Part 3: What Really Is Innovation?

This article would not be complete if we do not explore the reasons why we need to innovate or else we suffocate a painful corporate demise in this competitive era. Having read enough of the challenges, probably you may want to know how to develop innovation and how Six Sigma can be deployed to achieve innovation. Even if your company has survived the recent financial crisis, it may not be sufficient to withstand the next global economic downturn, you need to aim to thrive and emerge as market leaders through the effective managing of the innovation process.

Typical scenario of an innovation process

An employee has an idea to save cost for the company and this employee brings this idea to his direct manager. The employee’s manager likes the idea and agrees to present it during the next board meeting. The board also agrees to explore this idea but does not know who are the experts that can help to explore the idea further. They then assign it back to the manager to develop a business case. Naturally, the manager will ask the employee who is the originator of the idea to work on it further. The employee does not have the time allocated to further research on it nor is he the expert to build up the business case. The idea stays unexplored and may not even be developed to be innovated to the next level.

There could be several great ideas brewing within the organization, but the employees’ ideas will not be known through the entire company since there are no avenues or visibility to access these ideas. Since employees will not receive any rewards or incentives for their idea submission, it is not a surprise that ideas are lost in the myriad of other priorities.

It requires tremendous tenacity on the part of the person with the idea to push it through the organization.

The entire process contains the following top challenges: [1]

• Long lead times
• Limited number of experts involved
• No structured processes in place to drive–transparency, metrics, cross functional collaboration
• A significant amount of work is required by employees to refine their ideas
• No method to socialize the idea with a wide audience and no incentive to contribute.

Why the need to Innovate?

Industry trend is transitioning from the knowledge economy to innovation economy. Innovation has become a top priority for CEOs because more and more customers are increasingly demanding for innovative solutions. Your customers have their customers and competitors too. Organizations cannot compete on cost alone. Organization also cannot continue to operate in complex bureaucratic processes nor absorb the non value added costs that is eating into their profitability. CEOs need a more systematic approach to improve processes to reduce the complexity and thus provide simplified services. To achieve economy of scale, organization need to standardize their businesses processes globally in order to provide capable service and product reliability.

In today’s global business arena, a company’s long-term survival often depends on its ability to innovate. Innovation has become the key growth driver.  The new core competencies are creativity and innovation and companies must ensure that their products and services stay ahead of competition. Competitors are increasingly getting better at copying products and services and make it even better and cheaper. Thus, sooner or later, they will come knocking on your customer’s doors.

Thus the question is no longer “Should we innovate?” but rather “How fast can we innovate?” and “What can we innovate?”

How to develop innovation

Now that you have analyzed and understood the definition, know the problems faced in innovation and the importance of why you need to innovate, you are now ready to Innovate. Actually, not that fast! It is not as easy as it sounds. Before you can innovate or claim to be capable to innovate, there is a need to establish a few fundamental changes within the organization

The 6 Steps Approach outlined in the Managing Innovation Process (MIP):

Step 1: Strategize

• Identify the current innovative level[2]
  • Based on business models, customer experience, products, processes or services to know the reality of what you are working with.
  • Identify primary innovation business goals
    • Goals must be inspiring in three key areas of business i.e. Process, People and Products/Services
  • Define the gap
    • At each goal identify the gaps, based on your organization ‘current innovative level’ and where your organization wants to achieve ‘innovation business goals’
  • Identify strategic steps to narrow the gaps
    • Generate a wide range of options to achieving the goals
    • Choose the best options and identify the structures to support the options
  • Align primary innovation business goals with the organization strategic business plan
    • To ensure commitment, focus, support and budget.

Step 2: Enable

• Provide governing structure to oversee innovation across the organization
  • Program management  – inception, marketing and communication to coordinate /  capture employees and external customer insights
  • Human Resource Management strategy – people development, compensation and recognition to empower employees to contribute ideas and innovation as individual and/or as team
  • Structured process – capture ideas, share knowledge to create transparency and allow cross functional collaboration
  • Establish metrics – measuring impact value from ideas to innovation, govern the selection process, development cost and return on investment (ROI).
• Provide infrastructure
  • Collaborate with management information system (MIS) to identify effective enterprise wide platform to provide the avenues by leveraging on new technologies.

Step 3: Communicate

• Facilitation, Selection & Ranking
  • Ideas when captured successfully need to be brought to next level where facilitation to allow the community to select and best ideas will ranked highest
• Recognition for qualitative and quantitative
  • Publicize & recognize every ideas employee contributed to organization is capable of being innovative. It is natural to be proud of own accomplishment and this will encourage more participation.
• Top & Middle Management support
  • Inculcate to those in leadership position to see that their role is to encourage intellectual participation of employees and see the potential in their employees

Innovation has nothing to do with how many R&D dollars you have… It’s not about money. It’s about the people you have, how you’re led, and how much you get it.

Steve Jobs -Co-founder of Apple Computer

For the sixth consecutive year, Apple ranked number one in BusinessWeek’s 50 Most Innovative Companies report. [3]

Step 4: Prioritize

• Evaluate the top ranked ideas for innovation based on predefined metrics and measurement of value impact against the potential markets
• Selecting the right ideas is crucial as the needs to invest requires allocation of resources and expectations of return on investment (ROI).
• Prioritize several potential ideas based on value impact by following the value engineering method  with the objective to identify “value improvement”[4]

Step 5: Execute

• Use Six Sigma Methodology (DMAIC), Design for Six Sigma (DMADV), Theory of Inventive Problem Solving (TRIZ) and Lean Strategy – proven methodologies to support innovation of product, services or process improvement and reengineering.
• Opportunities to achieve breakthrough improvement
  • Think big picture not just one time improvement with mere achievement of less than 50% improvement
  • Many potential projects are overlooked, due to project hopping and a missed opportunity for innovation.
  • Scope improvement areas to manageable sizes to ensure overall results will render innovative result.
• Harness the creative and innovative thinking to become an integral part of the organization culture.
• Innovation does not mean you have to create the solutions from scratch, you can replicate similar solutions to your problems or ideas, it can be considered innovation.

Step 6: Evaluate

• Qualitative  results achieved
  • Customer satisfaction due to this innovation
  • Successful results per type of innovation.
  • Compare expected results versus actual results
• Quantitative results achieved
  • Compare benefits to cost of investment
  • Cost savings due to innovation efforts
  • Revenue retained or additional revenue generated
• Effectiveness of innovation
  • Are you able to proof there is significant improvement is due to innovation or other factors or merely by doing the same thing.
  • Take the results earned and learnt to the next step towards continuous improvement and innovation journey

Summary of Managing Innovation Process (MIP)

Innovation is critical

We innovate because

…we need to survive

…we need to stay ahead of competition

…we need to meet our customer’s expectations

…we need to add value & emerge as market leaders

If we don’t

…we will be overwhelmed by inefficient and cumbersome old processes

…someone else will and they will beat us to the profits

… it will cost us dearly

…we will be obsolete

Critical Success Factors

i. Leadership – For this innovation process to be successful, the innovation must be incorporated into the business planning and budgeting to become visible on the management agenda. This will show leadership commitment and sends the signal to whole organization that innovation is important.

ii. Participation of the people – The companies that embarks on innovation will retain high performing employees and attract potential employees to want to work there.  One of the criteria of being employer of choice is, innovation involves the people to successful outcome, values and supports new original ideas. It also reflects that the company is progressive and employees feel valued, respected and recognized through the innovation policies supported by effective human resource management strategy.

iii. Enabler - With the enterprise wide platform that enables open communication will foster a positive, productive and learning environment. To sustain the momentum, expectations, metrics to measure value and effective resources allocated to execute the innovative process must be established up front.

“Innovation is not a matter of chance, but of choice.” Gerard Gaynor

Defining innovation is not the main purpose of this article. The whole point is to clearly outline that taking strategic steps coupled with purposeful determinants can enable any organization to innovate successfully to achieve competitive advantage. It is a matter of blending the strategic business objectives, strong management support with proven methodologies to make innovation successfully. It is not by chance it is a CHOICE.

[2] The World’s 50 Most Innovative company ranking http://www.businessweek.com/interactive_reports/innovative_companies.html

[3] Christina Warren Apple Remains America’s Most Innovative Company [REPORT] Most Innovative company http://mashable.com/2010/04/16/apple-fortune-500/

[4] Value Engineering http://ve.ida.org/ve/ve.html