Innovation Performance

By Allan Ryan Currently, the popular press has a pronounced fondness for the word innovation. Businesses and governments are heralding the resurgence of biotechnology and internet companies businesses that are all about being new and groundbreaking along with a general need for the economy to become more innovative. The media is extolling the virtues of entrepreneurs and innovators as the new business gurus. Established companies are also embracing the drive to become more innovative. The word innovation is appearing in corporate mission and vision statements and core capabilities lists. The question that is not being addressed is what does innovation mean to established companies and, furthermore, how can their innovation performance be improved? The purpose of this paper is to demystify innovation for established organisations and to outline the elements that make up innovation performance. In reality, organisations do not want to become innovative; they want to continue to strive to be successful. A successful organisation achieves the goals and objectives that it sets itself. Innovation is simply a lever that delivers success rather than an end in itself. There are many levers that can be used to deliver success, including mergers and acquisitions, Six Sigma, and improved employment practices. Innovation is but one of these levers and it should be placed in context with the objectives and aims of an organisation.

Define Innovation for the Organisation When an organisation chooses to pursue innovation as a pathway to ongoing success, the starting point is to develop and publish its definition of innovation. Everyone in the organisation needs to understand what innovation means to them at both the individual and team levels. There are many definitions of innovation. Here are four: Innovation shows up in the quality and quantity of ideas and the efficiency and effectiveness of implementation of those ideas. These two parameters are independent, however, when combined they form the definition of innovation performance. See Figure 1. Figure 1 Innovation Performance

Quality and Quantity of Ideas

Innovation is the process that transforms ideas into commercial value Innovation = Invention + Exploitation The starting point for innovation is the generation of creative ideas. Innovation is the process of taking those ideas to market or to usefulness Innovation is anything that provides a new perceived benefit to a customer or employee. The one I choose is people implementing ideas that add value. This gives the widest definition of innovation and does not specify the desired outcomes within the definition. Set up for Innovation Performance A successful organisation that turns its focus to innovation is looking for achievements.

Strategic Innovation Continuous Innovation

Efficiency and Effectiveness of Implementation

The relationship between the definition of innovation and innovation performance is how fast, how well ideas are implemented and how much value is created. These measures are easily taken after the event. The true challenge is how to arrange your organisation to deliver innovation performance up front.

Quality and quantity of ideas Two factors contribute to the quality and quantity of ideas. The first is idea generation and the second is idea selection. Organisations often generate many strong ideas only to lose their way during the selection process. This tends to be attributable to lack of relevant criteria. Choosing the right people to undertake the idea assessment is also vital. Figure 2 Innovation Performance
Parameters Quantity and Quality of Ideas
Factors Idea Generation Idea Selection Resource Management Business Practices

Buzan. As highlighted above, as well as cherry-picking from these, choosing the most effective balance of the expertise and number of the individuals or teams who participate in the idea generation process will maximise results. It cannot be overemphasised that idea generation is but one of eight processes that drive an organisations innovation performance. The next factor of innovation performance is idea selection. Idea selection is again divided into two sub-factors selection criteria and assessment panels. Selection criteria are the parameters against which ideas are assessed and are best determined prior to idea generation. If these criteria are determined after idea generation then they can be influenced by the ideas that are generated. Criteria can vary within business units and should be aligned to overall business strategy and goals. Assessment panels and individual assessors are critical to effective idea selection. Firstly, by including subject experts from across an organisation, you can ensure the maximum intellectual input of an organised is utilised. The assessment process should involve all people who will subsequently participate in the development and support of an idea or project. It is rare to find only one group of people with the ability to undertake all assessment for a group of ideas. Using internal and external expert panels provides the opportunity for knowledge to be transferred from experienced to less experienced staff and creates input for an innovation bank. The use of internet-based assessment tools is becoming critical in order to enable subject experts and responsible managers to assess the ideas in a timely manner. Efficiency and effectiveness of implementation (see Figure 2.) The ultimate test of innovation is the efficiency and effectiveness of implementation. Implementation can be broken down into two key factors resource management and an organisations business practices. As with idea generation, business practices are made up of two distinct sub-factors. These are the roles and responsibilities of staff relative to innovation, and, secondly, the business planning process itself. Roles and responsibilities of staff within an organisation vary widely. A common misconception about innovation is that everybody has to be an idea generator. The reality is more complex. In order for an organisation to successfully

Efficiency and Effectiveness of Implementation

Sub-factors

Insight

Tools & Methods

Assessment Panels

Criteria

Resource Application and Monitoring

Workflow

Business Roles and Planning Responsibilities Process

Incubator

Evaluator

Innovation Process

Strategy & Structure

Areas of Review

Idea generation can be broken down into two distinct parts insight plus idea generation tools, methods, and systems. Given that each element of innovation performance can be similarly divided, in practical terms insight and idea generation individually represent only 1/8th, or 0.125, of the number of sub-factors that drive an organisations innovation performance. Insight involves the systematic search for, and compilation of, information, data and knowledge that forms the basis for the development of timely consumer and technology data. There are many avenues used to compile insight, including using sources external to the organisation such as consumers, users, technology drivers and so on. Insight is developed from this information, data and knowledge by combining and developing ideas specifically related to the data obtained. Idea generation is an umbrella term for a systematic approach that involves a diversity of people, methods and techniques and, finally, an ideas bank a repository for the ideas. Idea generation tools, methods and systems are covered in detail by many authors from Edward de Bono through to Tony

innovate, a wide number of roles must be described and delegated. Roles and responsibilities of staff account for 1/8 of innovation performance. On the matter of planning, it is correct to say that innovation is a sub-set of the overall business planning process and it is also correct to say that innovation should be focused on those parts of this process that will reap the biggest benefits or that require the most attention. As organisations do not have unlimited financial or time resources, an effective business planning process should take into account the availability of resources. That brings us to resource management. This can be broken down into work flow and financial resources. Each of these represents 1/8th of the sub-factors that make up innovation performance. Work flow refers to the timely execution of all the activities required to take a corporate initiative through insight, then idea generation, onto decision, development and delivery. In large organisations, there can be complex methodologies for new product or process development that involve multiple stakeholders across the organisation. Innovations may fail if work flow is not undertaken in a timely manner. Numerous organisations suffer from a lack of time to do anything other than keep the day-to-day business operating. Time may be squandered on too many meetings, too many emails, or through a shortage of people resources as a consequence of staff rationalisation. In organisations where innovation is viewed as optional and attention is focused on day-to-day operations, innovation activities are frequently postponed and innovation performance failures occur. This creates a vicious circle, whereby innovation becomes a lower priority on action lists and takes longer still to get done. The second sub-factor of resource management is financial resources. The timely availability of financial resources is critical for the flow of innovation. If financial resources for innovation are allocated in an organisations budget but are then reduced or are not available when needed for the development process, innovation is thwarted. In practice, innovation is often postponed because financial resources are reallocated and this seriously impedes an organisations innovation performance.

Innovation Performance Review The relationship between the eight sub-factors of innovation performance is organic in nature. They overlap and influence each other, and in reviewing an organisations innovation performance, this must be recognised. When reviewing innovation performance, four areas of investigation are undertaken incubation, evaluation, innovation process, and strategy and structure. An innovation performance review is generally undertaken in two stages. Stage one involves senior management and their direct reports and combines face-to-face interviews and surveys. Stage two typically uses survey tools and involves a large cross-section of the organisation. Summary As more organisations make innovation an integral part of their organisational structure, leaders must turn their attention to innovation performance. It is not enough to say we have an innovation manager in place, or we have innovation in our mission and vision, or we have an innovation strategy. The outcome of innovation must be delivered in order to both justify the expenditure and to ensure the continuing success of the business. There often is a long time between when the expenditure for innovation is promised and when the final outcome is achieved. If this time can be reduced by efficient innovation performance, then the organisation can deliver growth at a faster rate.

Allan Ryan is the Founder and Director of Managed Innovation International Pty Ltd. This article is the first in his series of white papers on Innovation Performance. For more details visit www.managedinnovation.com