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1、ENT 470/570 - 2009 03 2009: STRATEGIC INNOVATION MANAGEMENT Ozzie Mascarenhas S. J., Ph.D.May 12, 2009While for most companies continuous innovation is a strategic imperative, the task of managing innovations seems to be narrowly defined. Most companies treat innovations as discrete objects or proje
2、cts, whether they relate to a new or revamped process, new or retrofitted brand or service, or a commercial innovation such as a new sales channel. Corporate executives fail to see innovations systemically as a part of the companys innovativeness the capacity to ideate, conceive, develop, test, roll
3、 out, and improve new market offerings as a whole. Most executives look at just part of the innovation process. Companies like Xerox, Intel, Gillette, and Sony fell behind for a while because of their systemic deficiency of viewing innovations as a vital process of the entire company at all times, w
4、here the whole is greater than the sum of its parts. There is much literature on how to best manage innovation empower employees, encourage initiatives, cultivate risk taking, overcome mindless status quo, and the like. But managers need much more than such generic advice because there are many kind
5、s of innovation (e.g., technological breakthrough, continuous process improvement, process revolutions, product/service innovation, disruptive innovation, radical innovation, market breakthrough, and strategic innovation), and each requires a profoundly different managerial approach (Govindarajan an
6、d Trimble 2005: xxi). Managing each type of innovation has to be itself innovative and creative (Florida and Knight 2005; Kanter 2003; Kaplan and Norton 2005). When it comes to innovation, few modern corporate executives are more closely associated with revolutionary change than Steve Jobs, the icon
7、ic leader of Apple. During his tenure at Apple, the companys product introductions have altered not only how we talk but also how we live: the Mac, the iPod, iTunes, the iPhone 3G. Now that Steve is ailing from pancreatic cancer, the Apple board has been seriously searching for a worthy successor. I
8、nnovation is critical for long-term success of Apple. Boardroom discussions on choosing a successor to Steve often center on two questions: How can we sustain innovation? Do we have a plan for developing future leaders who can facilitate this goal? Truly innovative executives are very rare. Perhaps
9、5% or 10% of the high-potential managers within a company at any given time have the skills and attributes to become breakthrough innovators. Companies usually develop leaders who can replicate rather than innovate; that is, rising stars realize that to be promoted, they need to mirror incumbent lea
10、ders (Chon, Katzenbach and Vlak 2008: 63-64). Hamel and Getz (2004: 78) asked more than 500 senior and mid-level managers in large U. S. companies to identify the biggest barriers to innovation in their respective organizations. The number one response was “short-term focus” followed by “lack of tim
11、e and resources.” The first response indicates senior managements presumed obsession with near-term earnings, and the second response suggests that innovation is highly dependent on investment. Both factors limit a companys productivity and growth.Corporate Culture for InnovationCorporate culture re
12、fers to the core set of ideas and attitudes, policies and practices shared by the members of a firm (Despand and Webster 1989; Henard and Szymanski 2001; Tellis, Prabhu and Chandy 2009). Obviously, such a corporate culture of attitudes and practices differs across various functions such as innovatio
13、n management and new product development, human resources management, production management, financing management, and marketing management. While these attitudes and practices could be drivers of innovation, they can also be inhibitors of creativity and innovation. For instance, obsession with cash
14、 flows, profitability, shareholder value, accountability, structure and processes can slow down, if not paralyze, corporate innovation. In this connection, Govindarajan and Trimble (2005: 5) speak of an organization code that enables or disables a company from pursuing innovation. Following Govindar
15、ajan and Trimble (2005: 5), Table 3.1 explores possible organizational codes of efficiency versus creativity in formulating corporate strategies. Code A is about discipline and hierarchy while Code B is about creativity and democracy. Code A is risk averse and operational expertise, while Code B is
16、risk-absorbing, creativity, innovation and venturesome. In most companies, Code A is mainstream and code B is counterculture. The Code A-Code B debate dominates todays corporate and political meetings and defines the agenda. The truth is, we need both. If we want new blood, new thinking, new innovat
17、ions, new products and services, new and exponential growth, then we need more of Code B. Creativity (Code B) should precede efficiency (Code A); business plan (Code B) should precede profitability (Code A). You cannot expect long-term profitability without a new idea, without a new business plan, a
18、nd without resultant corporate growth. In relation to innovation management and new product development, Tellis, Prabhu and Chandy (2009) identify three firm attitudes and firm practices that may drive innovation: Willingness to Cannibalize: This is an attitude that puts up for review and sacrifice
19、current-profit generating assets, including current profitable and successful innovations, so that the firm can get ahead with the next generation of innovations (Chandy and Tellis 1998). Future Orientation: This attitude forces a firm to realize the limitations of the current technology and the eme
20、rgence of a new generation of technology that may become dominant in the future (Yadav, Prabhu and Chandy 2007). Risk Tolerance: This is an attitude that is ready to trade a current, sure stream of profit-generating assets for a future, uncertain stream of profits that can come from radical innovati
21、ons (Tellis, Prabhu and Chandy 2009). Empowering innovation and product champions, establishing attractive incentives, and promoting internal markets and competition are three proven business practices that can engender and sustain the above three pro-innovation attitudes.Related to the above three
22、pro-innovation attitudes are three strategies for innovation that Govindarajan and Trimble (2005: 17) investigate and demonstrate. They call existing business Core-Co and new emerging business NewCo. Forgetting: NewCo must forget some Core-Cos old success formulas, old and stable answers to what Cor
23、eCos business is and how it wins. Mere conversations and debates will not do this. NewCo must alter the organizational design in order to be distinct from CoreCo. Borrowing: NewCo can gain, however, critical competitive advantage from borrowing existing and successful expertise, skills and resources
24、 of CoreCo such as manufacturing capacity, specialized skills, sales relationships, distribution channels, and supply chain management relationships. Learning: Whereas CoreCos success formula is proven and stable, and NewCo is a guess, NewCo must learn, resolve critical unknowns in its new business
25、plans, and zero in on a working business model as quickly as possible. If NewCo cannot forget CoreCos old success formulas, it will struggle to learn its own. The above three attitudes and three strategies can help a firm to leapfrog from the stifling past into the creative future. A strategic exper
26、iment will be successful only to the extent it is willing to cannibalize, is future-oriented, is ready to take risk when necessary, is ready to forget the past even though success formulas, is ready to borrow proven skills and resources from the past, and, above all, is ready to learn as it goes alo
27、ng its path to great success. CEOs Challenges in Managing InnovationsA common top management problem in managing innovations is that business goals are stated so broadly or vaguely that they do not help to identify the best opportunities and innovations to pursue from a cadre of available options. F
28、or instance, if the top-level goal is to “create growth,” then is it best satisfied with a new technology that improves product performance by 20% and will empower you to take market share from your competitors. Instead, should you innovate new products or variants of existing brands that will enabl
29、e you to tap into new markets that will ensure long-term corporate growth? Innovations are mere tools and skills, which by themselves do not ensure sustainable competitive advantage nor even steady profitability“As commercial processes commoditize in a developed economy, they are outsourced or trans
30、ferred offshore or both, leaving onshore companies with unrelenting pressure to come up with the next wave of innovation. Failure to innovate equals failure to differentiate equals failure to garner the profits and the revenues needed to attract capital investment. It behooves us all to use our brai
31、ns to get out in front of this Darwinian process” (Moore 2004: 87). Sony, for example, had an impressive new product record throughout the 1980s with market breakthroughs such as the Walkman and the PlayStation. By the 1990s, however, Sonys engineers were becoming increasingly self-sufficient, compl
32、acent and insular suffering from a damaging “not invented here syndrome,” even as competitors were introducing next-generation products such as Microsofts Xbox and Apples iPod. Sony executives and engineers believed that outside sources of innovation were no so good compared to internal ones. Meanwh
33、ile, they missed great opportunities such as MP3 players, flat screen TVs, and instead developed unwanted products such as cameras that were incompatible with the worldwide standards of memory, storage, reproduction and electronic transmission. Creativity and innovation, however, are not enough. The
34、re is a big difference between being a creative firm and an innovative enterprise: the former generates many ideas; the latter generates much cash (Levitt 1963). A failing company needs innovations that quickly turn into market-ready ideas to good products to good markets and good markets that turn
35、into good cash and financial returns this is the innovation-to-cash chain (Andrew and Sirkin 2003: 78). Motorola rose to prominence with the first generation of cell phones; Sony created instant wealth in fast spreading fads like the collector card game Pokmon.Finding a great idea is not enough. You
36、 must find a great leader to endorse and sponsor it. Moreover, we need processes, techniques and organizational designs that can conceptualize, prototype, design-test, test-market and implement innovative ideas (Drucker 1985; Galbraith 1982; Hamel 1999; Kim and Mauborgne 2000). Moreover, implementin
37、g innovations faces stiff internal resistance from accountants and finance people on grounds that they consume too many resources, from marketing people that they cannibalize existing products, and from top executives that their financial performance results are not clearly predictable. Meanwhile, t
38、he competitors can go ahead and redefine the industry. Thus, Canon went ahead of Xerox; Wal-Mart forged ahead of K-Mart and Sears; Fuji bypassed Kodak; Toyota Prius outpaced Ford Escape, and in general, the foreign auto companies put U. S. auto companies behind.Strategic innovators need more than a
39、great idea. They need to move from idea to execution. With a great idea in hand, you move to a quest that would bring both great expectations and excruciating frustrations. Thus, leaders of any ground breaking business idea: a) need to attract funding, b) learn quickly to predict success from failur
40、e, c) rally people around a fuzzy view of the future, d) reorganize to leverage the lessons learned, and e) manage expectations of performance amid chaos. Besides these five challenges and constraints, the leader must: (Govindarajan and Trimble 2005: 2). Overcome tensions between the new idea and th
41、e old product that it may efface, Disengage core employees from existing products and deploy them to the new idea, Bring about changes in the existing power structure required to support the new idea, Siphon funds from the old products to new ideas, and Recruit new talent, if necessary, to implement
42、 the new idea; this makes managerial task very challenging Strategic innovation and the strategic experiments that accompany it need the support of the organization. Both fail if the company relies solely on the heroism of a hyper-talented and hyper-passionate individual who has a great idea, and ev
43、en has an executive champion to back it. For instance, Joline Godfrey, the leader of a great idea in Polaroid, created a business that focused on commercializing services that enhanced vacation experiences with photography. She had all the right stuff: boundless energy, ability to excite others enou
44、gh to work long hours with her, and even had a dedicated senior executive champion. Nevertheless, she failed to obtain unflinching support from the top. Polaroids old mentality of preserving the core business never gave her a fighting chance to succeed. Gifford Pinchot (1985) in his book Intrapreneu
45、ring lays down “Ten Commandments” for intrapreneurs to succeed:1. Come to work each day willing to be fired.2. Circumvent any orders aimed at stopping your dream.3. Do any job needed to make your project work, regardless of your job description.4. Find people to help you.5. Follow your intuition abo
46、ut the people you choose, and work only with the best.6. Work underground as long as you can publicity triggers the corporate immune mechanism.7. Never bet on a race unless you are running with it.8. Remember it is easier to ask for forgiveness than for permission.9. Be true to your goals, but be re
47、alistic about the ways to achieve them.10. Honor your sponsors.Organizations are almost always more powerful than individuals. Hence, executive intrapreneurs with a strategic innovation idea will have to fight both the long odds facing any strategic experiment as also the organization fighting them
48、at every turn.Innovation Management and New-Product Development Value ChainsInnovation is more than new product development. There is innovation in purchasing, in processes, in production, in employee motivation management, in marketing, in customer acquisition and retention, in business models, and
49、 everywhere in the corporation. The domain of innovation is very broad. Where a product is in its life cycle determines which kind of innovation will do the most good for the company (Moore 2004).A companys innovation success is a function of many variables, market factors and execution stages. All these relate the entire new
