BUILDING INNOVATION CAPABILITY

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BUILDING INNOVATION CAPABILITY

• A unique offering of Training Workshops On-Site
  Mentoring to build Innovation Capability within
  Organisations

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Creating an Innovative Culture

• Workshop 1
• October 2006

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Workshop Agenda

• 0930 Registration
• 1000 Kick Off Introduction to Programme
• 1015 Introduction to BSM
• 1030 Introduction to Creativity Innovation
• 1100 Review of the Critical Success Factors in
  Product RD
• 1130 Tea/Coffee
• 1145 Review of the Factors Impacting Creativity
  Innovation
• 1245 Lunch
• 1315 Review of the Factors Impacting Creativity
  Innovation
• 1430 Tea/Coffee
• 1445 Idea Generation
• 1545 Workshop Review, Evaluation and next steps
• 1600 Workshop Close

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Training Objectives/Expectations
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An Introduction to Creativity Innovation
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Some Definitions Creativity Innovation

• What is CREATIVITY?

• What is INNOVATION?

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Historical Views on Creativity
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The Importance of Innovation
The enterprise that doesnt innovate inevitably
ages and declines
Ref Peter Drucker
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Successful Innovator

• 3M develop, manufacture and market over 50,000
  different products that are drawn from
• Over 30 core technologies,
• Nearly 40 distinct 3M operating businesses,
  covering customer, commercial, industrial and
  health care needs.
• Consistently ranked among the top 10 in Fortune
  magazine's annual list of America's most admired
  corporations

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3M A Successful Innovator

• Keep
• Divisions Small

Tolerate Failure

• Motivate the
• Champions

Share the wealth
Stay close to the customer
Dont kill Ideas Immediately!
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Winning at New Products/Innovation Some
Background Information
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New Products The New Business Challenge

• Companies that are doing well today invariably
  have an enviable stable of new products
• New products innovativeness usually increase
  company value
• New products represent an increasing of
  companies sales revenues profits
• The New Products/Innovation Process (market
  opportunity to launched product) is a key
  business process

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Effectiveness of New Product Expenditures
Based on the NewProd Studies of almost 2000 new
product launches in 400 firms Studies conducted
by Robert G. Cooper
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New Products The Reality

• 46 of firms Product Development resources go
  to losers
• 7 out of 10 new products fail within a year
• 3 out of 10 new products fail at launch
• 66 of CEOs are somewhat or very disappointed
  with their firms new product performance

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Causes of New Product Failure
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Categories of New Products
RISK Low Medium High
Newness to Company
Newness to Market
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Winning at New Products/Innovation The Critical
Success Factors
Based on the NewProd Studies of almost 2000 new
product launches in 400 firms Studies conducted
by Robert G. Cooper
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1 Develop unique and superior new products

• Me-too, copy-cat, tired products tend to be the
  rule rather than the exception
• Technology push rather than demand pull
• Products liked by technical people

• Differentiated product
• Unique benefits for the customer
• Superior value for the customer
• As defined in the eyes of the customer

BUT

• The quest must be for real product advantage
• Meets customers needs better than competitive
  products
• Offers unique benefits to the customer
• Solves customers problems better than
  competitive products
• Better quality product than competitors products

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2 Follow a disciplined and systematic
Innovation process
F1 Opportunity Review 1

• GATES
• Each stage preceded by a decision point

F2 Opportunity Review 2
Ideas
F3 Business Case Review
F4 Proceed to Testing
F5 Proceed to Launch
Final Review
PRODUCT IDEAS OR PRODUCT CONCEPTS
NEW PRODUCTS ON THE MARKET
Production and Market Launch
Idea Generation
Test Validation
Preliminary Investigation
Feasibility
Development
Products
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3 Do the up-front activities very well
F1 Opportunity Review 1
F2 Opportunity Review 2
Ideas
F3 Business Case Review
F4 Proceed to Testing
F5 Proceed to Launch
Final Review
Test Validation
Production and Market Launch
Idea Generation
Preliminary Investigation
Feasibility
Development
Products
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4 Have a market driven and customer focused new
products process
F1 OpportunityReview 1
F2 Opportunity Review 2
Ideas
F3 Business Case Review
F4 Proceed to Testing
F5 Proceed to Launch
Market-driven, customer focused Staying in
touch with the customer at all stages
Final Review
Test Validation
Production and Market Launch
Idea Generation
Preliminary Investigation
Development
Feasibility
Products
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5 Have an organisation structure that supports
the new products process
F1 Opportunity Review 1
F2 Opportunity Review 2
Ideas
F3 Business Case Review
F4 Proceed to Testing
F5 Proceed to Launch
Final Review
Test Validation
Production and Market Launch
Idea Generation
Preliminary Investigation
Development
Feasibility
Products
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6 Have excellent project evaluation
F1 Opportunity Review 1
F2 Opportunity Review 2
Ideas
F3 Business Case Review
F4 Proceed to Testing
F5 Proceed to Launch
Final Review
Development / Design Verification
Design Process Validation
Production and Market Launch
Idea Generation
Most firms have too many projects and too few
resources to do them!
Preliminary Investigation
Feasibility
Products
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7 Have a clear new products strategy which
drives the new products process
NEW PRODUCTS STRATEGY
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Factors Impacting Creativity Innovation
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Innovation Strategy
Performance Management
Management Style
Cross functional team working
Recognition
Ideation Innovation Process
Physical Environment
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Strategy sets the context for Innovation
Filter

• A Clear Innovation Strategy
• (Communicated)

1
Filter
Ideas
2
Filter
3
Filter
4
Filter
5
Final Review
RD
Production and Market Launch
Idea Generation
Marketing
Feasibility
Development
Testing
Products
Operations
Preliminary Investigation
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What Is an Innovation Strategy?

• 1. The objectives for your Innovation efforts

2. The role of Innovation in your business
3. The arenas of focus markets, technologies,
products
4. The key development projects
5. The key Innovation capability building
initiatives
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Innovation Strategy Development Approach
1. Set the Innovation Objectives
2. Conduct Industry Market Analysis
3. Assess Internal Resources Capabilities
4. Identify Potential Innovation Development Areas
5. Evaluate Select targeted Innovation Areas 6.
Identify Development Projects 7. Identify other
Capability building actions
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Step 1 Goals Objectives

• Sales/Profits from new products
• By product group
• By market
• By geographic areas
• Percentage of sales/profits from products that
  are less that 3/5 years old
• Product strategy objective statements
• Gain a presence in a new market
• Exploit new opportunities in an existing market
• Defend market share

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Steps 23 Industry Market Analysis

• Industry / Market Analysis
• Understand the industry structure
• Macro-environment analysis
• Market segment, sizes and trends
• Changing customer needs
• Competitor Analysis
• List the number and type
• Outline the market/segment share achieved
• Understand products offered and how they are
  differentiated
• Outline resources and core capabilities in the
  following areas
• Marketing
• Research Development
• Process Development
• Manufacturing
• Account Management

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Step 4 Identifying Options

• POSSIBLE QUESTIONS TO ANSWER
• What arenas segment, value chain, activities
  are the most attractive for us?
• What changes are occurring in customer needs or
  values? How will they affect the industry and its
  key players?
• What new opportunities could emerge from these
  changes to help make our customers more
  successful?
• Are there opportunities to better meet customer
  needs /or capitalize on a changing environment?
• Review analysis and present new product
  development options

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Step 5 - Evaluate and Select New Product Arenas

• Evaluate the Options - Business Strength/Market
  Opportunity Matrix
• Business Strength
• Ability to leverage capabilities (Marketing, RD,
  Technical, Manufacturing and Customer
  Relationships)
• Potential for gaining product advantage
• Market Opportunity (how attractive are the
  opportunities in this arena?)
• market attractiveness
• technological possibilities
• Selection
• Plot options on strategic map
• Select preferred options

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Step 5 - Strategic Map - Arenas Plotted Example
Good Bets
High Risk Bets
No Bets
Conservative Bets
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The Arenas are Selected

• These are the hunting grounds
• they define whats in bounds and out of
  bounds
• arenas give you focus
• Now...
• Move to deployment (Step 6)
• priorities
• project selection
• capability building initiatives (Step 7)

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Innovation Strategy
Performance Management
Management Style
Cross functional team working
Recognition
Ideation Innovation Process
Physical Environment
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Good Design?
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The phrases that Managers use!

• Thats fine in theory but it doesnt work like
  that..
• Ah Yes, but
• Why dont you put that down on paper.
• Weve tried it before.

• Management style can have a significant impact on
  the creation of an innovative culture
• Immediate negative responses can have adverse
  implications
• Managers must encourage risk-taking and be
  prepared to accept failures, when they occur

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Assess your own Management Style
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Using teams for creativity and innovation
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Core Innovation Team
Cost Accounting
Production Planning
Sales
Finance
DELIVER DEVELOPMENT PROJECT(S)
Innovation Team Leader
Marketing
QA
Mtls Cntrl
Manufacturing
Research Development
Core Team Member
Extended / Support Team Members
Procurement
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Move to a Matrix Structure
Functional Manager
Functional Manager
Functional Manager
Functional Manager
Functional Manager
Functional Manager
Functional Manager
Programme Manager
Programme Manager
Programme Manager
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What to Measure?
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Measurement of New Products and NPD Performance

• FINANCIAL PERFORMANCE
• of Sales from New Products
• of Profit from New Products
• of Sales invested in NPD
• Sales Potential of Pipeline

• PROJECT PERFORMANCE
• Actual Time Performance vs. plan
• Actual time taken to complete stage
• Actual Cost Performance vs. budget

• PROCESS PERFORMANCE
• Time to Market (by project type)
• Market Launch Hit Rate
• Number of New Product Ideas reviewed

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Process Performance Reporting
Idea Evaluation
Concept Evaluation
1
Business Case Decision
2
Design Verification Review
Process Validation Review
3
Post Launch Review
4
5
6
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Recognition
Is it all about money?
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Recognition

• Every organisation needs to recognise the efforts
  of its employees
• Recognition should be for the effort taken in
  submitting ideas - regular random draws
• It is generally not recommended to recognise the
  quality of the idea, as some employees may have
  an advantage over others e.g. closeness of
  account manager to customer
• Recognition should be considered for the core
  team for excellent results (e.g. bring a product
  to market on time)
• Recognition should be consistent, fair and
  closely managed

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Physical Environment

• Open plan offices
• Seat people working on similar
• projects close together
• Low partitions
• Glass walls
• Locate water dispensing
• machines in different areas
• Open door policy

• Encourages information sharing and collaboration
• Improves communication
• Sense of mutual purpose

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Old Building Design!
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Use of Glass in Office Design
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Open Plan Office Design
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Assess the Culture in your organisation
Brown, 1988 (Adapted)
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Mortality Curve of New Product Ideas
Idea
Concept
Development
Commercialisation
For every 60 ideas - one successful new product
Source R.Cooper
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Idea Generation the typical issues

• Idea generation largely left to chance
• Ideas often lost, forgotten or ignored
• Few new product ideas in the pipeline
• Few novel ideas, only incremental ideas
• No process for capturing customer or supplier
  ideas
• No ownership of the idea generation process
• Idea sharing not encouraged or supported

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Innovating across three timeframes
Horizon 3 INNOVATE to create viable options
Horizon 2 INNOVATE to build emerging product
lines
Horizon 1 INNOVATE to extend / defend core
product lines
Time (years)

• Ref The Alchemy of Growth Baghai, Coley White

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Managing Idea Generation
Gate 0
Ideas
Predictable process or haphazard series of
incidents?
Gate 1
Gate 2
Gate 3
Gate 4
Final Review
Idea Generation
Production and Market Launch
Preliminary Investigation
Feasibility
Development
Testing
Products
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Managing Idea Generation
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Primary sources of new product ideas
Source R.Cooper
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Potential Sources of New Product Ideas
IDEAS
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Establish a Focal Point

• A person with four roles
• Receiver of ideas
• Takes active role in progressing ideas to Gate 0
• Takes active role in searching for ideas
• Reports on idea generation activities
• Who?
• Often the New Products Process Manager
• Head of Marketing
• Head of Technical / RD

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Establish lines of communication and stimulate
the flow of ideas
Focal Point
RD Engineering/Design Sales Marketing Production
Executives Other
Customer Competitors Research Houses Publications
Conventions Inventors Consultants/Agencies
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Managing Idea Generation
Identify and activate the idea sources
Establish a focal point for new ideas
Have an effective idea evaluation process
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Idea capture and handling process
Feedback to submitter
Focal Person
Gate 1
Stage 1
Ideas
Idea Database
Ideas Vault or Bank - ideas on hold - dead ideas
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Gate 1 Evaluating the Ideas
Who Keep it simple Usually Senior Marketing and
Technical Manager
Gate 1
Ideas
Gate 2
Gate 3
Gate 4
Gate 5
Must evaluate to Decide whether to allocate
resources to investigate the idea Provide
feedback to the idea originator(s)
Final Review
The Idea Generation Stage
Production and Market Launch
Preliminary Investigation
Feasibility
Development
Testing
Products
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Company Activity

• Identify 5 initiatives that you will take in your
  organisation to promote a more innovative
  company