The I Word: Moving
Innovation from Research
and Development (R&D) to
Ideation and Realisation
(I&R)
Alan McSweeney
Innovation Has Become a Ubiquitous and
Meaningless Word
• The word Innovation is being used and misused pervasively without
clear definition, meaning or understanding
• Every organisation claims to be pursuing and driving innovation or
offering innovation development services
• But are they?
• Innovation is not just about ideas
• Innovation is about driving the generation of good ideas and
ensuring their appropriate adoption in order to generate value
• Innovation is or can be a process (that can be measured)
• Innovation is about generating business value – an idea without
implementation has little meaning
November 7, 2011 2
Innovation =
Good Idea That is Defined and Validated
+ Appropriate Implementation and Adoption
+ Generation of Value
November 7, 2011 3
Innovation Can Be …
A new idea
OR
An existing idea or process that is improved
OR
An existing idea or process implemented or applied elsewhere
November 7, 2011 4
Innovation …
• … Is not necessarily one big idea
• It can be lots of little ideas
November 7, 2011 5
Innovation Is All About Value
• Sometimes …
Σ { Value
} >> { Value
}
November 7, 2011 6
Innovation Extends Creativity To Implementation
And Generation Of Value
Sell
Market
tion
ova
Inn Implement
Verify e
Valu
Clarify
Develop
y
Discern
tivit It’s All About
C rea The Value
November 7, 2011 7
Innovation Means …
• Acceptance of change – innovation implies and requires change
• Innovation exposes an organisation to change
• A secondary affect of successful innovation is the willingness of an organisation to
change
• To be good at innovation means to be good at change
• Innovation means welcoming change and being able to successfully deliver change
• Innovation means continuously challenging accepted conventions
• If you cannot change, you cannot innovate
November 7, 2011 8
Being Good At Innovation Creates a Positive
Feedback Loop (“Virtuous Circle”)
Better Experience,
Greater Satisfaction, Customers
Greater Loyalty
Greater Recognition of
Contribution, Greater
Satisfaction, Greater
Experience, More
Interesting Place to Work
Employees
Shareholders
Greater Long-
Term Value
Growth, Increased Market
Share, Improved
Perception, Increased
Revenue and Margin,
Organisation Customer and Employee
November 7, 2011
Loyalty 9
Being Good At Innovation Creates A Positive
Feedback Loop
Being Good At
Innovation Means
Accepting Change
Accepting Change
Reinforces, Fosters
And Encourages
Innovation
November 7, 2011 10
Strengths Of Being Good At Innovation
• Organisation leadership has a personal role in fostering a culture of openness and
risk tolerance toward innovation
• Use external partners and “open sourcing” to expand the pool of innovation ideas
• Use simple low-cost awards and recognition to encourage and reward innovation
• Ensure security policies do not inhibit innovation
• Set performance expectations for leadership traits that drive innovation
• Use lightweight, non financial criteria for initial evaluation of ideas
• Early-stage idea evaluation must rest on business judgement and not just
quantitative criteria
• Ensure there is a fast, lightweight process for testing innovation ideas
• Focus on generating learning when making early-stage investments in innovation
ideas
• Sequence the project to fail fast by testing for the most valuable learning first
November 7, 2011 11
Classification Of Areas To Look For Innovation
Business Model How Do You Make Money?
Finance Networking and How Do You Work With Other Organisations For Mutual Benefit?
Alliances
Core Processes How Do You Create and Add Value To Your Products And Services?
Processes
Enabling Processes How Are Core Processes Supported And Enabled?
Product
How Do You Design Your Core Products And Services?
Performance
Products
How Do You Connect Or Provide A Common Platform For Your
and Product System Products And Services?
Services
How Do You Provide Value To Your Customers Beyond Your Core
Service Products And Services?
Channel How Do You Get Core Products And Services to Market?
Provision
Brand How Do You Communicate Your Core Products And Services?
and
Delivery Customer How Do Customers Feel When They Interact With Your Organisation
Experience And Your Products And Services?
November 7, 2011 12
Classification Of Areas To Look For Innovation
• Innovation can be pervasive across all aspects of the
organisation
• Opportunities for innovation exist everywhere
• Innovation can be a structured process that can be
learned, practiced, developed and improved
November 7, 2011 13
Types Of Innovation
Radical Incremental Innovation By
Innovation Innovation Reapplication
Fundamental
Change Or
Incremental Application Of
Fundamentally New
Improvement Existing System,
Categories Of
Existing Of System, Process, Concept,
System, Process,
Process, Concept, Device In A New
Concept, Device
Device Domain
Disruptive, Radical,
Discontinuous
November 7, 2011 14
IT Innovation And Business Innovation
• IT innovation can drive business innovation
• Innovation is important to IT because of the very high rate
of change
• IT innovation can fundamentally change the way an
organisation operates
• IT can support business innovation
− Provide information and other support services
− Develop new systems, platforms, applications
• IT can be a catalyst to innovation
• IT can also innovate within itself
November 7, 2011 15
Analysis Of Volume Of Investment In Innovation
Across Innovation Areas Investment In Innovation Area
Business Model
Finance
Networking and Alliances
Core Processes
Processes
Enabling Processes
Product Performance
Products
and Product System
Services
Service
Channel
Provision
and Brand
Delivery
Customer Experience
November 7, 2011 16
Analysis Of Volume Of Investment In Innovation
• Traditional R&D areas dominate
• Investment skewed in favour of products
• Narrow focus, especially on pure product
November 7, 2011 17
Analysis Of Return Of Investment In Innovation
Across Innovation Areas Value From Investment In Innovation Area
Business Model
Finance
Networking and Alliances
Core Processes
Processes
Enabling Processes
Product Performance
Products
and Product System
Services
Service
Channel
Provision
and Brand
Delivery
Customer Experience
November 7, 2011 18
Analysis Of Return Of Investment In Innovation
Across Innovation Areas
• Returns do not match investment
• Small investment in non-traditional R&D areas
• Much greater return from smaller investments outside
traditional R&D areas
November 7, 2011 19
Comparison Of Investment And Return Across
Innovation Areas
Business Model Return
Finance
Networking and Alliances Return Greater Than Investment
Core Processes Investment
Processes
Enabling Processes
Product Performance Investment Greater Than Return
Products
and Product System
Services
Service
Channel
Provision
and Brand
Delivery
Customer Experience
November 7, 2011 20
Comparison Of Investment And Return Across
Innovation Areas
• Significant gap in returns across innovation areas
• Small investments in non-traditional areas yield significant returns
• Large investment in traditional R&D areas yield small returns
• Some of this can be explained by sustained pattern of investment in
traditional R&D and history of low investment in improvements
outside these areas
− Latent available improvements achieved easily
− Nonetheless demonstrates innovation can be successfully applied outside
traditional product-oriented areas to yield significant value
• Need a wider definition of R&D to I&R - Ideation and Realisation
− Identifying and implementing innovative ideas across the entire organisation
November 7, 2011 21
Eliminating The Disconnect Between Innovation
Investment And Value Generated
Develop
Structured
Approach
To Innovation
Decision-Making
To Maximise
Returns From
Investment
Innovation Decisions Future
Approach Innovation
Now Approach
Identify And
Develop Innovation
From Non-Traditional
Areas Outside
Standard R&D
Activities
November 7, 2011 22
Where And What Are The Innovation Ideas?
Incremental Innovation By
Innovation Area Radical Innovation
Innovation Reapplication
Business Model
Networking and Alliances
Core Processes
Enabling Processes
Product Performance
Product System
Service
Channel
Brand
Customer Experience
November 7, 2011 23
Innovation Metrics – Measure Along The Innovation
Process Revenue
Number of Cost of Generate
Innovation Projects Innovation
By Type Projects
New
Business
Speed of Innovation Estimated Value of
People Projects and Change Innovation Projects
Involved of Speed and Change of Value Cost
Reductions
Innovation Innovation
Innovation Process
Inputs Outputs
Budget
Allocated Innovation
Training Provided Publications/
Number Of Ideas Generated Patents
%Age Of Ideas Piloted
Innovation Library
%Age Of Successful Pilots
Size
%Age Of Pilots Commercialised
%Age Of Product/Services Launched
November 7, 2011 24
Innovation Model For Ideation and Realisation (I&R)
Ideas Enter Innovation Process
From Multiple Sources
Innovative
Ideas
Validated
and Distilled
Ideas
Discarded Or
Implemented
Successful Ideas In Other Ways
November 7, 2011 Implemented 25
Innovation Model For Ideation and Realisation (I&R)
• Ideas analysed, validated and distilled as they move
through the process
• Ideas exit the process appropriately
− Not valid, not proven
− Not appropriate for the organisation but can be used or applied
elsewhere
− Partially implemented
− Fully implemented
November 7, 2011 26
Define Stage Gates For Ideation and Realisation
(I&R) Process
Business
Idea Prototype
Case
Detailed
Launch Implement
Design
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Innovation Is About Value Obtained
• Value = Return - Investment Minimise
Investment
Point
of Best
Value
Maximise
Return
November 7, 2011 28
Achieving A Balanced Approach To Innovation
• Innovation needs to be balanced against run-the-business
activities
• Too much innovation and associated organisation change
can be disruptive and inefficient
November 7, 2011 29
Achieving A Balanced Approach To Innovation
Ability of
Organisation to
Change
• Decide on your innovation profile Cost of Support
Industry Profile
Budget
Constraints
Cost of
Organisation
Change
Resource
Constraints
Risk/Reward
Project Load
Profile
Maintenance of
Total Investment
Operations
November 7, 2011 30
Attitude Inhibitors To Innovation And Change
• Adopting innovation requires learning, training and management
− “I’m not in product development. Why are you talking to me?”
− “I’ve been here for 20 years and I don’t see why we should change now.”
− “I am willing to support innovation 100% as long as it does not affect me.”
− “This is the way it’s always been done and it’s worked well up to now.”
− “I’ve got 15 minutes to talk to you. I’m very busy with important things.”
• Attitudes that require change
− Belief that you know best
− Focus on short-term returns with no long-term focus
− Innovation is not the job of senior management
− Process will slow us down
November 7, 2011 31
Organisation Process Models – Common Structure –
High-Level
• At their core, all organisations have a common structure
Operational Processes With
Cross Functional Linkages
Vision,
Strategy,
Leadership,
Business
Management
Management and Support
Processes
November 7, 2011 32
Organisation Process Models – Common Structure –
High-Level
Direct Innovation – New
and Updated Products
Innovation and Services - Comes
Leadership From Here
Comes From Here
Operational Processes With
Cross Functional Linkages
Vision,
Indirect Innovation –
Strategy, New and Updated
Leadership, Support Processes -
Business Comes From Here
Management
Management and Support
Processes
November 7, 2011 33
Mapping Innovation Areas To Organisation Model
Business Model
Networking and Alliances Operational Processes
With Cross Functional
Core Processes Linkages
Vision, Enabling Processes
Strategy,
Leadership, Product Performance
Business
Management Product System
Service
Channel
Management and
Brand
Support Processes
Customer Experience
November 7, 2011 34
Organisation Process Models – Common Structure –
More Detailed
Vision, Operational Processes With Cross Functional Linkages
Strategy,
Business Develop and
Market and Deliver Manage
Management Manage
Sell Products Products and Customer
Products and
and Services Services Service
Services
Vision and
Strategy
Management and Support Processes
Business
Planning, Human Information
Financial Facilities
Merger, Resource Technology
Management Management
Acquisition Management Management
Legal,
Governance Regulatory, Knowledge,
External
and Environment, Improvement
Relationship
Compliance Health and and Change
Management
Safety Management
Management
November 7, 2011 35
Core Cross Functional Processes
• Three cross-functional processes that are common to all
organisations
− Product/service delivery
• From order/specification/design/selection to
delivery/installation/implementation/provision and billing
− Customer management
• From customer acquisition to management to repeat business to up-sell/cross-sell
− New product/service development
• From research to product/service design to implementation and commercialisation
• These processes cross multiple internal organisation boundaries and
have multiple handoffs but they are what concern customers
• Cross-functional processes deliver value
− Value to the customer
− Value to the company
• Integrated cross-functional processes means better customer service
and more satisfied and more customers
• Innovation works best when it crosses organisational functions
November 7, 2011 36
Every Organisation Has Three Core Cross-Functional
Processes
The customer sees across the structure and is not concerned with but is all too
often aware of the operational elements, their complexity and lack of
interoperability
1. Product/Service
Delivery: from order
to completion
2. Customer
Relationship
Management
3. New
Product/
Service
Development
The organisation sees the structure vertically and in a compartmentalised
view and all to frequently does not see the customer viewpoint
November 7, 2011 37
Organisation Value Chains
Value Chains
• Value chains add value and confer competitive advantage when defined and linked
• Innovation needs to be cross-functional to add real value
• Cross-functional innovation team sees the complete picture and generates greatest value
November 7, 2011 38
Projects And Innovation
• Projects are about change and innovation
− Innovations or changes to existing processes, systems, applications, structures
• Organisations need to be good at two sets of skills
− Running the Business (RTB) – business as usual operations
− Change the Business (CTB) – changing existing operations to survive or compete
• Projects are the way of introducing innovation and change into organisations
• Projects tend to be multidisciplinary, involving some or all of:
− Requirements gathering
− Solution design
− Hardware installation
− Product selection
− Software development or modification
− Testing
− Process change
− Organisation change
− Data conversion
− Implementation
− Parallel operation
• Organisations need to be good at projects in order to deliver innovation and change
November 7, 2011 39
Dimensions Of Being Good At Innovation And
Change
Ability to
• To be good at innovation Execute Projects
and change, three
dimensions must come
together within the
organisation:
− A clear vision for the
organisation and the set of
projects needed to deliver
on the vision Completeness of
− A proven capability to Organisational
deliver projects quickly and Vision
effectively
− Focus on the realisation of
expected business benefits
and business value
associated with the
implementation of Effective and Proven
investments Benefits Realisation
Approach
November 7, 2011 40
Dimensions Of Successful Innovation
• Innovation Capability – tools, techniques, methodologies for
identifying and assessing innovation
• Innovation Process and Project Management – being able to
manage portfolio of innovation projects
• Implementation of Innovation – being able to adopt innovation
• Value Management – understanding and articulating business value
of innovation
• Innovation Within IT – being able to drive innovation within IT
• Innovation Measurement – being able to measure innovation
activities, skills and successes
November 7, 2011 41
Innovation Value Management
• Value management means being able to articulate the
business value of innovation and communicate in the
language of business
• Connect innovation activities to business value
• Use standardised measurements and metrics
• Create effective, appropriate and accurate business cases
based on accurate understanding of costs and value
November 7, 2011 42
Innovation Business Case
Impact
Low High
Limited Simple Business
Case
Extent of
Adoption
Pervasive Complex Business
Case
November 7, 2011 43
Challenges Of Developing Good Cost Estimates
• Requires detailed, stable, agreed requirements
• Agreed assumptions
• Access to detailed documentation and historical data for
comparison
• Trained and experienced analysts
• Risk and uncertainty analysis
• Identification of a range of confidence levels
• Adequate contingency and management reserves
November 7, 2011 44
Reasons For Good And Bad Cost Estimates
Ineffe
and U ctive Risk
Effect ncer
i ve
Unce Risk and Unfa Analy tainty
r ta Techn miliar s is
Ident
ificat Analy inty First- ology or
s is
Rang ion of a Time
Use
Probl
em
Confi e of De Acces s Getting
dence
Level Docu tailed s to D
m ata Unre
s and H entation Unre
Proje asonable
Adeq
ua istor Train Unre alistic or ct Bas
Conti
ngen te Data ical e
Exper d and
liable
Data Unre elin e
Mana cy an ien
geme d Detai
led, S Analy ced Assumalistic
Reser nt sts No o ption
ves Agree table, Comp r Limited s Overo
Requ d ariso ptimi
ireme Agr Avail n Data sm
n ts
Assum eed able New
ption Pr ocess
s e s Untra
Proje Inexp ined and
ct Ins er ie
t abilit
y Comp Analy nced
le sts
or Te x Project
chnol Unre
ogy alistic
Savin Project
gs
• Lost of reasons for and causes of inaccurate cost estimates
November 7, 2011 45
Sources Of Risk and Uncertainty In Estimating Costs
• Lack of understanding of the project requirements
• Shortcomings of human language and differing
interpretations of meaning of project
• Behaviour of parties involved in the cost estimation
process
• Haste
• Deception
• Poor cost estimating and pricing practices
November 7, 2011 46
Specific Risks
• Sizing and Technology • Capability
− Overly optimistic developers − Mixed skills of team
− Poor assumptions on the use of reused − Optimistic assumption on
code development tools
− Vague or incomplete requirements − Optimistic assumption on productivity
− Not planning for additional effort − Geographically dispersed team making
associated with packages – communication and coordination more
integration, testing difficult
• Complexity • Management
− Tools − Management’s dictating an unrealistic
− Applications: software purpose and schedule
reliability − Incorporating a new method,
− Hardware limitations language, tool or process for the first
− Number of modules affecting time
integration effort − Not handling creeping requirements
and change proactively
− Inadequate quality control, causing
delays in fixing unexpected defects
− Unanticipated risks associated with
package software upgrades and lack of
support
November 7, 2011 47
Market And Organisation Capability Analysis
• Organisations need to understand what the opportunity from an
innovation is and what is needed to exploit it fully
• Analyses
− Growth-Share Matrix Analysis
− Marketing Strategy and Diversification Analysis
− SWOT (Strengths, Weaknesses, Opportunities, and Threats)
Analysis
− PEST (Political, Economic, Social, and Technological) Analysis
• Quick analyses that will define what is possible and achievable
November 7, 2011 48
Growth-Share Matrix Analysis
Market Growth
Stars Question
High Marks
c
c
Value of
Product/
Service
Relative
Market High
c Low
Share
Cash
Cows Low Dogs
November 7, 2011 49
Growth-Share Matrix Analysis
• Cash Cows – business units/products and service offerings with
high market share in a slow-growing industry
• Dogs – business units/products and service offerings with low
market share in a mature, slow-growing industry
• Question Marks – business units/products and service offerings
growing rapidly, consume cash but with low market shares and
not generating much cash
− Have the potential to gain market share and become a star and
eventually a cash cow when the market growth slows
• Stars – business units/products and service offerings with a high
market share in a fast-growing industry
− Stars become cash cows
November 7, 2011 50
Growth-Share Matrix Analysis For Innovation
• Where does innovation ideas fit into the Growth-Share Matrix
Analysis
• Where does the potential lie?
• What has to be done to actualise the potential?
November 7, 2011 51
Marketing Strategy And Diversification Analysis
Present New
Existing Market Penetration Product and Service
Markets Development
New Markets
Market Development Diversification
November 7, 2011 52
Marketing Strategy And Diversification Analysis
• Four possible growth strategies based on existing and new
markets and products and services
− Market Penetration - focuses on selling existing products and
services into existing markets
− Market Development - sell its existing products and services into
new markets
− Product Development - introduces new products and services
into existing markets
− Diversification – develops and markets new products and services
in new markets
• What approaches should the organisation take?
• What are the risks?
• What are the requirements?
November 7, 2011 53
Organisational Capabilities To Create And Sustain
Innovation
• Set of core capabilities within an organisation to create
and sustain an innovation function
• Being good at innovation means being having strong, well-
developed and well-functioning capabilities in these areas
• Use this as a check-list for creating and managing
innovation
November 7, 2011 54
Organisational Capabilities To Create And Sustain
Innovation
Innovation Vision Creation definition, communication and realisation of a vision for innovation
Innovation Innovation Strategic Planning Definition of the scope and nature of Innovation in line with business strategy
Vision, Innovation Funding and Definition of sources of funding for innovation and appropriate allocation of resources based
Strategy And Resource Allocation on prioritisation
Management Innovation Portfolio
Management of the portfolio of innovation projects and activities
Management
Innovation Management and Management and leadership support for driving innovation activities throughout the
Leadership organisation
Acceptance and Tolerance of Definition of appropriate attitude towards taking creative risks
Risk Taking
Level and scope of collaboration and maintenance of good behaviour, processes and
Innovation Collaboration and Openness practices that enable an environment of sharing, interaction and openness, fostering the
Organisation, open exchange of creative information
People And Innovation Capability Development of innovation skills and performance management for employees including
Culture Development defining career paths and implementing innovation training programs
Innovation Organisation Roles Definition of innovation roles/organisational positions and penetration of innovation
and Responsibilities activities as part of everyday work for all employees
Innovation Recognition and Creating a scheme for recognising and rewarding people based on contribution to innovation
Rewards
Innovation Processes Integration of innovation processes within the lifecycle of innovation
Innovation Frameworks and
Innovation Identification and use of methodologies and tools for innovation
Tools
Process, Tools,
Innovation Value Measurement of the impact from innovation through definition and use of innovation metrics
and that align with business priorities
Measurement
Metrics
Communication of Innovation Communication of the impact from innovation to the business and to external
Value partners/organisations
November 7, 2011 55
Innovation Organisational Capabilities - How Do You
Measure Up?
Innovation Vision
Innovation Strategic Planning
Innovation Funding and Resource Allocation
Innovation Portfolio Management
Innovation Management and Leadership
Acceptance and Tolerance of Risk Taking
Collaboration and Openness
Innovation Capability Development
Innovation Organisation Roles and Responsibilities
Innovation Recognition and Rewards
Innovation Processes
Innovation Frameworks and Tools
Innovation Value Measurement
Communication of Innovation Value
November 7, 2011 56
Mapping Organisational Capabilities To Dimensions
of Successful Innovation
Innovation
Implementation
Innovation Process and Value Innovation Innovation
and Operation
Capability Project Management Within IT Measurement
of Innovation
Management
Innovation Vision
Innovation Strategic Planning
Innovation Funding and
Resource Allocation
Innovation Portfolio
Management
Innovation Management and
Leadership
Acceptance and Tolerance of
Risk Taking
Collaboration and Openness
Innovation Capability
Development
Innovation Organisation Roles
and Responsibilities
Innovation Recognition and
Rewards
Innovation Processes
Innovation Frameworks and
Tools
Innovation Value Measurement
Communication of Innovation
Value
November 7, 2011 57
Summary
• The word Innovation is becoming devalued through meaningless use
• Innovation is about moving ideas to appropriate completion and
implementation
• Innovation is about generating value
• Innovation potential exists everywhere
• Innovation is not just about the one big disruptive idea
• Innovation is a process that can be implemented, measured and
monitored
• Innovation can be learned
• Innovation means change so to innovate effectively you must be
good at or get good at change
November 7, 2011 58
Next Steps
• Understand what you want to achieve from innovation and define
an innovation vision
• Establish a cross-functional innovation team and an innovation
progamme
• Measure where you are now to establish a baseline against which
progress can be quantified
• Develop the organisational capabilities that will make you good at
innovation
• Define a set of innovation metrics/KPIs and measure innovation
activities
• Understand your innovation strengths and weaknesses
• Learn from lessons such the strengths of being good at innovation
November 7, 2011 59
More Information
Alan McSweeney
alan@alanmcsweeney.com
November 7, 2011 60