WB Innovation Development Model © 2007 Winning Boost


ManagementManagementMultifunctional Multifunctional Project TeamsProject Teams

InnovationInnovationPrograms/ProjectsPrograms/Projects

Innovation Innovation ProposalsProposals

Business Business StrategyStrategy


CommitteeCommittee

19/30

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””Example: The Model of WINNING BOOSTExample: The Model of WINNING BOOST


The application of IT enable prototyping products, processes andbusiness models, fast and cost efficiently

The application of IT enable prototyping products, processes andThe application of IT enable prototyping products, processes andbusiness models, fast and cost efficientlybusiness models, fast and cost efficiently

20/30

When Frequent Prototyping of Products and Processes, is applied, the feedback from the end users results in an iterativerefinement of the model until it finally meets the user's needs and expectations.

Advantages of Frequent Prototyping of Products and Processes

• User requirements easier to determine• The development’s result, more closely meets the needs and

expectations of the end users • Changes identified earlier in the development process• Development costs are reduced • Faster development• Stopping development on an unworkable product or process

Advantages of Frequent Prototyping of Processes and Business Models

• Involvement of the personnel working for the process• Easier for the personnel to learn how to operate in the

process before its implementation• Employees know what to expect at the implementation of the

new process• Fewer changes needed after implementation• Employees’ resistance to change reduced.

Phase I Phase II Phase III Phase IVPhase I Phase II Phase III Phase IV


Fast Prototyping applying CAD/CAM





Fast Prototyping applying CAD/CAM Applying CAD/CAM for Fast Prototyping



Fast Prototyping applying CAD/CAM





Fast Prototyping applying CAD/CAM Applying CAD/CAM for Fast Prototyping

Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””Apply Frequent Prototyping for Faster and Reliable DevelopmentApply Frequent Prototyping for Faster and Reliable Development


Second Hint: Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””Improve the Competency for Project Management of your OrganizatiImprove the Competency for Project Management of your Organizationon

Development, the final Stage for Successful Implementation of Innovative Ideas is mainly a task of performing projectsProject Management Professionalism is Key for:

• Ensuring that the deliverables will meet the needs and expectations of the project’s stakeholders and the Company’s quality standards

• Identifying early the project's risks and defining and implementing properly the adequate risk response

• Managing properly the unavoidable project changes while ensuring the achievement of the goals of the organization and stakeholders satisfaction

• Tracking and Controlling adequately the project's progress• Taking advantage of the opportunities to speed up the

schedule, reduce cost and improve the deliverables features• Completing the projects within the optimal period of time and

the most efficient use of the budget and resources available

Provide to your Employees Education and Training for Project ManagementAssign to the Most Competent, Project Managers the Responsibility for Managing

your Key Innovation Projects

Provide to your Employees Education and Training for Project ManProvide to your Employees Education and Training for Project Managementagement

Assign to the Most Competent, Project Managers the ResponsibilitAssign to the Most Competent, Project Managers the Responsibility for Managing y for Managing your Key Innovation Projectsyour Key Innovation Projects

21/30


Third Hint: Third Hint: ““Make an Intelligent Use of the Information TechnologiesMake an Intelligent Use of the Information Technologies””

22/30

I-Service – Opportunities Model

Do you need it?

How is it?

Who distributes it?

Who has it?

How much does it cost?

Credit?

When do you want it?

Fully received, satisfied?

Ready to work?

How does it work?

Anything else needed?

Maintenance, repair required?

Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment


Do you need it?

How is it?

Who distributes it?

Who has it?


Credit?



Ready to work?

How does it work?



Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment

Do you need it?

How is it?

Who distributes it?

Who has it?


Credit?



Ready to work?

How does it work?



Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment


Do you need it?

How is it?

Who distributes it?

Who has it?


Credit?



Ready to work?

How does it work?



Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment


Do you need it?

How is it?

Who distributes it?

Who has it?


Credit?



Ready to work?

How does it work?



Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment

Do you need it?

How is it?

Who distributes it?

Who has it?


Credit?



Ready to work?

How does it work?



Sale Finished?

Provided Value ?

Order

Specification

Distribution

Availability

Price

Payment

Delivery

Acceptance

Installation

Performance

Improvement

Maintenance

Return

Assessment

• The use of new Information technology enables most innovations of the business processes. ("I-Innovations")

• Analysis of opportunities of "I-Operations" "and" I-Marketing " , enable identifying pragmatic paths to increase sales and competitiveness of the organization

• New business models and most radical innovations are most often identified, looking for opportunities of "I-Service“

At the selection of the technological platform to support the innovation of your processes or business model• Don’t rely totally on advice from

System Suppliers. Many times their advice is not free of conflicts of interest

• Ask for references of success, check and analyze them personally

• Apply, proven decision models, to facilitate your decision

At the selection of the technological At the selection of the technological platform to support the innovation of platform to support the innovation of your processes or business modelyour processes or business model

•• DonDon’’t rely totally on advice from t rely totally on advice from System Suppliers. Many times their System Suppliers. Many times their advice is not free of conflicts of advice is not free of conflicts of interestinterest

•• Ask for references of success, Ask for references of success, check and analyze them personallycheck and analyze them personally

•• Apply, proven decision models, to Apply, proven decision models, to facilitate your decisionfacilitate your decision


...

Intensity of Information along the Extended Supply Chain (ESC)High

High

High

Dispersion of

Information along the

Value Chain

Low

Info

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““EE--Operations Operations –– Opportunity ModelOpportunity Model””David Feeny, Oxford UniversityDavid Feeny, Oxford University

Banking, Insurance, Pharmaceutical, Publishing Companies...

To improveTo improve•• Product Availability Product Availability

and Functionalityand Functionality•• Development TimeDevelopment Time•• Cost StructureCost Structure

Reengineering of the Primary

Infrastructure and Key Business

Processes

Reengineering of the Primary

Infrastructure and Key Business

Processes

Companies with geographically dispersed homogeneous activities. Example: McDonald's

To improveTo improve•• Sharing Learning Sharing Learning

and Best Practices.and Best Practices.•• Economies of ScaleEconomies of Scale•• Cultural ConsistencyCultural Consistency

Reinforcing the“Parenting Value”Reinforcing the

“Parenting Value”

Companies with products including hundreds or thousands of components (Automotive, Aerospace, Appliances, Hardware ...) and companies of "Build to Order "

To improveTo improve•• Product Availability Product Availability

and Functionalityand Functionality•• Development TimeDevelopment Time•• Cost StructureCost Structure

Virtual Integration of the ESC

Virtual Integration of the ESC

Process TransformationsEnabled by WEB-Based Technologies

Third Hint: Third Hint: ““Make an Intelligent Use of the Information TechnologiesMake an Intelligent Use of the Information Technologies””A Model of WebA Model of Web--Based Transformations of Business ProcessesBased Transformations of Business Processes

David Feeny (Oxford University)David Feeny (Oxford University)

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InnovationProposals

Development

NewMarket

Boundaryof the Firm

CurrentMarket

Boundaryof the Firm

InnovationProposals

Development

TheMarket

Closed Innovation Model

Open Innovation Model

InnovationProposals

Development InnovationProposals

Development

NewMarket

Boundaryof the Firm

CurrentMarket

Boundaryof the Firm

InnovationProposals

Development

TheMarket

Boundaryof the Firm

InnovationProposals

Development InnovationProposals

Development

TheMarket

Closed Innovation Model

Open Innovation Model

The Open Innovation Model• The Company commercializes both its own

ideas as innovations from other firms• The Organization seeks ways, to bring its

in-house ideas to the market, by deploying pathways outside its current business

• The boundary between the Company and its surrounding environment is porous, enabling innovations to move between the two

Henry W. Chesbrough (HBS)

The Closed Innovation Model• The Company generates, develop and

commercializes its own ideas.• This philosophy of self-reliance dominated

the innovation processes and R&D operations of many leading industrial corporations for most of the 20th century

Fourth Hint: Fourth Hint: ““Adopt the Open InnovationAdopt the Open Innovation””Open versus Closed InnovationOpen versus Closed Innovation

24/30


Fourth Hint: Fourth Hint: ““Adopt the Open InnovationAdopt the Open Innovation””Why Adopting Open Innovation?Why Adopting Open Innovation?

25/30

Open innovation represents, in part, a reinvention of the organizational models that we have come to take for granted.

In the next few years, as connectivity becomes ubiquitous, the shift to more distributed, more networked and more open organizational models will become

commonplace and those not willing or unable to make the change will be left behind

Open innovation represents, in part, a reinvention of the organiOpen innovation represents, in part, a reinvention of the organizational models that we zational models that we have come to take for granted. have come to take for granted.

In the next few years, as connectivity becomes ubiquitous, the sIn the next few years, as connectivity becomes ubiquitous, the shift to more hift to more distributed, more networked and more open organizational models distributed, more networked and more open organizational models will become will become

commonplace and those not willing or unable to make the change wcommonplace and those not willing or unable to make the change will be left behind ill be left behind

False Beliefs for Closed Innovation• The talented people in our industry

work for our organization

• To profit from R&D, we must discover, develop and commercialize it ourselves

• If we discover it ourselves, we will get to the market first

• If we are the first to commercialize an innovation, we will win

• If we create the most and best ideas in our industry, we will win

• We should control our intellectual property (IP) so that our competitors don’t profit from our ideas

Realities to adopt Open Innovation• Not all of the smart people work for us, so

we must find and tap into the knowledge and expertise of bright individuals outside our company

• External R&D can create significant value. Internal R&D is needed to claim some portion of that value

• We don’t have to originate the research in order to profit from it

• Building a better business model is better than getting to market first

• If we make the best use of internal and external ideas, we will win

• We should profit from others’ use of our IP, and we should buy others’ IP if it advances our own business model


























































Two key questions to start the Implementation of Open Innovation• What are the kind of ideas we need?• Who are the potential collaborators that we can work with to

greatest effect?An early, clear answer to these questions could inhibit the creative freedom needed to create the desired new markets, radical innovations and fresh business models.

A recommendable path to start Open Innovation • Start small, with no more than two or three organizations. Some of your suppliers

or clients can be good candidates to start with• Create a conjoint multifunctional committee with each one of these organizations,

reporting to the top management of both organizations.• The aim of these committees is to extract investable propositions for the

participant organisations that will share the value chain and benefits of the developed proposal

• Emphasize more on valuable delivery partnerships than on passive ownership of IP• Periodically use the lessons learnt to refine the process and extend it to other

collaborating organizations • The process, matures when both organizations find several opportunities to make

investments or partnership decisions in collaborative business models like joint ventures or delivery partnerships

• A welcome by-product of these programmes is that the communities stay active long after the programme has ended, keeping the conversations going, and value flowing

A recommendable path to start Open Innovation A recommendable path to start Open Innovation •• Start small, with no more than two or three organizations. Some Start small, with no more than two or three organizations. Some of your suppliers of your suppliers

or clients can be good candidates to start withor clients can be good candidates to start with•• Create a conjoint multifunctional committee with each one of theCreate a conjoint multifunctional committee with each one of these organizations, se organizations,

reporting to the top management of both organizations.reporting to the top management of both organizations.•• The aim of these committees is to extract investable propositionThe aim of these committees is to extract investable propositions for the s for the

participant organisations that will share the value chain and beparticipant organisations that will share the value chain and benefits of the nefits of the developed proposaldeveloped proposal

•• Emphasize more on valuable delivery partnerships than on passiveEmphasize more on valuable delivery partnerships than on passive ownership of IPownership of IP•• Periodically use the lessons learnt to refine the process and exPeriodically use the lessons learnt to refine the process and extend it to other tend it to other

collaborating organizations collaborating organizations •• The process, matures when both organizations find several opporThe process, matures when both organizations find several opportunities to make tunities to make

investments or partnership decisions in collaborative business minvestments or partnership decisions in collaborative business models like joint odels like joint ventures or delivery partnershipsventures or delivery partnerships

•• A welcome byA welcome by--product of these programmes is that the communities stay active product of these programmes is that the communities stay active long after the programme has ended, keeping the conversations golong after the programme has ended, keeping the conversations going, and value ing, and value flowingflowing

•• Open Innovation is Open Innovation is still youngstill young

•• Companies like Companies like Orange, Philips and Orange, Philips and Hewlett Packard are Hewlett Packard are making of it a making of it a strategic prioritystrategic priority

•• Virgin Atlantic, and Virgin Atlantic, and Procter & Gamble Procter & Gamble reported great reported great benefits from their benefits from their Open Innovation Open Innovation Programs Programs

•• But still there are But still there are not enough not enough experiences to experiences to extract common extract common good practices for good practices for its implementationits implementation

•• The experiences of The experiences of success are not success are not consistent, because consistent, because each company has each company has started Open started Open Innovation in its Innovation in its own wayown way

•• Open Innovation is Open Innovation is still youngstill young

•• Companies like Companies like Orange, Philips and Orange, Philips and Hewlett Packard are Hewlett Packard are making of it a making of it a strategic prioritystrategic priority

•• Virgin Atlantic, and Virgin Atlantic, and Procter & Gamble Procter & Gamble reported great reported great benefits from their benefits from their Open Innovation Open Innovation Programs Programs

•• But still there are But still there are not enough not enough experiences to experiences to extract common extract common good practices for good practices for its implementationits implementation

•• The experiences of The experiences of success are not success are not consistent, because consistent, because each company has each company has started Open started Open Innovation in its Innovation in its own wayown way

Fourth Hint: Fourth Hint: ““Adopt the Open InnovationAdopt the Open Innovation””How to Start Open Innovation? Some Key IssuesHow to Start Open Innovation? Some Key Issues

“Six Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua1/30

Fifth Hint: "Apply Change Management to get an Innovative OrganiFifth Hint: "Apply Change Management to get an Innovative Organizationzation””

27/30

To succeed on business innovation, especially for effectively implementing new business models, processes and systems, organizations must quickly get the entire

organization' support to change. Many change initiatives fail victim to employees' resistance mainly because their

fears for their personal future

To succeed on business innovation, especially for effectively imTo succeed on business innovation, especially for effectively implementing new plementing new business models, processes and systems, organizations must quickbusiness models, processes and systems, organizations must quickly get the entire ly get the entire

organization' support to change. organization' support to change. Many change initiatives fail victim to employees' resistance maiMany change initiatives fail victim to employees' resistance mainly because their nly because their

fears for their personal future fears for their personal future

Key Features on Change ManagementEnrolling

• Making the people conscious of the the need for change• Helping the people to see a future they want to be a part• Requesting commitment

Enabling• Challenging people’s self-limiting beliefs• Providing education and training, for the required

knowledge, skills and behaviors• Building self-esteem and trust

Energizing, to sustain the change• Building and sustaining people’s energy• Celebrating successes• Giving recognition

Five basic tools to overcome the employees' resistance to change • The commitment and

example of the leaders• Education and training• Coaching• Recognition to effort

and celebration of successes

• Communication, Communication, Communication…!

Five basic tools to Five basic tools to overcome the employees' overcome the employees' resistance to change resistance to change

•• The commitment and The commitment and example of the leadersexample of the leaders

•• Education and trainingEducation and training•• CoachingCoaching•• Recognition to effort Recognition to effort

and celebration of and celebration of successes successes

•• Communication, Communication, Communication, Communication, CommunicationCommunication……!!

“Six Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua1/30

“The Innovation System at SIEMENS: Taking inputs from technology,competitors, and market intelligence and driving these into the planning

for new product and new processes development”

Fifth Hint: "Apply Change Management to get an Innovative OrganiFifth Hint: "Apply Change Management to get an Innovative Organizationzation””Example of a Communication Tool: Map of the Innovation System ofExample of a Communication Tool: Map of the Innovation System of SIEMENSSIEMENS

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Sixth Hint: Sixth Hint: ““Continuously Update your Professional CompetenceContinuously Update your Professional Competence””

A plan with six activities to sustain your professional competence throughout life

• Read, quarterly, a book recently published about Innovation Management

• Subscribe and read, at least three prestigious management magazines ("Harvard Business Review", "MIT Sloan Management Review" and the online magazine "www.innovationmanagement.se" are recommendable)

• Participate, at least a week per year, in continuing education programs of prestigious academic institutions

• Actively participate in the professional experience sharing programs of the alumni of the academic institutions where you studied and the professional associations where you are member

• Make a public presentation to a professional audience and/or write, and get published in a professional magazine, an article about Innovation Management at least once a year

• Build and sustain a network of prestigious management professionals and experts on innovation management from different industries, for sharing knowledge and experiences

A plan with six activities to sustain your A plan with six activities to sustain your professional competence throughout lifeprofessional competence throughout life

•• Read, quarterly, a book recently published about Read, quarterly, a book recently published about Innovation ManagementInnovation Management

•• Subscribe and read, at least three prestigious Subscribe and read, at least three prestigious management magazines ("Harvard Business Review", management magazines ("Harvard Business Review", "MIT Sloan Management Review" and the online "MIT Sloan Management Review" and the online magazine "www.innovationmanagement.se" are magazine "www.innovationmanagement.se" are recommendable) recommendable)

•• Participate, at least a week per year, in continuing Participate, at least a week per year, in continuing education programs of prestigious academic institutionseducation programs of prestigious academic institutions

•• Actively participate in the professional experience Actively participate in the professional experience sharing programs of the alumni of the academic sharing programs of the alumni of the academic institutions where you studied and the professional institutions where you studied and the professional associations where you are memberassociations where you are member

•• Make a public presentation to a professional audience Make a public presentation to a professional audience and/or write, and get published in a professional and/or write, and get published in a professional magazine, an articlemagazine, an article about Innovation Management at about Innovation Management at least once a yearleast once a year

•• Build and sustain a network of prestigious management Build and sustain a network of prestigious management professionals and experts on innovation management professionals and experts on innovation management from different industries, for sharing knowledge and from different industries, for sharing knowledge and experiencesexperiences

The current changes of the The current changes of the business environment, business environment,

deeper and faster each deeper and faster each day, are making challenging day, are making challenging

for managers, sustaining for managers, sustaining their professional their professional

competence, if they don't competence, if they don't work every day to update work every day to update the knowledge and skills the knowledge and skills required for performing required for performing

their professiontheir profession

The current changes of the The current changes of the business environment, business environment,

deeper and faster each deeper and faster each day, are making challenging day, are making challenging

for managers, sustaining for managers, sustaining their professional their professional

competence, if they don't competence, if they don't work every day to update work every day to update the knowledge and skills the knowledge and skills required for performing required for performing

their professiontheir profession


Successfully Managing Innovation requires:• Implementing collaborative and social networks for

capturing requirements and ideas, from colleagues, customers and partners, into products and processes

• Establishing consistent, repeatable processes for translating concepts into products.

• Making role-based data available to all stakeholders during each stage of the product development process.

• Standardizing the data captured about each project, such as strategic alignment, financials, and risk levels.

• Managing intellectual property including patent assets and the protection of specialized proprietary knowledge.

• Managing the project portfolio, tracking execution and alignment with corporate mission and competitive goals, and making time-to-market decisions via flexible scheduling.

• Maintaining effective communications across multiple sites and organizations.

The final stage of The final stage of anyany

effective idea effective idea managementmanagementapproach, is approach, is

the successfulthe successfulimplementation of implementation of

innovativeinnovativeideasideas

What says about these issues a Global Innovation Champion?What says about these issues a Global Innovation Champion?


“Six Hints for Building anEffective Business Innovation System”The author authorizes the integral reproduction of this presentation

Miguel Sáenz de Viguera Aizpurua2007 PMI Distinguished Contribution Award

[email protected]

November 2010

Documents

Six hints for building an effective business innovation system