Innovatyawn

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.

Dusty light bulb
Light bulb image: https://www.dreamstime.com/photos-images/light-bulb-cobweb.html

Why?

  • There are multiple muddy definitions
  • Many of the theories don’t feel useful
  • Innovation processes/gate processes don’t factor in people and culture

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.

Understanding the value of Research as in worth and importance

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:

  • How do research breakthroughs feed into innovation?
  • How do you justify the research spend?
  • What is the impact of other research activities, and what is their value in terms of worth and importance?

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:

  • Numbers of publications
  • Numbers of citations from those publications
  • Uplift in ecommerce sales detectable from research news

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!

Denicolai and colleagues in 2014 suggested this.

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

  • Research as part of R&D and Innovation is a financially valuable and worthwhile pursuit, but it is up to the firm to believe it
  • Research helps create value by maintaining a healthy portfolio of work options and ideas
  • Work needs to be done to build a value-creating machine
  • Tangible input and output metrics (Input: Investment, Output: Patents, publications) are OK proxies for sales, but not great
  • Studies suggest sales performance is related to knowledge, fruits of external partnerships and reputation, and these can be measured
  • Return on investment is therefore a factor of Knowledge, Partnerships, Reputation, alongside proxy measures, and all should be considered to place a judgement on whether research is good value
  • Internal processes and management needs to help R&D max out on value creation, and this will be the subject of another blog post

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

Understanding the ‘r’ in R&D

R&D (research and development) is a black box within organisations through which new ideas are crafted and implemented to drive financial growth. Global R&D spend is colossal with China and US the world heavyweights spending over $500 billion and UK around $50 billion (Statistica 2021).

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. 

Colourful tree

This blog post is just capturing my thoughts and may lead to further research. It is based on my thinking and talking to others, and not necessarily based on my own experiences.

What might some of the challenges be?

Being way back in the company engine room, it is difficult to attribute economic value and return on investment to research activities, and others have written about this (Stephen Diorio 2017).

Defining R&D is difficult and varied, and not having a shared common understanding of the function or people within it may hamper situating it within a company. One useful definition is:

“Research and experimental development (R&D) comprise creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge” (P44 OECD 2015)

Searching and evaluating ideas through to implementing them is not linear and the messy bit in the middle (which is dynamic and exciting) is often difficult to manage and align with fast moving company strategies or changing external landscape

Research may need to serve different clients – the consumer will ultimately purchase products but in some areas like health or medicine, other scientists, professionals and stakeholders are equally important for growing credibility. Here often presents as a language problem.

Why might these challenges arise?

Education, marketing, communications, finances and most business functions you can think of are all supported in higher education departments, therefore a clear identify pervades. You don’t go to university to study R&D; you may study product design, or be a researcher across any academic discipline, but through your education journey you aren’t helped in pulling it all together.

There may be the perception that researchers are boffins or technical heads. I’ve been called critical, and researchers may unwillingly become square pegs within their organisations. The consequences are that ideas and innovations may not receive a well-rounded level of scrutiny or be fully developed.

Opportunities for R&D?

Business success results from operational, cultural, innovation facets that all need to align. Today, firms also derive success from corporate social responsibility, or investing in purpose or mission work. Firms that invest here might be more successful (Jo Confino 2014, and there is other data that shows this).

The ideal is drawing a line right from your company impact (mission, communities, individual beneficiaries) through outputs (products and services) through company and team strategies, and I also believe right into team and individual goals and objectives. Here, research should be able to play an important role too (Tom Brennan and others 2020).

Research as a function may be able to help in multiple areas therefore:

  • Understanding your company culture, policies, people ambitions
  • Evaluating company outcomes and impact
  • Developing mission or purpose by working with stakeholders and devising strategies for evaluation or learning
  • Innovation – research strategy with centrally agreed short-medium-long term goals including both small improvements right through to radial blue sky research
  • Research as a network – researchers are a chatty lot and chances are your teams are well connected externally on an informal or formal partnership basis, feeding in ideas to all four corners of the company

Next steps

I’ll be adding to this post over time as I find new information. 

Reading

Stephen Diorio 2017. https://www.forbes.com/sites/forbesinsights/2017/11/16/proving-the-contribution-of-marketing-investments-and-assets-to-enterprise-value/?sh=716828846e04

OECD 2015 Frascati Manual. https://www.oecd-ilibrary.org/docserver/9789264239012-4-en.pdf?expires=1647012195&id=id&accname=guest&checksum=C6E9968E8CDB9D7B7EFF2B5BB98E7D67

Tom Brennan and others 2020. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/building-an-r-and-d-strategy-for-modern-times

Statistica 2021. https://www.statista.com/statistics/732247/worldwide-research-and-development-gross-expenditure-top-countries/

Jo Confino Guardian 2014. https://www.theguardian.com/sustainable-business/2014/sep/23/business-companies-profit-cdp-report-climate-change-sustainability

Business planning nuggets

Alan Levine: Golden Leaf
Golden Leaf: Alan Levine Flickr (CC0) https://www.flickr.com/photos/cogdog/30273430033/

Can’t believe I’ve a year of my MBA under my belt (online learning with Edinburgh Napier). That’s:

-5 modules

-50+ units of work

-over 30 assignments and tests

I’ve learnt global economics, financing, supply chains, marketing, leadership and managing change and business planning. Although wallowing in the theories around leadership and change are my happy place, my unexpected favourites have also been economics, finance and supply chains.

The latest module was business planning and with an excellent remote tutor and small group of students from around the world, the learning has been a transformational journey. From breweries to a jewellery store, their ideas were inspirational and their feedback supportive.

Here are some nuggets:

  • Have a clear idea – can you tell it to someone in one sentence?
  • Know who your clients/customers are – and precisely how to contact them.
  • Not having enough cash is the main reason why start-ups fail – make sure you have enough money to survive the first year.
  • You can find out an amazing amount of stuff on the web – who your competitors are, gaps in their offering, market trends.
  • Break everything down – even your work flow – and then you’ve thought of everything.
  • Know your limitations, weaknesses, and try and acknowledge what you don’t know.
  • Have fun! There’s nothing better than sitting in your room and saying to yourself “I’m going to earn a million £ from this desk”. The dog looking quizzical from the sofa on the other side of the room.

Whilst I study I’m also aware of my privilege in being able to do so. With the time I’m saving not commuting every day, and money I’m saving on petrol, I am able to invest in this. I have also a very supportive husband who has had a very boring wife for many evenings and weekends. Although to my joy he has built a guitar and bass during this time so I feel less guilty.

I always used to tell students to have a Plan B, so this is mine. Watch this space? Well who knows!