innovatie

Innovation management

the creative mind
the creative mind

As this part of the website concerns my professional life, all is in english. It will contain news about my occupation with 'innovation management'. My work on innovation management concentrates on new product and service development within and between private companies. What inspired me to enter this area is the combination of economic trade-offs (my original profession) and creativity.

I worked at the department of Technology and Operations Management, within the Section Management of Innovation (MI) at RSM Erasmus university. I retired in July 2015. I did a workshop of the Section's bachelor course in May 2016 and gave some guest lectures at Amsterdam University.


My main research interests have always evolved around cooperation in technology and new product development. For a more extensive overview:
www.rsm.nl/pbeije

 

If you want to contact me about innovation and innovation management, send me an email: paulbeije@kpnmail.nl

Terminology

Innovations are those 'new things' that are realized through a 'considerable effort'. They take money (budget), time, and often a project team. There are many changes in practice which are too 'small' to be called innovation (I would call them 'improvements').

Managing innovation projects means managing the team in such a way that the money, time, and quality is more or less controlled.


Of course, ideas must first be assessed and selected before they become projects. For this we need a(n) (innovation) strategy. Once you know what you want, you have the criteria at hand to select the right projects.

Innovation management therefor begins with:
1. A vision on how innovation contributes to the (profitable) growth of the company
2. Establishing a portfolio of viable innovation projects that contribute to this vision
3. Run all projects in the best way possible

In order to execute 2 and 3, a company has to develop and/or acquire specific expertise and it needs to free money.

Creativity and good ideas

Not all people are very creative, but in allmost all companies there are enough creative men and women. The question is whether this 'overall' creativity is stimulated or frustrated.

 

Frustrating creativity means killing every idea people have to change things in even a minor way, let alone in a major way. Good ideas are quite often the result of first having bad ideas which were discovered as such after a while by the people who came up with them or by other people around them, which they trust.

 

If creativity is not frustrated, most people in the company come up with good ideas on how to change things for the better, based on their experience with what customers do with the products and what the company does for making these products.

 

Creativity to change the whole industry and to come up with new products and services that customers did not even think of, is much more difficult. Fewer people have this kind of creativity and it is much riskier for a company to pursue such ideas. 

Selection of ideas

Most of the time, there are enough ideas, hidden or exposed. From a management perspective the main point is how to select the right ideas. Modern insights into management of innovation have led to the opinion that one should not kill ideas too quickly.

 

Get rid of the wrong ideas, but give people the freedom to work a bit further on the doubtful ideas and pick up the vary promising ideas as soon as possible.

 

Until a budget is allocated to 'an idea', elaborating on the idea (make a proposal to convince managers by for instance careful thoughts about technical and market feasibility) is not expensive. So, killing too many ideas too quickly means not getting enough innovation projects in the pipeline. Increasing competition demands a full pipeline of innovation projects..

 

Many good ideas lead to minor improvements in organizations, which can be implemented in a few days or even a few hours. I call them 'improvements'.

Ideas for which a business case is written, I call 'project ideas'. All project ideas approved and followed up by an actual innovation project (with budget, team and planning) I call 'innovation project'.

Management of innovation projects

Innovation projects need careful management, especially in the beginning (that is, after approval of the business plan, but before elaborate development), because mistakes in the beginning may be very costly later on.

 

A generally accepted model in innovation management research is the so-called 'stage-gate model'. This model identifies a number of 'logical' stages in the innovation project separated by gates. At each gate, the previous stage of activity (and especially the results of those activities) is assessed. And only after management approval, the innovation team can continue with the next stage.

 

The model is used by many companies. Often the number of stages is migh higher and some stages run parallel to each other. In my version of the model above, I distinguish a few stages of the innovation project, which can be seen in most industries (I mean, they are so common, that they are not industry-specific). I call the activities in those stages 'primary innovation acitivites': the actual technical and market oriented teamwork to bring the initial concept into the stage of a marketable new product (or a commercial application in-house). Next to these primary activites, I distinguish 'management activities' and 'supportive activities'. The management activities include resource support to the team, encouragement of the team, but especially screening at the gates. Support activities are more general, like patent application. These activities are largely non-project specific and are (therefore) carried out by specialists supporting all innovation teams. Small firms must hire outside specialists for such support. 

Managing the portfolio of innovation projects

"Doing the projects right" is about the stage-gate like control above. "Doing the right projects" is about selecting the projects from a usually much larger pile of ideas and project proposals. What is "right" for the company is not a straightforward thing. As said before, project selection can not take place in a fruittful way if the commercial goals are not formulated clearly. But the cost of the projects and their risks must be incorporated as well. Robert Cooper distinguished four main goals of innovation project management:

 

1. The value of the portfolio

2. The balance in the portfolio

3. The strategic fit of the portfolio

4. The number of projects

 

Simultaneously pursuing these four goals in selecting projects makes innovation portfolio management complicated. And selection is not a once for all decision! The previously introduced stage-gate model makes an assessment of a project at each gate. In innovation portfolio management, such assessment of each project must be made in relation to all other projects.

Innovation and competition

The last decades from 1980 - 2009 has been a period in which competition in almost all markets increased drastically. Developing new products and services and bringing them to the market has become a normal way of doing. The implication is that the R&D investments and their inherent risks and uncertainties must be made while competition is increasing and profit margins tend to go down.

 

Occasionally, one company (or a consortium) might be very successful with a breakthrough innovation. In the long run, all companies will no doubt manage the innovation process as described briefly here in an efficient and effective way. Therefore it will become more difficult to be successful with innovation, but not innovating means losing the game anyway..

Managing radical innovation

Stage-gate models and innovation portfolio management can be fine-tuned to all but the very radical innovation projects. All companies are or will become efficient and effective in managing such innovations. If they fight each other in the same markets in such a way, all will run into the "innovation trap": All companies spend more money on innovation, but profits decrease.

 

There is only one way out: developing new products or services which are so radical that only few rivals can follow.

 

Until quite recently companies were successful in radical innovation because they had the right people for it. Studies between 1995 - 2009 slowly made clear that the most innovative companies developed specific procedures and organizations for radical innovation. In such a way, they became independent of the initiative of individuals to become successful in radical innovation (which basically means that such individuals became part of the special organization).

 

Leifer et al. (2000) call this special organization the "innovation hub".

Open Innovation: Red or Blue?

As competition increases, innovation becomes part of the day to day activities. At the same time, it becomes more and more difficult to gain a competitive advantage through innovation and innovation management.

 

Open innovation (Chesbrough, 2003 and 2006) grasps an important number of issues and trends discussed in the innovation and strategy literature between 1980-2000: companies need to make use of external information and use of various ways to earn money with innovation or the knowledge underlying innovation as an integral part of their innovation strategy.

 

It is important to make a distinction between red oceans and blue oceans here. Many open innovation initiatives, such as online communities initiated or stimulated by companies, the use of alliances and sub-contracting, are used to make the innovation fight in red oceans more efficient. The ultimate goal of an open innovation strategy is to create blue oceans. As many companies become trapped in the continuous innovation fight in their red oceans, they have to initiate and develop radical innovations to escape this trap.

 

The open innovation paradigm which Chesbrough describes is "blue ocean innovation strategy". It is about creating breakthrough innovations for new markets or market segments.