How To Manage Innovation For The Best Results

Transcription

1 RESEARCH FOR THE REAL WORLD Changing the World with Innovation Dr. Donald L. Amoroso, Innovation and Strategy How can organizations change the world with innovation? How can they develop processes and structures for managing innovation and building innovation into their corporate strategies? These questions companies have been asking for many years. But organizations do not necessarily have a plan for innovation in their company, according to Dr. Donald Amoroso, the Lowder- Weil endowed chair for innovation and management at Auburn University Montgomery s College of Business. What is Innovation? Innovation is a project or service pipeline from ideation to consumer adoption. If your organization has employees, there is a good chance that you have a source for innovation. But innovation is more than just creativity and idea generation. It is a process that starts with the idea, strategic analysis, prototype development, product or service, investment, and ends with consumer adoption. The benefits of successful innovation include a greater degree of competitiveness, higher profitability, higher consumer adoption, streamlined processes, and a better working environment for employees. To investigate innovation in organizations, Amoroso talked to 21 senior executives in two of the top telecom companies in the Philippines, Globe and Smart/PLDT. Globe is a leading telecommunications company in the Philippines. The mission of Globe is to inspire and enrich lives through communications by way of their vision of having the happiest customers. Through our renewed commitment to enriching lives through ease and relevance, our goal is to enrich everyday communications by simplifying and removing obstacles in communication technology so that we bring our customers closer to what matters to them most. Smart/PLDT is the leading telecommunications service provider in the Philippines. Through its principal business groups fixed line, wireless and others PLDT offers

2 a wide range of telecommunications services across the Philippines most extensive fiber optic backbone and fixed line and cellular networks. After analyzing the interview data, Amoroso found that both companies had formal innovation structures, each having at least two major components: 1. Understanding the innovation ecosystem blueprint 2. Managing the portfolio of innovation projects These companies have provided a set of best practice processes and frameworks for making innovation work. What is an ecosystem blueprint? The idea behind ecosystem blueprinting is simple. An ecosystem is defined in the business world as the network of organizations including suppliers, distributors, customers, competitors, government agencies and so on involved in the delivery of a specific product or service through both competition and cooperation. All of the players have to be present to have a working ecosystem. Amoroso found that innovative organizations identify themselves in their ecosystem, drawing a picture of all of the key players and how they fit strategically. This helps organizations identify what is working, what is not, and what needs to be changed. The blueprint is a representative of a multitude of industries all of which have to cooperate in order to produce an innovative product or service. In the Philippine mobile ecosystem, executives in the telecom companies stated that to initiate an adoptable consumer mobile innovation, a number of industries had to be involved (see Figure 1). First it is necessary it identify the broad industry categories, for example telecom carriers, infrastructure providers, app developers, content providers, e- wallet/payment systems, and handset manufacturers. Second, within each industry, the analyst must identify both the unique products/services that will impact their organization as well as the companies that operate in their ecosystem.

3 Passaload management Online banking Checking balances Transferring money E-Wallet / Payment systems Content providers Mobile Department Store Locator Upgraded texting program Mobile Prayer Application Mobile social media Application developers Handset Manufacturers Handset functionality QR code readers Gadget convergence User interface friendliness R&D Handset manufacturers Consumers Consumer adoption Consumer behavior Trust Loyalty / Inertia Innovativeness Carriers Consumers Infrastructure providers (cell towers, middleware) Carriers Business model Investment Value measurement R&D Figure 1. Philippine Mobile Ecosystem Blueprint (Example) Mobile monitoring Mobile Internet search Location services Programming environments for development Apple introduced significant innovations, in fact creating the first mobile ecosystem in When Google came along a year later, their ecosystem had similar components to Apple, but a different structure. For example, Apple had only one handset manufacturer in their ecosystem Apple whereas the Google ecosystem had many handset manufacturers. Steps in ecosystem blueprinting So what are the steps a company needs to do in order to blueprint their ecosystem? From his research, Amoroso found that there are 8 steps in developing the innovation and blueprinting the ecosystem: (1) Identify the broad industries within the ecosystem. (2) Understand all of the players in the ecosystem and determine the products / services that each organization contributes. (3) Build a model showing relationships between the ecosystem players (similar to Figure 1). (4) Complete the firm s industry analysis and ecosystem analysis. (5) Determine which ecosystem players you want to develop a relationship in order to build and market innovative products. Build a strategy to co- create one or more products. (6) Determine the innovative- type technology needed to create the innovation. (7) Determine the business the business model for building and marketing the innovation.

4 (8) Conduct consumer (market) analysis to understand how customers will adopt the innovation. You can determine the factors critical to consumer adoption by analyzing the data. What is an innovation portfolio of projects? The second component Amoroso found for successful innovation initiatives is the management of innovation project portfolios. Portfolio management is the centralized management of a project portfolio, which includes identifying, prioritizing, authorizing, managing, and controlling projects, programs, and other related work to achieve specific strategic business objectives. Amoroso found that executives created a project portfolio management (PPM) office in order to ensure that innovation projects aligned with strategies, goals, and objectives of the business. Executives put in place a c- level portfolio executive to manage projects and programs as a whole and communicate innovation project details including costs and benefits. It was found that each project portfolio needs to be assessed for its business value and adherence to strategy. Innovation portfolios should be designed to achieve a defined business objective or set of benefits. Both of the organizations established a governance board for innovation initiatives. The governance board was primarily charged with the evaluation and selection of innovation projects. One executive said, The business case for a specific project can be compelling, but unless we can see the pipeline of projects, it is difficult to make the best decision for the company in the long run. Steps in managing the portfolio of innovation projects Once innovation projects are evaluated and selected, Amoroso found that organizations managed a portfolio of projects. Once the innovation project was initially approved, each organization went through a series of steps, each of which goes through a set of gates with the innovation governance board: (1) Select a project portfolio management software system. (2) Develop a Project Governance Process Map is a diagram that depicts all the funding and governance steps and checkpoints that the organization has currently established for the project funding lifecycle. (3) Build a working prototype for demonstration and discussion.

5 (4) Test the product with the consumer. Some of the key features of the project portfolio management system that organizations need to consider: Project evaluation process or methodology Cost and benefits measurement Progress reporting Communication of key project data Resource and capacity planning Cost and benefits tracking Bottom Line All of the executives in the Philippine telecoms that established successful innovation structures in their organizations kept an eye on value and benefits. Benefits should be validated wherever possible to ensure they are realizable, by making sure that those who will be responsible for delivering the business changes on which benefits realization is dependent agree that they are truly benefits. Benefits need to be actively managed, to ensure that forecast benefits are realized (especially important where those benefits are dependent on business change) and to capture benefits that were not anticipated at the business case stage. A governance board is crucial to developing the portfolio projects list and applying the selection criteria. Project portfolio management is critical to allowing organizations to manage resources across the entire organization. Organizations should invest in a portfolio management system. Connect Dr. Donald L. Amoroso Lowder- Weil Endowed Chair of Innovation and Strategy Professor of Information Systems Auburn University Montgomery College of Business Montgomery, Alabama USA Office phone: Mobile phone: damoroso@aum.edu departments/information- systems