Innovation management is possible. The best companies do it systematically and, as a result, know where and where not to use tools.
The Bottom Line: Five best practice elements comprise the path forward for innovation management. Use these practices to diagnose what is broken, where things need improvement, and how IT can make a difference if you are looking to improve innovation management.
What It Means: AMR Research has seen an increase in inquiries on best practices for innovation management, with most people subscribing to one of two beliefs:
- Innovation is a black box--Good ideas are a matter of chance. The best we can hope for is a disciplined process of assessment, promotion, and execution against the pool of ideas.
- Innovation can be scientifically delivered--Good ideas are the result of hard work. Knowledge management, market research, and pure science are thrown at the problem to push out winners.
The truth: best practice, in this field, inevitably sits somewhere between these beliefs. It is less a matter of solving the innovation management problem than of establishing a culture and organization structure that measures, rewards, and refines the critical design-to-launch or New Product Development and Introduction (NPDI) process.
Five best practice elements are granular enough to pursue within a project or initiative. Each is also capable of using IT tools well enough to far outperform manual or ad hoc processes. They are as follows:
- Capturing ideas in a coordinated structure--Raw knowledge management is a proven failure for most, since it lacks a coordinated or guiding principle for finding relationships among ideas. Coordinated structures, such as the approach used by South African Breweries working in SAP’s XPD application or Adidas’ use of a concept-bill-of-materials application built with MatrixOne, focus innovation and limit the wild goose chase.
- Turning ideas into products--The most common symptom of broken innovation management is a slew of bad ideas that won’t die. A former product development executive at Unilever posited a range of 30% to 90% of effort in R&D that is wasted. Best practice is to formally define and honor a governance process that prioritizes work. Stage Gate is the most common work process. IDe sells a widely used application to support the process, but many PLM vendors offer at least something here. Also essential is the use of digital experimentation tools like crash simulation in the Automotive industry or combinatorial chemistry in Pharmaceuticals.
- Minimizing time to peak sales--If time is money, then time to market measures the cost of each attempt with a new idea. Best practice here is a matter of pure business process and maximizing the number of at bats for an innovative company. A big part of it is communication between engineering, manufacturing, and sales. The most useful proven IT tool is electronic design change management to replace e-mail, phone, and fax. Also critical is coordination among interdependent activities, a function supported best with program management applications.
- Translating changes/feedback into product extensions--Customers’ needs define what ideas are good. Unfortunately, the typical siloed NPDI process fails to systematically tap this source of information. Best practices include IBM’s mid-1990’s overhaul of its NPDI process around a customer-driven engineering effort that formalized solving customers’ problems rather than pushing out new technologies. IT tools to support this element have evolved in field service and call center applications that capture such feedback and analytics to convert it to product parameters. Vendors like Attensity and SAS concentrate on the analytics, while many tools can be used to collect the underlying data.
- Rewarding good ideas--Ownership of the complete NPDI process is often no higher in the organization than a director level and only in a handful of cases can be tagged to an individual above the level of vice president. Only where some sort of Chief Innovation Officer (something we have seen in the Food business) or Chief Product Officer (not unknown in High-Tech) is in place can ideas be rewarded meaningfully. The norm is to punish functional roles like R&D or engineering for failure to meet dates. IT tools should be easy to apply to this problem under an Enterprise Performance Management (EPM) strategy, but only with the right organizational ownership.
Rather than look for shortcuts to implement innovation management, companies should assess which of these five elements is most broken and concentrate on what metrics they have or could create that would set an as-is baseline. Setting targets for what these metrics need to get to provides a relatively easy litmus test that IT tools must pass to justify their role in your company. Oh, and start the search for a Chief Product Officer.
AMR Research originally published this article on 30 October 2003.