Leading Successful Innovation: Processes in Transition Erkki Ormala, Sampo Tukiainen, Jukka Mattila...

Leading Successful Innovation:

Processes in Transition

Erkki Ormala, Sampo Tukiainen, Jukka MattilaAalto University School of Business

STARTING POINT

• Innovation is the most important factor in generating firm performance and success

• Thus, questions relating to • organizing, • generating, • motivating, • steering, • strategizing and • leading

innovation management processes are of primary importance

Industrial Innovation in Transition Ormala, Tukiainen & Mattila, 2015

CURRENT INNOVATION ECONOMIES

ArgentinaBrazilChileColombiaMexico

CanadaUSA

Bangladesh ChinaIndiaIndonesiaMalaysiaPhilippinesSri LankaThailandVietnam

Australia JapanKoreaSingaporeNew Zealand

EgyptKenyaNigeriaSouth AfricaTunisia

RussiaUkraineTurkey

Austria BelgiumCzech DenmarkFinland

France GermanyGreece Hungary Ireland

ItalyNetherlandsNorwayPolandPortugal

SpainSwedenUK

Innovation economies

Resource & Efficiency economies

IranPakistanSyria

Connectivity Scorecard 2011 May 2011


THE FIRM’S CHALLENGE

1) HOW TO ORGANIZE?

2) HOW TO GAIN SUBSTANTIAL KNOWLEDGE ABOUT INNOVATION MANAGEMENT WORKFLOWS?

3) HOW TO LEAD?


THE ELEMENTS OF WINNING

• We argue that success in contemporary competition rest on two dimensions: 1) Growth and 2) Development. These two are intertwined.

• To successfully combine the two, firms need integrative structures and processes. These, in turn, comprise of the following elements:

1) Anticipating the future business environment with the help of a strategy process2) Linking the innovation strategy with the business strategy 3) Implementing the innovation strategy and 4) Bringing innovations to the market and expanding the market.

Innovation calls for interlinkages between these elements


LAYER 1

Mapping the future business environment


MAPPING THE FUTURE BUSINESS ENVIRONMENT

The development in the changing oglobal and regional markets,o technology development, opolitical environment,ocustomer needs,ocompetition, oeconomic and regulatory landscapes,

should affect 1) companies’ visions,which should lead to 2) choices and choices should establish 3) strategic

intents.


WORLDMAP TRENDS 2018 ON EVOLUTION CURVE; (Nokia example 2010)


FROM MEGATRENDS TO CONCRETE VISIONSTO BE OR NOT TO BE: In addition to mapping and following megatrends, focus also on how to influence, create, and organize for megatrends

1) Encourage creating understanding on company specific transformation paths for the next 3 – 10 years based on visions and gap-analyses.

2) Consider “blue ocean strategy” leaps – prepare for 3 – 10 year implementation spans – create roadmaps and milestones

3) Utilize existing data and services: Team Finland, ministries, barometers, Finpro, ELY-Centers etc.


Political and regulatory risks – Company Readiness and Competitor Engagement

CompanyReadiness

High

CompanyReadiness

Low

CompetitorEngagement

Low

CompetitorEngagement

High

Corruption

China Risk

Substances/Raw Materials

Social Aspects ofLearning/Local Context

Human RightsRegulation

Patents

Global Marketfragmentation

ConsumerInformation

EducationBusiness Opp.

Blended Learning/Vocational training

Privacy/Freedom of Speech

LATAMRisk

Energy and ClimatePolicy Debate

Energy and Climate/Smart/Public Transit

Business Opp.

StandardsIndia TradePolicy Risk

Waste management

ResourceEfficiency


CASE: Microsoft Finland

”We want to be developing Finland and the possibilities of the Finns to utilize IT.”- Active participation with own agenda- With the help of industry federations and networks- High level contacts with even PM and other cabinet members- A plan, programmatic with clear goals - the company as a "trusted advisor” for the publilc sector

decision makers

-> Improved impact on regulatory setting plus early warning system


LAYER 2

Linking innovation strategy with business strategy


INNOVATION STRATEGY

• Does a separate innovation strategy complement business strategy?

• Can innovation strategy and business strategy diverge?• Or is it a question of balancing the two?• Continuous process instead of Ad Hoc experiments• Two approaches:

– Top-down or – bottom-up feedback between innovation and business strategy


LINK BETWEEN BUSINESS AND INNOVATION

Top-down innovation strategy o Business strategy cascades down to innovation strategy

Bottom-up innovation strategyo Innovation strategy feeds to business strategy

Our findings show that 1) top-down model dominates in the Finnish context, 2) Only few radical new openings / innovations

Consider balancing!

How to deal with exceptional initiatives and long time frames?

– Innovation can start as strategy-driven, and end up being non-strategic, and even later again emerge as strategically important.


INNOVATOR’S DILEMMA (Christensen 1997) RENEWAL VS. STREAMLINING


LAYER 3

Implementing the innovation strategy


IMPLEMENTATION

1) The Stage-gate model –> be mindful that this model may lead to business line/unit domination in the innovation process

2) An iterative, customer engagement model –> builds on innovation co-creation with the customer from early on

– Current ecosystem –level innovation for companies often means innovation activities with the closest subcontractors and clients

– Then, how would you expand your markets?

NONETHELESS,– Radical/disruptive innovations might require development work

outside of the boundaries of current strategy/business units – aim to utilize open innovation, crowd funding/sourcing

– Internal venture units can be utilized for developing radical/disruptive innovations


THESES OF OPEN INNOVATION

• Mental leap of faith: Are we strong enough to open up the boundaries and grant access to our core innovation capabilities and knowledge Foster global mindset

Access and drive global intellectual vision and insight

Build global test beds to learn from broader audiences

Establish transparent management and collaboration rules

Fair rules for IPR ownership and use

Reformed reward and incentive systems

• Home market covarage is rarely enough for sustainable growth


IPR Guidelines for partnerships

1) Foreground: all parties have access right royalty-free to all foreground generated in the project

2) Background:

A) parties shall grant access right to background if it is needed for the project work (royalty free)

B) parties shall grant access right to background if it is needed for the commercialization of foreground (FRAND)

C) each consortia decides if they will create inclusion lists or exclusion lists

3) Ownership: Joint ownership is not preferred


TWO WORDS OF CAUTION

A generic note from a study:”We aim to be the leading company in our field, with the help of cost cuts”

Ormala et al. 2014: “Only a few comments about radical, disruptive innovations and activity aimed at them. This kind of activity was described to happen especially outside business strategy, ‘under the radar’, or in terms that business strategy was seen to restrict this kind of innovation activity.”

!!!!!! -> Consequences?


COMPANY CASE

A lesson from the study:”Both stage-gate and iterative models are needed. They fit to different industry and economic contexts”

Stage gate model: from an idea to conceptualization, business case and plan, in order to be able to evaluate profit potential, and to convince specific business units.”

Iterative model: Reversing the traditional order by engaging with the client for co-creation, building up mock-ups, demos rapiply with the client, conceptulizing and expanding business plans afterwards.


LAYER 4

Expanding the market


CREATING NEW VALUE

• BUILD!– Build industrial ecosystems to gain leadership of the new

emerging value domains

• EXPAND! – Aim to expand the “innovation horizon” to involve the

ecosystem more holistically, e.g. start-ups, “kickstarters”, crowd sourcing, crowd funding, “hackathons” etc.

• CAPTURE!– Capture the critical knowledge assets to enhance value

generation in the network economy


CREATING NEW VALUE

• Innovation is often network and ecosystem dependent• Utilize available resources: public and private

organizations and data• Companies usually have a limited understanding of the

ecosystem and value chain• Dig into Big Data! May lead future transformation - an

opportunity, but not used extensively yet• Market and competition perspective conservative, not

reflecting the business environment vision


Summa Summarum


CHALLENGES TO INNOVATION ACTIVITY ON THE LEVEL OF PRODUCTS/TECHNOLOGY

• Ownership of innovations seems to disperse among business units

• In the stage-gate model, there is internal bureaucracy and personal reflections

• The stage-gate model seems to serve short-sighted innovation

• Innovations requiring risk and courage, about which it is difficult to evaluate the anticipated revenue accurately, are often discarded when defining final development programs


CHALLENGES TO INNOVATION ACTIVITY AT THE COMPANY LEVEL

• A need for more creativity, experimenting and entrepreneurship in order to create breakthrough innovations

• The focus of management is easily concentrating on emphasizing incremental development of existing activities

• New initiatives and actively changing the business environment were not emphasized in the interviews, even if changes in the business environment were actively monitored in the strategy process

• It is often possible to promote new openings and radical innovations only outside the current organizational structure and the existing strategy

• The development logic followed by companies causes an innovation gap at the level of society


KEY OBSERVATIONS & RECOMMENDATIONS • Innovation requires process ownership by a dedicated

person, who has a proper motive to bring innovations to the market

• Uphold long-term vision and perspective in top management teams regarding radical/disruptive innovations

• Encourage risk-taking and enable inclusion of projects with uncertain expected returns

• Maintain, attract and enrich human capital to provide a solid base for innovations

• Focus especially on new value creation – take into consideration a general tendency of companies to over-emphasize cost-cutting and lean-processes


NATIONAL INNOVATION POLICY & SERVICES

• TEKES, SITRA, SHOKs, and different industry bodies play a key role in creating new innovation platforms and integrative forums

• Creating new business models, ecosystems, businesses and value calls for strengthening the integration of key stakeholders – including universities and the companies them selves

• Strengthening and advancing the interlinkages between universities and industry is crucial in the future

• With regards to the companies’ possibilities to bring innovations to market, there seems to be an “oversupply” of innovative ideas – spin-off activities should be developed within technology hubs and incubators


Thank you


Leading Successful Innovation: Processes in Transition Erkki Ormala, Sampo Tukiainen, Jukka Mattila...

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