Continuous innovation Adapting to the changing business environment

Managing Innovation Business Coach Continuous innovation Adapting to the changing business environment Vadim Kotelnikov Continuous change as a norm Companies, like any living organism, must become learning organizations that change and adapt to suit their changing business environment. According to Bill Gates, if you don’t practice the change management that looks after the future, the future will not look after you. “... The tendency for successful companies to fail to innovate is just that: a tendency. If you’re too focused on your current business, it’s hard to look ahead ...” The constant formation of new units within a corporation is one means of gearing up to change. To determine the improvements to make in response to the change, you should continuously: Partner with customers; Listen to their feedback; and Study new technology opportunities. Two main sources of sustainable competitive advantage 1. Continuous improvement culture: a continuous effort to improve organizational climate and productivity of the core business in response to continuous changes in the marketplace. 2. Durable corporate venture strategy: internal investment in innovation and new product/service development, new business creation, and external venture investing in new technologies and emerging markets. Mastering continuous innovation: Main assumptions8 Standing still equals falling behind; While innovation isn’t the only route to corporate growth, it’s essential to creating sustainable growth; and The underlying strategy, system, leadership, structures, processes, and skills that drive innovation are fundamentally different from those that are used to manage daily operations. Principles of innovation “Innovations had better be capable of being started small, requiring at first little money, few people, and only a small limited market.”4 That gives the innovator more time and space within which to correct inevitable errors. The purposeful and effective innovation results mainly from analysis, system, and hard work. Innovating for the present and preparing for the future No-one can predict the future. You can, however, discover the secrets of the present. Innovation is not about taking risk or predicting the future - it’s about focusing on the opportunities of the present. Understand the present, study what is known and turn this knowledge into future opportunities. Innovation as a mindset and corporate strategy “Every manager needs to learn how to lead, nurture, and manage innovation. In today’s knowledge-driven world, new technologies appear at shorter and shorter intervals. “Knowledge constantly makes itself obsolete, with the result that today’s advanced knowledge is tomorrow’s ignorance,” stressed Peter Drucker. “You need to encourage innovation when your company’s doing well. The last thing you want to do when you’re in the lead is become complacent,” writes Michael Dell9, the Founder & CEO of Dell Computer Corporation. Innovation, thus, should be not a one-off event, but a continuous response to changing circumstances. A sustainable innovation system doesn’t not just help to solve a problem but creates a new capacity, opening up opportunities for further innovation. Do not confuse innovation with novelty. Novelty “only creates amusement”4, and will not last into the future. Develop strategic innovation road-maps, but do not limit innovation to development of new products only. New processes and methods can be more powerful in helping you to win sustainable competitive advantage. Understanding the present and preparing for the future By Peter Drucker What is the current situation of the business? How is the situation changing? How will the changes affect the business? How will the changes affect the competitors? How can the changes be turned to advantage? 62 TECH MONITOR Jan-Feb 2005 Business Coach Entrepreneurship as a continuous source of innovation Many people equate entrepreneurship with an individual and his or her start-up company. However, establishing entrepreneurial small business in a big organization has become very popular in today’s rapidly changing and complex world. Many organizations, willing to exploit the benefits of new product/service development as internal ventures, will need to change their mindset, redefine their concept of organization and loosen controls in order to expand their capacity for speed. Mastering of the new business systems approach to managing projects aimed at development of innovative products and services will help corporations to move with speed to capitalize on emerging technology and market opportunities. Managing Innovation edge of knowledge forward, one inch at a time ... In contrast to traditional firms where organizational structure defines the framework within which work occurs, Valley firms use the work to define the organization’s structure.”8 These structures are best described as flat, flexible, permeable, and fluid. Bibliography 1. “The Practice of Management”, by Peter Drucker, 1954. 2. “Management: Tasks, Responsibilities, Practices”, by Peter Drucker, 1974. 3. “The Frontiers of Management”, by Peter Drucker, 1986. 4. “Managing in Time of Great Change”, by Peter Drucker, 1995. 5. “Kaizen - The Key to Japanese Competitive Success”, by Masaaki Imai, 1991. 6. “The Road Ahead”, by Bill Gates, 1996. 7. “Roads to Success”, by Robert Heller, 2001. 8. “Relentless Growth”, Christopher Meyer, 1998. 9. “Inspiring Innovation”, Ellen Peebles, Harvard Business Review on The Innovative Enterprise, 2003. Case in point: Relentless approach to innovation in the Silicon Valley In the Silicon Valley, technologies and markets move so fast that what is possible changes daily. “The innovation process that succeeds in this environment is a relentless, opportunistic, and somewhat frenzied approach that pushes the leading Innovation performance measurement: Striking the right balance Innovation is indisputably one of the most important strategic and operational levers available to managers for creating competitive advantage, regardless of the industry sector. Recent studies suggest, though, that there remains a serious disconnect between what firms are hoping for and what they are reaping from their investments in innovation. Conventional approaches to performance measurement, while serving performance-driven firms well in a variety of traditional areas focusing on cost, efficiency and speed, have, as yet, had little impact in the area of innovation management. What you will learn The extent to which innovation can be measured, if, indeed, it is at least partly driven by serendipitous events. The measurements of innovation that are meaningful, that is, the measurements that can be acted on. The assumptions underlying any measure of innovation performance. The limitations that are there to measurement, both physical and conceptual. The underlying assumptions that justify the measurement of innovation performance. The limitations and constraints on any meaningful measure of innovation performance. The best way to design a measurement system. How to make best use of the resulting measures. Prominent aspects discussed in the Report include: The case for measuring innovation performance. Why firms measure what they measure. The nature of innovation measurement. The impact of measurement schemes on performance. Frameworks for innovation performance measurement. Managerial and organizational implications of innovation performance measurement. Case studies. For more information, contact: MindBranch, Inc. 131 Ashland St., Suite 200, North Adams, MA 01247, USA Tel: (+1-800) 774 4410; Fax: (+1-413) 664 9791 Web: www.mindbranch.com TECH MONITOR Jan-Feb 2005 63 Managing Innovation Business Coach Innovation Fundamental to business growth http://www.businesslink.gov.uk Department of Trade and Industry, UK I nnovation is fundamental to the growth of your business. The successful exploitation of new ideas has been identified, in survey after survey, as a key component in a business being able to improve its processes, continuously bring new and improved products and services to market, improve its efficiency and, more importantly, improve its profitability. Today’s marketplaces, be they local, regional, national or global are becoming highly competitive, reflecting the ability of companies to access new technologies, and the power of trading and obtaining knowledge via the Internet. This guide explains how you can adopt innovation as a key business process and outlines the different approaches you can take. It also gives you advice on planning for innovation and creating a business environment that nurtures innovative ideas. It also outlines the help and support available to innovative businesses. Success comes when these ideas are filtered to identify those that the business will focus on and the effort and resources that are applied to exploit these ideas for maximum benefit. Introducing innovation can help you to: Improve productivity; Reduce costs; Be more competitive; Build the value of your brand; Establish new partnerships and relationships; and Increase turnover and improve profitability. Businesses that fail to innovate run the risk of: Losing market share to competitors; Falling productivity and efficiency; Losing key staff; Experiencing steadily reducing margins and profit; and Going out of business. The business case for innovation It is improtant to differentiate between invention and innovation. Invention is the manifestation of an idea. Innovation is the commercial application and successful exploitation of the idea. Fundamentally, innovation means introducing something new into your business. This may take the form of: Improving or replacing business processes to yield higher efficiency and productivity, or to enable the business to extend the range or quality of existing products and/or services. Developing new and improved products and services often to meet rapidly changing customer or consumer demands or needs. Adding value to existing products, services or markets to differentiate the business from its competitors and increase the perceived value to the customers and markets. Innovation can take the form of major breakthroughs, totally new products such as a videophone, or totally new services such as on-line banking. But they can also be small, incremental changes - for example, increasing the number of mega pixels on a digital camera. Regardless of the form it takes, innovation is, essentially, a creative process. The ideas may come from inside the business, from the employees and managers, from in-house R&D - or from suppliers, customers, researching the market, links with universities and other sources of new technologies. Approaches to innovation Innovation in your business can mean introducing new or improved products, services or processes. Analyse the marketplace There’s no point, however, in considering innovation in a vacuum. To move your business forward, you need to study your marketplace and understand how innovation can add value to your customers. Identify opportunities for innovation You can identify opportunities for innovation by adapting your product or service to the way your marketplace is changing. For example, if you’re a specialist hamburger manufacturer, you might consider lowering the fat content in your burgers to appeal to the increasingly health-conscious consumer. You can also innovate in your business by identifying a completely new product. For example, as a burger manufacturer, you could start producing a vegetarian burger as well as a meat one. 64 TECH MONITOR Jan-Feb 2005 Business Coach You could innovate by introducing new technology, techniques or working practices - perhaps using better processes to give a more consistent quality of product. If research shows that people have less time to go to the shops, you might find it helpful to innovate your distribution processes, offering customers a home-delivery service, possibly tied in with online and telephone ordering. And if your main competitor’s products have a reputation as cheap and cheerful, you could innovate by revamping your marketing to emphasise your quality - and perhaps take the chance to review your pricing. The competitive edge The important point at all times is to consider how innovation can give your business a competitive edge and help your business grow. Managing Innovation Encourage innovation in your business Your people are your most vital asset and can be the source of many innovative ideas. But to get the most from them, you need to foster an innovative environment and nurture creative thinking. Steps to promote innovation: Make sure you have processes and events to capture ideas. For example, you could put suggestion boxes around the workplace or hold regular ideas workshops or occasional company awaydays to brainstorm ideas. Create a supportive atmosphere in which people feel free to express their ideas without the risk of criticism or ridicule. Encourage risk-taking and experimentation - don’t penalise people who try new ideas that fail. Promote openness between individuals and teams. Good ideas and knowledge in one part of your business should be shared with others. Teamworking, newsletters and intranets can all help your people share information and encourage innovation. Stress that people at all levels of the business share responsibility for innovation, so everybody feels involved in taking the business forward. The fewer the layers of management or decision making in your organization, the more people feel their ideas matter. · Reward innovation and celebrate success. Appropriate incentives can play a significant role in encouraging staff to think creatively. Look for imagination and creativity when recruiting new employees. Remember: innovative thinkers aren’t always those with the most impressive list of qualifications. Planning innovation If innovation is to help your business grow, you need to plan carefully. Though some ideas may just come out of the blue, you also need to have a strategic vision of how you want your business to develop. You can then focus your innovative efforts on the most important areas. Start by considering all aspects of your marketplace. You should: Look closely at your competition; Study trends reports; Have a strong relationship with your customer; Involve your suppliers and other business partners; and Follow news in your sector, including reports in trade and professional magazines. Think carefully about what you could do to improve your position in your market. You need to consider how you can offer your customers added value and how you can better exploit your strengths. Next, you should consider what any particular innovative step could mean for your business. Ask yourself: What the impact on your business processes and practices will be; What extra training your staff may require; What extra resources you may need; How you’ll finance the innovative work; and Whether you’ll be creating any intellectual property that will need protecting. Finally, you should include your vision in your business plan. Put down your goals, both long-term and short-term, and detail how you intend to achieve them. Link them to financial targets, such as achieving a specific turnover by a set date. Review your plan regularly. Funding innovation There are a number of ways you can fund your growth through innovation. You could finance innovation, using your own funds or external funding such as loans or equity finance. Some government grants are also available for innovative businesses. You may want to start by approaching your bank for a loan. However, they won’t consider your project if you haven’t prepared a well thought-out business plan. Alternatively, if you are willing to relinquish some control of your business, you may be able to attract investment from business angels - wealthy individuals who invest in private companies, typically £ 10,000 to £ 250,000. Another way of raising finance is through venture-capital firms who provide higher levels of investment, from around £ 3m upwards, in return for shares in the business. There are a number of grants that you may be able to apply for that will help finance part of your project. Regional development agencies also actively fund innovation; however the amount available will vary from region to region. TECH MONITOR Jan-Feb 2005 65