Why Companies Suck at Innovating and What to do About it
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Transcript of Why Companies Suck at Innovating and What to do About it
The Innovation Enginevs.
The Efficiency Engine
The Battle All Businesses Face
The Strategy + Innovation Group | All Rights Reserved - Copyright (c)
27/8/2012
76% of Innovation Initiatives Fail
60% outright fail and another 16% make it to market, but lose money
Only 24% are successful and
profitable
So
urc
e:
“In
no
vato
r’s
Dile
mm
a”
The 2003 Data
The Strategy + Innovation Group | All Rights Reserved - Copyright (c)
37/8/2012
Reality: 98%
Failure Rate
The 2013 Data
The Strategy + Innovation Group | All Rights Reserved - Copyright (c)
47/8/2012
Can’t Hide itWe All Suck
at Innovating
3/12/2013 The Strategy + Innovation Group | All Rights Reserved - Copyright (c)
55
Luck isn’t Enough
6
The Strategy + Innovation Group | All Rights Reserved - Copyright (c)
77/8/2012
In 2008 we went Deep Undercover
In the midst of economic
chaos… to learn the hard lessons
We Chose to Investigate
ASKING TWO QUESTIONS
1. Why don’t more companies use Systematic Innovation methods?
Especially when there are examples of good useSamsung | Intel | Siemens | Dow | Motorola
2. What prevents companies from materializing / monetizing results from innovating systematically?
8
MULTIPLE THEMES EMERGED OF WHY COMPANIES DON’T USE SI
METHODS
1. Biases – 11 different biases cited, (see backup and McKinsey Report on Biases)
2. Prejudices – a.k.a. PI (Psychological Inertia)
3. Organizational Dysfunction
4. Ignorance of Systematic Innovation Methods or how to best apply them
9
The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 107/8/2012
Biases distort the Quality of Decisions = Poor Execution
Biases
See backup for detailed explanation of McKinsey’s Analysis and What we found
Innovation:a commercially successful
step change advance
(not to be confused with ‘optimization’)
This the typical way most of us approach improving businesses and technology
3/12/2013 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 12
WHAT DOES A 98% FAILURE RATE IMPLY?
Extremely costly making innovation “bets”, but We cannot call it management or investment
– Results Do Matter
Clearly No Established Process for innovating
Managing the Risk of Innovating is ineffective
The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 137/8/2012
Traditional Innovation Risk:The Risk of Decision MakingP
red
icti
on
Learning
% R
isk
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cu
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f D
ec
isio
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akin
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Time
Wild Guesses 0%
25%
50%
75%
100%
25%
50%
75%
100%
InformedEstimates
ReliableForecasts
The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 147/8/2012
Traditional Innovation Risk:The Risk of Decision MakingP
red
icti
on
Learning
% R
isk
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InformedEstimates
ReliableForecasts
Most management at best, are guessing
MORE INNOVATION FAILURE STATISTICS
Over 90%
of innovation attempts fail before they reach the market
of those attempts that do reach the market will also fail
of innovations are delivered late, over-budget or at a lower quality than was originally planned
of collaborative innovations fail
3/12/2013 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 16
WHY WE ACTUALLY FAIL AT INNOVATION HAS MULTIPLE SOURCES
10%
18%
44%
20%
28%Coordination
Production
Route to market
More Ideal Solution
Market Demand
Sources of Innovation Initiative Failure: SME's, Startups
3/12/2013 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 17
A LITTLE DIFFERENT FAILURE RATE AT MNC’S
34%
12%
8%
23%
26% Coordination
Production
Route to market
More Ideal Solution
Market Demand
Sources of Innovation Initiative Failure: MNC's / Large Corporations
THE HEART OF THE PROBLEM
CustomerNeed
Technical Solution(protectable IP)
Ability of an OrganisationTo successfully exploit the IP
Only when all three are in place
is there an opportunity for
successful commercialisation
VoC VoS
VoBLegend:VoC: Voice of the CustomerVoS: Voice of the SystemVoB: Voice of the Business
The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 197/8/2012
WHICH MEANS IF WE NEED TO BE MORE PREDICATABLE (PROFITABLE)
THEN WE WILL NEED TO BE RESPONSIBLE AND ACCOUNTABLE FOR:
Our Thinking
Our Learning
Our Decisions
Our Actions
Our ResultsOtherwise
The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 207/8/2012
WE ARE NOT MAKING INVESTMENTS – WE ARE…
TYPICAL APPROACH TO PROBLEM SOLVING AND
INNOVATING
We leverage our acquired knowledge and the experience we’ve gained from academia, on-the-job, company and industry experts, etc…
The good news: This works well enough when addressing known problems and
solution sets with conventional methods and frameworks for solving problems in a given discipline.
The bad news: When we look at all problems in the same way we can become
‘stuck’ in looking at things the same way that others have. Resulting in a psychological inertia, preventing a solution from being found.
7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 21
04/11/2023 22
PSYCHOLOGICAL INERTIA EFFECT
Property of the Strategy + Innovation Group-- Do Not Distribute or Reproduce without permission
Problem solving is like digging for treasure in a field
If a hole already exists, our inclination is to dig in deeper
If someone else comes along, we encourage them to jump in the hole with us
The deeper the hole, the more difficult it is to see what’s happening in other parts of the field
CLASSIFICATION OF PROBLEMS
Invention:Innovator
(Sys. Innov trained Engineers)
Troubleshooting:Skilled
Prediction:Futurist
(Advanced Sys Innov,trained engineers)
Shotgun Approach / Trial and Error:Pseudo-Expert
Known Unknown
Kn
ow
nU
nk
no
wn
Solution
Problem
Type III ErrorsType III Errors
Inventive ProblemsInventive Problems
• Eliminate Type III errors (solving the wrong problem precisely).• Remove Psychological inertia.• Improve the level of innovation
Psych
olo
gic
al
Inert
ia L
ine
4/27/2010 24
CORPORATE CULTUREADAPTIVE VERSUS UNADAPTIVE CORPORATE CULTURES
ADAPTIVE UNADAPTIVE
Core Values
Most managers care deeply about customers, stockholders and employees. They also strongly value people and processes that can create useful change.
Most managers care mainly about themselves, their immediate workgroup or their product. They value the orderly and risk-reducing management process much more highly than leadership initiatives.
Common Behavior
Managers pay close attention to all their constituencies, especially customers, and initiate change when necessary to serve their legitimate interests, even if that entails taking some risk.
Managers tend to behave somewhat insularly, politically and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environments.
Source: “Corporate Culture and Performance”, Kotter, J.P. and Heskett, J.L., 1992
7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 25
Designing For Organizational Innovation
Avoid the Stupid
Mistakes, Learn from
Others
and Don’t be a
Fluffy Bunny
Fluffy Bunnies go
here too
Copyright Protected | Property of the Strategy + Innovation Group 27
THE COST OF THE DYSFUNCTIONAL ORGANIZATION
25% Avg. Profitability Difference (20-30% range) between “Remarkable” vs. “Unremarkable” firms (dysfunctional culture)
Can be as high as 50%
This material MAY NOT be distributed to others, copied or reproduced without the express consent of the author
“Culture, a fancy word for the habituated thinking of an organization, rightly or wrongly”
-RP
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THE COSTS OF THE DYSFUNCTIONAL ORGANIZATION
Those working in an uncivil work environment• 48% decreased their work effort• 47% decreased their time at work• 38% decreased their work quality• 66% said their performance declined• 80% lost work time worrying about (an uncivil) incident• 63% lost time avoiding the (uncivil) offender • 78% said their commitment to the organization declined
Bad Apple Syndrome Negative comments are 5X stronger than good Caustic people will infect and bring down performance in short time frames
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DYSFUNCTION’S IMPACT
BOTTOM LINE: Dysfunction causes 25 - 50% Lower Profitability and Productivity, Higher Healthcare costs and Higher Employee turnover
Performance gains are hindered by poor work processes that in turn creates toxic employees
Toxic Employees / Leaders • Have a significant negative financial ripple effect on an firm’s
performance and profitability (Bad Apple Syndrome)• They’ll likely block necessary strategies to achieve performance
gains (Maintaining status quo irrationally)
Organizations need a multi-pronged strategy to eradicate the effects of operating in a
dysfunctional stateThis material MAY NOT be distributed to others, copied or reproduced without the express consent of the author
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ROOT CAUSE
Only 1% of the population is Sociopathic so… Pointing at people alone as the problem is not a
complete answer
We Believe the workaround to the issues are..
Misunderstanding what an effective Professional Leader really means and does
Lack Knowing “How-To” effectively Influence others
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ORGANIZATIONAL LIMITATIONS
Successful companies & the strategies they use often owe a great deal to the inertia and inefficiency of rivals
An organization’s greatest challenge may not be external threats or opportunities but instead to the effects of inertia and entropy
This material MAY NOT be distributed to others, copied or reproduced without the express consent of the author
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DIAGNOSIS OF THE PROBLEM
Organizational Inertia: is an organization’s unwillingness or inability to adapt to changing circumstances
Organizational Entropy: measures a organizational system’s degree of disorder, and without intervention will always increase
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Causes of Fear and Dysfunction Entitlement Self-Interest Putting Oneself Above the Rules
Some companies even have individual promotion / compensation programs that support this
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WHAT LIMITS ORGANIZATIONS FROM BECOMING GREAT?
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RESOLVING THE DILEMMA
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GOT LEVERAGE?
Mind Set Skill Set
StrategyDiagnosis Insights – looking for assumptions and contradictions
Strategic Intent
Strategic Policy
Strategic & TacticalActions
Competitive Frameworks / Tools / Methods
Copyright Protected | Property of the Strategy + Innovation Group 35
5 DYSFUNCTIONS OF TEAMS
Inattention to
RESULTS
Avoidance of ACCOUNTABILITY
Lack of COMMITTMENT
Fear of CONFLICT
Absence of TRUST
Fear of being vulnerable with team =
Artificial harmony for the sake of peace =
Ambiguity & Failure to Buy-in to decisions =
Unwillingness to call peers on performance or behaviors =
Caring about something other than the collective goals of the group =
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HOW FUNCTIONAL TEAMS BEHAVE
Artificial Harmony
Mean-Spirited Personal Attacks
Ideal Conflict Point
DestructiveConstructive
How do you define success?
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37
THE POWER OF PROFESSIONALISM
“Technical competency will get you onto the green. But a professional puts it into the cup every time”
-Richard Platt
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38
WHY PROFESSIONALISM MATTERS
Professionals hold it together under difficult circumstances
Professionals 1. Demonstrate mastery in their work
2. Conduct themselves in a way that engenders trust
Choosing to be a Professional provides an identity that raises your sights above mediocrity
People who view themselves as professionals outperform, outsmart and outlast others
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39
WHY PROFESSIONALISM MATTERS
The Effectiveness of a Professional is Balanced
“What You Do”(blade #1)
Skill Set(Technical Competency)
“How” you go about Your Work
(blade #2)
Mind Set(Leadership Competency)
Note: Experts are not necessarily Professionals
40This material MAY NOT be distributed to others, copied or reproduced without the express consent of the author
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FOUNDATIONS OF PROFESSIONALISM
Trust: The One Thing You Have to Get Right
With Trust: people are more confident, proactive and hopeful
Without Trust: people are more skeptical, withdrawn and pessimistic
Gaining Trust is based on supporting another’s priorities, protecting their self-interests and respecting their values
3 elements needed in order to Build Trust: Character, Competence and Judgment
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41
FOUNDATIONS OF PROFESSIONALISM
Trust: (Continued)
Consistency, an inseparable correlation between it and trust. You cannot have trust without it.
Show up as a professional, not merely when it suits your needs
No mixed messages, be clear
No double standards,
No creative rationalizations
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42
7 MIND-SETS OF TRUSTED PROFESSIONALS
MS#1: Professionals Have a Bias for Results
Delivering results demonstrates trustworthiness
Deliver the Right Results in the Right Way • Ensure outcomes are sustainable, not just a flash in
the pan
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43
7 MIND-SETS OF TRUSTED PROFESSIONALS
MS#2: Professionals Realize (and Act) They're part of Something Bigger Than Themselves Commit to the success of the firm, organization
or client.
Realize success transcends your own parochial interests.
Collaborate as an effective team member
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44
MS#3: Professionals Know Things Get Better When They Get Better
Disaster / Aid Workers
Selfless Efforts in the For-Profit World • Giving back to the Community
Personal example • Near death, significant losses and the march back
7 MIND-SETS OF TRUSTED PROFESSIONALS
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45
MS#4: Professionals Have Personal Standards Often Transcending Organizational Ones
Have a personalized core set of values
Do what’s right over what’s expedient by taking a long view
Rise above the fray, stay focused and avoid pointless drama
7 MIND-SETS OF TRUSTED PROFESSIONALS
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others, copied or reproduced without the express consent of the author
46
MS#5: Professionals know That Personal Integrity is All they Have
3 Very Important underpinnings of Integrity:
1. Authenticity and honesty
2. Delivering on one’s commitments (both explicit and implicit)
3. Refusing to violate the trust others have extended to us
7 MIND-SETS OF TRUSTED PROFESSIONALS
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47
MS#6: Professionals Aspire to Be Masters of Their Emotions Not Enslaved by them
3 by-products of Mastering one’s emotions (and inspiring trust in others):
1. Professionals are respecting when it’s difficult to be respectful
2. Professionals maintain their objectivity and keep their wits about them – Don’t take things personally
3. Professionals manage their ego and resist the urge for immediate gratification
7 MIND-SETS OF TRUSTED PROFESSIONALS
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48
MS#7: Professionals Aspire to Reveal Value in Others
“Aspire” suggests intent, priority and, most importantly, proactively
Professionals who hold this mind-set: Readily extend trust
• Where & When appropriate – don’t be naive – that’s stupid
Recognize the value other professionals bring to the table.
Aspire to lift others through their demeanor and actions
7 MIND-SETS OF TRUSTED PROFESSIONALS
PERFORMANCE MANAGEMENT PYRAMID
7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 49
POSITIVE RESPONSE TO CHANGE
Informed anguish
Blissful ignorance
Coming to terms
Realistic support
Overtchecking
out
Covertchecking
out
1. UninformedOptimism(Certainty)
2. InformedPessimism
(Doubt)
3. HopefulRealism(Hope)
4. InformedOptimism
(Confidence)
Resistant
Time
Supportive
4/27/2010 Property of Strategy + Innovation Group LLC 53
Finding Out What You Don’t Know is the
1st Step
“It is not what you do know that hurts you, it is what you don’t know that get’s you thrown under the bus”
- Richard Platt
SO AS INNOVATION CHAMPION CHARTERED BY THE CEO
TO PROLIFERATE ACROSS THE ENTERPRISE you HAVE TO PICK A SIDE
This?
Or This?
Fluffy Bunnies Don’t Live at the Intel I Know
Published in 1999
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Whatever You Do Remember
This:
This Is NOT about You
It is about Your Customer
Take Nothing Personally
4/27/2010 Property of Strategy + Innovation Group LLC 60
WHAT OODA LOOP SPEED MEANS TO A CHANGE AGENT
ImplicitGuidance& Control
Know whatto do
Act
And be able to do it
UnfoldingInteraction
WithEnvironmen
t
Action(Test)
Feedback
Decide
Decision(Hypothesis)
FeedForwar
d
FeedForwar
d
Feedback
While learning from the
experience
Observe Orient
Feed
Forwar
d
Observations
UnfoldingCircumstances
OutsideInformation
UnfoldingInteraction
WithEnvironment
Quickly understand
what’s going on
ImplicitGuidance& Control
CulturalTraditions
GeneticHeritage
NewInformation
PreviousExperience
Analyses &Synthesis
Source: Adapted from presentation by Chet Richards author of “Certain to Win”; http://www.belisarius.com/index.htmli
THE VALUE PIPE (A STORY OF 2 FLOWS)
$ flow back to
the business
Value provided to a downstream
customer(JTBD, product, service,
information, etc…)
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Copyright Protected | Property of the Strategy + Innovation Group 62
COMPARING PROCESS IMPROVEMENT AND SYSTEMATIC INNOVATION
METHODS
Program Six Sigma Lean ThinkingTheory of
Constraints TRIZ / Systematic InnovationTheory Reduce Variation Reduce Waste Manage Constraints Evolve System to Next Generation
1. Define 1. Identify Value 1. Identify Constraint1. Identify Ideal Final Result and gaps to IFR
2. Measure 2. Identify Value Stream 2. Exploit Constraint 2. Functional Analysis of System
3. Analyze 3. Flow 3. Suborndinate Processes3. Solve Contradictions (w/ Inventive Principles)
4. Improve 4. Pull 4. Elevate Constraint4. Apply Trends and Laws of Technological Evolution
5. Control 5. Perfection 5. Repeat Cycle 5. Select Best Solutions
Focus Problem Focused Flow Focused System Constraints System Analysis & Break Contradictions
Primary Effect
Uniform Process Output
Reduced Flow Time Fast Throughput Innovative Solutions for tough problems
Application Guidelines
Reduction in process Variability(Stop building crap product)
Stop doing
Wasteful Activities
Increasing the Speed of Processes
Complex Problem Solving Tools for
Evolving the System to Next Level
of Performance
Value Derived for Company
The results of a firm’s competitiveness is derived from its ability and process by which it innovates. If the results are poor we have no other alternative but to look at the process by which the results that were delivered gave us.
It is our process by which we innovate that must become our focus – otherwise we are back in the land of magic pixie dust and the business god’s favoring us as we attempt to move forward with
our business plans and expectations.
Focus on the process to deliver Customer Results. Build the process in and manage it relentlessly.
Results are what Customers Pay For,Everything Else is Waste
Systematic Innovation TOOLS AND THEIR
APPLICATIONSystematic Innovation Tool
Application / Use
JTBD – “jobs to be done”:
The job that a customer hires a product or service for, embedded within a given system. a.k.a. the main parameters of value
IFR – Ideal Final Result: Uses Law of Ideality as a guideline, (when the JTBD is within it), to define the functionality, performance, costs and limits of a system
Functional Modeling: Shows “how” the system is interacting dysfunctionally
Zone of Conflict Analysis:
Shows “where” and “when” the system is dysfunctioning
Contradictions: Refines “how” the system is dysfunctional, and “where to focus” efforts
Inventive Principles: Provides potential solutions to overcome system contradictions and dysfunction (best solutions are usually combinations)
S-Curve Analysis: Shows level of system maturity, and “how to” evolve the system to greater level of maturity, performance and profitability
Trends of Eng. Systems:
Shows “how to” evolve the system to higher levels of functionality
Scientific Effects: Shows ways to solve limitations of the system using scientific effects from other industries or sciences
7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 64
THE SYSTEMATIC INNOVATION TOOLBOX
65
66
Systematic Innovation++
<5%Going After
Non-Consumers
5 - 10%No Guts, No Glory
5 - 10%Staying In Your Own Backyard
80 - 100%Staying Inside
the HouseSource: Booz, Allen, Hamilton white paper “The Innovators Prescription - Raising Your
Return on Innovation Investment” (2004)
Note: The #’s come from NIST’s analysis of Typical R&D spending by corporations, the category names are my own
Evaluating Efforts; Use 4 Metrics (minimum):1.Return On Human Assets (ROHA):2.Return On Investment (ROI):3.New Usage or Market Segment? (Y/N) 4.Proprietary Technology? (Y/N)
BILL GATES
Intel Confidential | Internal Use Only
INGREDIENTS OF AN INNOVATION MANAGEMENT SYSTEM
Leadership & Organization
Vision & Goals
Innovation Strategy
Org Structure
Innovation Policy - ICMM
Culture & Values
Collaboration
Open “Idea Friendly” Culture
Innovation Incentives and Rewards
Established Process to trust
Processes & Tools
Systematic Innovation methods
Supporting Tools (Proto-typing capability)
Idea Management (Generation & Shaping)
Pipeline & portfolio Management
People & Skills
Grammar of Innovation
Proficiency in Innovation (Process, Methodology & Tools)
Innovation Training, Workshops & Coaching
Innovation Effectiveness
Innovation Metrics
7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 71
INNOVATION CAPABILITY MATURITY MODEL INDEX
Effects of implementing an ICMM
Managed Process for Innovation Increase in Customer Loyalty Increase in Quality Increase in Predictability Increase in Profitability Decrease in Risk
Level -3: Undermining
Level -2: Contemptuous
Level -1: Obstructive
Level 0: Negligent
Level 1: Initial
Level 2: Defined
Level 3: Implemented
Level 4: Managed
Level 5: Adaptive
Risk
Profit
ICMM helps to combat Bias
Prejudice and Organizational
Dysfunction
STEVE JOBS
OPTIMIZATION IS DEFINED BY BOUNDARY CONDITIONS OF THE
SYSTEM
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Optimization occurs at or below the apex
Contradictions define the limits of all systems
Put another way:Assumptions or biases limit what we view when
look at how a system performs
Parameters ‘x’ and ‘y’ limit performance of ‘z’
RESOLVING BIASES AND ASSUMPTION ARE ADDRESSED LOOKING FOR CONTRADICTIONS AND USING FUNCTIONAL ANALYSIS OF THE
SYSTEM
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XInnovation occurs
above the apex of the contradiction
paraboloid
Contradictions define the limits of all systems, if we purposefully break them we gain performance in the ‘z’ axis
Parameters ‘x’ and ‘y’ limit performance of ‘z’
S-CURVESHelps define where a technology exists in regards to its functionality (performance), and its maturity
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Per
form
ance
S-CURVES AND CONTRADICTIONS
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Each step in increased performance along a single s-curve can be defined in terms of contradictions (obstacles to be overcome)
Measured Parameter – Cost, Profit, ROI, Efficiency, Effectiveness, etc.
Current System
Altered System
Fundamental Limit of Capability
target
Getting to the target requires a change to the system- Solve a contradiction- Use another means- Evolve to other trend stages
THE OVERRIDING IMPORTANCE OF EVOLUTIONARY S-CURVES
EACH LARGE SYSTEM IS MADE UP OF INDIVIDUAL COMPONENTS
Individual components, have their own individual s-curves
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A PRODUCT IS DEFINED BY THE PROCESS THAT MAKES IT
The process by which a product is produced is inseparable from its process, thus any improvement suggested or envisioned for a product has a direct causality back to the processes used to create it.
In effect there are always at least two s-curves defining a system:• The product (a demand driven
function)• The process that builds or
produces a product (a cost driven function)
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Danner, T.W. A Formulation of Multidimensional Growth Models for theAssessment and Forecast of Technology Attributes. Aerospace Engineering (Georgia Institute of Technology, 2006).
IMPROVEMENT OF A DESIGN IS LIMITED BY THE IMPROVEMENT IN THE PROCESS THAT CREATES IT
Design performance (demand driven curve) is constrained by Manufacturing performance (cost driven curve)
Why Important: Coordinating development of the Process Innovation curve to coincide with the Product Innovation Curve increases margin sooner, shortening Time-To-Productivity, shortening Time-To-Market, lowering product cost with greater performance, reliability, and functionality than competitors products or processes that don’t use such a methodology7/8/2012 The Strategy + Innovation Group | All Rights Reserved - Copyright (c) 80
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Systematic Innovation Risk:Reducing the Risk of Decisions
Pre
dic
tio
n
Learning
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isk
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akin
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Wild Guesses 0%
25%
50%
75%
100%
25%
50%
75%
100%
InformedEstimates
ReliableForecasts
Utilizing Systematic Innovation Methods: Dramatically Reduce the Risks of Human Biases and the costs of Trial & Error drop significantly
Quality of Prediction/Solution = Better Faster Speed
TYPICAL TOP DOWN PERSPECTIVES
CEO’s Perspective
Grow topline business
Grow Revenues
Launch new products / services
Globalize the business
COO’s Perspective
Execute current priorities
Operational efficiencies
Effective processes
People priorities
CFO’s Perspective
Grow bottom line
Reduce costs
Manage Risks
Compliance
What’s the Next BIG Thing?
What’s Today’s BIG Challenge?
What’s our Next BIG Risk?
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Source: Cognizant’s submission to MIXprize.org
EXAMPLES OF STRATEGIC BUCKETS
Portfolio management splits the overall NPD resources a priori to the formulation of project ideas on different NPD programs as bundles of NPD projects.
Projects compete with like projects instead of with one another across the buckets
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Development of advanced
technologies
Cost Reductions
Process & Product
Improvements
Development of Completely new
products / services
INNOVATION SYSTEM CONTROLS
Focus on problems that need to be solved, customer’s and production processes (needs)
Learn and implement systematic innovation tools across the org (methods and people)
Start simple where there are already issues, (look for contradictions)
Support and enable the products, services, R&D, and process development activities (idea conversion)
Tie projects to revenue, cost savings and productivity benefits (metrics)
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INNOVATION SYSTEM CONTROLS
Connect with others in the organization, get their support, enable their activities and agendas (key initiatives)
Communicate up down and across the organization on the value add (dashboards)
Communities of practice are vital (culture)
Big wins are nice, but look for multiple small wins from all corners of the organization, they accumulate (visibility and rewards)
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Understanding the Different Types of Innovation
Understanding the Different Types of Innovation
Knowing the different types of innovation and which one to use and when is vital to architecting your process that fit’s your industry and firm’s needs to be competitive
Geoffrey Moore did an insightful analysis of the many different types of innovation in his book “Dealing with Darwin”
INNOVATION
MYTH
BUSTING
Myth Busting
There are multiple types of innovation initiatives NOT just disruptive innovation, each one provides a means towards achieving profitability and delivering value to customers.
Disruptive innovation: really only works if you have excess functionality, or over-serving a given market and that there are underserved elements to migrate that functionality towards those underserved markets
Disruptive Innovation
PlatformInnovation
ApplicationInnovation
ProductInnovation
Value Eng.Innovation
IncrementalInnovation
ProcessInnovation
DesignInnovation
MarketingInnovation
ExperientialInnovation
Value MigrationInnovation
IntegrationInnovation
OrganicInnovation
StructuralInnovation
This is the one many think of, when thinking about innovation and it’s the riskiest to do
EXAMPLE OF A MISUNDERSTOOD AND MISAPPLIED METHOD
Blue Ocean Strategy (BOS) is an excellent example of a marketing innovation. The authors present it as a means of “value” innovation, however the downside that we’ve noted about it’s use is that it is often a one-time win for a firm.
Can Blue Ocean Strategy be sustained?
By example when we evaluated Casella Wines (‘yellow tail’ brand) from Australia, an example cited by the authors of Blue Ocean Strategy, what we did not see was any subsequent use of the method demonstrating a repeatability and reliability of using the method.
It might be repeatable migrating from one company or industry, however it has not been demonstrated that it is repeatable within the same product line that it was first applied.
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It is not that yellow tail didn’t gain benefit from its initial BOS analysis and redefining the market, but what new innovation has yellow tail introduced since it began. The only noticeable change is that the price of yellow tail wines has
increased, and the hoped for volume increases did not pass on a lower cost to buyers.
Blue Ocean Strategy Conclusion
Our conclusion is that BOS is useful for redefining other parameters that are under-recognized by the market.
But once that has been executed and the market made aware of the enhanced value of a given product, the method is not able to exploit other value parameters that the buyer may desire.
It is not that BOS’s approach is wrong, we adamantly agree with the fundamentals of decreasing industry costs, and increasing buyer value, we see it as a marketing tool, not necessarily as a repeatable and reliable method we can go to market with.But can it modified to be repeatable?
Can BOS be modified to be repeatable?
The Core of BOS
The Four Actions Framework is the core process by which BOS operates and where the additional value parameters are found, and where a firm may reduce, change, or eliminate to gain competitive advantage.
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IMPORTANCE OF 4 ACTIONS FRAMEWORK TO SKILLED
INNOVATORS
All of these methods
are techniques
from the Systematic Innovation
toolbox
Evolve System using
Evolutionary Trends to achieve
higher performance
Model System under evaluation for its functionality and
utilize Trimming Method
Use Inventive Principles to solve contradictions
Find an alternative means of achieving
Functionality
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PROBLEMS WITH ORGANIZATIONAL
STRATEGY
and What to Do About It
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SCHOOLS Base Discipline – Some Shortfalls
Design Architecture as metaphor - Neither analytical, nor intuitive. Too static in an era of rapid change.
Planning Linked to urban planning, system theory, & cybernetics - Neither supports real-time strategy making nor encourages creative accidents.
Positioning Economics of industrial organization & military history (Art of War) - Strategy reduced to generic positions selected through formalized analysis of industry situations.
Entrepreneurial Early writings come from economics - Vague vision; strategies are designed mainly based on leader's intuition.
Cognitive Cognitive Psychology - Too subjective approach to strategy formulation (just in the head of the strategist).
Learning Linked to learning theory & Chaos theory in mathematics - Strategy development process is rather chaotic, unpredictable and process (rather than result-oriented)
Power Political science - Focuses mainly on the clash of self-interests of stakeholders during the process of strategy development
Culture Anthropology - Not well suited for radical change projects.
Environment Biology - Severe limits to strategic choice.
Configuration History - Polarized between two approaches favoring either radical or incremental change
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SUMMARY OF ISSUES WITH THE SCHOOLS OF STRATEGY
Majority miss…
organizations ability to compete and innovate is the sum total of the collective habits of its people – What Your People Do
• “How it gets things done” (a.k.a. the company culture)
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SUMMARY OF ISSUES WITH THE SCHOOLS OF STRATEGY
Majority miss…
are tops down, thus little / no buy-in from the people doing the work, the execution part
• Little appreciation for front line on “how to” deliver value (What Customers Pay For)
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SUMMARY OF ISSUES WITH THE SCHOOLS OF STRATEGY
Majority miss…
not focused on “how” the work will achieve the desired outcomes
• Doesn’t unleash capabilities and talents of front line personnel delivering value to the customer (How the Value is Delivered to the Paying Customer)
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wis•dom |ˈwizdəm| the ability to discern or judge what is true, right, or lasting; insight.
Confucius stated that wisdom can be learned by three methods:
Reflection (the noblest) Imitation (the easiest) Experience (the bitterest)
THE DEMING AND DRUCKER MODEL OF CHALLENGE
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“The enterprise that does not innovate ages and declines. And in a period of rapid change such as the present…the decline will be fast.” - Peter Drucker
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Topic of Intersection Dr. Drucker Dr. Deming
Fear as a motivator
Modern behavioral psychology has demonstrated that great fear coerces, while remnants of fear cause only resentment and resistance. Lesser fears destroy motivation.
Drive out fear, so that everyone may work effectively for the company. Fear impairs performance and causes numbers to be padded.
Management by drives and quotas
Many managements fail to draw the obvious conclusion that drives [such as cost cutting, then inventory cutting, then human relations] are after all, not the way to get things done.
Quotas are a barrier to improvement. Eliminate numerical quotas for the work force. Eliminate numerical goals for people in management.
Innovation
Inherent in the managerial task is entrepreneurship: making the business of tomorrow. Inherent in the task is innovation. Innovation is above all, top-management attitude and practices. Innovation in a business enterprise must therefore always be market-focused. Actually, “What is our business?” is almost always a difficult question and the right answer is usually anything but obvious.
Innovation, the foundation of the future, cannot thrive unless the top management have declared unshakable commitment to quality and productivity. The moral is that it is necessary to innovate, to predict the needs of the customer. A good question for anyone in business to ask is: What business are we in? What product or service would help our customers more?
Productivity
Productivity means that balance between all factors of production that will give the greatest output for the smallest effort. Economic performance that is achieved by mismanaging work and workers is illusory and actually destructive of capital even in the fairly short run. To leave knowledge skill underutilized is impoverishment of society and individual alike.
Production [and service] should be viewed as a system. The improvement of quality begets naturally and inevitably improvement of productivity...this transfers waste of man-hours into good product and better service. The result is a chain reaction—lower costs, better competitive position, happier people on the job, jobs and more jobs.
Variation
To design a control system, one has to think through what is routine and what is exception. The traditional American system is misapplication of control. It subordinates the routine to the exception.
There are two mistakes frequently made:
1. To react to an outcome as if came from a special cause, when actually it came from common causes of variation.
2. To treat an outcome as if it came from common causes of variation, when actually it came from a special cause.
Learning
Worker responsibility for the job, work groups, and output cannot be expected, let alone demanded until the foundations of productive work, feedback information, and continuous learning have been established. The fault is in the system, not in the men.
I should estimate that in my experience most troubles and most possibilities for improvement add up to proportions something like this: --94% belong to the system, (common causes) which are the responsibility of management. --6% special causes
Psychology of leadership
Management by drive [such as a theme of the month] is a sure sign of confusion. It is an admission of incompetence. It is a sign that management does not think. To make a living is no longer enough. Work also has to make a life.
Transformation to the new philosophy of management will result in joy in work, joy in learning. The result will in time be greater innovation, expansion of market, greater material reward for everyone. Everyone will win; no losers.
Use of rewards to motivate ...watch lest the compensation system reward the wrong behavior, emphasize
Rewards motivate people to work for rewards (quoting Alfie Kohn). A show
W. Edwards Deming, renowned statistician and management expert, and Peter F. Drucker, the father of modern management thinking, knew one another.
What might surprise you is the incredible number of intersections there are in their thinking
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Deming’s SOPK (System of Profound Knowledge)
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THE SYSTEMATIC INNOVATION TOOLBOX
109
110
JTBD and
Diagnosis
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INTEGRATING THE INNOVATION LIFE CYCLE INTO THE PRODUCT LIFE CYCLE
Planning ProductionDevelopment
Implementation
(IPA)
ApprovalMeetings:
ShipReleaseApproval(SRA)
DevelopmentInvestmentApproval
(DIA)
ProductDocuments:
ProductRequirements
ProductImplementation
DesignSpecifications
QualificationReports
ProductOverviewProposal
(POP)
ProductDiscontinuance
Approval(PDA)
ExplorationBusiness
RequirementsDocument
(BRD)
Plan
PlanApproval
Strategic Goal
and Limits
Diver
gent
Convergent
Analysis
Diver
gent
Convergent
Problem Definition
Diver
gent
Convergent
Competitive Frameworks
and Innovation
Methods
Diver
gent
Convergent
Solution Finding
Diver
gent
Convergent
Adoption / Rapid
PrototypingImplementation
Diver
gent
Convergent
Design for Innovation in Manufacturing
After Action ReviewPLC
ILC
Diver
gent
Convergent
Product Life Cycle
Innovation Life Cycle
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Customer Requirements,
Data Standards
e-CAD data input CAM / DFMs/w package
Run Design for Manufacturability
Analysis and review results
Do manufacturability
issues exist?
Document Issues in the DFM report
Use principles to Identify
viable solutions
Yes
No
Prototype New
Component solutions for ES
Build ES Prototypes(w/ Mfg. Eng.
at build)
Identify Contradictions
Check DFM violations
against customer Product cost and
Performancerequirements
Low
Risk
Med & High Risk
ReviewManufacturingPerformance
(w/ mfg floor feedback)
Legend: ES = Engineering SystemCAM = Computer Automated ManufacturingDFM = Design for Manufacturability
Release Product for
High Volume Mfg
DFM Tool as a Virtual Prototyping Tool
Continue NPIBuilds forStatistical
significance
Root cause for low yield
High
Yield
Trends of ES EvolutionAnalysis
S-CurveAnalysis
Low Yield
Problem solved with standard
Engineering approach
No
Yes
DfIM Flow
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Innovation Management
The Strategy + Innovation Group 503.421.9391
Please contact The Strategy + Innovation group for a discussion of your organization’s needs www.sig-hq.com
BACKUP
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6 COMPANIES INVESTIGATED* +10 YEARS 10 Biases - Barriers to Effective
Innovation#1: Overconfidence in Predictions – outcomes fall
short of predictions, plans are usually overly optimistic
#2: Innovation is Too Risky – uninformed about the different types of innovation, where, when and how to do it effectively
#3: a Priori – bias that you don’t actually know, so you guess, a.k.a. confirmatory bias
#4: Illusion of Predictability – separate variant of #1 bias, in that one undervalues the uncertainty of environmental/external factors
#5: Silver Bullet – overestimating or assuming a simple remedy for a challenging, difficult or intractable problem
* Note: Plus a boat load of research on organizational decision making, resistance, inertia, entropy and dysfunction
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10 BIASES - BARRIERS TO EFFECTIVE INNOVATION
#6: Ego – bias since we were previously successful / innovative, you can’t tell / teach us anything about innovation, we are the leaders
#7: Recency – bias focusing on what just happened instead of looking at the totality of what happened from the beginning
#8: Familiarity – instinct to gravitate to familiar explanations, instead of investigating more deeply
#9: Size – bias of large effort for large results, resulting in an inaccurate attribution of what actually achieved the results. Typically seen in large culture changes.
#10: Political – individual’s bias and focus on personal interests / positions versus organizational needs. Killing projects that aren’t yours, siloing, etc…
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Bonus Bias: WHAT MOST COMPANIES THINK IS GOING TO MAKE
THEM COMPETITIVE
The driver of “Talent-driven innovation” is misleading, effective innovation is a function of skills and capabilities that are learned and can be taught
PREJUDICES AGAINST INNOVATION
Lack of understanding that everyone is innovative
Fear of failure
Fear of criticism
Lack of a conducive environment/motivation (management)
Lack of time
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Lack of understanding of innovation process
Team culture too focused on status quo
Lack of skills/knowledge that drives insights and ideas
Lack of awareness about reuse as a form of innovation
‘Not invented here’ syndrome prevents use