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You may wish to ignore all of the blogs that have come some ten years before this one. They trace my career journey through higher education, the herbal tea industry and business. But now this blog is dedicated to “Viv’s Health Coaching”.
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That’s the end of the innovation model. Boy, that was dull. I was looking forward to a lively and creative three months, but suffered a slow lingering death by innovation. I don’t think poor old innovation is in a good place.
Why?
Definition
Innovation is implementing new ideas to create things that society or customers value.
The definitions is also expanded to mean the transfer of ‘value’ to the customer in a whole variety of ways including communication platforms, customer services, processes. Articles are written about “twelve ways for companies to innovate”.
This can all be innovative, but it has created a real fog around innovation in terms of harvesting and translating ideas into new products or services, and the role of R&D and discovery centres in companies. Maybe the world could distinguish between ‘new things’ innovation and ‘how to do things’ innovation.
Theory
People are Clayton Christensen mad (disruptive innovation). People are Von Hippel mad (lead-user theory). Innovation should come from creative teams. Innovation should be open. It should be incremental. Disruptive. Sustainable. Blue sky. Blue ocean. Crowd sourced.
My take-out is that innovation should be the thing your company needs it to be. Lead-user theory can help support more radical and novel innovation, working with experts or people at the cutting-edge of the user space. Blue ocean thinking is a method of connecting with people who don’t use your product/service, to create a new market. But, don’t get pulled along by ideas just because they are surrounded by hype.
Processes
There are several models to base a company innovation process on. At its simplest level, Tidd and Bessant’s 4 stages is useful:
Search –> Selection –> Implementation –> Value Capture
Within Implementation often sits a Gate Process (Cooper) for defined ideas to explore the consumer need, market feasibility, commercial potential, testing, launch, during which projects can progress or be killed off.
The importance of culture and people within these processes is hugely relevant. If a company are generating ideas from a small closed group of individuals, or experience ‘group think’ without a good critical discussion at the start, they can enter the journey without all the information to hand. Being overly considerate of the customer may stifle more radical ideas as they don’t always know what they want. My example of this is they’d never have come up with the idea of ingesting live bacteria for their digestion, giving rise to a multi $billion probiotic industry. The push came from the science.
What was interesting was the notion of intrapreneurship, encouraging people and teams to follow their energy and creativity to produce new ideas, being given time and recognition for doing so.
My experience
In a previous company I was part of a small group who introduced an innovation process. Ideas were invited from all staff, from cleaners, receptionists and anyone who had lived experience of the company products. It was fun! Ideas then entered a selection phase with the individuals pulling together a business case or prototype. All I remember is two or three ideas going to market within six months. The process included panels of nurturers, “yes, and…” people, and pruners, “yes, but…” people.
Final thoughts
Forget the theory and the hype. Empower all of your staff to become intrapreneurs and to have their ideas valued. Have a clear process but keep it open and flexible. Allow for ‘push’ from those in your company producing discoveries like your researchers and developers, and balance with ‘pull’ from what your customers want. Innovation often fails first time but the best ideas are picked up from others. Don’t be afraid to fail, and do look around and learn from other company failures.
As my innovation module progresses it centres more and more around the importance of R&D and the role that research plays.
A big note – these are just my initial thoughts, and I’m suspecting there is a lot more to be understood from business research papers. I would welcome comments to correct my misunderstandings.
In my last post I wrote:
“My personal hunch over the years that R&D never maxes out, and there are always questions about value in terms of financial gains, and value in terms of worth and importance that gets played out in politics and culture”.
As the weeks have passed, I’m looking into this more. Value is defined financially as a return on investment, sales, revenue, plus also in terms of wider commercial importance like providing stories for communications, inputting into business decisions. Value = Worth and Importance.
There are several tricky questions to consider:
What is value?
Value describes the translation of knowledge or technical know-how services or products that the customer is happy to pay for. Things satisfy a need or something the customer wants. Without a doubt, businesses small and large can have a huge impact on economics and society so there must be some form of value?
R&D creates a lot of value. R&D creates options from blue sky research or technology know how. These options meet consumer needs or deal with uncertainty and solve problems. As this study says, one challenge is to create a healthy portfolio of viable options. Researchers come into their own here by understanding the problems to be solved and are able to look into the future for opportunities.
What processes are needed?
The first challenge partly comes with the innovation process and how research feeds in to create value be it for new products, services or better processes. Challenges might be at the very heart of the R-D relationship. Difficulties include alignment in big ideas, timings, variables affecting one function of another. In my experience, getting this right won’t happen some of the time, and there has to be lots of opportunity for discussion in forums or casual chats. Maybe we’ve lost some of this through lock down.
Then how does your company R&D feed into the innovation process – usually four steps of searching, selecting, implementing and capturing learning. The same difficulties crop up again – aligning R&D with the company plans, more variables and different wants from perhaps marketing and innovation functions. Again in my experience, so difficult to make it work all of the time. Covid certainly knocked my reasonably well-aligned project roadmap on the head. I suspect this is a much bigger area to explore, so I’ll dump it for now.
Measuring value
I’m constantly asked what is the commercial value of my research. I now realise that is two questions about financial worth and importance. I’ve always struggled to come up with anything that felt like meaningful metrics for my research:
Nothing seemed to really work, and the last one would be a nightmare of data gathering so not really practical.
What business research says
Rouse and Boff says to construct the value network or stream and then assess the role of R&D in creating that value. This looks like a pass-the-parcel of knowledge often back and forth or between groups until it reaches the end user, and the important part is that this knowledge is new and competitive. You can then allocate the costs and returns associated. I must admit, I do not fully understand this yet, particularly how to allocate the returns.
Other studies say that the relationship between innovation (measured by an innovation index) and company performance (sales, growth, cost reductions) is only moderate. Therefore measuring aspects of innovation itself isn’t the full story. The research says the obvious metrics of intellectual property and patenting inventions aren’t that useful either, and these can close down discussions and hinder ideas and innovation.
Knowledge is Queen!
Innovation gathers internal and external knowledge and creates value. Knowledge comes from staff experiences, researching and inventing, or sometimes company acquisitions.
They talk about KINT – Knowledge INtensity and Technology capability and EINT – External knowledge sourcing INTensity. In their research of 300 organisations and collection of data for sales, innovation and knowledge, they found quite clearly that sales resulted from strong knowledge processes and external knowledge coming in, and less about what you’d measure in the form of innovation or R&D outputs.
Other work suggests that strong relationships are vital for growing expertise and success, and reputation growth also relates to company performance.
This work gives clues to how to design processes, develop internal know-how and grow external knowledge opportunities.
So that is:
Knowledge processes and management
External partnerships and open discussions to bring ideas to the table
Deepening partnerships to enhance reputations
Delai also talks about efficient knowledge management systems which I’m happy about having spent the last six months building one.
So what to measure?
For the research-innovation relationship, input and output metrics are still useful proxies. But the capturing of sales and innovation data is less important than capturing knowledge, partnerships and reputation. I guess my remaining questions are, 1. How transferable are these ideas to my company? 2. You still need a group of people to place a judgement on whether something is valued or not, and the approaches written about here will help build a stronger case with more tangible facts and figures.
I like this broader view of companies needing to rethink value beyond the finances, although I suspect this is easy to say when firms are doing well.
Summary
Bessant J & Tidd J (2013). Managing Innovation. https://www.researchgate.net/publication/285052130_Managing_Innovation/citation/download
Rouse WB & Boff KR (2004). Value‐centered R&D organizations: Ten principles for characterizing, assessing, and managing value. Systems Engineering, 7(2), 167-185.
Denicolai S, Ramirez M & Tidd J (2014). Creating and capturing value from external knowledge: the moderating role of knowledge intensity. R&D Management, 44(3), 248-264.
Dancey K and Tilley C (2020). Now Is the Time for Companies to Rethink Value Creation. https://www.ifac.org/knowledge-gateway/preparing-future-ready-professionals/discussion/now-time-companies-rethink-value-creation-heres-what-means-cfos