Innovating processes

© Richard Welke 2002

MBA 8125:Innovating Business

Processes

Authors:Mike GallivanLars Mathiassen Richard Welke

Adapted by C. Stucke

© CEPRIN (2007) MBA 8125 Innovating Processes 22

AgendaInnovationProcess innovationCase discussion


Topic one


What is innovation?Dictionary-style …

The act or process of inventing or introducing something newSomething newly invented or a new way of doing thingsThe process of adopting a new thing, idea, or behavior pattern into a cultureThe act of starting something for the first time; introducing something new

Authors on innovation …Leifer, et.al. (Radical Innovation, HBP, 2000)

Producing an outcome with:An entirely new set of performance featuresImprovements in known performance of 5x or greaterA significant (30 reduction) in cycle-time and/or cost

James MarchExploration vs. Exploitation

Yours? …


Who is innovating?

“Midlevel managers play a crucial role in every company’s innovation process, as they shepherd partially formed ideas into fully fledged business plans in an effort to win funding from senior management.

It is the midlevel managers that decide which ideas … they support and carry to senior management”

From C. Christensen: The Innovator’s Solution, HBP, 2004


What types of innovation?

Sustaining innovation (exploitation):Successful companies are good at responding

to evolutionary changes in their marketsMakes a product or service perform better in ways that mainstream customers already valueTypically developed and introduced by industry leaders

Disruptive innovation (exploration):Where they run into trouble is in handling

revolutionary changes in their marketsCreates entirely new market by introducing a new product or service that mainstream customers initially sees as worseNo company has a routine for handling themMore difficult for large, mature companies, easier for smaller, immature companies

Creating change Creating change capabilitycapability

Creating new Creating new capabilities capabilities internallyinternallyCreating Creating capabilities via a capabilities via a spinoutspinout organizationorganizationCreating Creating capabilities by capabilities by acquisitionacquisition

Adapted from Christensen & Overdorf (2000)


Which capability to change?

Which Which forms of forms of

change are change are your your

organizatioorganization capable n capable

of of handling?handling?

• Formal and informalFormal and informal• Processes are not meant to changeProcesses are not meant to change• Disabilities to change in less visible Disabilities to change in less visible

processesprocesses

Processes

Values• Basis for judgment at all levelsBasis for judgment at all levels• Clear/consistent values facilitate Clear/consistent values facilitate

changechange• Two key values influence change Two key values influence change

capability … How:capability … How:1.1.Acceptable gross margins judgedAcceptable gross margins judged2.2.Interesting opportunities judgedInteresting opportunities judged

Resources• Tangible and intangibleTangible and intangible• High quality resources facilitates High quality resources facilitates

changechange


Capabilities evolve over timeThe factors defining an

organization’s change capabilities evolve over time:Begin with resources (primarily people)

Departure/addition of just a few people can have dramatic effectsSome fail to ever develop processes

Consistency, quality, and productivity suffersMove to visible, articulated processes and values

Founders impact initial processes and valuesSuccess becomes independent of individualsRepeatability

Migrate to shared and invisible cultureEnables people to act autonomously and consistentlyCan both enable or inhibit change

Change easier

Change more difficult


Fitting tactics to needs

Poor

Good

Use Use heavyweight teamheavyweight team::within existing within existing

organizationorganization

Use heavyweight team:in a separate spinout

organization

Use lightweight or functional team:

within existing organization

Use heavyweight team for in-house development;

but commercialization requires a spinout

Good Poor(sustaining) (disruptive)

Innovation fitInnovation fitwith with

processesprocesses

InnovatioInnovation fitn fitwith with

valuesvaluesWhat’s a “heavyweight” team?What’s a “heavyweight” team?


When & how to innovate? (1)

From: “Darwin and the Demon” (HBR, Geoffrey Moore, Jul-Aug 2004)From: “Darwin and the Demon” (HBR, Geoffrey Moore, Jul-Aug 2004)


When & how to innovate (2)

Main Street (early)

Existing technologyto new markets

Established offers inexisting markets tonext level

Surface modifications toimprove customer exper.

Improve customer-touching processes

Reframe establishedvalue proposition

Restructure industryrelations


Topic two


Process & innovation

• Why are processes created?• How are processes managed?

• What are the defining elements?• How are the elements related?

Process Innovation• Why is innovation needed?

• How is innovation managed?• What are the defining activities?• How are the activities related?

How does business process configuration influence and shape innovation?

How is innovation organized to facilitate enhanced process performance?

Business Context

MarketMarket

Techno-Techno-logy logy

BusinesBusinesss

partners partners


Degrees of change

Improvement Innovation

Level of change IncrementalIncremental RadicalRadical

Starting point Process problemsProcess problems Environmental Environmental changechange

Frequency of change ContinuousContinuous DiscreteDiscrete

Participation Bottom-upBottom-up Top-downTop-down

Risk ModerateModerate HighHigh

Primary enabler Statistical controlStatistical control Information Information TechnologyTechnology

Adapted from Thomas H. Davenport: Process Innovation: Reengineering Work Through Information Technology, Harvard Business School Press, 1992.


Outcome and Process Focus

Poor

Good

Use Use heavyweight teamheavyweight team::within existing within existing

organizationorganization

INNOVATIONINNOVATION

Use heavyweight team:in spinout organization

INNOVATION

Use lightweight or functional team:

within existing organization

IMPROVEMENT

Use heavyweight team in-house; commercialization requires a spinout

IMPROVEMENT

Good Poor(sustaining) (disruptive)

Innovation fitInnovation fitwith with

processesprocesses

Innovation Innovation fitfit

with valueswith values

Radical versus IncrementalRadical versus IncrementalRelates to both outcomes and Relates to both outcomes and Process and can be combined Process and can be combined


Managing the BPI project portfolio

BPI management

BPI project

BPI project

BPI project

BPI project

Prioritize, coordinate, and monitor portfolio of BPI projects

Focused BPI projects


Building innovation capabilityTYPESTYPES

1. Leadership-driven capacity:

Individuals see opportunity Individuals see opportunity and run with itand run with it

2. Structural-driven capacity:

Mechanisms are put in place Mechanisms are put in place to enable changeto enable change

3. Organic capacity:Employees see innovation as Employees see innovation as an integral part of their joban integral part of their job

INGREDIENTSINGREDIENTS

1. The ability of people within the organization to innovate

2. The desire of people to act in an innovative manner

3. An environment that enables and empowers innovation

Innovation is like jazz -- not random; requires improvisation

Creativity is just having enough dots to connect

Is Is youryour organizatioorganizatio

n n InnovativeInnovative

??

Adapted from Shapiro: Innovate your organization. The 24/7 Innovation www.24-7innovation.com.


Innovation and improvement

Improvement Innovation

1.1. Process definedProcess defined

2.2. Process measures definedProcess measures defined

3.3. Process diagnosisProcess diagnosis

4.4. Improvements identifiedImprovements identified

5.5. Improvements prioritizedImprovements prioritized

6.6. Process design and testProcess design and test

7.7. Implement improvementsImplement improvements

1.1. Success indicators definedSuccess indicators defined

2.2. Current strength-weakness Current strength-weakness analysisanalysis

3.3. Future opportunities-threat Future opportunities-threat analysisanalysis

4.4. Innovations identifiedInnovations identified

5.5. Innovations prioritizedInnovations prioritized

6.6. Process design and testProcess design and test

7.7. Implement innovationImplement innovation

Adapted from Beechner & Hamilton: “Infinity: A Model for Organizational Excellence”(www.paragonstar.com)


IDEAL improvement model

McFeeley, B. (1996). “IDEAL: A User's Guide for Software Process Improvement”, CMU/SEI-96-HB-001. www.sei.cmu.edu

Stimulus for improvement

Set context &establishsponsorship Establish

infrastructure

Appraise &characterizecurrent process

Develop recommendations& document results

Set strategy & priorities

Establish processaction teams &action plans

Define processes & measuresPlan & Execute pilot plan

Execute, & Track installation

Document & analyzelessons

Reviseorganizationalapproach

INITIATING

DIAGNOSING

ESTABLISHMENT

ACTINGLEARNING

See also:See also:CMMCMMCMMICMMI


Critiquing the as-is process

1. Rethink2. Reconfigure3. Resequence4. Relocate5. Reduce6. Reassign7. Retool

Adapted from Stephen ShapiroThe 24/7 Innovationwww.24-7innovation.com

Question Apply when…..

How can activity frequency be reduced or increased?

An activity is non-value added but necessaryThere is low variation in the process or productThere is high variability and low setup costs and times

How would more information enable greater effectiveness?

Higher accuracy is neededGreater segmentation would yield greater marketing effectiveness

How would less information or fewer controls improve efficiency?

A high proportion of costs goes to data collection and controlsThe value received from information or controls is minimalAbsolute accuracy is not necessary

How can critical resources be used more effectively?

Utilization of key resources is lowCritical resources are performing non-value-added or waste work

7R’s of process innovation


Reviewing the BPI triangle

InfrastructureInfrastructure

CustomerCustomerss

Products & Products & ServicesServices Strategies

StrategiesEnvi

ronm

ent

Envi

ronm

ent

Work Practices

InformationParticipants Technology

Steven Alter (2002). Substitute:

- Work system Business process

- Business process Work practices

1. Create a snapshot of the business process

2. Find problems and opportunities for improvement

3. Explore effects of proposed process changes

Innovating processes

Engineering

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