Review and update of the paper presented at the Working Sessions of the III Conference of ACCID and APC. University of Girona, May 2014
In the management of companies and organizations, the ideas are that really matter and to a lesser extent, the models. The models are simplifications of reality, and they help us to summarize the complexity, to transfer knowledge and experiences, to be adapted to another reality.
However, they are useful, not because they offer universal solutions to the specific problems of each company, but to facilitate the explanation of a complex reality, and to help the transmission of experiences from other cases, as well as helping in structure of processes.
For this reason, new models, and variations of them are constantly emerging. In management models, what counts is what is done with them. (1)
(1) Steven ten Have et alt. Key Management Models. 2003. ISBN 0-273-66201-5
The innovation process.
Innovating is something like bringing new ideas to reality successfully and continuously. Therefore, it is not the result of genius, chance, or luck; it is a process. A process that can be designed, implemented, and improved in all companies and organizations.
A process that organizations should be prepared to manage. If managed well, it favors the creation of an “innovative culture”.
It is a measurable process that encompasses the entire organization and all areas of a company. It is based on external openness, exploration, searching for opportunities, research, risk, trial and error, and finally, it’s based on individual skills and the work of highly efficient teams.
Obviously, there are innovations that have arisen from a moment of genius, but the truth is that most, especially those that have proven to be important in society, emerge from an innovative culture and a structured process, which occurs best in environments and very specific situations. (2)
(2) Peter Drucker. The discipline of innovation
First, before embarking on the exciting journey of bringing ideas and concepts to real life, it is important to distinguish between invention and innovation. (3)
An invention would be something that until now is unknown, usually based on a scientific or technological discovery. An innovation is the use of this new knowledge or technology for a real application. Something that serves people or the community.
Innovation can mean a radical leap in business, something the market has never seen before. Or it can be incremental, meaning that an existing concept or idea has been taken and improved or redirected, redesigned, leading to a new commercially viable product.
(3) The Innovation Process. CPI (UK) May 2013. http://www.uk-cpi.com/news/the-innovation-process/
The results of the innovation can be:
- Innovate in products or services. Do something new
- Innovate in customer focus or orientation and Marketing positioning. Position yourself in a new way
- Innovate in internal processes. Do things differently
- Disruptive innovation resulting in a paradigm or category shift
Therefore, the scope of innovation encompasses not only the development of new products, but also the development of new processes, new market positioning initiatives, the generation of new concepts and platforms, and on some occasions, the creation of new paradigms.
The entire process ranges from the exploration and generation of ideas to the reality of their application and consolidation in the real world. In business terms, the generation of ideas transformed not only into new products or services consolidated in the market, but also, and very importantly, into significant changes in knowledge, know-how or processes, that is, in how we do business.
The practical form of the process logically includes the management of a portfolio or flow of projects, resulting of ideas selection, and programs of grouped projects. The management of this portfolio is the way to channel and optimize the necessary resources to bring them to market.
Within this broad process, there are continuous reviews and decisions on ideas and projects, so that they can be interrupted when it is considered that they will not meet expectations, and this the sooner the better. It is done through what we call phases reviews. (“stage and gate”)
Innovation is best managed in an “open” process, meaning that no limit or barrier can stop the flow of ideas and participation in projects, both internally and externally. Innovating as an open process is favoured by the interaction of as many knowledge and skills as possible, not only of which we generate internally.
Going from an idea or a basic concept to a useful and commercially available product is very rewarding work, but it does involve managing this complex process well. Recognizing and understanding it, being able to navigate through it with available resources, can mean the difference between success and failure.
The model we present is based on experience and practice gathered in companies. It serves to improve innovation management.
We consider innovation management as a management process, directly linked to the strategy of each company and in accordance with its vision and specific values. More specifically, it is an essential part of a unique management process that integrates the day-to-day, marketing, sales, operations and supply-chain oriented processes, and the future oriented process: innovation.
A unique management process facilitates timely decision-making. Innovation management is harmonized with this process and its continuous improvement with the use of measures and indicators.
It is designed based on agility and customer orientation methodologies. Although it has been represented as a linear process, in fact it is based on the iteration and simultaneous activity of the different streams.
The process facilitates opening the company externally, increases its ability to learn and preparing to continually create technological advantages, advantages in the customer value proposition or advantages in internal processes that reduce costs.
The experience with this model has served at the same time to develop an evaluation tool on the management of innovation and the ability to innovate in companies and organizations.
We structure the evaluation it in 6 main areas, four are the axes of the primary activities and the other two are the framework and its orientation to the external environment: Culture and organization of the company and the vision and strategy.
We divide each of the main axes into 2, a total of 12 axes that are assessed with the questionnaire. This evaluation should be carried out periodically to sustain the progress and improvement of the process.
- External Opening.
- Customer orientation
- External exploration
- Ideas generation and selection. Filters.
- Generate ideas, concepts, prototypes
- Filter and select. Phased reviews
- Management process: projects and programs
- Manage innovation projects and programs
- Measures and indicators
- Realize and capture benefits
- Ability to generate profits
- Ability to review and learn
- Culture and organization. The culture and organization of the company are a fact at a certain time, the result of its origin and its history. It is important to periodically review with the evaluation and the consequent action plans its evolution towards an innovative culture.
- Innovative culture. Its importance in innovation is key, as well as the change it implies, and it is favoured with the implementation of the process, its integration with the management process and day-to-day practice.
- Organization. The organization can favour or hinder innovation. In general, a hierarchical or bureaucratic organization hinders both the generation of ideas and the taking of risks inherent to innovation, errors are penalized, it tends to slow down the organization and favours departmental ‘niches’ or ‘silos’. Organizations focused on customer-oriented processes or projects, and matrix organisations, are more favourable to innovation. None of this should be hindered by overly complex decision-making and working of cross-functional teams.
- Vision and strategy
- Innovative vision. A clear and shared vision is essential to focus all your processes and activities. Integrating innovation into the vision makes it easier for the management process to be structured around it and the innovation process to be part of decision-making.
- Strategy. Innovation management is integrated into the strategic plan.
The graph above shows the results of a company evaluated with the evaluation tool mentioned above. Among some values that are considered minimum at the management level and others at the limit of excellence, it is possible to visualize the situation of the company at the time of the evaluation for each of the axes of the model. Most importantly, the actions necessary to improve the process and results It is convenient to carry out the assessment at regular intervals to see the progress of the actions taken and the variations.
Agile innovation model implementation practice.
The implementation of the model is based in the practice of companies, Taken into account 9 key elements.
1. The leadership role and decision-making process. Form an innovation team or committee that guarantees the innovation process. Its composition depends on the size of the company, it can be the same committee or management team or, in larger companies, a specific team that is at least made up of managers and led by a member of senior management. It is the team that takes all the decisions in the process, defines the innovation strategy and has the ultimate responsibility in the selection of projects, teams by project and phase reviews.
2. Organization by projects / programs. The result of the generation of ideas and their selection with the appropriate filters, allows the implementation of innovation projects. Each project is assigned to a cross-functional team, with a project manager or leader. In projects or companies of a certain size, the project team is usually made up of a central team (“core team”) and other members or specialists who can be incorporated according to needs. Programs are groupings of projects, with similar objectives, purposes, technologies, or resources that can be managed in a common way, simplifying follow-up and phase reviews.
3. Structured development of each project / activity. It is about maintaining a structured development of projects with reviews by phases, which maintains a continuous flow and the iteration of activities and concurrent development. The innovation flow is made up of the set of projects and programs and works in accordance with the product strategy, portfolio management and technology management.
4. Reviews by phases: Stages and gstes. It is about making decisions in each phase, according to the latest information available.
5. Manage the appropriate techniques and tools. As an example:
- Design techniques. Eg QFD, DFE, UOD etc.
- Design automation tools.
- Simulation tools
- “Design Thinking”
- Development tools and techniques
- Project planning and control tools.
- Programming techniques and tools
- Financial analysis techniques
- Group work. Groupware.
- Information and document management tools. Etc.
6. Management of the flow or portfolio of innovation. It contemplates and connects in an integrated way all the existing projects and programs in the portfolio with the support processes, management of technology, products and / or services, the intelligence of the company and knowledge management.
7. Product strategy. It takes into account the life cycle of products, segments or lines, their evolution in the market, platform strategy, expansion or concentration strategy, and new developments. Competitive strategies take into account differentiation, pricing structures, global trends, cannibalism or technological obsolescence, and dwell times. It is usually based on the development of a technological map and a map of interrelated products and / or services.
8. Technology management. The process should make it possible to have, internally or externally, a bank of technologies, such as building blocks, available to be selected and integrated. The technological strategy knows the evolution of the technological infrastructure, the transfer of technologies and the development of new blocks. The acquisition of knowledge or the formation of specialized teams in this area may be a necessary or complementary activity. Technology development also needs phased reviews as does project development. The so-called ‘Levels of technological preparation’ or TRL are recognized. It is based on a technological development plan, phase review plan, experimentation, testing activities, laboratory, prototypes, etc.
9. The intelligence of the company. Intelligence comes with continuous internal and external learning and is structured in different processes:
- Economic intelligence. It is related to the information of the economy, geopolitics, and legal regulations.
- Strategic intelligence:
- Around social intelligence, the company determines the convergence and coherence of its activities with social issues and the values of the environment. Beyond its image, it is possible to evaluate the degree of openness or resistance of society to the innovations that are proposed to it.
- Around market intelligence, power or influence relationships can be analyzed throughout the supply chain, between suppliers, competitors, customers, end users, new entrants etc. The company can create an opportunity map, save time and avoid reinventing the wheel. You will be able to build your “marketing mix” to measure and position yourself according to the most suitable value proposition.
- Around technological intelligence, the company tries to follow the evolution of knowledge and technologies, especially those that can be related to its current or future activity. It has a defensive part and a proactive part. On the one hand, it must prevent its innovations and its technology, which is the heart of its differentiation, from becoming obsolete. On the other hand, you must identify the axes in which the technologies are developed and decide whether to acquire or work on new incorporations that ensure new concepts and innovations to obtain new competitive advantages.
No intelligence can be approached separately from the others. Market intelligence feeds on information that comes from all of those mentioned.
The innovation chain: turning science into value
It’s a fact that the same innovation process does not work the same everywhere. Not only in all companies, which are naturally never the same, but experience has shown us that the environment and culture, educational level, experience and knowledge in society, the same social organization, industrial structure and efficiency of the institutions and the administration have great influence on the success or failure of any innovation model
The conditioning factors, both of internal culture and organization and of its environment, are key to its operation. Therefore, it is not surprising that the same company, even the same team, with the same model and innovation process, is successful and produces excellent results in one environment or in one country and is a failure in another.
The foregoing also indicates that any innovation process model is not a panacea or a standard tool simply applicable to any organization and anywhere. Each model and each process must be tailored for each organization, taking into account mainly:
- Its culture, history, values, etc.
- Your vision and leadership.
- Your organization, your staff, your skills, motivation, etc.
- The structures, processes and knowledge that it has created, and its degree of maturity as an organization
- The environment in which it is situated
- The culture and values of this environment
- The private and public structures with which it relates
- The institutions that condition it, political, economic, fiscal systems, etc.
- The educational system, universities, research centers.
All this influences the ease or difficulties that an organization or company will have in its innovative activity. And also, very important, the existence of public, private or mixed institutions, associations, groups (clusters) that act as promoters of innovation, being bridges between research and basic technology and the company.
This reality probably explains that many international companies (more than 80%) maintain their innovation centres in a single country, where they believe that the conditions are more favourable.
The term “valley of death” is well known, where the many new ideas and concepts lie, which have started the innovation process and have not managed, even after 5 or 10 years, to progress further.
The challenges that a new idea or concept is likely to encounter are these, among others:
- Enter the correct mental model, way of thinking or adequate paradigm.
- Find and work with the right people.
- Identify and guarantee financial resources
- Manage your cash flow
- Understand the market and its globality
- Find the right segment
- Create prototypes to see the idea through the closest reality
- Establish the cost and value of the products correctly
- Recognize the opportunities available.
The following diagram shows the simplified model of the innovation chain, which encompasses basic research and the conception of new technologies, until their launch as products or services on the market. It is a model based on the so-called ‘Levels of technological preparation’ or TRL:
The so-called ‘valley of death’ tends to be at the point where a conceptual idea needs to be converted into a prototype to demonstrate that it works, to evaluate production costs and define the equipment and processes necessary for manufacturing. It usually occurs between TRL levels 4 and 7 (see the diagram below). It is at this stage that organizations, public, private or mixed institutions that, being bridges between research and basic technology and the company, can support the evaluation of the potential viability, the value of ideas and provide information and advice. or about the best way forward. They are equally important in helping companies make decisions to stop some projects and focus their finances on the projects with the best chance of success.
“Push and pull” in innovation
The “Push” and “Pull” models have been described a lot in the innovation process. In reality and in practice, innovation is a process of iteration, trial and error where openness and communication are critical elements. Sometimes the “push” will dominate, other times the “pull”, but successful innovation in general requires an interaction between the two.
In the diagram below, the approach combines the technological push with the market pull, to drive those ideas that universities and companies alone are not prepared to develop due to a lack of adequate connections or high capital costs. involved.
Investors fund ideas into prototypes, but since risk is still high, they often demand a high percentage of ownership of the final product.
A company is in a much stronger investment position to obtain and realize value if it has a prototype with International Intellectual Property (IP) protection and enough data for production. This is where an independent technology innovation center can help. These public, private or mixed centers or institutions also serve as a catapult for the experience in a wide range of technologies and services, for having the equipment to demonstrate the process / product and to be able to demonstrate that it is feasible before investing large amounts of money. This allows to develop, test the prototype and scale the product, in the laboratory and in the plant before being manufactured on an industrial scale.
In the 1990s, about 88% of the innovation activities of the 500 largest technologically advanced companies were in their own country of origin, compared to about 55% of their production and much lower percentages in sales. (Patel, 1995). As a consequence, we find that the technological strengths and weaknesses of countries are reflected in their main companies.
This changed in the early 2000s, but still global companies rely on one, or perhaps two countries for their expertise and experience in formulating and executing innovation strategies.
There is now a recognition that networks cannot simply be at one end of the traditional spectrum between doing everything in-house (vertical integration) and outsourcing everything to providers (with consequent management costs).
It is advisable to use a “third way”, which is based on systems theory and the theory that networks have synergistic properties, the whole is greater than the sum of its parts. This does not mean that the benefits flow effortlessly, on the contrary, the participants in a network must solve coordination and management problems, otherwise the risk is that all its advantages will be lost.
Even the largest and most internationally established innovative companies recognize this change. The future of R + D + I is “Collaborate and develop”. Form collaborative networks that are in contact with a% of the research that can be high and that we do not do ourselves. Example of what Henry Chesborough (2003) presented as “open innovation” where links and connections become as important as the production and appropriation of real knowledge.
The importance of this interconnectedness is not simply from one company to another, it is also about building rich links within the national innovation system.
Government policies to support innovation are increasing, although with higher, lower or no successes. The aim should be to allow a better connection between the elements, and a better understanding of the extended or global innovation chains.
This is especially true, for example, among the many small and medium-sized companies with technological needs and the main research centers, universities, etc. Also with needs for alliances and cooperations that would synergize their capacities to share resources and undertake higher level projects
In a simple way, we can see some different types of innovation networks in the diagram, which positions them in terms of (i) the radical or incremental form of the innovation objective, and (ii) the similarity of the companies participating in the network .
Different types of networks have different problems to solve. For example, in zone 1 we have companies with a similar orientation in general terms that work on innovation tactics issues. Typically, this could be a sectoral ‘cluster’ or forum dealing with the adoption and configuration of “good practices” and n an industrial area. It would involve sharing experiences, disseminating information, developing trust and transparency, and creating a sense of shared purpose around innovation.
In Zone 2 the activities could involve the actors of a sector, to explore and create new products or process concepts, around the latest scientific developments and the need to seek interesting connections and synthesis between adjacent sectors. The purpose is exploratory and defies existing borders. But it will depend on the degree of exchange of knowledge, information and the taking of shared risks, often in the form of ‘joint ventures’ and formal strategic alliances.
In zones 3 and 4, the players are very differentiated and can bring very different blocks of knowledge to the set. Your risk in disclosing them can be high, so it is key to ensure appropriate intellectual property (IP) protection management and establish very clear rules of the game. It will also be critical to establish agreements on how to share risks and benefits, and their distribution since this type of innovation is likely to involve considerable risk. For example, in a review of “high-value innovation networks” in the UK, researchers from AIM, (Advanced Research Institute of Management) found the following characteristics as important success factors:
- High diversity: Network partners from a wide range of disciplines and backgrounds that encourage exchanges of ideas across different systems.
- Third parties as process controllers: scientific partners such as universities, but also consultants and associations, who provide access to experience and act as intermediaries of knowledge and ‘expertise’ throughout the network.
- Financial leverage: access to investors via “Business angels”, venture capital and “venture capital” companies, thereby diversifying the risk of innovation and accessing market intelligence.
- Proactive management: participants consider the network as a valuable asset and actively manage it to reap the benefits of innovation.
An extended chain of innovation is understood from the creation of new knowledge and technologies to its launch or actual application in a sector of society or the market. Therefore, it includes agents outside the company, but in an open innovation process, they are equally important to consider, such as universities, institutes of technology, research centers, etc. both private and public or mixed.
The importance of innovation networks is in the interconnection, which is not simply from one company to another, but is also about building effective links within the national innovation system and government policies.
We recommend studying the sources of measurement and information of the innovation results by countries that they provide, the EU in the EIS, (European Innovation Scoreboard) and the Global Innovation Index, (GII) of which we provide summaries.