The Wheel of Innovation Fortune
By Steve Crom
Companies that are serial innovators have the strategy, structure, skills and processes to support innovation. This article describes a road map that links these four dimensions in an innovation wheel that starts with the business need for innovation and ends with testing and implementing new ideas and/or business models.
If necessity is the mother of invention, then business need is the father of innovation. The innovation wheel begins with defining a clear business objective around which innovation needs to occur. Typically, there are chronic problems that a given industry has been unable to crack, such as:
- Adherence to medication after leaving the hospital – typically as low as 40 percent
- Reducing the time it takes to introduce a new white goods product by 75 percent
- Increasing the loyalty of online users of content, such as photographic images
- Getting premium prices for premium service in the fiercely competitive automotive supply business
All of the above challenges have been tackled successfully by following the roadmap below.
Take the case of adherence to medication following a hospital stay to illustrate how the first stage, visualize, works. First the hospital leaders needed to define the business issue related to adherence to medications. One hospital employee described it this way:
Over 50 percent of those patients discharged from our hospital do not take their medication properly increasing the risk of relapse and re-admittance.
In this situation the communication between healthcare providers and patients demands an innovative solution. The stakeholders are the nurses who organize the patients’ discharge and the doctors who discharge the patients, prescribe medications and explain the medication regime to their patients and their families.
1.Work with the business leaders to define their objectives.
2.Help define what type of innovation is needed. Constraints are determined such as time and resources or access.
3.Clarify sponsorship. Work with an assigned project leader to analyze the interests of various stakeholders and assign the business sponsor is for the innovation in question.
Innovation takes place within a context (or business system). The next stage, identify, maps out the system in question. The extent to which the system is open for innovation is measured and the levers and obstacles to innovation are identified.
In the white goods example, refrigerators in the domestic appliance business unit were selected with a focus on first time home owners. The key actors identified were those who interact with these customers on a day-to-day basis: employees from the service call center and field service technicians as well as those whose decisions have a direct impact on development lead-times: design engineers and suppliers.
4.Define the system by identifying the organization unit where the innovation will take place. Who are the relevant actors: customers, suppliers, distribution channels, potential partners?
5.Assess the readiness to innovate of the organizational system in the following areas:
- Organizational motivation
- Management practices
- Supervisory encouragement
- Available resources
- Team support
6. Identify the key leverage points and the main obstacles to innovation, the issues that must be solved to increase the chances of success.
With a clear understanding of the system that needs to innovate, engage a cross-functional innovation team as the next stage. Using the online image provider as a case in point, digitizing photo libraries meant having to redesign the sales and support organizations to fulfill on-line orders. Archive librarians were brought together with sales reps and editorial assistants, all of whom had a role in serving the needs of editors in need of pictorial content. Germany was selected as a pilot country due to a progressive General Manager who endorsed the idea of “looking at the processes and organization structure together starting from scratch based on what the editorial customers need.” Her boss, the owner of the global business, gave her license to break new ground on behalf of the company. She was given full-time responsibility to lead an innovation team that included people not only from the German pilot business but three other lead countries (the U.K., France and the U.S.) that represented the full range of customer needs and requirements.
7. Identify sources of creativity by deciding which actors will be involved in the generating and screening ideas. Do we need representatives from marketing, sales, regulatory, communication, outcome research, human resources, finance? Who should be involved?
8. Get the commitment of key stakeholders to challenge the status quo. Through internal communications raise peoples’ awareness of the need to innovate.
9. Select the right innovation team – a vitally important step. Assess the following creative traits of the potential candidates on the following dimensions:
- Task motivation
- Creative problem solving
- Tolerance for ambiguity
- Lack of concern for social approval
- Risk taking
- Pay special attention to creating a balanced group based on individual profiles.
Now the conditions are right to surface and create big and small ideas that address the challenges at hand. The process culminates in a two day workshop kicked off by the business leader with the innovation need. Information about the external market and internal factors is prepared ahead of time and presented at the workshop to spark idea generation. Emerging trends, current problems and opportunities are turned into insights about what customers value.
In the case of the white goods supplier, the insight that the kitchen is the communications center for young families led to a white board refrigerator with a rewritable surface introduce to the market in three months. In the hospital case, enacting the patient experience of discharge showed that if a patient is told about their medications several hours before discharge, rather than 30 minutes before, plus asked to repeat the information they have been given, the success rate jumps by 45 percent.
10. Collect information on internal and external factors such as trends and current constraints.
11. Generate ideas in a two day workshop
12. Screen the concepts by having the sponsoring manager give immediate feedback: approve, disapprove or request further study with an explanation of why.
The workshop participants (15-20 people) typically work in groups of 5-6 people each. The standard agenda of the workshop is as follows:
The ideas are screened by the full group taking into account the value generation potential for the company, the customers, the consumers and the brand. The key questions for each idea are:
- Does it provide a clear benefit for emerging and/or traditional customers?
- Does it show the potential of creating new rules for the market?
- Is it diverse enough to be sustainable?
- Does it provide a wide growth potential?
- Does it have the potential for a brand equity increase?
- Is it scalable and easy to replicate?
- Is it based on existing core competencies or does it require the acquisition of new competencies?
- What is its maturity stage?
- What resources are required to transform this idea in a potential pilot?
The feedback session with the sponsoring business leader is a form of recognition for the participants as well as opportunity to select the ideas to further pursue.
In the automotive supply example, a leading paint supplier identified that 24 hour made-to-order paint would change the rules of game in the market, forcing competitors to follow. Their innovation solution was the supply chain solution of producing intermediate components and fulfilling orders on the customer site, to demand. It required reformulating products based on the intermediates idea, which took many months. Moreover it lead to a new configuration of “base” and “satellite” plants that reduced the need for capital investment, thereby improving the company’s return on assets by five percentage points.
Implement is the final stage that involves testing the central idea as well as supporting elements. The biggest and most sustainable innovations are of the entire business model: product/service design, the customer interface, suppliers/customers, order fulfillment and cash collection combined.
13. Screen and develop the most attractive ideas, deciding where further research on feasibility is required.
14. Test the concept on a small scale basis.
15. Develop the policies, practices and enabling processes needed to scale up from pilot to full-scale implementation. In this step, structural changes are made to sustain the benefits proven out in step 14.Rather than selling paint, the breakthrough idea was to sell painted cars. That in turn led to the new service of running the painting operations on behalf of automotive assemblers. Beyond selling online photos to editors, the business innovation in photo imagery was providing the industry standard desktop operating system for editors, “locking in” customers as the industry content portal.
The approach described above creates the right conditions for breakthroughs in business practices that can be sustained. It starts with a clear definition of the business need for innovation. The relevant system within the business that needs to innovate is carefully defined. A fact-based assessment of the openness of that system identifies the potential drivers and obstacles to innovation. The people are brought together who can contribute the most creative ideas, from diverse perspectives, to the challenge at hand. In an incubator workshop, big ideas are generated having first analyzed the environment and labeled the dogmas that can subconsciously limit our field of vision in looking for breakthrough ideas. From the potential big ideas, one or two are immediately selected and their potential is explored further. Piloting and scaling up the innovations typically requires the further development of the system in question: work processes, managerial processes and responsibilities, individual competencies, reward systems and structural changes. The groundwork for implementation is built along the way through the direct involvement of key stakeholders. Those who own implementation have been intimately involved in identifying and responding to the need for innovation.
About the Author:
Steve Crom is a leading practitioner of Valeocon’s innovation roadmap, working with clients such as Johnson & Johnson, Novartis, Getty Images and PPG. Contact Steve Crom at steve.crom (at) valeocon.com or visit http://www.valeocon.com.