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Canon of KnowledgeChartered Institute of Marketing
Innovation
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Objectives
The Canon of Knowledge is a focused, dynamic
reference and inspiration source for Marketers. The
Canon covers a number of subjects - Innovation is
just one of them.
The aim is to identify and promote the information
and knowledge about Innovation, which is critical to
successful marketing practice.
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Contents
The basic questions
Innovation management
Inspiring innovators
Software and innovation
Practical innovation knowledge
and what to know about creativity
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The business hastwo basic functions:
marketing and innovation. Marketing andinnovation produce results; all the rest are
costs
Peter Drucker
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Why innovate?
Innovation is a crucial source of competitive
advantage:
Nokia, Intel, Sony, Seiko, Corning & Motorola have all generated sustained
competitive advantage. These firms have generated 49% of their revenue
through new products versus 11% for mediocre performers.
Without innovation core competencies can
become core rigidities
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What is Innovation?
A Choice of Definitions: Innovation is the sum of invention plus the commercialisation of that
invention. (D.R. Ireland)
A major innovation is one that sparks further innovations andinvestment (e.g. the computer) as opposed to other innovations whichare primarily improvements (N. Rosenberg)
Innovation is a process by which a company
Builds insights about its customers
Identifies and evaluates unique market opportunities and prepares
a plan to seize them Develops a stream of winning products (JP Deschamps)
An Invention is a new product; an Innovation is a new customer benefit(P. Doyle)
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What is Innovation?
A Choice of Definitions:
..the ability to look where everyone else is looking and see what no-one
else can see.Richard J Duggan
Innovation is the practical application and use of creativity
Creativity is thinking up new things .Invention shows it can be made
Innovation is making it commercially valuable
Research is the Transformation of Money into Knowledge - Innovationis the Transformation of Knowledge into Money
A.C./ McD
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Commercial Innovation
Manufacturing
Processes
BusinessProcessesNew Services
New Products
What is Innovation?
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What is Innovation? -
Terminology
Dimensions of innovation
product
service
process (manufacturing or service delivery system)
business process
Degreesof innovation
incremental
radical /fundamental
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Where does innovation come
from?
While the sources for innovations are literally all around us, thereare two avenues to harness them:
Formal Innovation Processes External Innovation, such as innovation outsourcing or a
formalised external scouting structure / network.
Institutional Innovation
Internal R&D
NPD processes New Venture Division / Internal Venture Capital mindset
Cultural innovation
Innovation is at the centre of management efforts (3M,Rubbermaid)
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Where does innovation come
from?
Informal Innovation Processes
Individual ideas and observations (often the source ofentrepreneurship)
Innovation Camps (professionally orchestrated, strategicallydirected idea generation sessions).
Brainstorming sessions (let a 1000 flowers bloom; weird &wacky & all is welcome
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Innovation Management
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Managing Innovation
Human Resource Management
Innovation Strategy
Creativity / Ideas
ManagementPortfolio
Management
Implementation
(NPD, etc) Market-Products
-Processe
-Services
Culture
Motivat ion
Appraisa l
Goals
Communicat io
Technology
Measures
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Innovation Strategy
Has innovation been introduced as a fundamental part of your company
philosophy and values?
What is the role of technology in innovation?
Does top management spend sufficient time supporting all stages of
innovation?
Are competitors innovation rates known/monitored?
Are innovation goals / measures defined - for new products, services
and processes?
Is there a good balance of truly innovative projects as well as product
improvements?
Does your innovation strategy integrate all five areas of innovation
management?
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Creativity & Knowledge
Management
Are creative ideas collected on a regular basis from all
employees?
How many ideas for new products, services and processeswere developed in the last 12 months?
Do ideas originate from all departments, often from contacts with
customers?
Are ideas quickly developed into new product / service
concepts?
Are creativity techniques and workshops used?
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Portfolio Management
Is there a good balance of ideas for new products, services and
processes?
Are concept reviews held regularly?
Are choices made quickly?
Is there a good feedback mechanism from actual product
performance to ensure screening decisions
Does the responsibility for screening decisions lie too high inthe company hierarchy?
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Implementation
Is this a bottleneck stage, because too many projects are
attempted? Are best practice techniques such as simultaneous engineering
applied, where appropriate?
Is your time-to-market comparable to your competitors?
Are manufacturing ramp-ups fast and efficient?
Does manufacturing regularly develop new processes?
Are project reviews effective and used to improve performance?
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HRM - People Management
Is the broad meaning and importance of innovation-new
products, services and processes- understood by allemployees?
Are clear innovation targets set and known by all employees?
Do human resource policies support a culture of innovation
through stimulating a creative, problem-solving working
environment? Are organizational structures flexible andeffective?
Is innovation covered by employees appraisals?
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Portfolio Management
Innovation Strategy
Has innovation been introduced as a fundamental part of your company philosophy and values?
What is the role of technology in innovation?
Does top management spend sufficient time supporting all stages of innovation?
Are the innovation rates of competitors known and monitored? Are innovation goals - for new products, services and processes - defined?
Is there a good balance of truly innovative projects as well as product improvements?
Does your innovation strategy integrate all five areas of innovation management?
Human Resource Management
Is the broad meaning and importance of innovation-new products, services and processes- understood by all employees?
Are clear innovation targets set and known by all employees?
Do human resource policies support a culture of innovation through stimulating a creative, problem-solving working
environment? Are organizational structures flexible and effective?
Is innovation covered by employees appraisals?
Creativity Management
Are creative ideas collected on aregular basis from all employees?
How many ideas for newproducts, services and processeswere developed in the last 12months?
Do ideas originate from alldepartments, often from contactswith customers?
Are ideas quickly developed intonew product / service concepts?
Are creativity techniques andworkshops used?
Is there a good balance of ideas for
new products, services and
processes?
Are concept reviews held
regularly?
Are choices made quickly?
Is there a good feedback
mechanism from actual product
performance to ensure screening
decisions
Does the responsibility for
screening decisions lie too high inthe company hierarchy?
Is this a bottleneck stage, because
too many projects are attempted?
Are best practice techniques such
as simultaneous engineering
applied, where appropriate?
Is your time-to-market comparable
to your competitors?
Are manufacturing ramp-ups fast
and efficient?
Does manufacturing regularly
develop new processes?
Are project reviews effective andused to improve performance?
Implementation (NPD, etc)
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Upstream innovationdefinition
Jean-Phillipe Deschamps argues that Innovation can be managed as a
linear process and split into two major parts:
upstream innovation - the process of developing and cultivating ideas
for new business creation and evaluating their merit downstream innovation - the process of converting selected
opportunities from concepts to market-ready products or services.
Most companies have a formal downstream process, but very few
manage the upstream process in a formal way, which creates fewer
ideas and fewer innovations linked to business goals. He details three
stages to the upstream process: Fertilisation: Envisioning Opportunities (usually a top mgmt. task)
Seeding: Generating & validating the Idea Flow (innovation teams, etc)
Incubation: Managing the early feasibility process (budgets, feedback, time
frame)
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Upstream innovationSome ideas for getting upstream results:
The 3M example of allowing certain employees up to 20% oftheir paid time on independent research efforts
Insist on working with people who have their ear to theground, who have seen the ocean and who have theability to network with intelligent purpose.
Professionally managed Employee Idea Schemes (caution:many fail because they are poorly conceived and managed).
Thinking Communities and Knowledge Forums asIntranets within the organisation
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Upstream innovationSome ideas for getting upstream results:
Mixing cultures, skills, functions, age and gender within ideateams
Creating an Intrapreneur structure / philosophy
Creating a New Venture Incubation unit / division.
Innovation Task Forces for Product, Services, Processes,Technology,
Setting Strategic Innovation goals as major management
focus (Rubbermaids goal to have 50% of their products lessthan 5 years old)
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Upstream innovationSome challenging views:
Brian Quinn, Amos Tuck Business School, having studied GE,
IBM, Polaroid, etc. found that not a single major productinnovation has originated from a companys formal planningprocess.
Karl Kalcher, MindFolio Ltd, having worked with Clarks, LEGO,Motorola, HP, Polaroid on innovations believes that companiesmust encourage rebels and missionaries, revel in managing
creative tension and strive to obtain results through a parallelprocess of quick experiments and disciplined innovationmethodology. And they must insist on managing a tight After-
Action-Review for every try.
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Upstream innovationSome challenging views:
.
Motorola believes in creating new avenues through learning bydoing
Most practitioners agree that cross-functional project teamsare the only way
Intel insist on staying scared, believing that they are, at alltimes, only two years away from bankruptcy.
Dana requires employees to generate two ideas for process
innovations each month (and supports them with correspondingtraining too)
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Send the Wrong signals
Itll Never Work
We Explored That Thoroughly 10 Years Ago
OK, If We Can Get Somebody Else to Pay for It
Were Too Shorthanded to Work on Blue Sky Ideas
Its Not in the Business Plan
Its Not Your Job to Talk to Customers
Pocket guide to Poor Innovation
Management
A.C./ McD/3M
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Pocket guide to Poor Innovation
Management
Rules to avoid Innovation
Be Suspicious of Every Idea that Originated Below You
Insist that People Go Through All LevelsWith a New Idea
Express Criticism and Withhold Praise
Make a Decision to Reorganise in Secret andMaximise Surprise
Be Control Conscious
Never Forget that People at the Top Know Everything
A.C./ McD/3M
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Pocket guide to Better Innovation
Management
A.C./ McD/3M
Rules to improve Innovation
Increase base of knowledge upon which innovation can be based Education should not focus on specific skills Make change based on what you want Blur distinctions between jobs Base salary on what someone can do (potential)
Dont shield information - good or bad Daily team meetings
Give logical and compelling reasons for change Establish favorable workplace climate for change and trust
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Pocket guide to Better Innovation
Management
A.C./ McD/3M
To activate Innovation
You need to know where you want to go - VISION
You need to know where the rest of the world is going - FORESIGHT
You need ambition - STRETCH GOALS
You need freedom to achieve your goals - EMPOWERMENT
You need to draw from and work with others -
COMMUNICATION, NETWORKING
You need to be rewarded for your efforts there is nothing more rewarding than
RECOGNITION from your peers
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BEST PRACTICES IN
INNOVATIION
Inspiring Innovators
I i i M f i
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Innovation in Manufacturing -
Trends
Was focused on products, NPD processes and time-to-market
Now moving to more flexible NPD processes (faster less formal);
auditing innovation performance
Greater focus on choosing the right innovation projects (portfolio
management)
Clever use of process and service innovation to strengthen
competitive advantage
I ti i S i I d t i
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Innovation in Service Industries -
Trends
High level of interest in improving performance
Focusing on better/documented living processes
Conducting innovation audits to determine current performancelevels
Moving to look at other types of innovation - not just product and
delivery
Attempting to implement more effective cross-functional teams
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Inspiring innovators 3M
3M The company:3M is dedicated to the innovation of products in over 28 sectors from adhesives to
products for cars. 3M is an American company with global offices. Most employees
are hired locally because they know their markets, customs and culture better than
anyone their global network helps bring customers innovative and useful products.
Just some of 3Ms products
(picture) (picture)The postit notes. The inhaler
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Inspiring Innovators 3M
The culture of innovation
Innovation is encouraged from the top 3Ms motto is we are forever new.
Cross-functional teams work in the products sectors, e.g. automotive products, officeproducts.
New ideas are encouraged within those sectors
Constant tweaks are made to those products to fulfil customer needs
Ideas are sought from outside 3M to improve the quality of upstream innovation
There is continual measurement of the innovation process through the 6th Sigmasoftware system
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Give it
a go
attitude
Give a
person a job
&the
freedom
to do it
Teams
Defiantrole
models
15% rule
Tolerance
of mistakes
Recognition
Management
by
walking
around30% new
product
rule
Growth
with the
business
Self
appointedinnovators
Toleranceof
bootlegging
THE
CUSTOMER
3M
A.C./ McD/3M
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Inspiring innovators - DYSON
The companyDyson emerged during the 1990s as one of the leading vacuum cleaner
manufacturers through the creation and production of the paperless bag
vacuum cleaner no other manufacturer
s vacuum cleaner came close.
The Products
(picture) (picture)
The most powerful upright The only 2-drum wash action
45% more suction than a Dual Cyclone
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Inspiring innovators - Dyson
The Culture of InnovationLeadership: James Dyson, the creator of the dual cyclone vacuumcleaner and founder of Dyson gives sets the tone for innovation at Dyson.
The teams: Design staff work in teams and wear casual clothing, sothat they have nothing to hide behind. Ideas are continually brainstormed
and then built accordingly. Every member of staff when they join Dyson
has to build one of the vacuum cleaners.
Design teams are within easy reach of the production lines, so they can
walk over and talk with those manufacturing the vacuum cleaners to ensure
that any problems are countered early on.
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Inspiring innovators: Dyson
Control MechanismsDyson vacuum cleaners are constantly taken to homes and usersare asked what their likes and dislikes are. Changes are mad to thevacuum cleaners in accordance with the customers wishes. Designchanges are made in the cross-functional teams.
New products and New ideasIn the words of James Dyson, you know the feeling when some
everyday product lets you down.I could have designed this bettermyself. Each employee is encouraged to think in this manner.
The product is then designed and redefined accordingly.
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Inspiring innovators: Convergis
The CompanyConvergis is a world-wide leader in innovative billing systems. The
billing software is used by large organisations to bill their customers.
Convergis is renowned for the scalability of its products.
In the fast moving telecom sector constant innovation is vital.
Organisations that do not innovate will die.
The ProductsSoftware for billing. The products and business to business
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Inspiring Innovators: Convergis
The culture
A vision of innovation comes from the top
Cross functional teams
Trusting culture in a market area where there is constant breakthroughinnovation
The products are constantly tried and tested by customer and the product istweaked accordingly
The ControlConvergis get constant feedback from customers, market research teams,such as the Yankee group. Speaking at conferences gives them theopportunity to discuss their products with others in the sector
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Inspiring Innovators: MBNA
The Company MBNA (Maryland Bank National America) is an American company
specialising in lending credit card lending to the consumer markets.Over the last 9 years MBNA has captured over 13% of the market in
the UK and is still growing strongly. MBNA has been truly innovative in the way it has developed the
customer service processes and channels to customer
Products
MBNA Credit Card Insurance
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Inspiring Innovators: MBNA
The Culture MBNA believe that employing the right people leads to acquiring the right customer
Employees are given career path
Salaries are well above the local and industry norms
Customer service staff are empowered through training to give customers the rightadvice and solve their problems
55% of customer service staffs time is spent in training
The Control Mechanisms
MBNA monitors the activities in the customer services department on a daily basis
Customer service department know how they are performing on a daily basis.Excellent service is rewarded accordingly by the company
Customers are constantly asked their opinion, MBNAs 5% customer attrition rate isthe lowest in the business, it speaks for itself.
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Commercial Innovation
Use of
3rd Parties
New services
CustomerProfiling
New Insurance
Policies
Inspiring Innovation in Insurance
Channels
+
++
+
+ ?
First-to-market?
Pre-sales
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Software for innovation
Case studies of software support
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Software-based innovation
Software provides the critical mechanism through which managerscan lower costs, compress time cycles, decrease risks and increasethe value of innovations.
Software can be used to: Define how people interact
Dictate the information they use
Determine what they communicate about
Identify where they can be located
Enhance the skills It can become integral to the organisation
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Innovation software
What type of innovation software exists:Innovation software exists to support the innovative thought and processes of
the company. Usually software can only support one part of the process,either the initial ideas creation, the portfolio management or the new
product development phase.
Creative and New Ideas: Software exists to assist a small team bouncingideas of one another. Generating new ideas is very often the biggestchallenge for companies so, having software gives the teams support and astructure.
Portfolio Management: Developing new ideas, then leads to having tocreate a selection process by which only the best ideas get through. Anexample of this type of software is at Oxford Assymetry where software hasbeen developed by Steve Davies to identify new compounds which aremore likely to be made into drugs.
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Innovation software
Knowledge Management: Managing data and ideas within acompany is another means to improving the quality of innovation ina company. Software gives employees access to other employeesdocumented findings. Companies such as PA consulting, Cap
Gemini and McKinsey specialise in developing and implementingsuch software.
Measuring software: Software also exists for companies to pinpointtheir progress on specific projects. Such software is developed bysuch companies as Q Management, Fishbone and Kaiser.
New Product Development: The stage gate process usuallyrequires various teams working in parallel and a considerableamount of resource allocation. Such software provides informationon who is working on which project and also gives a crosscomparison.
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Innovation software - selection
There is a wide selection of software available, each has the potential to
help with a different part of the innovation pathway. Some of the software is
only suited to a particular size of company. A website giving you a list of
different types of software is as follows:www.zdnet.com
How to decide to purchase software:
Identifying why you need the software
Listing the costs versus the benefits
What are the advantages of using software rather than other non-
software processes
How long will the implementation take
Is the software suited to the size of the project
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Innovation software: KODAK
The company
Kodak produces films and cameras for both the
commercial and industrial markets. Such a companyconstantly needs to evolve.
The software:
Kodak have a worldwide system, WIN. This is adatabase which generates cross-functional ideas. Thecompany wanted to stimulate ideas in an informalmanner
96% of the ideas generated through WIN were unusable
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What was the problem with WIN?
96% of the ideas generated through WIN were unusable WIN was modified by installing idea focus, this served
as an early filter. It focussed on real customer needs,
advocates and short proposals
Innovation software: KODAK
Innovation software: Hewlett
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Innovation software: Hewlett
Packard
Hewlett PackardComputer company that constantly seeks develop new products for this
ever burgeoning market.
The software:To assist new concepts and ideas Hewlett Packard use the intranet.
This system enabled employees to exchange ideas and the email
was programmed so that if one employee wrote an email on a
specific subject they would be put in touch with another employeewho had written an email on a similar subject.
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Innovation software: CGEY
The Company: CGEYCGEY is one of the largest management consultancy firms in
the World providing effective solutions through every part of the
business cycle from first ideas to long term operations.
The Software: Knowledge Management Employee Structure: Professions divided into communities
Community Portal:
Discussion forum set up where community members can shareknowledge.Primarily used to integrate and implement gain access to
knowledge on projects and clients.
Components are generally purchased off the shelf from existing partners.
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Practical Innovation
Knowledge
Starting with the Mindset
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The innovation mindset
Effective innovation management starts with you and your mindset.Here are some Lessons Learnt from practitioners who havedeveloped many new businesses and products.
Innovation is a company wide process and involves all aspects ofthe Value Chain on an on-going basis. Too many managers have avery narrow view of Innovation, i.e. it only concerns New ProductDevelopment or R&D.
Marketers carry the Duty of Initiative for innovations. The key
driving force for innovations are customer benefits and, therefore, itis the Marketer who should identify and galvanise the business toseek new solutions.
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The innovation mindset
Life is too short to wait for Eureka. New thinking, idea generation,innovations do not, for the most, rely on sudden flashes of brilliance.
A disciplined, creative innovation process will yield surprisingly
effective results and will usually involve a multitude of people. Aswith most things, its about smart, hard work rather than hope.Specialist Innovation Consultants can be valuable catalysts during aspecific process.
Constraint is the essence of creativity. In order to gain effective
results from an innovation process, managers must clarify
essential constraints, not just budgets. Most innovation teams willfind solutions to the most difficult challenges if the road map is
clear from the outset. Moving goalposts several times during a
process will usually kill spirit and outcome.
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The innovation mindset
A generous budget is no substitute for poor or indifferent top
management. Disunity amongst senior managers about the
direction or the priority of a given innovation project will sink any
effort by the innovation team. It is essential, therefore, to ensure that
consensus exists within the management team prior to project
commencement.
Essential Innovation Ingredients: Hard Fun, inspirational
leadership, internal and external people with different skills and
outlooks, a clear brief, reasonable funds against reasonable
deliverables, some training about idea generation and effective
creative processes and..customer focus.
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Mindset: A New Spiritual GoalThe Way Forward
Put imagination before experience(innovation not optimisation)
Go against the flow
Create the future
that we want
A.C./ McD/L.Burnett
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Mindset: A New Spiritual GoalTo Create Our Future We Must Be Prepared to...
Challenge industry conventions
Challenge our own assumptions about the
nature of the business we are in Learn from others
A.C./ McD/L.Burnett
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Mindset: A New Spiritual GoalTo Create Our Future We Must Be Prepared to...
Create alternative pictures of the future
Create new customer needs rather than
merely satisfying existing ones Leverage the inherent power of our brand
A.C./ McD/L.Burnett
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Measuring innovation
A frequent weakness of management is to think through and setrealistic expectations for a project. Good projects can thus bedamned to failure before they even got off the ground and prevent
the spreading of a positive innovation culture.
There are four categories of Innovation Measurement:
measuring the internal skill base / efforts
e.g. patents per employee; R&D expenditure in relation to
competitors, etc measuring the results
e.g. New Product share of total profits; Time to Market, BreakEven Time, etc
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Measuring innovation
measuring innovation culture
e.g. Response Times to competitor action, cross-functionalprojects as % of total, etc
management accounts
e.g. R&D costs as % of revenue, etc; Innovation costsdedicated to core business, new business and early trials,etc
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Protecting innovation
Intellectual Property Rights (IPR) come in many forms, e.g. patenting a
technical invention, protecting a design, trade marking a logo,
product or service and / or copyrighting of a piece of creative work.
The following sources can provide further assistance:
Patent Office www.patent.gov.uk
Chartered Institute of Patent Agents, London, 020 7405 9450
IPR helpdesk www.ipr-helpdesk.org
Government www.intellectual-property.gov.uk
EU registrations Lovells-Boesebeck-Droste, Alicante, Spain+34 96 514 41 05
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Outsourcing innovation
The basic premise of Innovation Outsourcing is the fact that no single
company can hope to possess all the resources, skills, eyes and
ears and, especially, time, to grow the business successfully.
The decision to outsource is preceded by a strategic process in
which the company examines their Value Chain, their processesand activities in order to determine the scope for Innovation
Outsourcing. The basic objectives are to:
lower innovation costs
speed up development cycles
gain untapped knowledge
spread risks
know more and act faster than competitors
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Outsourcing Innovation
The most popular avenues for outsourcing are in Basic Research and Supplier
Integration. Cisco Systems is a much quoted example. Johnson Control has led the
car industry in forward integration, delivering ever more complex sub-systems to car
assembly lines.
Some golden rules:
Give and Take; the partner must benefit, too
A chance for talented intrapreneurs to head the process
A cross-functional approach; superior communication facilities, accessible
software process tools.
Respect the centres of gravity; be very clear about the what & when, but be
tolerant about the how.
Scanning for feasible New Opportunities or the management of certain elements of
the Innovation / New Product Development is provided by specialist Innovation
Consultant firms or universities. Some very large companies finance their own
scanning unit.
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New Product Development
Detailed descriptions of NPD processes exceeds the scope of thisCanon, save to say that the task remains one of the constant battlesfor improvements for most companies, however here are some
useful hints forBest Practices
:
The Stage / Gate process is still amongst the most popular methods
There is increasing focus on fast prototyping and acceleratedexposure to customers
Cross-functional teams are de rigueur, however, accountabilityproblems have dogged some teams. One response is to extend theresponsibilities of the Project Team beyond the launch period.
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New Product Development
NPD processes are notoriously individual, even undisciplined tothe point of amateurish. Companies are now looking to invest in thevery best practices
, increasingly supported with software, and
then insisting on standardising the process throughout businessdivisions.
Innovation Directors, heading Project Offices are new organisationalpositions to facilitate this development.
Reflect on the study that it takes 3000 raw ideas to equal 1commercial success (G.Stevens).
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Intrapraneurs
Defined as entrepreneurs within a larger business, Intrapreneursare people who provide a strong stimulus to the innovative (and/orcommercial) activities of a company by leveraging the might of a big
business with the skills and nimbleness of a self-employed businesscreator.
Consider a company-wide programme to create a intrapreneurculture (but with transparent objectives, reward systems, exit
conditions). It may be more important to search first for latent entrepreneurial
individuals than for ideas, because it is their tenacity andcommitment which may make the real difference.
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Intrapraneurs
.
Train senior managers to recognise, tolerate and enjoy thepotentially unconventional consequences of giving Intrapreneurs alead role.
It is usually better to form teams of Intrapreneurs, as they are likelyto support and stretch each other.
Critically, allow good failures, recovery and the re-start of anotherproject.
Protect Intrapreneurs from the iron disciplines (and monkey rules?)of Big Business, whilst insisting on disciplines foe money anddeliverables.
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Internal PR for Innovation
Innovation activities are not automatically welcomed by everybody!
Emotions can range from the Fear of Change, Envy, Disagreement about
priorities to potential Turf Wars.
Here are some actions to minimise such potential sentiments: Clarify / classify all stakeholders
Briefly introduce the project / inform about rough purpose / time
Ask for advice
Invite visits / make visits (esp. some prior to milestones)
Create an internal P.R. Plan
Subtle
Low to no cost
Friendly tone; beware of arrogance, self-promotion, etc.
Share Lessons Learnt
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what to know about
creativity
To be completed via the Design Institute