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INDEX INTRODUCTION CHAPTER 1 History of Innovation Innovation and Economics CHAPTER 2 Ways to Innovate Risk, Failure, and Innovation Thomas Edison on Innovation CHAPTER 3 The Innovation Hub The Innovation Pipeline Evaluation Criteria for Ideas Innovation is a Cross-Functional Activity CHAPTER 4 More about Value The Value Chain Idea Generation CHAPTER 5 Business Innovation Product or Service Innovation Marketing Innovation Process Innovation CHAPTER 6 Problem Solving Methodologies Building Innovation into Business Processes Making Innovation a Habit CHAPTER 7 The Innovation Platform Innovation and People Innovation and Performance The Integrated Innovation Framework CONCLUSION 1 3

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INTRODUCTION Innovation is the key to growing your business. Most likely, you already know this. What you may not know is precisely how to go about incorporating innovative practices into your current business. In the following pages, you will learn the steps that you can take to maximize your success. The word innovation is derived from the Latin innovatus, meaning renewal. In business, it is the principle of creating new products or services to increase market share and profits. There is a distinction between invention and innovation, though they are often used interchangeably in casual language. Invention is the idea itself, while innovation is the putting into practice of the fully realized idea. Ideas are great, but until they are implemented, they are not innovation. To be truly innovative, you must have the follow through. Innovation has been called a convex value, referring to the shape of the growth curve on a graph, because it bears fruit in the future. Innovation is cyclical as opposed to linear. Every output is also an input, providing information that can be used to decide where to go in the future. Outputs feed back, as well, becoming a means of determining how effective a given procedure or tactic was, the flow that creates continuous improvement. Innovators are bold and confident. They possess social intelligence, a combination of charisma, gregariousness, and communication skills that makes them good at bringing others to their way of thinking. In this way they are able to sell others on their ideas in order to get the necessary support to see them through to the end. Some people are born innovators, but the skills can be taught.

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CHAPTER 1 History of Innovation The theory of diffusion of innovation, first studied in 1903 by sociologist Gabriel Tarde, describes how ideas and technology spread through a culture. It is as applicable to business innovation as it is to social concepts. It begins with knowledge: a new idea or concept is generated. Attitudes are formed about the idea, and it is adopted or rejected on the basis of those attitudes. Following implementation, there is a final step, which is the confirmation of the decision; in other words, what was once new becomes routine, or falls out of favor, and the cycle begins again. In business, diffusion of innovation is often illustrated by means of an s-curve, graphing growth as a function of time. Growth begins slowly as a new product or service becomes established and the word gets out. This is followed by a period of more rapid growth as demand increases. Finally, a plateau is reached and the line stabilizes, or may even begin to drop, signaling the functional end of the products lifecycle. Continuous innovation requires that new products be under development already when the previous product is experiencing its growth spurt. That way, the new product will be established and beginning its rise as the old product begins to wane, allowing a business to grow. From manufacturing to service industries, and for every business in between, you cannot compete without continuous innovation. Youll be left behind by your competitors. Businesses in the modern era face competition not only from within their own region and country, but from all around the world. They must also be competitive worldwide themselves. The only way to survive is through a dedication to establishing an innovation culture within the organization. The classic example of the perils of failure to innovate is Ford. The automobile manufacturer began with a highly innovative product and revolutionary manufacturing techniques, leading to great success in its early years. However, for all his business acumen, Henry Ford failed to recognize the importance of continued innovation. Between 1920 and 1927, the companys market share fell to 15 percent due to the influence of competitors. The need to innovate isnt a new concept in business. Taking a proactive approach to innovation impacts your business by improving efficiency, productivity, quality, competitiveness, and market share. It benefits not only manufacturing and retail organizations, but service industries, healthcare, science, and technology. Because innovation principles are scalable, the same basic approach can be applied to an organization of any size and can grow with a business. The intended end result is to gain market share, and therefore profits, by enhancing customer satisfaction. Innovations can be applied directly to the product or service, or to any business process, including implementing of new standards relating to safety, performance, and quality. The most successful organizations incorporate innovations across all areas of the business. Innovation is a human-focused perspective, rather than a process-focused one. Business practices are driven by the needs of the customer and the input of the employees at all levels. This approach leads to an improved reputation in the community and in the industry for an organization and to happier customers and employees. Innovative organizations depend on an internal distributed network to generate and develop ideas, in contrast to the traditional top-down approach, in which management determines the course of improvements. Employees are empowered and have a greater stake in outcomes, which improves both morale and the bottom line. Innovation is particularly important in so-called mature markets, not only in times of rapid economic or business growth. Once you have an established place in the market, your competitive edge depends even more on providing a product or service that is continually

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improving to fulfill changing customer needs. Customers want things that seem fresh and new, and you must be ambitious, strategic, and proactive to keep up. In addition to keeping your current customers satisfied to earn their repeat business, you want to expand your customer base to gain market share and increase profits. Increasing your penetration into existing or new markets cannot be done if your product or service is stagnant. Innovative thinking is the solution. Because innovation is a customer-focused process, consumer feedback is essential in determining what innovations might be potential successes for you. You will also need to predict what customers dont realize that they want. This involves some creative thinking, but it can also be extrapolated from information gained in other areas of consumer research. The collaborative power of crowdsourcing, discussed below, is an emerging trend in many industries. The globalization of markets is both an opportunity and a challenge. It is an opportunity in the sense that you now have access to potential customers worldwide, and a challenge in the sense that you are also competing with other businesses around the world. Todays customer pool is more sophisticated and informed than ever before, mostly due to the influence of the internet. They can comparison shop at the touch of a button, and research products, services, and industries. People are also shopping more with their conscience, preferring to support companies that express a level of social consciousness, sustainability, environmental awareness, and compassion. Ultimately, your success will depend on the way in which you approach bringing innovation into your business, and how you go about keeping it as a focus. It cannot be a haphazard process. Innovation is, by definition, a new way of doing things. That is true of your organizations approach to becoming more innovative, too. Only by using a system can you realize the full power that innovation brings to your business. A system enables you to integrate the principles of innovation into every area of your business and to track the effectiveness of your programs. It makes it easier for your employees to develop their ability to think and act innovatively by providing the structure and tools they need to do so. A system keeps everything organized and accessible to all personnel involved. Business processes should be designed, or redesigned, to include the techniques that encourage innovation. Innovation must become a habit. Thought processes that lead to innovative ideas should be developed as a core skill in all employees, including management at all levels. Performance metrics which measure the effectiveness of innovative focus should be included in both corporate and personnel evaluation criteria. Use tools, such as idea management software, that support and track ideas and implementation projects. Innovation takes place in every area of a business. It may be realized through diversification, market penetration, product development, or market development. A balanced strategy of innovative deployment produces the best results, supporting business goals and innovation initiatives. Aligning innovations with business goals produces a single strategy that supports projects through completion. Studies have shown that more innovative companies grow faster and earn more profits than less innovative ones. They produce more employment opportunities, and job retention is higher. By establishing a new corporate culture that seamlessly includes innovation, you will give your organization a big competitive advantage. Involving all areas of the business in innovation creates a structural balance that supports optimum success. When deciding which ideas to develop, no one element for example, cost should be over- or under-emphasized.

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Innovation and Economics Increasing productivity through a commitment to innovation leads to increased profits. But the benefits go beyond mere financial gain. New knowledge, new technologies, and new applications create new opportunities within an organization which ultimately benefit entire industries and communities. Traditional economics focused only on the accumulation of capital as the sole basis of economic growth. Joseph Schumpeter was the first to discuss economics in the context of innovation, in 1942. He used the term creative destruction to describe the cycle by which new is continually replacing old. He believed that knowledge, entrepreneurship, and technological change not capital were key drivers of economic growth. His ideas have only recently begun to be adopted by a growing segment of economic thinkers, as the impact of technology on the world has become impossible to ignore. Innovation economists believe that economic policy should be created in such a way that it encourages productivity and innovation, which leads in turn to economic growth. They contend that an over-dependence on prices and scarcity as indicators of economic fitness is misplaced and potentially misleading. Innovative companies have been found to be as profitable as companies that do not focus on innovation, while providing more benefit to society as a whole. In the new economy, these thinkers claim, knowledge is at least as important as money. Additionally, innovation economy theory adjusts for the imbalance in competition that is created by innovative strategy. Traditional economic theory assumes that similar outputs result from similar inputs, but this is not really the case. Innovators have often found ways to spend less to produce the same product or service, or have developed proprietary methods or products that do not correlate directly with the features of their competitors products. Both of these instances will lead to higher profits for the innovator, an effect which wont be captured by traditional economic measures. Innovation economics views the organization as part of the world around it, including competitors, governments, institutions, and society. Innovations improve the global economy by contributing the commodity of knowledge. If organizations begin to think in terms of competing on the basis of innovation, they experience growth and increased profits, and society as a whole benefits. When organizations are thinking only of profits, society may suffer, or at least, it wont be improved. The choice should be clear for any business. The effects of innovation can be quantified for the purposes of making determinations about its effectiveness. Determinants including research and development spending, patents, acquisitions, recruitment, and lists of innovations obtained through survey. Businesses considering implementing innovative strategies can use these methods to quantify the contribution to their own bottom line. An organizations capital management techniques may need to be altered to be more supportive of the innovation culture. Current methods may not adequately relate returns to the innovations that created them, leading to an erroneous financial year-end picture about the true cost benefits.

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CHAPTER 2 Ways to Innovate Innovation is viewed as being driven by the needs of the customer, rather than by the needs of the business. This shift in the way of thinking is a big part of the new corporate culture and it underlies every decision that is made. By understanding how your customers needs and desires are changing, you will be able to identify new opportunities that will allow you to retain your current customers and to gain new ones. Typically, consumers want products and services that are cheaper, simpler, and more accessible. That is, of course, a generalization. The ways in which you create a cheaper, simpler, or more accessible product or service may depend on your particular industry, geographical location, and other factors unique to your business. Resources that keep you informed of your customers changing needs will provide you with a large pool of ideas for possible innovations. Finding out what your customers want is a task that should be approached from several angles. Consumer surveys are one way. Wise use of customer relationship management (CRM) technologies and procedures gives you a way to keep your finger on the pulse of customer needs. CRM consultant firms and software applications can help you get started in creating a structure for two-way communication with your customers, which will both increase satisfaction and provide you with valuable feedback that you can use to brainstorm improvements. Social responsibility, community involvement, and green technologies have become more important to customers deciding what products to purchase and what services to use. Looking at these values when generating ideas can be beneficial. Investment in training employees how to think innovatively will pay off in greater participation and more relevant idea generation. Many may not understand how to do so, and most wont be in the habit of doing so. Even the most creative thinkers on your staff will most likely learn some new tricks, which can translate to increased enthusiasm and a chain reaction of support for the new initiatives. Providing employees with the support, training, and tools they need is key to the success of your program. It is also a good idea to have a coach or two on staff. Coaches, experienced in innovative procedures, can offer assistance, cheerleading, and targeted retraining when it is needed. The best coaches have a working style that makes them good at sharing knowledge, being patient, adaptable to different learning styles, and using clear, precise language. To begin to generate ideas about product improvements, you need to take a critical look at the current product. Evaluating your own product or service objectively can be a challenge. You have a long history together and you are naturally biased in its favor. But unless you see your product or service as a customer would, you are holding yourself back. True innovation depends on the ability of your development team to recognize all areas in which an improvement could be made, even and especially the less obvious ones. You should also familiarize yourself with your competitors products or services, comparing them with your own. Look at them, too, as if you were the customer. Consider the reasons that someone might choose one over the other. Think about how you might bring your product closer to a competitors, or how you could further differentiate your own, always observing from the customers perspective. Ways to Innovate There are three types of market-based strategies. Leaders are the first to use an innovation, either a new or improved product or service. This strategy may be used to gain market share, to discourage or leap-frog the competition, and/or to establish market dominance.

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The quick-follow strategy brings a product to market shortly after that of a competitor. It may be the same type of product, or a similar product that incorporates an improvement or enhancement of some kind. This daring strategy can pay off big if it succeeds This strategy is most often used by a business that already has a strong reputation and is confident in its ability to crush the competition and gain market share. A slow- or no-follow strategy is utilized in situations where it isnt practical to enter the market due to a slow economy or competitive pressures. The reality is that, even in a down economy, innovators are the organizations are those who will be able to grow. The very culture of innovative thinking, with built in flexibility in business practices, supports fast and fluid adjustments that keep the business moving forward. Risk, Failure, and Innovation The corporate culture that supports innovation is one in which risk and failure are not feared or punished. Innovation, by definition, involves risk; stretching the organizations vision to the next level in order to grow. Having a system through which innovation is managed will ensure that the risk taken is limited to a reasonable level and controlled through open communication and review procedures. Employees at any level may fear failure that leads them to resist incorporating innovative practices. Top management may be concerned about money or reputation, while lower level employees may be worried that theyll be fired or punished if they are involved in a failing project. It can be a challenge at first to break through these ingrained beliefs, but it is important to do so in order for innovative strategies to be completely effective. Some of the most successful companies have adopted policies that recognize, and even reward, failure. Calling them smart failures, these companies understand the potential for failure to drive improvement, by educating and motivating. Acknowledging that failures happen removes the stigma which can keep the lessons of failure from being fully realized, and allows people to harness the motivating power of wanting to try again to get it right. Thomas Edison, when an assistant expressed frustration at repeated experiments that did not have the desired result, said, If I have found 10,000 ways that wont work, I havent failed. I am not discouraged, because every wrong attempt discarded is often a step forward. He saw that knowing what doesnt work is just as valuable as knowing what does. To establish a corporate culture in which innovation is the primary shared goal, an organization must not punish or conceal failure. Rather, it should be embraced for the knowledge it can provide. Of course, failure should still be the exception rather than the rule; your implementation system will incorporate risk management methods for control. Thomas Edison on Innovation Thomas Edison was not just an inventor; he was also an innovator, creating the first research lab in the world. His thinking on the topic is greatly admired and has become the foundation of innovation programs around the world. There were certain characteristics of his which were fundamental to his mastery of the innovation process and hold great wisdom for those who seek to emulate it. A solution-centered mindset is one of these characteristics. Edison himself worked tirelessly in order to find solutions, and expected the same of his employees. His drive to succeed allowed him to break through obstacles, no matter how unexpected. By viewing all results, even the

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disappointing ones, as valuable data, Edison remained focused on his goal. He saw limitations as opportunities for change. Another of Edisons competencies has been termed kaleidoscopic thinking. Just as a kaleidoscope rearranges bits of glass into an endless number of different patterns, the brain can be trained to see innumerable options. This principle is sometimes called whole brain thinking, the use of both the creative right hemisphere and the logical left hemisphere to find unique, innovative solutions. Kaleidoscopic thinking can be used to approach stubborn problems in a new way, and to recognize patterns that lead to breakthroughs. This way of thinking enables people to discover connections between different areas, ideas, and goals, and to become comfortable thinking about seemingly contradictory matters to find how they can work together. Edison said, Theres a way to do it better find it, and I never pick up an item without thinking of how I might improve it. He was always thinking innovatively, looking for hidden value. It was a habit with him, and it led him to greatness. Edison was able to calmly steer his way through the sometimes rocky innovation process. This is the ability to balance shifting priorities while remaining dedicated to the goal. Being able to see both the big picture and the smaller picture, as needed, is an important element of this competency. Organizations can use this skill to keep innovation projects on an even keel, allowing team members to retain their creative energy. Collaboration was used by Edison as a way to maximize the innovative approach in his company. His employees made up a highly diverse workplace in terms of talents, skills, and backgrounds. Small, focused work teams were created with this diversity in mind, to match tasks to talents and to stimulate creative thinking. Rewarding collaboration helps personnel to grow more comfortable sharing their own ideas and expertise, strengthening the entire organization. Edison was one of the first to use branding, creating name recognition through a platform of products. This principle is still a critical element of consumer engagement in todays business world. By recognizing trends and openings in the market, a business can identify areas in which to expand its identity. A flexible business model allows for an agile reaction to changes in the market or competitive pressures. Branding can be enhanced by finding ways to improve promotion and packaging. Edison understood that smart, innovative business practices were at least as important as having well-designed products. His approach led him to build a company that was worth more than a hundred billion dollars in a period of only 40 years.

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CHAPTER 3 The Innovation Hub You have seen why your innovation program must be managed through a structured system. The heart of the system is the innovation hub, a construct through which all ideas are collected, evaluated, and organized. The innovation hub enables you to manage every aspect of your innovation program for successful implementation. All information flows into and out of the hub, just as the hub of a wheel supports the spokes, centralizing everything for fast access, analysis, and control. Collaboration is enhanced because all stakeholders stay informed and connected through the hub. The hub even helps to ensure that you are developing the right projects at the right time. Once collated, ideas should be evaluated for value, suitability, acceptability, feasibility, and endurance. These criteria are discussed in more detail below. Those which are found lacking for some reason should be rejected respectfully, without any negative remarks being attached to the idea itself. Idea generators need to feel that all their ideas are valuable, even the ones that dont turn out to be good candidates for implementation. Using a formal review and filtering process, subjecting all ideas to the same criteria, is the best way to keep rejection a neutral effect. In general, more ideas are better. The more there are to choose from, the more likely you will be to find truly innovative ones. However, it is possible to face innovation overload, when there are so many ideas and inputs that the business stalls, as it is unsure how to proceed. Rather than putting a limit on the number of ideas that will be allowed, which would have the negative effect of stifling employee participation and creativity, use of an organized screening system lets ideas be rejected or elevated to the next level quickly. The smooth processing of inputs leads to improved efficiency. Idea management software is a great way to implement a smooth, consistent, and fair filtering process. The Innovation Pipeline The innovation pipeline is the series of steps and processes through which innovation activities flow, from idea to implementation. Innovation is a circular process, feeding back on itself. The pipeline framework is better for innovative companies than the traditional staging/gating framework for projects because it is more adaptable to this two-way flow of information. The pipeline framework can be applied to a wider number of improvements across the business, not just new product development. The decision points in the pipeline are flexible, and the work depends on teamwork, so that employees feel more invested in their contribution. The pipeline includes innovation throughout the process so it fosters the sense of culture that leads to success. The initiating stage of the pipeline is the generation of ideas. The ideas that drive innovation can, and should, come from any area of the organization as well as from external sources. These inputs are gathered via the innovation hub to be collated for review. Employees at all levels should be empowered to advance their ideas. They often have very good ideas about what could improve a process, but dont bother to mention anything. Perhaps they lack the knowledge to figure out how to get it done, and feel its not worth speaking up without a complete solution. The innovative operation is dependent on employee participation. Employees who feel that their ideas are valued are more likely to continue thinking in ways that lead to innovation, supporting the business. Those who work for companies with an innovative culture are happier in their jobs, because they feel invested in the companys success, and are less likely to leave.

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Customer feedback, collected through surveys, workshops, and other CRM methods, are invaluable in generating ideas, because it is customer needs that drives the entire process of innovation. Feedback from potential customers should be solicited, too, and competitor products, services, and reputation should be included as a source of idea brainstorming. Once gathered, ideas are filtered through the evaluation criteria, discussed in more detail below. The next stage is sometimes referred to as opportunity management. The ideas which have been elevated to this stage, by passing the selection criteria, are further evaluated to determine which ones will become the focus of implementation projects. Ideas may be chosen which align most closely with the years strategic focus, or for any other reason that supports current business goals. Those that have similar business objectives can be compared to see which have the highest potential success in terms of return. The ideas that are not selected for development at this time should not be discarded. They may later become viable due to changes in circumstances or strategy, or at the very least, as a resource for brainstorming new ideas. Design, development, and execution take place during the next stage in the pipeline. Innovation doesnt stop at this stage, but continues so that the whole process is agile and can respond to changes, obstacles, or pressures without losing momentum. The following launch phase involves deployment of the innovation, whether it is a process improvement or a new product. It is often done on a small scale at first to test the success and to identify any final issues that need correction or modification before large scale release. The strategic context for the pipeline includes the business goals, market and competition factors, and regulatory and economic factors. These conditions determine which ideas will be selected for development, and drive how decisions are made throughout the project. They may lead to shifts in the project as they change over time. Successful pipelines share certain elements. They keep focus on strategic context and are both pragmatic and flexible. Filtering ideas early in the process prevents less-viable ideas from cluttering the pipeline. All activities are transparent and communicated openly and promptly to all stakeholders. Cross-functional collaboration and learning benefits the organization as a whole. Strong decision making is important in keeping projects healthy and on track. The effectiveness of a pipeline how well commitments are met is another measure of success. The results of innovation can be measured. Doing so enables you to recognize what strategies have worked best and which have been less effective. A smart innovation system includes quantitative and qualitative ways in which a projects success can be measured. Benchmarks should be set for key steps and for every segment of the organization. Look at finances, process efficiency, customer satisfaction, and employee contribution and motivation. Evaluating inputs from all these areas will produce a vivid picture of how effectively innovation was used in a given project. Measurements should be taken periodically for the duration of the project, not just at the end. In fact, innovation is a highly recursive process. Each step feeds information forward to the next step, and also back to the previous process, a structure which is facilitated by the pipeline framework. By evaluating project status and business conditions frequently, you will be ready to make any necessary changes to ensure that the innovation being implemented remains feasible. Innovation must become integrated into every process at a fundamental level. It cannot be an afterthought. Once the commitment has been made to refocus an organization on innovation, the entire business model needs to be restructured in order to support the new direction. The pipeline framework is one component of a wise restructuring.

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Evaluation Criteria for Ideas There are five key criteria against which ideas and inputs are evaluated to determine whether they are good candidates for implementation. By looking at each of these criteria, the team can eliminate the ideas which are not, without spending a lot of time on them. The first area to be looked at is value, which assesses the benefits to the organization of the idea. The significance of the term value is discussed in more detail below. An estimate of the specific benefits that are projected to result from a given idea should be prepared in order to quantify them for review. Ideas which do not show much value can be eliminated. Next, consider the suitability of the idea. Evaluate how well it fits with current strategy, business goals, and the economic climate. Ideas that are inconsistent, not likely to produce a high return, or would take focus away from core business, can be eliminated, or, perhaps, considered for an alternate track, such as licensing for outsourcing or creating a new product line. The acceptability of the idea to all stakeholders is another criterion to be considered. Stakeholders include current customers, potential customers, employees at every level, and shareholders, if any. They may also be suppliers, partners, licensees, or others external entities. For implementation to truly succeed, their support is going to be needed. Ideas need to be advocated for and stakeholders buy-in obtained, before beginning the process of implementation. This is one significant way in which becoming an innovative organization is a change in corporate culture. Dont just discard ideas which are met with resistance at first. If the idea seems like it has potential, take some effort to sell the idea to those parties who are resistant, using whatever data or facts you need to support your position. Ensuring that the resources and time available to complete the implementation are adequate reflects the feasibility of the idea. The necessary funding and skills should be evaluated, and a timeline created that includes any fund raising or training that might be needed. Once the timeline is made, the team can decide if the return on investment will be worthwhile, or if constraints of time are insurmountable. The best innovations are those which are enduring, providing a good long-term value and return on investment. Evaluating ideas in light of this concept will help to identify the ones which make most sense and those which appear to have only short-term appeal or a low return on investment even over time. New products and services often take some time to establish their full market share, so following fads is usually not a good choice. It is important that the filtering process for ideas be formal and proceduralized, with the full support and participation of top management. A casual process will lead to an uneven application of criteria and, as a result, good ideas may be lost. Furthermore, a casual process doesnt demonstrate the necessary commitment to innovation and can lead to diminished morale. This is one more reason why having a system is so important. Focus on the ideas that offer the most value, and discard those that are not as strong. Employees should be rewarded for sharing all ideas, not just the ones that are eventually developed. When they feel that their input is valued, they continue to think more creatively about ways to innovate. To this end, group recognition is most effective, so that employees feel that they are part of a team. Communication is key to a successful innovation culture. The entire organization should be kept informed about what ideas have been selected for implementation, and what impact innovations have had on the business. The innovation hub and centralized knowledge management system makes this easy for you by centralizing all the relevant material for easy access.

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Innovation is a Cross-Functional Activity The implementation process involves a cross-functional team which develops the plan, timeline, and goals. They are responsible for follow-through and keeping all stakeholders informed during the process. This team may be a permanent innovation team, or teams may be drawn from personnel with expertise in different areas depending on the project. There are pros and cons to both approaches. A permanent team may not be as effective over time, because there isnt the stimulating spark of new members with different ways of thinking. Teams comprised of personnel who arent used to working together can suffer from dysfunction and reduced efficiency. In either case, the team should include a balance of different working personalities from different areas of the organization. Not only does this create a stronger team, but helps to foster trust across the organization as people from different areas get used to working together. The number of team members will depend on the project. Typically, eight or ten people is the right size for a team. Much larger and the team becomes unwieldy; too few and the dynamic effect of diversity may be lost. Five basic types of personality should be included on every team for the best balance and diversity. The idea generator is responsible for creative thinking, problem solving, and recognizing opportunities. He or she will typically be a subject matter expert (SME) in one or more areas of the business, with a talent for finding new markets or niches. This person has a talent for going beyond the obvious. This type of working personality often prefers to work alone or in a subordinate role. The advocate is responsible for promoting ideas to others in order to gain support. He or she is typically someone who is skilled at developing ideas into larger concepts, sees the big picture of the organization, and eagerly approaches teamwork. This type of personality enjoys salesmanship and influencing others to a come around to a certain position. The project leader personality type is skilled at leadership and organization. A strong leader communicates effectively and often and works to keep the project on track. This person is knowledgeable about business processes and politics and understands how to manage resources efficiently. Good leaders know when to delegate and when to participate. The gatekeeper manages the flow of information to and from the team. This person enjoys market research and gathering relevant data from multiple resources, and is skilled at distilling data. The gatekeeper shares relevant information with the team as a means of critically assessing the aptness of ideas that are under development. He or she is often more technical than creative, with a capacity for looking at things objectively. The coach supports the team and the project in whatever way he or she is needed. This personality naturally offers encouragement and motivation, keeping morale up, even in the face of skepticism or resistance from other areas of the business. The coach may step in to moderate disagreements or misunderstandings within the team, or between the team and outside parties. There are some shared characteristics which distinguish the best team members. Primary among them is the sense of identification with the team, rather than as an individual or as a representative of one functional area or another. Team cohesion leads to optimal integration of diverse perspectives, which makes for better decisions. Other characteristics include a high level of participation in the process and a willingness to take direction and to admit mistakes. The most effective teams embody commitment and loyalty. They think competitively, being confident in sharing and discussing ideas, and are open minded and progressive in thinking. They have established specific measurable goals and communicate effectively.

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Because innovation is a whole-business effort, different employees may comprise different implementation teams at different times or for different projects. Participating in these teams generates a sense of empowerment in employees, leading to a higher comfort level in promoting new ideas. This creates a positive cycle and supports the integration of innovation into the corporate culture. As with every aspect of innovation, the team should have a clear direction, with target dates and metrics. During the entire implementation process, the project should be continually reviewed in light of any new information, changes in the marketplace, changes in the industry, and changes in customer needs. The innovators way of thinking is to be flexible and willing to make necessary alterations and judgments in midstream. Review makes it possible to respond early and quickly to reduce the impact on the timeline and outcomes.

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CHAPTER 4 More about Value Value is the primary element of business that drives the need for innovation. Value is created when a company invests capital for the purposes of generating cash flow in the future, at a return on investment which results in a profit for the company. Innovation is the principle of focusing on value creation, rather than on profit making, as the goal of the business. Creating products that have a high value leads to greater market share and therefore to higher profits, the same end result. But focusing on customers is humanizing, leading to a stronger public image, which tends to also add value. From your customers perspective, value is the reason to choose you over a competitor. It may be tangible (the product itself) or intangible (customer service, for example). They include elements of pricing and reputation, as well as the more obvious aspects of usability, quality, and fulfilling a need. To compete effectively, your innovation team needs to be better at recognizing value, in all its forms, than your competitors teams. Understanding of customer behavior leads to stronger product development and strategies for the future, because you will come into better and better alignment with your customers needs. Value is subjective, because it is dependent on context: how much the customer is willing, or able, to spend and other conditions of the marketplace. Knowing your customer will help you become better at approximating and predicting the value of your product or service. This skill can help you to be very responsive to changing markets as you learn recognize the signs that predict certain customer behaviors. The methods used to quantify value need to be appropriate so that they adequately capture true value, and do not conflate other qualities that do not add value. For example, using financial return on investment may not fully capture the true impact of an innovation. New products may not be runaway sellers right away, but have the potential to capture a larger market share given more time. By using a longer measurement window and a reduced dependence on financial measures alone, a more realistic assessment can be made. Another disadvantage of using financial performance as an indicator of value is that changes in the influence of risk are not taken into account. When risk is reduced, value is increased, but if projected cash flow has not changed, the impact on value wont be captured. Equity capital is another area that is ignored in traditional measures of financial performance, even though it is typically larger than debt capital. Better measures of value include market share, free cash flow and economic profit, customer satisfaction, and development productivity. The more diverse metrics that are used, the more accurately they will reflect the true value that an innovation will create. A combination of shortterm and long-term indicators is best. Which measures to use depends, to some extent, on the business strategy of the organization and its critical success factors. In the innovation program, new ideas are evaluated for how much value they will create. To make the best decisions about the value represented by a given idea, an understanding of the industry as a whole, as well as individual products and services, is important. Creating a new or improved product is the first thing that most people think of that adds value, but value can be added by implementing improvements at any level of the business. Reducing inventory management costs is one. Streamlining the process of materials ordering, if applicable, is another.

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Customer service is a large contributor to customer satisfaction, which is an element of value. Finding ways to provide better, faster, or more accessible customer service can be a simple, inexpensive way to add value. The Value Chain A relatively new way of thinking about business in the innovative model is to consider the value chain, along with the supply chain. They are complementary and should be managed together for the most effective and efficient strategy. Chain theory involves inputs from every business function, and can be applied to any business, not just those that are in the manufacturing industry. A supply chain flows from the organization to the consumer, and originates with product requirements. The value chain, on the other hand, flows from the consumer, and begins with customer requirements. This is just another way of looking at the same central concept of innovative thought: focusing on customer needs as the foundation of the business. Supply chain management refers to the process which describes and tracks every step in the process of getting a product into the hands of the consumer. A similar value chain management process can be implemented to capture the steps involved in increasing competitive strategy, developing collaborative models for enterprise, and globalization. The traditional business practices, such as Six Sigma, that have been used to uncover potential improvements in supply chain management can be applied to value chain management as a means of identifying innovative concepts. By formalizing the value chain, an organization can see where innovations can be implemented to increase value or trim non-value added steps. The chain may include coordination activities, information technology, organizational processes, leadership commitment, flexible workflow, employee involvement, and a supportive corporate culture. The value chain concept can be applied to broader sequences including those steps which take place outside of the organization, such as supplier or distribution networks, export costs, and the like. Management of the value chain and the supply chain should be synchronized. This creates a fuller understanding of work flow and can lead to some very powerful opportunities to make processes more lean. A numbers of metrics are used to evaluate chains to track performance and identify trends. The synchronization can be done and managed using the innovation hub. There are tools and software applications that make it easy. Idea Generation A new corporate culture of thinking innovatively means that employees are constantly evaluating processes, procedures, practices, products, and equipment for potential improvements. The impetus for innovation may come from anywhere within the organization. It might be unexpected results, either an unexpected success or an unexpected failure. It might be the result of an accidental occurrence which suggests new possibilities, or an incongruity between perception and reality for example, high demand but stagnant sales. Sometimes, when one new process or product is implemented, it elucidates the need for improvements in other, supporting processes. Changes in the market and industry may also drive the need to innovate. Those impetuses which come from external sources include demographic changes, new knowledge or technology, and a shift in perception among the target customer group. Both internal and external impetuses are valuable in a well-rounded quest for the ideas that lead to innovative successes. Your innovation hub should be designed in such a way that it will capture as many of them as possible.

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Among the inputs that can be used to generate ideas is the process of failure mode and effects analysis (FMEA). Most organizations already use FMEA as a component of their design process, and it is no less valuable in innovative processes. In fact it becomes even more powerful because the results can be used as a springboard for brainstorming innovative ideas. Innovations are not, and should not, always be triggered by a crisis. Such a situation may lead to a creative solution, but it is not the ideal working condition. Furthermore, an effective innovative culture is one in which thinking innovatively has been incorporated into the daily routine. Innovative culture will serve to reduce the instances of crisis situations arising, because potential issues will be identified sooner, when they are smaller and more manageable. There are four basic areas in which new ideas should be encouraged to be found: business innovation, product and service innovation, marketing innovation, and process innovation. All functional areas of the business should be targeted equally for improvement. Streamlining, the removal of any non-value added processes, steps or activities, can take place in any of these areas and will have an impact on productivity, profitability, and efficiency. The use of technological tools to support innovation and implementation is wise. They will save you time and effort, reduce the organizations learning curve relative to instilling the new culture, and make centralizing of activities and communication possible for optimum efficiency. Webbased technologies allow all stakeholders to be able to connect at any time from anywhere. Its everyones job to innovate, but as a business process, innovation needs to be managed. The system that you implement will make it easy by providing structure and tools for management. You will develop turnkey procedures for innovation in business, product/service, marketing, and process. Turnkey means ready for use. In this context, it means procedural steps that are in place and ready to spring into action to turn ideas into innovations. Striving to innovate in all four areas results in balance so that improvements in one area arent negated or suppressed by wasteful processes in another area.

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CHAPTER 5 Business Innovation Innovation is at its heart a creative process, but it can be systematized. Once an idea has been generated, the rest is planning and problem solving. The entire process can be mapped out and is repeatable, so the steps can be formalized. Innovations in business processes add value by reducing costs, increasing production, reducing waste, reducing inventory, generating new avenues of revenue, and more. Looking at current business practices with a critical eye will help to reveal areas in which improvements may be possible. All such ideas should be processed through the innovation hub. To be successful, innovation requires decisions to be made quickly and based on accurate information. Timing is essential to avoid bringing out new products or services too late to be truly innovative. New business processes and supply chain models can be implemented to streamline planning and decision making processes. A flexible workflow ensures that adjustments can smoothly be made along the way to keep projects on track and to adapt to any changes in scope. The use of web-based idea management software allows you to harness the power of technology so that you can spend more time innovating and less time managing. Its easier to multi-track processes when they are managed centrally and can be visualized better. Improved communication with stakeholders is another benefit of using software applications. Development is stronger because the input and feedback of all stakeholders is gathered easily, creating a robust idea that stands out from other, more weakly supported ideas. Software can also be used for supply chain and value chain modeling and tracking. Data is compiled so that it can be easily accessed and analyzed, meaning that decisions can be made faster and based on the most complete and current information. Smart management of the supply chain and the value chain supports maximum efficiency and identification of innovation opportunities. Product or Service Innovation New products and products that have been modified for improvements are a major focus of innovators. Product loyalty isnt what it once was; consumers are constantly alert for something better, cheaper, more convenient, or just newer. Innovations in every area of the organization are important for growth, but your product or service is the face of your business so it naturally gets a lot of attention from idea generators. You must continue to appeal to your existing customers while seeking to gain new ones, which means there may be a fair amount of pressure to innovate products and services first. This is fine, but dont neglect other areas as a result. The use of social media has become a highly effective way for businesses in every industry to interact with their customers. Using it wisely can be a significant element in your success. Apart from the well-known social media sites, there are web applications which have been designed specifically to create a lab space for you to connect with your customers. The term crowdsourcing has been coined to mean the use of information contributed by the general public to a project, usually through the internet. There are dozens of different ways to approach crowdsourcing. Collaborative brainstorming, focus groups, and design contests are just a few. Customers see social media as an experience in which they are participating. The process of easy sharing of content has revolutionized how they connect with their friends and families, and also with the companies that they like. You can exploit this by using social media to give your customers a more fun way to associate with you. You can gather feedback, share knowledge

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about different ways to use the product that they may not have known, encourage your customers to share information about your products with their friends, and more. Knowing what your customers and potential customers want often, before they know it themselves drives new product development and product improvement. You cant know what those things might be unless you are tuned in to their habits, tastes, and lifestyle choices. Social media and crowdsourcing give you the window you need to see into your customers life, while making a human connection that makes customers feel more valued by you. Sometimes, a great innovative idea comes along for a new product, but it just isnt practical, for one reason or another, for you to produce it within your organization. Maybe it doesnt fit in well with your current product line, or perhaps it would require installation of a new production line, making it not cost or space effective. Licensing is a good solution in this circumstance, enabling you to still reap some profit from the idea with a minimal investment on your part. You will also be building a relationship with the licensee which may be of further benefit to your business in the future. Marketing Innovation Continued innovation in marketing, especially in todays technological landscape, is another essential to keep your business strong. As you are looking for ways to open a new market or create a new customer base, innovations in marketing are one approach. New advertising campaigns, redesigned packaging, and special promotions are just a few of the ways in which innovation can be applied to marketing. A strong online presence is essential for any company that wants to be competitive today. Your online marketing strategy must be more than just having a website, but an attractive, up-to-date, interactive website is a good starting point. Your site should contain clear information that is easy to find. Customer self-service, if applicable to your business, should be incorporated, and answers to the most common questions about your product, service, or industry should be provided. Consumers are highly dependent on the internet for gathering product information, comparison shopping, and making decisions. The use of social media and crowdsourcing, as discussed above, offers opportunities for marketing innovations as well as product and service innovations. Consumers have begun to seek a relationship with the products they use. Building a story and a community around your products makes customers feel a part of something bigger, boosting loyalty and sharing. The low cost of the social media approach makes it highly desirable because the return on investment and added value will be high. Expand your online presence as widely as you can; however, dont take on more than your organization can reasonably manage. If you do not have the resources to keep website information current, to ensure that there are no enduring technical difficulties, and to keep a visible social media presence, then these are not areas in which to expend energy. Branding is another area in which you can deploy marketing innovations. Branding is the external appearance of your business, so you are already connecting with the customer through it. Obtaining customer and potential customer feedback can help you find ways to do it better. Having an innovative brand strategy enhances your public image, leading to a widening customer base. Your branding strategy should be flexible enough to allow for smart innovations, while remaining cohesive enough that it is unified and recognizable to your customers. Trying to do too much can result in clumsy, sprawling branding. Changing branding too frequently is another strategy to avoid, as it may confuse or annoy customers. Innovations are best when they are supportive of

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existing branding. Branding innovations are best used to support corporate growth strategy, not the other way around. Dont be afraid to stretch the parameters of the brand, or look at it from a different angle. Test marketing can help you to determine the impact of changes on overall branding strategy. When considering branding innovations, consider customers behavior more than their words. Customers are often not good at articulating precisely what it is that they want, and often speak from a place of emotion rather than logic, which may not reflect their practical needs. They may also change their minds quickly about what they want. Depending on behavior gives you a better predictor of long-term needs. There are plenty of ways in which marketing innovations can come about. Employees who are not involved in marketing often have very creative ideas that are worth pursuing. Marketing ideas are often the easiest ones to get buy-in from management, because they are likely to be low in cost or easily absorbed by existing marketing budgets. The most potentially effective ideas are those that are customer-focused and clearly support the current business strategy. Process Innovation Process innovation is any improvement or change to an internal process that has the effect of boosting efficiency and improving customer satisfaction. Doing things the way theyve always been done is a sure way to be left behind. Innovative processes are those that arise from an understanding of how they impact the delivery of customer needs and the resulting profit margin. Anything that makes a process faster, less wasteful, or more robust is a good improvement to consider. The redesign of the value chain is one way in which to implement process innovation. Significant savings can often be found through evaluating the value chain steps, rather than the supply chain. Developing new capabilities for customer self-service is an example of this type of innovation. Making processes flexible improves workflow and turnaround time. Other improvements include those that improve documents, including procedures, records, and requirements, logistics, and discovering applications for using emerging technologies. The greening of processes reducing environmental impact by reducing waste, reducing packaging, or using raw materials that are less destructive to the environment is a popular way to boost public opinion and reputation, as consumers are increasingly choosing to support companies that care for the Earth. There may be added benefits in reduced regulatory or disposal requirements or lower costs due to locally sourcing materials. Processes should be examined to see if there are any opportunities for greening. The best ideas for improvement come from the employees who are actually involved in work processes. In organizations that dont have an innovative culture, employees with good ideas have a tendency to keep them to themselves, or mention them only offhand to co-workers. These ideas never find their way to management, even in organizations where they would be inclined to act. Innovative organizations actively solicit these ideas and encourage personnel to regularly contribute them. The principle of kaizen, which was first popularized in Japan, has become a feature of doing business around the world. The Japanese word can be translated as change for the better. The focus is on continuous process improvement, with the involvement of all employees. Its five elements are teamwork, personal discipline, morale improvement, quality circles, and improvement suggestions. Kaizen can be applied to any business in any industry, though it began in manufacturing. Each employee is empowered to identify areas in which improvements can be made. In some organizations, small groups are formed which focus on their own processes, sometimes led by a

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kaizen supervisor. Others use large groups, or a suggestion system. The format can be whatever is most practical for the particular organization. Any process can be approached from the perspective of kaizen. It is also used in troubleshooting and root cause analysis, with the problem being the input which is then analyzed using the methods of kaizen. This is just one way of approaching problem solving; some more are discussed below, and any of them can be employed to evaluate ideas for innovative potential. The success of kaizen as a business principle is that the many small improvements which are generated cumulatively lead to large benefits over time, for the organization and ultimately for the customer. Because the focus is on these small changes, rather than sweeping long-term projects, the feedback loop is faster and adjustments can be made more easily. Kaizen begins by measuring a standardized operation to determine current parameters, such as cycle time and materials usage. This data is compared to the requirements which are in place. Then, the process is evaluated to see where improvements could be made to better meet requirements and to improve productivity, efficiency, and safety. Once the new process has become standardized, the kaizen cycle is repeated for continuing improvement. Innovative thinkers can use the cycle as a way of generating and evaluating ideas. To use kaizen for innovation, current procedures are evaluated against ideas that have been developed by looking at changing customer needs, new markets, or new products or services. Waste of materials, time, and money can be greatly reduced, and processes that run better produce higher quality end results. Production capacity is increased, and there is often a smarter use of existing space. Kaizen doesnt require a large capital investment, and can be used to manage any system. Studies have shown that kaizen can lead to as many as 30 ideas per employee per year, and that 90 percent of them are typically implemented. Employees feel empowered and are happier in their work, so retention is high, reducing costs related to training of new employees. Related to kaizen is the concept of lean production. This focuses on eliminating any practice, step, stage, or element of an organization which does not directly contribute to value for the customer. It benefits the business by streamlining and optimizing flow in every process. Some organizations take the approach of using a series of tools to identify areas of waste, while others focus on improving the smooth operation of processes, which has the result of reducing waste. The second method is often preferred because it naturally takes a broader view of systems, leading to more improvements. There are three main types of waste that can be addressed through the application of kaizen and lean practices. The first is unevenness of work flow. This may be due to irregular production schedules including scheduled down time, poor planning, unplanned work stoppages, erratic employee performance, or inconsistent work instructions. The second type of waste is the continued use of tasks and procedures that do not add value; for example, a disorganized procedure that leads to unnecessary movement of people or materials back and forth, or unnecessarily complex approval processes that take too long. The third type of waste is found in overly burdensome workloads. This includes asking too much of any equipment or procedure, as well as of human resources. Work cannot get done efficiently and safety and quality are negatively impacted, sometime severely. Great improvement can be realized by distributing work more evenly. All of these sources of potential waste should be regularly addressed looking for opportunities to innovate. Because every process affects the other, they can be seen as together comprising a

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feedback loop. Changing one will lead to changes in the others, which may or may not represent improvements. Continued checking for new issues will control that.

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CHAPTER 6 Problem Solving Methodologies Innovation is the art of solving problems. They are not always problems in the negative sense, but include things like the problem of how to create a better product. There are numerous problem solving methodologies that can be incorporated into your innovation framework. The principle of TRIZ is frequently used as a framework for innovation. The acronym is from the Russian for theory of inventive problem solving. It uses a series of laws that have been developed from patterns in patent literature. These laws include the law of increasing degree of ideality, the law of non-uniform evolution of a subsystem, the law of increasing dynamism, the law of transition from macro to micro, the law of completeness, the law of shortening an energy flow path, the law of increasing controllability, and the law of harmonization. In general, the laws describe predictable conditions that will arise during product development or improvement, the trade-offs that will need to be addressed. Genrich Altshuller, the father of TRIZ, recognized that technical contradictions, in which an improvement in one area has a detrimental effect in another, could be dealt with by using an innovative solution. He and his associates developed a set of tools that can be used to expand thinking in order to generate ideas that are not constrained by psychological inertia. Although the tools were developed based on patent data, they can be applied to problem solving in any industry, because the general principles are not restricted to manufacturing. TRIZ has become a popular approach to innovation and problem solving in numerous industries, and has spawned several off-shoot methodologies. It is just one possible way to go about creating a framework for innovation. Six Sigma is another popular methodology. It defines the steps to follow in order to achieve a project goal by reducing variation in a process. This methodology specifically quantifies financial return, which not all structured methodologies do. It is often combined with the principle of lean processes, and then called Lean Six Sigma. There are two main paths that Six Sigma projects can take. Each has an acronym that describes the steps. The first is DMAIC and is used for improvement projects. The acronym stands for Define, Measure, Analyze, Improve, and Control. The second path, DMADV, is used for new product or process design. It stands for Define, Measure, Analyze, Design, and Verify. Both paths can be useful as an innovation framework. Training programs are available in which personnel can earn a Green Belt or a Black Belt in Six Sigma. Many companies have one or two employees who are Black Belt certified, who then manage the process as it is used by other employees, who may or may not be Green Belt certified. Certification is not required to implement the principles of Six Sigma, but the full program is quite complex and it is more powerful if there is an expert on staff. There are other methodologies in addition to the ones mentioned, and numerous quality management tools that can be used independently or as components of a structured method. You may use one method or a combination of them, or use different ones for different situations. Your systematic approach to innovation management is enhanced by using any of these defined strategic approaches to problem solving. Innovative thinking is open and flexible, but it is the framework that integrates it into the business structure. Employees can work faster and smarter when they are provided the right tools.

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Building Innovation into Business Processes There are three levels at which innovation should be built into business processes, those related to annual, quarterly, and daily activities. This keeps the focus on the new ways of innovative thinking. By combining proactive and reactive approaches, you will create an environment in which there are abundant opportunities for ideas to be generated. The Annual Business Planning process will outline the goals and direction for the coming year. A review of the previous years plan and outcomes sets the background. The organizations mission, goals, and benchmarks are evaluated and assessed for areas in which they could be changed to better support innovation. It is not a bad idea to repeat this review of mission and goals every year, to foster a continuing commitment to innovation. The annual plan can be thought of as the catalyst for the innovative culture that you are developing. Incorporating innovation into the plan is the only way to secure its continued importance even under the inevitable financial and productivity pressures that arise throughout the year. Including innovation funding in the annual budget ensures that projects arent killed because of a lack of resources. Funding should be earmarked for innovation, not for specific projects, so that its available when and where its needed. Access to the fund should not be entangled in lengthy approval processes. Flexibility being a key element of innovation, it may seem difficult at first to know how to incorporate it into a year-long plan, which is a more rigid construct. It might sound paradoxical, but including innovative activities and funding into the plan provides the structure that is needed to keep on track while being flexible. If innovation isnt included in the plan, it wont happen, whether because of inertia, lack of management support, or lack of resources. Discussing innovation at the annual meeting is also an exercise in the creative thinking process that is necessary to innovate well, one more way to instill culture. A timed brainstorming session in the annual meeting is used to gather ideas for discussion. Small group brainstorming should be used to avoid the groupthink effect. Groupthink is a psychological effect in which a group of people, in a desire for harmony, goes along with the prevailing view. This stifles creativity and can result in bad decisions being made due to an inadequate consideration of facts. The ideas generated in each of the small group sessions are collected and sent to the innovation hub for processing. If there is a formal suggestion system in place, those contributions will be sent to the hub as well. All ideas are recorded for later review through the implementation team. Dont try to decide on which ideas to implement at the meeting. A general goal, aligned with business goals for the year, might be determined, if appropriate. Dont be too restrictive, as innovation depends on flexibility. A brilliant idea might be generated weeks or months after the meeting; you want to be able to seize it and go with it. At quarterly business meetings, the progress and status of all ongoing projects is reported. It can then be analyzed against the goals that were set at the annual meeting, if any. Benchmarks and other metrics are included in the report to provide hard tracking data. This reporting is helpful for those who are outside the project, as well as being an opportunity for all stakeholders to step back and take a look at the big picture, from implementation to current status to future completion. Many companies have implemented Quarterly Innovation Workshops (QIWs) as a way to keep innovation in the forefront of the business while instilling new knowledge in the organizations personnel. Learning to think innovatively can be taught, and workshops allow employees to develop and practice these skills. These are workshops, not lectures; they are intended to be interactive and to stimulate participation by all personnel. Workshops can also be used to develop teamwork, a key foundational skill for the innovative approach to business.

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Ideas should be reviewed and evaluated regularly, the process for which should be formalized into the business routine, as described above. Using the methods outlined above, you can determine which ideas have the most potential, taking them through the pipeline for further development. Ideas can be collected at any time. Idea management software makes it easy to do this. A monthly review meeting keeps projects on track. Innovation projects must remain flexible so that they are ready to respond quickly to changes in the market or in customer behavior, or to feedback that is encountered during the project. Resist the temptation to skip these monthly reviews. The earlier in the process that issues can be identified, the sooner they can be addressed. Making Innovation a Habit Innovation isnt something to think about just once a year or once a quarter. Every day to day activity should support the culture that focuses on innovation as a key element of doing business. By thinking innovatively at all times, employees will always be alert to recognizing the areas in which improvements could be made. All ideas should be captured at the time they arise and delivered to the innovation hub for review. Having a procedure for doing so ensures that there are no missed opportunities. Building an innovative culture into your business, and making it a habit, requires a firm commitment from all levels, and the inclusion of innovative thinking into all processes. Employees must be empowered to share their ideas, all of which should each be treated equally. There must be no reprisal for failure, as risk is inherent in an innovative workplace. Enthusiastic leadership creates enthusiastic followers and is a significant factor in innovative success. There are many strategies that can be used to develop daily habits that support innovative thinking and behavior. One is to try something small new every day, as long as it isnt something that goes against current procedural requirements, if any. All employees should be encouraged to explore industry journals, websites, and competitors information to learn how to think like an innovator. Adopting good innovative daily habits is partially a retraining in the way of thinking. Remaining positive in the face of obstacles and eliminating negative habitual thought that block creative thinking are essential. Another strategy is to consciously look for patterns in things; it will quickly become second nature. The recognition of patterns often leads to breakthroughs and innovation, either because the pattern has a detrimental effect on a process or because it suggests a way in which the pattern can be utilized to improve a process. There are a number of different creative thinking games that can be used to stimulate the brain to work in new ways. There are many other habits, or ways of thinking, that support innovation. Keeping a focus on the future is one. The past holds data that can be useful in projecting potential outcomes, and has provided lessons that can be learned, but past performance should never be held as the standard. Innovators are always thinking about ways to grow, develop, and change. They do not settle for how things are now. Another shift in the way of thinking is becoming more comfortable questioning things, even the most familiar ones, as a way of gaining insight and knowledge.

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CHAPTER 7 The Innovation Platform It should now be clear to you that having a system to manage your innovation program is critical if you want to succeed. A system controls the flow of information among stakeholders, including customers, employees, and third party entities. By providing structure and rules, the system lends confidence that tools and techniques are being applied consistently and appropriately. It also creates an environment that facilitates cross-functional learning. The system is designed in such a way that it allows good ideas to be developed and implemented when they are identified without having to go through a lengthy approval process, as is the case with more traditional projects. The system framework needs to be devised and implemented as the first step in the organizations shift in business strategy. Using a web-based system of software applications, accessible to all team members in any location, is the best strategy for managing your innovation processes. It should be user-friendly and allow for access to all necessary information regarding projects and ideas that are under review. Different levels of access, such as the ability to retrieve but not change information, can easily be applied if needed. Using a web-based system means that you arent dependent on software updates and wont face issues with different operating systems. Because data is stored online (cloud-based storage), its not susceptible to loss and can be accessed from anywhere. Two main types of software tools comprise the foundational components of your innovation system. The first is an idea tracker, or electronic suggestion management system. It can be used to gather and compile ideas and to create visual maps and charts for planning purposes. Filtering of ideas can be done directly in the application, according to the parameters that have been programmed by the user. This adds efficiency and fairness to the filtering process, as there is no perception of human bias. The second type of tool is a broader management system which controls every element of the whole process, from idea to implementation. By facilitating communication across the enterprise, this tool improves the speed and efficiency with which projects are able to move forward. Collaboration across multiple locations is made faster and more interactive as well. Using a message board enhances visibility of discussions. Files can be shared and automated deadline reminders can be set. These applications are powerful allies in helping to establish and integrate innovative methods into your organization. Both tools should be used together for the best results. They are inexpensive, easy to use and are much more effective than dependence on an old-fashioned paper-and-meeting based method for management of projects and ideas. In the innovation hub, these tools work together to provide fast, complete access to all relevant knowledge and data. There are other types of software that can be used as components of a total innovation system, including crowdsourcing lab software. Most are stand-alone applications that can be combined as needed to build larger system, so that it can be customized to the needs of your business. Innovation and People In order to instill in your organization a new culture of thinking innovatively, all members of the staff must be on board with it. The organization should foster an environment in which employees feel safe and can be comfortable sharing their ideas without fear of reprisal, mockery, or dismissal. Some ideas will be rejected through the review and filtering process, but employees must always be rewarded for their participation, even if their ideas are not ultimately chosen to be developed. Employees who feel that they have been listened to will continue to generate more ideas, and some of them are bound to be worth developing.

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When you are making the switch to a customer-based, innovative business model, you will most likely encounter resistance at some level. People are naturally resistant to change. This is particularly true in business situations, where managements fear of losing money keeps them from being open to new ideas, even good ones, and employees become entrenched in doing their jobs as they have been told to do them. This tendency to resist change is the greatest barrier you will face in creating a truly innovative culture. Management must be totally committed to supporting and advocating for innovative thinking. Their leadership will be essential in motivating others to embrace the new procedures. The risk of failure has to be accepted as an integral part of doing innovative business, and allowance for it built in to the new way of doing things. There is abundant literature showing that a customerbased model is highly successful in growing a business, and is often more effective at doing so than traditional profit-based strategies. However, an enthusiastic attitude will go further in selling the concept than just data alone. Once everyone in the organization has thrown their support behind the shift, a good place to begin strategizing is to look at the current barriers to innovation. Look at whether or not ideas are being solicited, and, if so, how those who produce them are rewarded or recognized. Look at why the current process, if any, for gathering ideas hasnt resulted in effective innovation. Most likely, it will turn out to be simply because there is no system in place to manage the process of innovation. Employees at all levels should be fully educated about the reasons that innovation is critical to growth. They need to know that their expertise in their own areas of work will be an essential component to the new way of thinking, and that they will be partners in the success of the business. They should also be informed that they will be provided all the training and support that they will need to learn how to effectively participate in the new paradigm. There are a number of elements that contribute to a healthy innovative corporate culture. All workers must have the freedom and control to do their jobs with little supervision. The work environment must foster encouragement and support for risk taking and open communication of ideas and feedback. Project managers and team leaders should be deft at assigning duties to the personnel that are most able to do them. Project managers must also be willing and able to protect the group from outside influences that might be destructive. There must be adequate resources, access to them, and full support for obtaining necessary resources without undue bureaucracy. Adequate time to complete projects without cutting corners is important, too. Careful attention should be paid to providing recognition and reward for idea sharing. This can take any form from cash bonuses to awards or celebrations. It has been found that group recognition is more effective than individual recognition, where practical, because it fosters the sense of being a team. The use of a reward system has been shown to correlate highly with the tendency of employees to generate more and better ideas over time. Innovators are risk takers by nature, and they thrive in an environment where things frequently change. In business, it is more common to encounter people who are not comfortable with change. The term undertaker is sometimes used to describe a person who is so resistant to change that they will even stoop to sabotage to avoid it. Such people cannot co-exist with an innovative culture. Others, called caretakers, are more passive about their resistance to change. They prefer to maintain the status quo, but will eventually turn around as the new procedures become more routine. Gaining the cooperation of undertakers and caretakers within the organization can be tricky, and is part of the reason for establishing a formal system, which helps them to get used to the new way of doing things. Dealing with resistant parties from outside the organization, such as

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suppliers, is even more difficult. Providing data about the benefits, and how the outside party will be involved as a stakeholder, is often a good approach. A strong commitment to becoming innovative and persistence in the face of resistance may be necessary by the advocates in the organization to avoid early failure of the program. Innovation and Performance One way in which an innovative culture can be supported and allowed to become established is by using longer performance evaluation cycles. Because a new or improved product may take some time to achieve its maximum performance, a longer cycle allows for a better measure of the true success of the implementation. The level of innovation in inputs, outputs, and processes should all be measured and consolidated to give a picture of the overall performance resulting from innovation. Both hard (tangible, like technologies) and soft (intangible, like activities) indicators in each area should be used to measure performance. Examples of input indicators include the number of employees dedicated full-time to innovative activities and the time spent on innovative activities. Output indicators may include number of patents, number of new products or services, and number of different innovative activities. Some process indicators are certifications, changes in organizational structure, amount of collaborative activity, amount of outsourcing of innovative activities, and measures of customer satisfaction. Many other indicators are possible and the best balance may differ from industry to industry. Measures which depend only on financial data should not be used, at least not by themselves. As was discussed above, they can obscure many of the real contribution that innovation makes to product and process value. Comparison with competitor performance is useful, but should not be weighted too heavily. Ongoing measurements are important for providing continual feedback and early warning of concerns or arising issues. There should be weekly and monthly meetings involving all key personnel for the purposes of discussing the status of current projects. The report should include the presenting of benchmarks and other key performance indicators that can be used to evaluate success. Any new information that has come to light which will have an impact on the project will be reported and discussed. The collection of this type of information is built in to the project plan, because the team needs to be able to make adjustments earlier rather than later, so that the project remains agile. At these meetings, any new ideas that the development team has recommended will also be discussed. As concerns relevant to the project are identified, they become inputs which are then used to determine the next steps, as well as to evaluate the effectiveness of the original strategy. Creative, innovative thinking can be applied at every stage in order to continually strengthen processes. There should also be a set procedure for elevating issues of concern to the appropriate personnel, so that valuable time isnt lost wondering what to do. Risk management needs to be approached carefully. Remember that risk is inherent in an innovative culture, and it must be accepted as such in order to be truly innovative. However, that doesnt mean that all risk is good. In fact, a wise risk management program is at the heart of an innovative culture. It is through the identification of risks, which can then be prioritized and eliminated systematically, that innovation is tested and strengthened. The information gathered during the course of risk management helps to improve the design of future innovations and the entire process of innovation in the organization. Innovative risk management requires some financial discipline and new ways to evaluate profitability, since existing measures may not take into account the additional time that a new product or service may need to fully flower. The process of risk management in an innovation-based operation has been well studied and methods developed that balance the sensible control of risk with the risk necessary to innovate successfully.

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The selection of the cross-functional implementation team has an impact on risk management. The team comprises representatives from every area of the business, so that both the input and feedback for risk management decisions is more solid. The decision framework should be structured so that it is applied fairly in every context, and so that it includes criteria touching on cost, quality, and all other aspects that might influence a decision. There are certain assumptions that will need to be made, including projected rate of growth, operating expenses, and capital costs. Decisions are followed by testing. Risk management is a driver of experimentation and testing which uncovers new techniques, skills, or procedures that may be appropriate for use in broader applications. Taking the time to experiment is an essential component of innovation, and allowance for it should be built into the timeline for a project. Doing so can actually reduce the time to market by providing real-world data that can be used to make adjustments. Besides the matter of business performance, the individual performance review process needs to be undertaken in such a way that it supports the organizations dedication to innovative thinking. Current review procedures should be reevaluated in light of the new expectations of an innovative workplace. Rather than focusing on past performance, the focus should shift to how performance can be improved in the future, using past performance only as an educational tool, to indicate the areas in which improvement could be sought. In an innovative culture, the recursive feedback loop is found in every process, and this includes feedback on individual performance. Employees should always know in which aspects of their jobs they are doing well and in which they need to improve. But the standard formal annual review should not be entirely rejected. One strategy that some companies have used is to provide project-based reviews every three years (in addition to more regular in-project feedback), so that more realistic data is available, with routine-based reviews done annually. To create a formal review that supports innovative thinking, include competencies and phrases that reflect innovative thought and activities. Teamwork is an important component, so employees should be evaluated on the successes of their teams, not just on the basis of individual results. They should be recognized for their contributions, whether the outcome was success or failure. Employees who did not participate as fully as expected in innovative activities should be marked down, and encouraged to develop this weakness going forward. Another strategy to employ with the individual performance review is to ask personnel what they will create or change over the next year, and how they will go about it. It doesnt have to be anything major. The exercise will help to instill good habits, critical thinking, and accountability. The importance of continual, open communication among all stakeholders cannot be overemphasized. Having a centralized system, using the web-based applications described above, helps to ensure that everyone involved can participate in the sharing of information for the most effective outcomes. The Integrated Innovation Framework To most effectively implement innovation in your organization, an integrated approach is essential. A business strategy with innovation at its core gives you the strongest operational methods which are both efficient and effective, allowing the fullest expression of the power of innovation. The integrated approach is built on organizational support, competency gathering, and knowledge. All three components must be present in order for the system to work properly. There should be one person in the organization whose responsibility it is, as a primary role, to manage the innovation hub, including all the software applications and other systems that are involved, as well as all the knowledge that passes through the innovation hub. This position can

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be thought of as a sort of Director of Innovation; in fact, many organizations do use that term. The precise duties of the director may vary from company to company. In some cases, he or she is hands on as a team leader for innovation projects. In others, he or she is more of an advocate, who manages the activities of multiple teams working on various projects throughout the organization. Yet another approach is for the director to create long-term innovation strategy. The best personality types for a Director of Innovation are those who are outgoing and flexible thinkers, with a diverse background and a strong history in implementation. They must be comfortable interacting with a variety of working styles, and have a familiarity with all areas of the business or industry. Experience in, or skill with, marketing or sales is a bonus as the director may encounter situations in which he or she has to sell an idea or a strategy to hesitant parties. Those who are creative thinkers, but who do not have experience in implementation, are not well suited for the director position, for which being able to deliver results will be paramount. An integrated approach is the only way to ensure that your innovative processes will succeed and bring the desired growth to your business. The necessary culture change can only happen when the entire business strategy supports it, through integration.

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CONCLUSION Fostering an innovative corporate culture is the best way to grow your business. Break out of the old-fashioned, process-driven way of doing business and discover new avenues for adding value to your products and services. Consumers now have access to a larger number of businesses, worldwide, than ever before, thanks to the internet. This widens your potential customer base, but also increases your competition. You have to innovate to survive. By creating a stronger relationship with your customers, you will come to understand their needs better, being able to predict what they want before they realize it themselves. Through the use of social media and labs, you can connect with customers in new ways to obtain feedback, focus testing, and involve customers directly in the development of new ideas. Collaborative methods are a hallmark of innovation. Employees in innovative organizations are more content. They feel more in control of their own duties, and can see how they contribute to the success of the business. They work harder and smarter. Human capital is your greatest resource, as employees are the ones who have the expertise to generate innovative ideas for process improvement. Your innovation hub is what makes it all happen. Through the hub, all stakeholders have access to the tools and knowledge that they need. The hub also serves to manage your processes so that projects run smoothly. By centralizing everything, you make it easy to create and complete the innovative products and services that will lead to new growth for your business. You must have a system to succeed, and your innovation hub is the heart of that system.

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