Innovation for Program Management

Jeff Flak Marymount University Information Systems Graduate Research Project Version 1.0 July 17, 2008

Table of Contents

1 1.0 Objectives of Innovation for Program Management Study 1 2.0 Innovation Defined 2 2.1 Macro Level Impacts 2 2.2 Sources of Innovation and Impact 2 2.2.1 Management Innovation 3 2.2.2 Product and Service Innovation 3 2.2.2.1 Business Model Levers for Innovation 4 2.2.2.1.1 Value Proposition 4 2.2.2.1.2 Supply Chain 4 2.2.2.1.3 Target Customer 4 2.2.2.2 Technology Levers for Innovation 4 2.2.2.2.1 Products and Service Offerings 5 2.2.2.2.2 Process Technologies 5 2.2.2.2.3 Enabling Technologies 5 2.2.3 Degree of Innovation 5 2.2.3.1 Sustaining or Incremental Innovations 5 2.2.3.2 Semi-radical Innovations 6 2.2.3.2.1 Disruptive Innovations 6 2.2.3.3 Radical Innovations 9 3.0 Innovation Process 10 3.1 Set Innovation Strategy 10 3.1.1 Perform Industry Analysis 11 3.1.1.1 Porters Five Forces 11 3.1.2 Assess Client Needs 13 3.1.2.1.1 Client Adoption of New Products and Services 14 3.1.2.2 Current Client Needs 15 3.1.2.3 Performing Gap Analysis of Current Client Needs 15 3.1.2.4 Assess Future Client Needs 15 3.1.3 Defining Innovation Strategies 16 3.2 Developing an Innovation Culture 18 3.2.1 Fending off Organizational Antibodies 18 3.2.2 Learning Organization 19 3.2.3 Collaborative Teams 20 3.2.4 Build Program for Innovation 21 3.3 Generate Ideas and Select Innovation Initiatives 24 3.3.1 Idea Generation 24 3.3.1.1 Idea Brokering 24 3.3.1.2 Lead User Idea Generation 25 3.3.1.3 Idea Generation the Ideo Way 26 3.3.2 Idea Generation Analysis 26 3.3.3 Making Decision to Implement Innovation 27 3.3.3.1 Decision Criteria for Incremental Innovations 28 3.3.3.2 Decision Criteria for Semi-Radical and Radical Innovations 28

3.3.3.2.1 Describe how the business works 29 3.3.3.2.2 Identify Metrics 29 3.3.3.2.3 Establish Goals 30 3.3.3.2.4 Create Spending Guidelines 30 3.3.3.2.5 Predict Performance 31 3.3.3.2.6 Identify Critical Unknowns 31 3.3.4 Present/sell new project ideas to client 31 3.3.4.1 Show Expanding Capabilities using Sub-contractors 31 3.3.4.2 Show alignment to objectives 31 3.3.4.3 Show value of project 32 3.3.4.4 Show total cost of ownership to client 32 3.4 Execute project using Project Management and Innovation Principles 33 3.4.1 Initiating Process Group 33 3.4.2 Planning Process Group 33 3.4.2.1 Project Management Style Assessment 33 3.4.2.2 Defining Reward Systems 36 3.4.3 Executing Process Group 37 3.4.4 Monitoring and Controlling Process Group 37 3.4.5 Closing Process Group 38 3.5 Measuring Innovation output and Providing Feedback 39 3.5.1 Measuring and Providing Feedback for Incremental Innovations 39 3.5.2 Measuring and Providing Feedback for Radical and Semi-Radical Innovations 41 3.5.2.1 Analyze Disparities Between Predictions and Outcomes 41 3.5.2.2 Revise the Plan 41 4.0 Lessons Learned to Share with Other Students 43 5.0 Final Project Proposal 44 6.0 Appendix A: Innovation Assessment Form 45 7.0 Appendix B: Works Referenced 47

List of Figures Figure 1 Innovation Matrix 3 Figure 2 Innovators Dilemma (Christensen, 1997, p. 185) 7 Figure 3 Innovation Process 10 Figure 4 Innovation Strategy 11 Figure 5 Porters Five Forces (Porter, 2008, p. 80) 12 Figure 6 Customer Adoption (Shenhar & Dvir, 2007, p. 154) 14 Figure 7 Goal Trend Graph (Govindarajan and Trimble, 2005, p. 163) 30 Figure 8 Project Management Process Groups 33 Figure 9 NTCP and Project Management Style (Shenhar & Dvir, 2007, p. 166) 35 Figure 10 NTCP and Degree of Innovation (Shenhar & Dvir, 2007, p. 148) 35 Figure 11 Project Reward Structure (Davila et al., 2006, p. 208) 36 Figure 12 Single Initiative Measurement Process 40 Figure 13 Prioritize Multiple Initiatives 40

1.0Objectives of Innovation for Program Management Study

The main objective for the study of Innovation and its role in Program Management is to explore how Innovation can be effectively implemented in Program Management. At a high level, the concepts that were researched include how to identify market opportunities and equip staff with the appropriate skill sets and environment to successfully deliver Innovative products and services. The research that was conducted attempts to define Innovation and explain the levers of change that lead to successful Innovation. From there, a process that outlines steps that lead to successful Innovation efforts is defined. The steps that are outlined include best practices from multiple practitioners and theorists and are laid out in a logical manner. The key steps of the process include setting the Innovation Strategy, developing an Innovation culture, generating ideas and selecting Innovation initiatives, implementing Innovations and measuring success and providing feedback. While the process as a whole has not been implemented in a real world situation, individual components of the process have delivered successful results.

2.0Innovation Defined
When asking random people to define Innovation, it is extremely interesting to listen to their responses. There are many preconceived notions about what Innovation is and what it is not. You will undoubtedly get a response that states that Innovation has something to do with technology, while that response is not incorrect, it is not the complete answer. Peter Drucker defined Innovation best by stating that Innovation is the effort create purposeful focused change in an enterprises economic or social potential. (Davila, Epstein, & Shelton, 2006, p. 5) That definition accurately depicts Innovation as change that ultimately has a positive economic impact on organizations. The distinction between change and Innovation is that Innovation is change that is focused on creating specific value, whereas change occurs without specified value goals in mind.

2.1Macro Level Impacts

In an article entitled Why the United States Needs an Innovation Strategy, author Amy Bernstein (2007) interviews John Kao, the author of Innovation Nation: How America is Losing its Innovation Edge, Why it Matters and What We Can Do To Get It Back (Free Press, 2007). He argues that the capacity to innovate lies at the heart of any societys ability to address its greatest challenges, including education, health care and national security. Allowing that capacity to erode puts the entire society at tremendous risk. Additionally, Nico Macdonald writes in an article called Innovation and the Prosperity of Nations, it was stated that Innovation will dictate the economic Prosperity of Nations. Emerging economies such as China, India and New Zealand are embracing design and creativity, whereas the UK Government has implemented tax credits for design that have mostly been unclaimed by design firms that qualify.

Governments have in the past been at the forefront of Innovation and they have experienced significant economic rewards for these initiatives. Take, for example, Dwight D. Eisenhowers ARPA and NASA initiatives which are largely responsible for the internet and communications satellites. Additionally, John F. Kennedy made a tremendous cultural and psychological impact with his initiatives for the manned-rocket launching and moon landing programs. (Macdonald, 2007) These are interesting points and they cause reflection as to whether the motivation to Innovate needs to be driven by the government or organizational entities. This topic is outside of the scope of this particular research paper, but it is interesting and worth noting.

2.2Sources of Innovation and Impact

The following section of the paper describes two key sources of Innovation, the first is management Innovation, which can be a critical factor in allowing organizations to achieve success with Innovation, while the second source involves Innovations with the products and services that are offered by organizations. Throughout this study, it will be clear that management Innovations are an input to developing an Innovation culture, generating ideas and implementing Innovations. Alternatively, product and service Innovations are the output of the setting an Innovation strategy, generating ideas and selecting Innovation initiatives. 2.2.1Management Innovation Innovations that are created by management can have significant impacts on the competitive position of an organization. These Innovations change the way that the workforce is managed and can therefore change the synergies within an organization that implements these Innovations. According to Gary Hamel (2006), A management Innovation can be defined as a marked departure from traditional management principles, processes, and practices or a departure from customary organizational forms that significantly alters the way the work of management is performed. (p. 3) There are three especially noteworthy management Innovations that Hamel discusses:

Toyota has enjoyed significant efficiencies over its automobile manufacturing competitors and this has been attributed to the fact that they see their line workers as resources that can significantly helps solve difficult problems. Toyota was able to harness this intellect and utilize it to foster a more productive work environment than its competitors. Whole Foods Markets has grown distinctively in the retail market as a result of its unique management model. Each department of the store is broken up into teams, such as produce or seafood and store managers consult these teams for all store level decisions. Each team has the power to vote on what new items to stock and who to hire. GE is known to have one of the greatest management development programs in the world. Their leadership advantage has been created by the unorthodox commitment to developing leadership programs that can be utilized by their management teams. Other companies are

not as committed to leadership development and therefore GE has gained a competitive advantage. (Hamel, 2006) There is not a one size fits all methodology for creating management Innovations that will create an advantage for an organization that can be protected. These examples provide guidelines that can be followed for a greater probability of success. It is important to understand that management Innovations can be used to help facilitate the Innovation process by making the process more efficient or by motivating employees to create new innovative ideas. 2.2.2Product and Service Innovation For a quick view of the separate Degrees of Product and Service Innovation and the impact that different levers have on the Degree of Innovation, refer to figure 1. These classifications are important, since they will significantly drive the Innovation process which is evident later in the study. The key distinction that this study makes as far as Degree of Innovation is concerned is between Incremental and Radical, which includes Semi-Radical Innovations.
Figure 1 Innovation Matrix Levers Business Model Levers Value Propositio n Small change in one or more of the six levers Significan t change in one or more of the three levers Small change in one or more of the three levers Significan t change Small change in one or more of the three levers Significa nt change in one or more of the three levers Significa nt Value Chain Target Custome r Technolo gy Levers Product and Service Process Technolog y Enabling Technolog y

Degree of Innovation

Incremental

Semi-Radical Business Model Driven

Semi-Radical Technology Driven

Radical

in one or more of the three levers

change in one or more of the three levers

The Innovation Matrix displays how each Business Model and Technology Lever impacts the Degree of Innovation for a particular effort. (Davila, et al., 2006, p. 41)
2.2.2.1Business Model Levers for Innovation

In addition to management Innovation, another form of Innovation can be derived by modifying the business model, which is the way that an organization creates, sells and delivers value to its customers. There are three areas within the business model where organizations can innovate to gain a competitive advantage and they are the value proposition, supply chain and target customer. (Davila et al., 2006)
2.2.2.1.1Value Proposition

In order to innovate the value proposition, organizations must look for new ways to deliver value to their customers. They may create entirely new products or services or they might take existing offerings and expand the value proposition. An example of this is where IBM has moved away from a product-driven value proposition and they have coupled their existing products with services that are related to these products. The impact of this shift in value proposition is that in 2003 roughly 48 percent of IBMs revenues came from providing services and this revenue generated 41 percent profits. (Davila et al., 2006)
2.2.2.1.2Supply Chain

The supply chain, which is how organizations create value and deliver it to the market, may be a key source of business model Innovation for organizations. This could be especially true in an IT services organization, where the services organization may partner with packaged software and hardware providers to create more value for the customer. Sun Microsystems utilized supply chain Innovation in the 1980s by working with strategic partners via Innovation which created a huge competitive advantage that could not be easily repeated by competitors. Ultimately, Changes to the supply chain affect the way that a company organizes, partners and operates to produce and deliver its products and services. (Davila et al., 2006)
2.2.2.1.3Target Customer

By understanding how the market is segmented, organizations may be able to identify customer segments that they have yet to target with their products and services that would find value in their offerings. An example of this is the Dockers brand, where they were typically targeting fashionconscious men. They used their signature stain resistant, no-iron khakis and targeted the lower maintenance fashion challenged men and experienced renewed growth. (Davila et al., 2006) In the IT services government space, a strategy of developing a software product for one agency that can be modified and deployed at a fraction of the cost could allow an organization to increase its market share by targeting customers with less access to funding.

2.2.2.2Technology Levers for Innovation

Technological changes can fuel Innovation, because they can help to facilitate more efficient processes and they allow businesses to offer new products and services. When performing technological Innovations, companys can either create new product and service offerings, or utilize process and enabling technologies. (Davila et al., 2006) A brief discussion of each of these technological changes follows.
2.2.2.2.1Products and Service Offerings

When organizations develop new products and services or enhance existing products and services by utilizing technological advancements, they are working on a critical aspect of the organizational strategy, since they are innovating on a level that has a direct impact on the customers. A key example of this technology Innovation is the fact that McDonlalds introduced a new low-fat oil that enabled it to offer products to the health-conscious consumers. McDonalds was a pioneering company in this approach to fast food and was able to optimize the value of its product and services offering. (Davila et al., 2006)
2.2.2.2.2Process Technologies

Process technologies are the technical tools that assist with performing a particular function. (Davila et al., 2006) Within the IT services industry, these technologies would consist of software that allows software development teams to manage the software development lifecycle. These technologies assist software development teams with ensuring that all expected functionality is accounted for as well as managing the quality of the product before the product is delivered to a customer.
2.2.2.2.3Enabling Technologies

Enabling technologies are those that allow an organization to execute their strategy much faster and leverage time as a source of competitive advantage. (Davila et al., 2006) In IT services, examples of these technologies would be Knowledge Management Technologies that allow employees to collaborate more effectively. These tools become extremely relevant when it comes to working on proposals with deadlines, because they allow employees to access enterprise information and identify specific points of contact for different topics to be discussed in the proposal. 2.2.3Degree of Innovation Within the different types of Innovations, there are different degrees, which are associated with the market risk factor of the Innovation. The key thing to note when discussing the different degrees of Innovation is that they are relative to what currently exists within the organization. It is also important to recognize that a radical Innovation for one organization may be to develop a product or service that already exists, but what makes it a radical Innovation is that it is a truly a change in either the business model or technology for the organization that undertakes the Innovation effort. Decisions about Innovation initiatives should be made with a great deal of understanding of the underlying market factors and should be treated as investments in a portfolio. The appropriate mix of initiatives can only be decided upon after the industry and risk analyses have been performed.

2.2.3.1Sustaining or Incremental Innovations

Incremental Innovations are projects that make small changes to one or two of the levers in their business model or technology and they may account for roughly 80 percent of organizations Innovation investments. These Innovations are utilized as part of a strategy to get as much value out of the organizations current portfolio of products and services. Incremental or Sustaining Innovations are the cornerstones of most organizations, since they protect existing products and services from eroding market share. Assuming that organizations perform these incremental Innovations in a way that is driven towards customer needs, they will help an organization to sustain both its market share and profitability levels against competitors for a longer time. Successful implementation of incremental Innovations will provide a company with better cash flow and quicker payback on development and marketing investments. Organizations must be particularly careful not to get caught in an incremental state of mind for numerous reasons. The first is that if they are not careful, their incremental improvements may be made irrelevant due to a disruptive offering, which is discussed further in Section 2.2.3.2.1 Disruptive Innovations. Second, incremental Innovations somewhat constrain creativity due to their nature of small changes. Organizations may become comfortable with the safety and lack of risk associated with these ventures and may not have the ability to venture beyond these types of Innovation when the need to do this becomes urgent. (Davila et al., 2006)
2.2.3.2Semi-radical Innovations

Semi-radical Innovations involve a significant amount of change on either the business model or the technology, but they will not change both. A perfect example of a semi-radical Innovation is the way that Wal-Mart modified the business model of the retail outlets. At the time, retail business models included an urban location with a limited number of sales items with high markups. WalMart understood that there is a large market segment of consumers that wanted low-cost, high quality products. They were able to deliver that value to consumers by applying the supermarket business model to retailing and utilize a strong supply chain to significantly reduce costs. They subsequently reduced their prices as well to ensure that the cost savings were passed along to their customers. (Davila et al., 2006) Every Semi-radical Innovation offers organizations an opportunity in either the business model or technology, depending on which aspect the Innovation affects. For example a technology Innovation may present the organization with a radical new way to operate their business and may have a significant impact on the business model. This provides a great challenge for many businesses and this is a key concept for IT Services firms to focus on. When providing IT services for clients, it is extremely important to ensure that the business and the technology are aligned so that they support each other in a way that will provide the most value. Wal-Mart was able to do this by using their large supply chain to gain a competitive advantage, but they use sophisticated supply chain management software to help them sustain that advantage and continue to deliver value to their customers.
2.2.3.2.1Disruptive Innovations

What is a disruptive Innovation? Why do the incumbent firms in an industry ignore disruptive offerings to their detriment? What can firms do in an effort to understand their industry and ensure that they are not toppled by disruptive Innovations? How can the concept of segmenting offerings by job help these organizations? A very intriguing concept is the theory of disruptive Innovations, because it explores the underlying market forces that determine how and why certain companies have not been able to hold onto their decisive competitive advantages in their industry. The concept of disruptive innovations sheds light on the market forces in play when an incumbent firm is taken over by a new entrant into their market space. At a high level, a disruptive Innovation can be thought of as a new product or service that segments a group of customers that are overshot by current offerings and eventually picks up steam, moves up-market and competes directly with the incumbents to ultimately take a lead in the market space. An example of such a disruptive Innovation is the disk drive industry, where smaller disk drives were developed that were not used in the larger server market, but as the ability to perform the job of storing digital files improved in these smaller drives, they moved up-market into the server market and eventually gained a large market share and toppled the manufacturers of larger disk drives. The forces behind this can be explained quite simply by understanding the trajectory of the customer needs, coupled with the trajectory of the performance of the product or service that is being offered. Once the performance of the product has met the needs of the customer, it becomes a perfectly good substitute for the product of the incumbent and typically, the cost structure of the disruptive Innovation allows the product or service to compete successfully with the incumbent firm. (Christensen, 1997) A graphic that displays the product performance trajectory and the customer needs trajectory is displayed below in Figure 2:

Figure 2 Innovators Dilemma (Christensen, 1997, p. 185)

The forces that cause the incumbent firms to overlook disruptions are twofold. First, the untapped markets inherent in disruptions are typically too small to help the incumbents meet their growth goals and second, the customers that are served by disruptions are the least profitable to the incumbents. However, this analysis is not forward thinking and the size of the untapped market can grow to be not only significant to the incumbent, but it can also cannibalize their current revenue streams. The main point to focus on in this section is the fact that competition can come from unforeseen competitors and that all new technologies and services must be understood, and the risk of them taking market share from current technologies and services must be assessed critically. Examples of this in the Information Technology Services industry are Application Service Providers, these could have a huge impact on software development programs if the services rendered can fully meet the needs of the market. Another example of a disruptive service would be IT Service teams that offer trimmed down services that might meet the needs of government clients during periods of budget cutting.

In the case that it is obvious that disruptive Innovations are being developed and they are threatening the core business of the incumbent, there are a few steps that the organization can take in order to mitigate this risk. First, they have the option to attempt to directly compete with the disruptive Innovation, which will require them to assess their resources, processes and values to ensure that they have the capability to take on this endeavor. If they find that their resources, processes and values do not match up well with competing in an emerging market, then they are left with the options of acquiring the capability or spinning-off a subsidiary to compete with the disruptive firm. (Christensen, 1997) Organizations have an opportunity to create new market disruptions in light of disruptive innovations. They will not look at market opportunities where the customer is overshot, but where the only other option for the customer is non-consumption. The analysis involves segmenting offerings by the job that the consumer is looking to purchase. In services, this is a little more straightforward than if you were to assess a product by the job that the consumer is purchasing it to perform. (Christensen and Raynor, 2003) Once the decision is made to pursue an Innovation to compete with non-consumption, the scope of the business needs to be defined and this deals with determining how much of the value chain will be performed in house and how much of it will be outsourced. This is a very important step, since in the 1980s IBM had dominance of the PC market, however, they outsourced two key aspects of the PC Value Chain, which were the Operating System and the Processor. If you look at the market power of the PC today, Intel and Microsoft have gained a significant share of it. The profitability in the value chain lies in the modules that are not yet good enough. When assessing new opportunities, a careful assessment of the value chain will need to be performed in order to understand where the profitability will be and align your resources accordingly. (Christensen and Raynor, 2003)
2.2.3.3Radical Innovations

A radical Innovation is a significant change that simultaneously affects both the business model and the technology of a company. (Davila et al., 2006, p. 51) The arrival of radical Innovations will typically reshape the competitive landscape of the industry. An example of a radical Innovation that changed the competitive landscape of an industry is the introduction of disposable baby diapers in the 1970s. The new technology changed the woven cloth of traditional diapers and also made the diapers disposable which radically changed the business model for diapers. Investments in radical Innovations can put a company in the lead in their industry, however these are low probability investments and should be approached with caution. Investments in too many radical Innovations can be counter-productive, since they can use up valuable resources and not provide much value to the organization. It is critical to understand the inherent risk involved in these investments and plan the portfolio accordingly. (Davila et al., 2006) Due to the inherent risky nature of radical Innovations they are not a key source of revenue or profitability for organizations. Most of the Innovation efforts that are initiated by companies tend to be in the incremental to semi-radical range, since the probability of success is much higher, although the potential rewards will be smaller as well.

3.0Innovation Process
In order for organizations to make Innovation work successfully as part of their business strategy, the leadership of the organization needs to understand the following perspectives on Innovation: Innovation is a management process that requires specific tools, rules and disciplines Innovation will require metrics and incentives in order to consistently deliver value to the organization Organizations can utilize Innovation in order to redefine an industry via the use of both technology and business model Innovations. (Davila et al., 2006)

The process for consistently developing innovative products and services begins with solid industry analysis. As seen in previous sections of the research, firms must be customer-centric in order to continually reign as the incumbent in their industry. Without paying attention to the needs of customers, an organization will not have the ability to outperform its competitors. Products and services must be analyzed to ensure that they meet the needs of potential clients. Without this upfront legwork, a decision to market a product or service should not be made. The high level process for Innovation (Figure 3) consists of building the appropriate culture for Innovation, generating and selecting ideas, implementing the Innovation, measuring the success and implementing changes based on the outcomes of critical pre-determined measures for the Innovation efforts. Appendix A outlines the process in a checklist style and makes a good reference sheet to be used throughout the process.
Figure 3 Innovation Process

3.1Set Innovation Strategy

When setting the Innovation strategy, the first step in the process is to Perform the industry analysis and for services. It is important to assess specific client needs and find gaps in what they need and what they have. This will allow an organization to have a better understanding of potential initiatives to explore. Additionally, the signals for change within an industry must be defined with indicators for each to understand when a shift in the industry is about to occur. When

this occurs, the strategy may need to be shifted as well. Figure 4 highlights this process and the following sections explain each step.
Figure 4 Innovation Strategy

3.1.1Perform Industry Analysis When performing the Industry analysis, it is important to not only understand the competitive forces, but to also understand the signals for change within that industry. Understanding both of these aspects of the industry will a firm or program to become agile and move with the market forces.
3.1.1.1Porters Five Forces

Innovators must begin their quest to develop a new product by performing an industry analysis. Michael Porter from Harvard Business School established the Five Forces of industry competition and these forces are at the forefront for making decisions regarding the strategy that will be developed within a program. Porter states that Industry structure drives competition and profitability, not whether an industry is emerging or mature, high-tech or low tech, regulated or unregulated. (2008, p. 80) The five forces are defined as follows and depicted in Figure 5: Threat of new entrants when new entrants enter an industry, they put pressure on prices, cost and the rate of investment necessary to compete, because they add new capacity and have a high desire to gain market share. The threat of new entrants has a significant impact on profitability and when the threat is increased, incumbents will need to either reduce their prices or increase investment to deter competition. The Power of Suppliers when the suppliers in the industry are powerful, including the suppliers of labor, they will create more value for themselves by charging higher prices, limiting the quality of services and shifting their costs to the participants in the industry. It can be seen how this can have a large impact on the profitability of an organization. It can even have the ability to make companies unable to compete if increases in costs make them unable to competitively market their product or service. The Power of Buyers When buyers have negotiating leverage relative to the other industry participants, this will make them powerful and they can demand lower prices and better

quality. In either case, an industry with powerful buyers may become unattractive due to the fact that costs to deliver value are high and the market price is not high enough to sustain profitability. The Threat of Substitutes It is important to understand what other products or services can be substituted for the product or service that you are offering to the market. There are two key factors that allow products and services to be substituted and they are the fact that the substitute product or service may be a better value proposition and there may also be low costs associated with switching. Rivalry Among Existing Competitors The rivalry of key competitors within an industry can be the cause of decreasing profitability for the services and products within that industry. The rivalry of competitors can affect the price of the products or services and therefore significantly reduce profitability. The key factor to understand is that if companies compete on the same attributes or needs of the customer, profitability within that industry will erode, since price competition will become a huge factor. However, if competitors offer products that are similar but target different needs, profitability will be less impacted. (Porter, 2008)
Figure 5 Porters Five Forces (Porter, 2008, p. 80)

The Five Forces help to determine the long term profitability of an industry and allow management to understand the underlying forces that determine profitability. It is not enough to see that an industry is experiencing fast growth, the underlying factors of how the economic value of an industry is divided allow strategists to determine how much profitability is bargained away to customers and suppliers, how much is limited by substitute products and constrained by potential

new entrants as opposed to how much profitability is retained by competing firms. The following factors play a role in industry analysis: Industry Growth Rate High rates of industry growth are not always attractive, since they open up opportunity for multiple competitors. Technology and Innovation Advanced technology innovations are not indicative of an attractive industry, the five forces are more indicative of an attractive industry. Government Government policy can either benefit or hinder an industry, as such, the policy should be monitored closely. Complementary products or services A hot new product or service that is found to be complementary to a product or service that already exists can increase the attractiveness of that product or service. (Porter, 2008)

Another key factor is to understand that the competitive forces must be monitored in order to determine the impact of a shift in one of the competitive forces on other competitive forces. In summary, industry analysis gives strategists insight into the underpinnings of profitability in a particular industry and this should be performed with the timeframe of an entire business cycle for that particular industry. The five forces help to determine the root causes of profitability and explain the gap between revenues and costs. Lastly, solid industry analysis includes scenario analysis to determine the relationships between the forces and how shifts in one of the forces impacts the profitability of an industry. (Porter, 2008) 3.1.2Assess Client Needs Once the five forces that shape the industry have been analyzed, the innovator must look to identify Client Needs that can be turned into a business opportunity. In the example of performing the program management role within a consulting services firm, the innovator will need to look carefully at both the current and future needs of its potential Clients. The key questions that should be asked at this point of the analysis are as follows:

Where are the gaps in the current needs of my customers that we could perform a service to them that they are not currently receiving? Where are potential new customers that would value these offerings? What are the drivers for the future needs of our customer base? What might the future service needs of customers look like? What does our organization need to do in order to prepare for the providing both current and future service offerings?

This is the point in the process where the Program Manager will need to be able to put themselves in the role of the client as well as the role of a service provider. The Program Manager will need to leverage the experience of their clients and their consultants by discussing the risks and current hurdles the client faces to achieve their goals. Once understanding the client needs, the Program Manager will look to how they can deliver such a service in the most beneficial manner, keeping quality, customer satisfaction and profitability in mind. As far as the service industry is concerned, there are four ways for Program Managers to develop Innovation strategies to achieve their desired growth in business.

Offer new services to current clients (compete with non-consumption) Offer similar services to new clients (compete with non-consumption) Compete with incumbent firms to generate sales with new clients Compete with incumbent firms to generate sales with existing clients

The key to developing an Innovation strategy will depend upon the needs of the clientele and what specifically drives those needs. In essence, the program manager will need to assess what job that their services can provide that the client will not be able to provide for themselves. In the government services arena, a good way to assess the needs are as follows:

For current needs, it is imperative to understand the current risks and struggles of the client For future needs, the key is to fully understand the impacts of potential legislation to the client and build those capabilities

Once the Program Manager has a solid understanding of both the current and future needs of the client, the Program Manager will need to perform analysis to understand if the needs can be met with an appropriate level of quality and profitability. It is important to note that at this point, the needs may not be met by specific services that already exist and therefore a new solution may need to be developed.
3.1.2.1.1Client Adoption of New Products and Services

It also extremely important to understand the adoption habits of the clients in the markets that you serve as well as markets that you are targeting. An interesting discussion talked about The Chasm, which deals with the fact that there is a specific point where a product or service can cross over from the enthusiasts and early adopters into the mainstream and really take off. The Clients to the Right of The Chasm in Figure 6 are the Clients that you ultimately want to target in order to really develop a breakthrough product or service. (Shenhar & Dvir, 2007)
Figure 6 Customer Adoption (Shenhar & Dvir, 2007, p. 154)

3.1.2.2Current Client Needs

In order to support the current needs of the client from a technical perspective, a strong understanding of the current business processes and goals will need to be assessed. The business processes and goals of a client can be assessed via discussions about how they currently operate and their key objectives. Using this information, a framework can be developed for arriving at services that will help the client meet their objectives.
3.1.2.3Performing Gap Analysis of Current Client Needs

Performing analysis on the needs of a client starts with gathering information on the key organizational objectives, however; these will not always be the specific areas where services will be necessary as the processes and technologies surrounding these objectives may already be mature. This is still the best place to start, since it will give you a good idea of other supporting processes that may need to be revamped. Once the core objectives are understood, the objectives that support the core objectives will need to be analyzed. Examples of objectives that support an organizations core objectives would be budgeting, training and knowledge sharing. It will be necessary to have a clear understanding of the processes that support the objectives, so that it will be easy to select which objectives the organization may not be supporting with their current operating model. If there is a lack in support of objectives based on the operating model of the client, this could be a good indicator that there is a market for process improvement within that specific client. The next portion of gap analysis that is necessary is to understand the performance of these processes. Key questions to ask during this analysis include: Are the processes that this client performs operating at an optimal level? Are there technologies that can help to improve the performance of this process? Do the technologies that would improve the performance fit into the strategic alignment of the client organization? What other organizations may be facing similar problems?

At this point in the process, a good understanding of current client needs should exist and the next step would be to utilize this information to set the Innovation strategy for the program.
3.1.2.4Assess Future Client Needs

When assessing the future needs of the market, Program Managers will need to play the role of entrepreneur and assess the market for opportunities. There are several sources of opportunity that can lead to successful Innovations that should be monitored in order to identify new market opportunities. (Drucker, 2002) NOTE: Changes to any of these sources of Innovation opportunity will drive a reassessment of the Innovation strategy.

Unexpected Occurrences Unexpected occurrences can greatly impact an Innovation effort or the direction of the Innovation strategy. An example of this is when IBM was targeting banks for their new accounting machine, however, the banks did not have money and were not buying the machines. IBM then turned to the New York Public Library System, who had money and did buy the machines. Shifting the target customer allowed IBM to successfully sell their machines. Incongruities It is important to look for incongruities between expectations and whether those expectations are being met. (Drucker, 2002) The following classify these types of incongruities. Undershot Customers Customers that would like additional value out of your product or service. Overshot Customers Customers that do not see value in all aspects of the current offerings. A simpler product or service would fit their needs. Non-consumers Potential customers that find value in offerings that are not currently available. (Christensen, Anthony, & Roth, 2004) Process Needs As clients begin to realize their needs as they relate to their business processes, service organizations should assess the business viability of offering services that meet the needs of the client initiative. Industry and Market Changes Industry and Market Changes occur as a result of significant growth as well as modified regulations. (Drucker, 2002) Following is a method for analyzing the impact of these changes: Non-Market Contexts A framework for mapping the ability of firms in an industry with the motivation factors in place via government regulations. This analysis attempts to project how potential government factors will impact the motivation for competition. (Christensen et al., 2004) Demographic Changes Always know the demographics of your customer, if you are in the government services industry, what is the impact of the bathtub effect, lack of leaders in the upcoming generation, on the relationships with clients? Changes in Perception - It is very important to not only understand your customers current perception of your product or service, but also to predict and react to changes in perception. An example of this is the fact that the personal computer was once thought of only a tool to be used at work, but now it is very commonplace within the home. New Knowledge Lastly, new Innovations that may be useful to your organizations services or product must be monitored so that you will have the ability to react to this shift in the market and compete effectively. (Drucker, 2002)

The sources of Innovation allow you to assess when a particular venture will be appropriate and can play a significant role in the decision of how to proceed with an Innovation strategy. Additionally, it is important to stay on top of these market forces, so that you are aware of these factors and monitor them to ensure the risk or market change is being managed. 3.1.3Defining Innovation Strategies There are two distinct Innovation strategies and they are the Playing to Win and Playing Notto-Lose Strategies. The key here is for the organization to understand its competitive landscape and have the ability to understand the risks they face within their industry before deciding which

strategy to pursue. Setting the Innovation strategy is an iterative process that requires modification as any component of Porters Five Forces or the sources of Innovation opportunity are altered. It would be most appropriate to select the Play to win Strategy when the five forces are in your favor for profitable business and there are positive signs in the sources of Innovation opportunity. Alternatively, selecting the Play Not-to-Lose Strategy would make the most sense when the five forces are not in your favor and there are not positive signs in the source of Innovation opportunity. In the Playing to Win Strategy, an organization would be planning to utilize their Innovation strategy in an effort to gain some sort of competitive advantage. This competitive advantage would typically be achieved by investing lots of capital into many radical and semi-radical Innovations with the intent of outperforming competitors. Another potential way to gain competitive advantage using the Playing to Win strategy is to rapidly invest in significant amounts of radical, semiradical and incremental Innovations. Using the Playing Not-to-Lose Strategy can be due to the fact that the industry landscape is extremely competitive and with many uncertainties. This type of atmosphere would drive an organization to take more calculated risks with a focus on incremental Innovations. The rewards may not be as large as they are with the Playing to Win strategy, but the risk of investing heavily in uncertain market conditions detract organizations from investing heavily. (Davila et al., 2006) Money that is invested would be best spent on the Technology or Demand Side, initiatives with the objective of making operations more efficient, projects. Due to the uncertainty of the market, the best strategy would be to focus on improving operations and cutting costs in order to differentiate current offerings based on price. When selecting one of these strategies, the Program Management will need to manage the mix of Innovation projects, so that the dollar amount of investment in incremental, radical and semiradical Innovations is aligned with the strategy that is selected. As market conditions change, the Innovation Strategy may change and therefore the mix of Innovation projects may change. The following factors should be validated upon making a decision about pursuing a specific Innovation strategy. Note: These factors will be validated at a high level against the strategy that is selected and they should be revisited for each specific new offering.

Technical Capabilities Does the Program Manager currently have the technical capabilities necessary to carry out the strategy? Organizational Capabilities Does the organization currently have the capabilities necessary to carry out the strategy? Success of the Current Business Model If the current business model is successful, would there be an organizational resistance to changing the business model? Funding Does the Program have the funding to carry out the strategy? Can the funding be supplied in other ways? Top Management Vision Does the Innovation Strategy conflict with current Senior Management Objectives and Vision? Would the strategy be palatable to Senior Management? (Davila et al., 2006)

3.2Developing an Innovation Culture

Program Managers must place a high value on the culture that is developed within their organization, since it has a high impact on the innovative output that will be generated. The culture that is developed within a program will be a direct input into how innovative the teams within the program will be. If the culture is too risk averse, then personnel within the program will not be motivated to take risks and opportunities may be lost. Furthermore, organizations must foster a collaborative culture where it is understood that great ideas do not necessarily always come from the top of the organization. By giving all employees the opportunity to think innovatively, companys will benefit not only by the increase in ideas that will be generated throughout the organization, but employees will feel empowered and they will be more committed to their roles. Another aspect of Innovation culture is that organizations must be willing to adapt ideas from other places and use them for their benefit. This is known as the Not invented here, but I did it anyway concept. The culture for Innovation is the number one critical factor for successful Innovation and a lot of time and effort will need to be spent on it in order to create this environment within your organization. 3.2.1Fending off Organizational Antibodies Organizational antibodies can seriously deter the progress of Innovation within a program or organization. Organizational antibodies are general attitudes and beliefs that are held within the members of the organization that block them from the free thinking that is necessary for successful Innovation. It is incumbent upon leadership to make sure that they monitor their staff for these attitudes and work towards changing perception. Typical Organizational Antibodies are described below:

The Not Invented Here syndrome For some reason, individuals are less inclined to develop new products and services that were originally developed somewhere else. This can be counter productive, since viable business ideas may be passed up. The We Have Always Done It This Way syndrome Surely, everyone has been exposed to this organizational antibody. This thought process is purely human nature and it is always more difficult to change than to keep the status quo. However, this is a risky attitude, since it can completely hinder the potential for improvement within organizations. Fear of failure - This antibody is an interesting one, since to an extent, you do want people to be held accountable for their business decisions; however, allowing individuals latitude and accepting failure as a learning opportunity will motivate staff to take risks. Innovations are funded based almost entirely on financial metrics This topic is explored more thoroughly in Section 3.3.3.2 Decision Criteria for Semi-Radical and Radical Innovations. Ideas have nowhere to go This is probably the most dangerous perception for staff to have of leadership, since this will completely minimize the amount of motivation that staff will have towards creating new ideas. This organizational antibody is the key reason to develop an Innovation process that allows all ideas to be assessed by management so that employees understand that their ideas are valued. (Davila et al., 2006)

3.2.2Learning Organization Learning Organizations are typically described as firms that have many members that are highly skilled at creating, acquiring and transferring knowledge. This is a very important capability for organizations to compete in the era of the knowledge worker. According to Is Yours a Learning Organization?, David Garvin, Amy C. Edmundson and Francesca Gino (2008) give a framework of building blocks that leaders in organizations can take in order to cultivate a learning organization environment. The first building block that is discussed is a supportive learning environment, which is comprised of four characteristics: psychological safety, appreciation of differences, openness to new ideas and time for reflection. A brief explanation of each characteristic follows: Psychological safety refers to the fact that employees must feel comfortable expressing their thoughts about the work at hand. They must not feel that they risk their reputations when they disagree with the majority viewpoint, ask nave questions or own up to mistakes. Appreciation of differences allows employees to gain valuable insight from diverse perspectives and has the potential to spark new ideas, since these alternative viewpoints can increase the motivation and energy of a group. Openness to new ideas will motivate employees to explore new approaches to how they perform their jobs. The key is that new ideas should be openly promoted throughout the organization and examples of previous new ideas should be highlighted to communicate the commitment to this philosophy. Time for reflection is important in organizations, since managers must have the opportunity to think through their processes and potential improvements. In some organizations, the workload can be so large that it prevents this type of insightful thinking. (Garvin, Edmundson, & Gino, 2008)

The second building block to create a learning organization is to have concrete learning processes and practices, which involves generating, collecting, interpreting and disseminating new information throughout the organization. It is critical to understand that the new information relates to the following: Knowledge gained through the experimentation of the development of new products and services. Knowledge gathered via tracking the trends of customers, competitors and new technologies. Knowledge that is gathered through problem solving and analysis Knowledge surrounding the development of employees as well as the on-boarding of new employees. (Garvin et al., 2008)

It is critical to understand that knowledge and information sharing should occur in a systematic fashion and the information can flow in all directions within the organization. There are a couple of methods that may be used to collect the knowledge and it can be performed either internally, with project teams, or externally with clients and customers. In either case, the key is to get the information and distribute it to the people that can utilize the information to be more effective.

The third building block that is discussed is the fact that Leadership needs to reinforce learning. When leaders show a commitment to organizational learning, employees within that organization will be influenced to make learning a priority as well. A list of the actions that leaders in organizations can take to reinforce learning are listed below: Leaders can actively listen and question employees to prompt dialogue and encourage employees to learn. Leaders can communicate the importance of spending significant time on problem identification, knowledge sharing and after action reviews to influence employees to do the same. Leaders can also take the time to entertain alternate points of view, so that employees feel that their ideas will be heard. By doing this, employees will feel empowered and offer up more ideas to leadership. (Garvin et al., 2008)

It can be seen that there is some overlap between the three building blocks and it is important for organizations to establish themselves in all three of these building blocks in order to effectively cultivate a learning organization. Additionally, there are four principles that should be assessed when implementing the framework for a learning organization and they are described below: Leadership support of organizational learning is insufficient to accomplish a learning organization, without the structured processes and a supporting learning environment the outcome of organizational learning is uncertain. It is important to assess the organization on a departmental basis, this is because different departments will have different cultures and level of learning maturity. When setting out to implement an organizational learning effort, it is important to take this diversity into consideration. When setting up an organization for learning, it is important to keep in mind the fact that the goal of the effort is to create a competitive advantage. Based on that fact, it will be critical to implement a strategy for learning that allows the organization to be more competitive in their particular industry. Each building block within the Organizational Learning framework is multi-dimensional and therefore, each aspect within the building blocks should be assessed and the areas for improvement should be broken down to a granular level. (Garvin et al., 2008)

3.2.3Collaborative Teams Collaboration is the ability of a diverse team to effectively work together to accomplish a common goal. When organizations attempt to develop the appropriate culture that will lead to collaboration, it is extremely important to assess what factors would keep individuals from wanting to collaborate. From everything that is printed and theorized, it seems that it would be obvious that individuals would naturally want to collaborate, however; there can be social dynamics that would create an environment where collaboration would not be preferable to individuals. A couple of key traits in a team that can naturally hinder collaboration include large team size, diversity and a team that is made up of many experts. It is the function of management to identify these risks within their organization or team to effectively create value through collaboration and develop strategies to deal with the risks.

Understanding that there is a potential for the benefits of collaboration to not be fully realized, management can assess the following eight factors to determine strategies for creating a collaborative environment for teams to work within.

Investing in signature relationship practices - A significant impact on collaboration can be developed by the fact that executives invest in office spaces that facilitate open communication. Modeling collaborative behavior Executives can lead by example and perform their work in a collaborative fashion, which will set the tone for the rest of the organization. Creating a gift culture By setting the course of the organization to be such that mentoring relationships are embraced, executives can create the appropriate atmosphere that leads to successful collaboration. Ensuring the requisite skills It is extremely important to help employees develop skills that help them to build relationships, communicate effectively and resolve conflicts creatively. By developing these skills, employees will be well prepared to perform collaboratively on their own. Supporting a Strong Sense of Community By supporting a strong sense of community, employees have an appropriate level of comfort to share their ideas with each other. Assigning Team Leaders that are both Task and Relationship Oriented Leaders must be able to fulfill both Task and Relationship oriented roles in order to be truly effective at creating collaborative team environments. It is critical to be more Task Oriented at the beginning of a project to lay out the goals of the work to be performed, but after the expectations have been set, a relationship oriented approach should be taken in order to foster a collaborative environment. Building on Heritage Relationships Teams should consist of a few members that already have trusting relationships so that these individuals can be an example of how to collaborate. Understanding Role Clarity and Task Ambiguity All members on the team must clearly understand their role on the project. If this is not the case, more time could be spent on attempting to find out who has responsibility for given tasks than working towards achieving the goal. Additionally, if the roles are not well defined, employees may get territorial and this will not lead to collaboration. (Gratton and Erickson, 2007)

3.2.4Build Program for Innovation Tom Kelley of Ideo, Inc. has written notable books on the topic of Innovation, including The Art of Innovation and the Ten Faces of Innovation. They highlight the process of building an Innovation Team. In his discussions of the Innovation process, he gives an excellent overview of how a team of innovators should be built. He discusses all of the different personality types that are necessary as part of the Innovation process and he gives examples of the different benefits that each personality type can add to an Innovation project team. It is important to understand the different personality traits that lend themselves to award winning Innovation. The Ten Personalities of Innovation are broken into 3 separate groups and they are the learning, organizing and building personas. They were developed to show the human side of innovation, because at the end of the day, all great organizations are powered by humans. These Personas can be mapped to specific phases of the Innovation process. Having the ability to identify these traits will allow teams to best utilize the skills of personnel and consistently innovate. (Kelley & Littman, 2005)

The Learning Personas are based around the fact that organizations must not get complacent due to successes that they have enjoyed in the past, but they must continue to work towards gathering information that will be useful to the organization or program. Having these types of personalities on a team will help the team from being too internally focused. The three faces of Innovation that are a part of this persona are as follows: The Anthropologist helps to gain new insights and learning opportunities by studying the way that people interact, both physically and emotionally, with products, services and spaces. Employees with this face of Innovation find true value in observing and interviewing people to gain a deep understanding of what they value and what things may need to be changed. The Experimenter constantly prototypes new ideas with the intent of learning by trial and error. These individuals take calculated risks in order to learn by implementing new ideas and modifying the ideas until they are successful. The Cross-Pollinator is an individual that will find new ideas to fit the needs of the organization or program by researching other cultures and industries. A critical aspect of this personality is that they know how to seek out ideas that seemingly may not apply to your organization and adapt them. (Kelly & Littman, 2005)

The Organizing Personas are individuals that have a great deal of understanding about how ideas are moved through organizations. They fully understand the fact that ideas must compete for time and resources and they view the budgeting of resource allocation processes as a complex game of chess that they are prepared to win. The Hurdler is an Innovation personality that understands that there will be obstacles that they will face while they are try to sell their new idea and they are highly skilled at devising and executing strategies to move around the obstacles. The Collaborator is a personality type that understands the value in bringing multiple people with different backgrounds and perspectives together to problem solve. They will even form partnerships to collaborate with clients and customers so that they can work together to come to the best resolution. The Director is a personality type that has a deep understanding of the particular skills necessary within a team. This personality of Innovation will play a crucial role in motivating team members to continuously get the best performance out of each and every team member. (Kelley & Littman, 2005)

The last group of Innovation personas is the Building Personas. These individuals understand how to apply the concepts that are created by the learning roles and utilize the empowerment that is granted to them by the organizing personas to implement ideas with impact. The Experience Architect attempts to connect with customers needs at a deeper level by designing compelling experiences that go beyond the mere functionality of the product or service that is being created. By successfully designing experiences that meet customer needs, firms will have the ability to charge a premium and create a marketing buzz. The Set Designer focuses on transforming physical space into an area where team members can perform their best work. They design space layouts that influence collaborative behavior

and attitude, ultimately, space design may have a significant impact on the performance of work teams and should be valued as such. The Caregiver works to go beyond mere customer service to provide customer care, similar to the way that health care providers provide care to patients. Good caregivers are focused on staying out in front of customer needs using anticipation. Due to the nature of the caregiver, these individuals tend to be a key source of new products and services that end up being in high demand. The Storyteller uses compelling stories to communicate fundamental human values or reinforce specific cultural traits and increase internal moral and external awareness. Examples include the way that Dell and Starbucks use corporate legends to continue to support their brands and develop camaraderie amongst teams. (Kelley & Littman, 2005) It is important to understand that each team member can employ multiple roles in a given year, project or even day. It is up to the leadership of the organization to identify the strengths of each individual and place them in situations where their strong Innovation personas will lead to the greatest successes. Based on the different Personas, it would make the most sense to utilize strong Learning Personas in the Requirements and Design for a particular effort, while the Organizing Personas will be best utilized in a Project Management role. The building Personas would be the best fit for a Marketing and Human Resources role at the Program Management level.

3.3Generate Ideas and Select Innovation Initiatives

Once the strategy for how Innovation will be employed within the organization or program has been defined, it is time to begin the process of creating the next big idea that will help the organization gain or sustain market share. This process has to be performed carefully with the right balance of creative leeway and alignment with the organizational or program strategy. Managing this process requires a significant level of skill to motivate employees to think both strategically and creatively. 3.3.1Idea Generation Overall, idea generation can be fostered by the culture of the organization and it will be critical to communicate to the entire organization that everyones ideas are valued. Without an open environment such as this, employees may feel that their ideas will not get too far up the chain of command and receive financial support. Based on the Toyota example earlier, line workers helped Toyota gain a significant competitive advantage, while other automobile manufacturers held on to the belief that line workers could not possibly have ideas as good as theirs. Empowering employees is a great win-win situation, since as a manager, you will receive greater commitment to your organization from your employees. Also, employees will be motivated to generate potential blockbuster business ideas if they feel empowered and committed to the organization.
3.3.1.1Idea Brokering

The concept of idea brokering is a process by which organizations utilize ideas and transform them to create value for their current situation. Organizations can systematize this process by developing

a process that allows inter and intra-organizational sharing. The idea is that organizations seek to find promising ideas by spanning multiple industries and gathering and sharing ideas in a method known as knowledge brokering. Once the ideas are discovered, they will have to be kept alive so that they may be adapted and applied to new problems and ideas. Lastly, the idea will be tested to ensure the viability of the promising Innovation. In the phase of capturing ideas, the thought is that you will need to work with people that have experience in your industry as well as people from other industrys, cross-pollination can be a very effective method of generating ideas. This is synonymous with Thomas Edisons guidelines for starting a project, First, study the present construction. Second, ask for all past experiences Study and read everything you can on the subject. (Hargadon and Sutton, 2000, p. 5) By keeping the ideas alive, the organization will need to foster meetings where knowledge brokers can meet with one another and share their knowledge. Additionally, brainstorming sessions will need to be setup in order to fully discuss the old ideas and ideas from other industries and try to match these to current problems that the organization faces. Lastly, the organization will need to facilitate tests of the ideas at a small cost. This will be necessary in order to determine the feasibility of the idea prior to making a full blown investment. (Hargadon and Sutton, 2000) Depending on the degree of the Innovation effort, this may or may not be necessary. Having this information will also be a good baseline of data for Theory-Focused Planning, which is discussed in Section 3.3.3.2 Decision Criteria for Semi-Radical and Radical Innovations. It is important to note that in order to utilize this method of idea generation, the organization will need to cultivate the right culture. In this case, they will need to have a collaborative environment within a learning organization. Without these mechanisms in place, Idea Brokering could be difficult to use for idea generation.
3.3.1.2Lead User Idea Generation

The Lead User Process was developed by 3M, because the executives were concerned that most of the companys growth was coming from changes to existing products. The reason that the Lead User Process was chosen as a method for generating new products is the fact that research has shown that most new products are prototyped by customers and not by the companies that develop the products. Additionally, Lead Users, companies, organizations or individuals that are well ahead of market trends and have needs that go far beyond those of the average user (Von Hippel, 1999, p. 1), tend to develop these products. The Lead User Process is composed of four distinct phases and it begins with the creation of crossdisciplinary teams with capabilities that range from technical to managerial. Lead User Process teams will foster a collaborative environment so that they can utilize different perspectives to creatively identify new opportunities within their market. The four distinct phases are as follows:

Laying the Foundation Laying the foundation deals with analyzing new markets or market segments to target. Decisions about what markets or market segments to target will rely heavily on the Innovation strategy that is set by the organization or program.

Determining the trends - It is important to discuss the trends of the industry and the markets that are being targeted. Experts that will have information about emerging technologies as well as leading technologies will be identified in order to get the most valuable information possible. Identifying Leads Users The Lead Users that were involved in determining trends will be utilized further in order to gather more information about the market potential for new products or services. Having this information will allow the cross-disciplinary teams to identify potential Innovation breakthroughs. Teams will use this information to formulate opinions and strategies about the potential viability of different Innovation ideas. Developing Breakthroughs The development of breakthroughs begins with a workshop with the intent of getting the cross-disciplinary team to collaborate with the Lead Users to finalize concepts. After the workshop is completed, the team will further develop the conceptual product or service and determine if they are aligned with the needs of the target customer. Once they have successfully proven that the idea has credibility, the team will present the idea to Senior Management for approval.

It may seem odd the Lead Users would be willing to discuss potential business ideas with the companies that provide products and services to them. There are a couple of motivating factors that drive lead users toward these discussions. The first reason is that Lead Users are typically in another industry than the company attempting to grow their business, so the lead users typically do not feel threatened by the growth. Second, Lead Users typically develop new Innovations on their own, because they usually need to perform their work in more efficient ways to keep up. Since they develop these tools without the intent of marketing the Innovation, they are more willing to have someone else perform that work that has the capability. (von Hippel, 1999)
3.3.1.3Idea Generation the Ideo Way

In Tom Kelleys The Art of Innovation, he walks through the process that Ideo, one of Americas top design firms uses in order to consistently develop top notch Innovations. In fact, the book outlines a bit from Nightline, where a team from the firm is tasked with designing a new shopping cart in 5 days. (2001) The process starts out with observations and discussions with shopping cart users so that the team can build their constraints around the design of the new shopping cart. For example, they found out that parents are not very confident with the safety of their children when sitting in the seat at the front of the shopping cart. They also found out that shopping cart users would like to have the ability to move the cart from side to side. Using these constraints, the team broke up into multiple teams and each team designed their own shopping cart per the requirements and constraints that were gathered. Additionally, each design was displayed on the wall in the room in which they were working on and they voted on the solutions to each key requirement and constraint. In essence, they took the best design ideas for each specific requirement and aggregated them into the final shopping cart. Ultimately, they built a life size shopping cart and gave a demonstration of its new functionality to shoppers and they were very impressed with the finished product.

Ideo likes to perform a lot of up-front analysis and collaboration when they are designing products. Another critical aspect of their design process is their extensive usage of prototypes. By prototyping, they allow potential customers to get a better idea of what it is that they are proposing. This would be critical for selling new ideas to potential clients, since they may be unfamiliar with what you are presenting, you will want to utilize prototypes where possible. (Kelley & Littman, 2001) 3.3.2Idea Generation Analysis It is important to understand that each of these idea generation philosophies are effective, but there must be some analysis regarding when each method would create the best results. Based on the type of Innovation effort that is being pursued, you will select the method for idea generation. Idea Brokering would be a good fit for Semi-Radical and Radical Innovation initiatives due to the fact that you test the ideas, which significantly reduces uncertainty. Lead User Idea Generation allows organizations to get a sense of the market trends that will be coming, since you will be dealing with existing customers, this method would be a good fit for Semi-Radical and Radical Innovations. The Ideo Way of Idea Generation is a good fit for incremental Innovations, since it involves gathering requirements through observation and improving upon the status quo.

Another key point to note is that the ideas that are generated may not match the initial Innovation type that was set out for and that may not be an issue, depending on the industry forces and risk tolerance of the organization. In any case when ideas are developed out of the idea generation process, it becomes necessary for an organization to begin analyzing the ideas based on what is known as the NTCP Diamond. The NTCP Diamond assesses projects based on their novelty, technology, complexity and pace. At this point in time, the only critical aspect to assess is Novelty, since this will drive out the methodology for making a decision about whether or not to implement the Innovation. Novelty refers to the uncertainty of both the goal of the project and the uncertainty in the market. Novelty is a unit of measure that describes how new the product of the project is to customers, markets and users. Using this measure will give you a clear view of how well you can clearly define the requirements up-front and it will give you a clear indication of how many iterations will need to be performed in order to freeze the requirements of the project. (Shenhar and Dvir, 2007) The three units of measure for novelty are: Derivative A derivative project can be an improvement to an existing product or service and it may include cost reduction, product modifications or improvements or additions to existing lines. Platform A platform project deals with taking an existing product or service and creating a new generation of it for new or existing markets and customers. Breakthrough A breakthrough project on the novelty dimension can be considered as a new to the world project that makes everything that people know about that particular market irrelevant. (Shenhar and Dvir, 2007)

The Technology, Complexity and Pace dimensions of the Innovation effort will be analyzed further in the Project Management Style Assessment in Section 3.4.2.1 of this document. 3.3.3Making Decision to Implement Innovation For the purposes of this study, the decision to implement an Innovation refers to the decision to offer new products or services to a client. After the industry is well understood and the needs of the client are a fit for the Innovation to be offered, a more detailed analysis of the market opportunity will need to be performed. It is the incumbent upon the decision maker to select an appropriate method to perform the decision analysis and the selection method may either be qualitative or quantitative. However, an assessment of the degree of the Innovation will drive the decision process based on the amount of uncertainty and accessibility to historical data. In the case of an incremental Innovation, it stands to reason that there should be minimal uncertainty and lots of historical data to base decisions on. However; if you are dealing with semiradical and radical Innovations, there will be much more uncertainty and lack of historical data. Based on the fact that Radical and Semi-Radical have much different structures for measurement, it is necessary to handle the decision making model as well as the metrics differently for these separate Innovation types.
3.3.3.1Decision Criteria for Incremental Innovations

There are two distinct situations for making a decision and they are categorized as Go/No Go decisions and initiative prioritization. In both cases a decision matrix will be developed and it will consist of decision criteria. In the Go/No Go decision model, the criteria will be created and where applicable projections are made. The costs of implementation are weighed against the organizational benefits, both quantitative and qualitative. In the initiative prioritization model, the criteria will be created and projections are made where applicable. Each criteria is then weighted and scored in order to prioritize the alternatives. It is important to note that the weights and scores can be subjective, but this study attempts to help organizations improve on their weighting and scoring. Refer to Section 3.5.1 Measuring and Providing Feedback for Incremental Innovations. The following is a list of potential criteria that can be used as inputs for a decision model for either situation: Aligns with overall Corporate Strategy Currently have experienced resources in place Allows the organization to move into a new Market Segment Size of that New Market Segment 5 year projected growth of that New Market Segment Financial figures ROI Return on Investment NPV Net Present Value

Payback Period Risk Factors and the Impacts of the Risk Necessary in order for the organization to compete in their market space What capability needs to be developed Time and cost to build the capability

3.3.3.2Decision Criteria for Semi-Radical and Radical Innovations

In 10 Rules for Strategic Innovators, Vijay Govindarajan and Chris Trimble discuss a concept known as Theory Focused Planning, which is devised to help organizations plan for their Innovation efforts and measure against their plans and assumptions so that they can learn from the discrepancies. (2005) The planning portion of their method will be used to help make decisions, since it helps to give the decision maker a clear and concise way to understand the factors that lead to success with a business opportunity as well as understand the assumptions or uncertainties that can lead to a risky endeavor. In Theory Focused Planning, the up-front process is as follows:

Describe how the business works Identify metrics Establish goals Create Spending Guidelines Predict Performance Identify Critical Unknowns (Govindarajan and Trimble, 2005)

While executing the project effort, the following tasks will be performed:

Analyze disparities between predictions and outcomes Revise the plan (Govindarajan and Trimble, 2005)

Now that the basics of Theory Focused Planning has been laid out, the first six up-front steps of the process are discussed in more detail.
3.3.3.2.1Describe how the business works

At this step in the process, it is important to have an understanding of the steps that need to occur in order to deliver business value to the market, as well as the timeframe for completing these steps. The output that is generated as a result is a story that tells the cause-and-effect story that can be depicted by an influence diagram. Typically when discussing a cause-and-effect influence diagram, the steps to get to the end result will typically be budgeting decisions, such as hire new capabilities or enhance staff. At this stage of the Innovation effort, it will be important to identify the assumptions that are made. The assumptions should be based on what are known as critical unknowns, elements of the theory of your business that, if incorrect, could radically alter or break it. (Govindarajan and Trimble, 2005,

p. 154) It will be important to make sure that you do your best to make these assumptions known as you go through the process. The second key aspect of the Describe how the business works step of Theory-Focused Planning is determining the trends of each of the cause-and-effect factors. By doing this you will be predicting the trends for each aspect of the cause and effect diagram. Qualitative trend graphs are good tools for performing this analysis. Laying out the steps in the cause-and-effect diagram allows you to think more critically about all of the factors that will lead to success and give you an idea of what to monitor when executing the initiative. (Govindarajan and Trimble, 2005)
3.3.3.2.2Identify Metrics

Each Innovation initiative will need measures to be defined that relate well to the business model that is being proposed. Measures help Innovation teams to gather evidence that either confirm or deny their theories that are laid out in the cause-and-effect diagram. When performing the analysis to identify what should be measured it is important not to rule out qualitative measures. Qualitative measures can include public perception of the initiative, strategic positioning into a new market space or brand development. Even though these factors may not be quantifiable, they may have a significant impact on the outcome of the initiative. A candidate list of quantitative metrics includes:

Market Share over time Net Income per quarter Revenue per quarter Cost per quarter (Govindarajan and Trimble, 2005)

3.3.3.2.3Establish Goals

Goals for the metrics that are being measured will be developed once the metrics have been identified. Again, using Theory-Focused Planning, you will want to analyze the trends and therefore, your goals will be developed using trend graphs. The trend graphs depict how the venture would like to perform over a period of time as opposed to hard numbers on a quarterly basis. Key Questions that will lead to the goals of the initiative include:

What is a reasonable multiple for market growth? Over what time period? To what extent can we endure losses? Over what time period? (Govindarajan and Trimble, 2005)

An example of a Goal Trend Graph is displayed in figure 7.

Figure 7 Goal Trend Graph (Govindarajan and Trimble, 2005, p. 163)

3.3.3.2.4 Create Spending Guidelines

Creating the guidelines for spending requires significant analysis. The reason for this is that you will not only be estimating the amount of money you will have for spending at a given point in time, but you will also strategize when you will spend that money given the risk of the venture. As an example, if you have performed the market analysis and feel that for a given service, the market is about $100 million and you feel that you will have 30% market share, you will expect to make $30 million that year. The question here is whether you spend up to that level quickly or if you wait until you are actually at that level to spend at that level. The risk here is two-fold, since the market may not grow to that level and competitors may be spending to that level and taking market share. A thorough analysis of both of these risks needs to be performed and weighed heavily in the decision to move forward with the initiative. (Govindarajan and Trimble, 2005)
3.3.3.2.5Predict Performance

Predicting Performance also utilizes trending and combining trends that are related to each other. Taking the example from the spending guidelines, the performance prediction trend graph will display the trend for market growth as well as investing in the venture. This will allow you to test the impacts of one factor on another factor. (Govindarajan and Trimble, 2005)
3.3.3.2.6Identify Critical Unknowns

Identifying the critical unknowns involves gathering the assumptions that were made and plan for to resolve the unknown. In other words, we know that the size of the market is an unknown and we might want to get some data on the market without fully engaging ourselves into the initiative. This is where test data or polling clientele will come into play. The risk of the venture may be minimized by getting out in front of these critical unknowns. (Govindarajan and Trimble, 2005)

3.3.4Present/sell new project ideas to client Once a decision to pursue an Innovation effort has been made, the next step is to target clients and make them aware of your new product or service. When making the decision to present a new innovative idea to a client, there are some key value propositions that must be presented to the client in order to get their buy-in. Based on prior relationships with the client, you will have a good idea about which of these factors the client would weight the highest and those would be the factors that you would want to highlight in your presentation. It is important to note that for this particular function in the Innovation process, you would want to employ the Hurdler Innovation personality. For more information on this topic, refer to section 3.2.4 Build Programs for Innovation.
3.3.4.1Show Expanding Capabilities using Sub-contractors

Procurement can be the most underrated area for Innovation due to the fact that a project team can have completely different capabilities depending on who they partner with. It is quite possible that during competitive bids, organizations that partner with the appropriate sub-contractors may gain a competitive advantage due to newly acquired capabilities. Organizations that may be limited as to their technical approach can open themselves to new solutions by partnering with an appropriate sub-contractor.
3.3.4.2Show alignment to objectives

When presenting the alignment of a technology initiative to organizational objectives it is critical to keep in mind that the key components are the people, process and technology. With that in mind, it is important to map the technology initiative that is being sold to the processes that support the organizational objectives. The mapping can be accomplished by modeling the business processes that support the objectives and providing justification for how the technology initiative will support the initiative. (Hoque, 2006)
3.3.4.3Show value of project

When presenting the potential value of a particular service to a client, it is extremely important to differentiate between radical and incremental Innovations, since the value proposition is dependent on which type of Innovation is being proposed. In the case of radical Innovations, there will typically not be much historical data to show impact of the service, whereas with an incremental Innovation, historical data is more prevalent and impact can be shown quantitatively. For example, if a new technology or service is being proposed, the challenge will be to present the difficulty that the client currently faces and how the new technology or service resolves their issue. The approach for resolving the clients challenge will have to be clear and concise. Within the approach and methodology, the following questions need to be addressed:

What is the current challenge to be resolved? What is the source of the current issue? What steps will be necessary to arrive at a conceptual solution? What is the expected outcome of implementing the new technology or service? How did you arrive at the expected outcome of implementing the new technology or service?

Are there any assumptions or critical unknowns (risks) that could impact the expected outcome?

An example of an incremental Innovation would be to implement a technology or service to a new client where the needs of the client are not significantly different from that of previous clients. In this case, metrics that show the impact of the solution for other clients can be used as a reference for potential clients. However, the questions that would be addressed for a radical Innovation should also be addressed and accompany the quantitative analysis. By presenting the potential client with both qualitative and quantitative analysis, the level of confidence in your ability to deliver gives your organization or program a competitive edge.
3.3.4.4Show total cost of ownership to client

When presenting a new innovative service offering to a client, it will be vital to make them aware of the total cost of ownership (TCO) of the service. Especially if there is a new IT system that will be developed, since there will be license renewal costs as well as the costs of the labor to support the new system. This is concept that is not only relevant to Innovation initiatives. Setting the expectations of the clientele early in the process will keep them informed and they will appreciate the honesty. Lastly, ensure that these costs are documented in any presentation or proposal so they can be easily referred back to when it is time for the client to start paying these maintenance costs.

3.4Execute project using Project Management and Innovation Principles

Once the new innovative service has been sold to new clients, the Innovation process is not complete. This is the point where the supply side Innovation will begin and the entire project team may assist with generating innovative ideas that will help deliver the service more efficiently than competitors. A key component to performing this successfully is to make sure that project team members are involved and that they are kept motivated by utilizing their strengths. Refer to Figure 8 for a depiction of the Process Groups for Project Management.
Figure 8 Project Management Process Groups

3.4.1Initiating Process Group It should be noted that this does occur when a project is performed and that innovative ways to initiate a project can be assessed. A key question is whether the time invested to innovate at this point in the process would really add value. The main objective when initiating a project would be

to ensure that collaborative relationships are developed with key stakeholders at this point, since that would lend itself to Innovation at later points in the process of delivering a product or service. 3.4.2Planning Process Group During the process of planning for a project, there are two critical aspects where the tone can be set for successfully developing an innovative product. These include Defining the Project Management Style and Reward Systems. Performing these critical steps well early on in the project effort will get the project off on the right foot for successful Innovation.
3.4.2.1Project Management Style Assessment

Earlier in the report, a concept known as NTCP was discussed, which is a framework for planning projects around these four dimensions. The Novelty aspect was discussed in detail in Section 3.3.2 Idea Generation Analysis, which is where it is most appropriate, since before engaging in any Innovation effort, the marketing work needs to check out to ensure that there is a business case to support the initiative. Assuming that this work has been performed, the dimensions that are relevant for planning a particular project are the Technology, Complexity and Pace of the specific project. The key thing to understand when assessing these dimensions is that they will provide a great baseline for risk identification. These will be your high level risks. Looking at the project from this perspective will give you a good understanding about where your risks will be coming from and allow you to manage those risks more carefully. When assessing the Technology dimension of the project, an assessment of the uncertainty of the amount of technology that will be used in order to complete the project will be studied. By using this assessment, a good understanding of the amount of iterations necessary to freeze the design of the project will result. It will also allow you to make a good assessment of what skills are necessary to successfully complete the project. There are four units of measure for the technology dimension: Super High-Tech The super high tech category for the technology dimension is for projects where new technologies will be developed as a result of the project. High-Tech The high tech project category involves the use of many new technologies that already exist and will be integrated with one another in ways that have not been performed. Medium-Tech The core technologies of medium technology projects already exist and are quite mature. There may be some non-core technologies that do not already exist. Low-Tech All of the technology that is used on the project exists and is mature. (Shenhar & Dvir, 2007)

The Complexity dimension of a project can be described as the complexity of the product and the task. It will affect how the project will be organized to include the level of bureaucracy and the formality required to manage it. The three units of measure for complexity are:

Assembly Projects that are categorized as having assembly level complexity are projects that deal with a single component or module of a greater system.

System Projects of system complexity deal with the integration and coordination of multiple assembly type projects in order to arrive at a system solution. Array Array projects are typically so large that they are described as a system of systems. An example of a project of this size would be the New York City Transit Authoritys program for subway infrastructure modernization. (Shenhar & Dvir, 2007)

Pace is a dimension in the project assessment that represents the level of urgency of the project. Having an understanding of this dimension affects the planning of the project. Additionally, based on the pace of the project, you can make decisions on how many reviews and the involvement of senior management necessary to make the project successful. The four units of measure for the complexity dimension are as follows: Regular A project that has a regular pace is one in which the time factor will not impact organizational success. Fast/Competitive A fast/competitive project is one where the completion of the project on time will impact the organizations competitive advantage. Time Critical Time critical projects are projects where the success of the project is 100% dependent on the time factor. Blitz Blitz projects are typically projects that are in response to some sort of crisis. (Shenhar & Dvir, 2007)

As displayed in Figure 9, Novelty will have a later timeframe for requirements freeze as the project gets more towards a breakthrough initiative. Along the same lines of thinking as the technology dimension gets closer to the Super High-tech categorization, the design freeze will occur later in the process and there will be more design cycles. As the complexity dimension of a project increases towards array, it becomes important for a more formal organization structure to be in place for the project team. And lastly as the pace pushes towards Blitz, the team will need more autonomy to perform their tasks.
Figure 9 NTCP and Project Management Style (Shenhar & Dvir, 2007, p. 166)

It is critical for a project management style to be defined early and to ensure that the style fits the profile of the project that will be performed. This is really where the ideas generated above become reality and strong project management principles must be practiced so that the ideas can successfully be transformed into value added business initiatives. Going back to the Radical and Incremental Innovation comparison throughout this study, you can see how the NTCP dimensions relate to Radical and Incremental Innovations in Figure 10.

Figure 10 NTCP and Degree of Innovation (Shenhar & Dvir, 2007, p. 148)

By understanding the NTCP dimensions of your particular project, you will have an understanding of the key areas where risks will be identified. Using the dimensions, as the rating for a particular dimension gets further from the axis, it becomes more important to spend more time discussing that dimension during the risk identification portion of the project. (Shenhar & Dvir, 2007)
3.4.2.2Defining Reward Systems

The reward systems associated with Innovation will have a direct impact on the success of the program. Designing a reward system that rewards both individuals and teams for behavior that is aligned with successful Innovation is critical. Figure 11 outlines the different types of rewards to be offered for incremental and radical Innovations.
Figure 11 Project Reward Structure (Davila et al., 2006, p. 208) Incremental Innovation Projects Incentive systems more relevant Cash-based compensation more relevant Formula-based incentive systems emphasized Performance measures play a significant role in compensation Outcome-based performance measures more relevant Radical Innovation Projects Reward systems more relevant Stock-based compensation more relevant Subjective evaluation emphasized Performance measures plan a minor role in compensation Input and process-based performance measures more relevant

Local performance measures

Company-level performance measures

It is important to note that the reward systems that are defined should be created at the project or effort level and not at a global level. The reason for that follows the same philosophy that every person is motivated by different things and therefore, different types of projects will call for different reward systems. Whether the project is an incremental Innovation or a radical Innovation will have a significant impact on how the reward system is designed. The concept of rewards is centered around whether the project that is being performed would be considered an incremental or a radical Innovation. According to Davila, the reward system that is developed for a project has to be devised carefully and should take into account the degree of Innovation that is being performed. When the project is an incremental Innovation, has a lesser impact on the overall organization and the results can be measured easily, cash based incentives should be used. However, if the project is more towards the radical Innovation end of the spectrum and has the potential to significantly impact the overall organization, a longer term stock based reward system should be utilized. 3.4.3Executing Process Group During the execution of a project, the principles of management Innovation and organizational culture are critical, since staff needs to be empowered with creative leeway in their design decisions and executing ideas for optimal efficiency. A candidate list includes:

Using network and past experience to creatively resolve issues and develop risk mitigation strategies Create estimates using different estimating methods, then challenge team to beat those estimates using more effective methods for completing their tasks. Rewards can be used as a motivational factor for staff. Think outside the box and look for efficiencies that can be gained by adding resources in places previously thought inefficient. Keep to the context of the overall goals of the project and the organization holistically. New innovative technologies have been developed and they should be utilized to help facilitate effective project communications, especially in a globalized economy with disparate project teams. A real effort needs to be made at the Project Manager level to keep all project resources engaged and focused on the goals of the project. Hold collaborative sessions whenever possible and utilize all resources, even those that may not have the appropriate background, they will bring a new perspective. Give risk other dimensions, such as time value of risk, illustrating the value of identifying risks early on.

3.4.4Monitoring and Controlling Process Group Monitoring and controlling can be effectively accomplished for the duration of a projects timeline by aligning all critical decisions to the impact that they will have on the organizational objectives. In the contracting world, these decisions need to be aligned to both the client and the contracting

firms organizational goals. Other ideas to look at when attempting to innovate with the Monitoring and Controlling Processes include:

Keep to the context of the overall goals of the project and the organization holistically and ensure that they relate to organizational objectives One Innovation could be to look for new metrics to track regarding the progress of a project Track outstanding risks and their potential financial impact against the budget Another Innovation may be to look for new ways to bring the project back on track How can current resources be utilized to accomplish the job within budget? Quality is measured and can be placed in charts and graphs. If certain products/systems consistently experience quality issues, we can use that information in the planning process

3.4.5Closing Process Group During the closing process of a project, there are two areas where Innovation may be utilized for the benefit of the organization or program. The first key area is employee development, while the second key area is business development. As far as employee development is concerned, the philosophy is that during the lessons learned portion of the project, the culture will be set so that people will feel a level of comfort to openly identify areas for improvement. Additionally, rewards on future projects can be setup to provide incentives for improvement on areas that were identified during lessons learned. While working with a client on a project engagement, the typical thought is that there will be a lot of opportunity to identify other areas where your services would be beneficial to the client. The key to winning that work is showing impact with the project that was just completed. This can be accomplished by working with the client to capture metrics that display how well the project accomplished their organizational objectives. Showing this impact and having a sound strategy for approaching other relevant problems within the organization will give the client confidence that your team and organization are well-equipped for the work.

3.5Measuring Innovation output and Providing Feedback

Measuring the Innovation output and providing feedback is a very critical ongoing phase of the process, because it allows the teams to understand the performance of the effort and the impact of critical factors to the success of the effort. By setting this process up in a manner that makes the Innovation effort iterative, project teams become more agile and can quickly react to changes in the original plan. The measures are really in place to guide the evolution of the effort and allow management to make the necessary changes based on the data for metrics that were setup at the outset of the effort. It is also important to note that the classification of the Innovation initiative will significantly affect the measurement process for that particular effort. Incremental efforts will be based on historical data and will therefore be more quantitative in nature, while the Radical and SemiRadical Innovations will be measured against the trends that were defined in Section 3.3.3.2 Decision Criteria for Radical and Semi-Radical Innovations.

3.5.1Measuring and Providing Feedback for Incremental Innovations When measuring incremental Innovations, the reality is that your actual results will be compared against models that have used historical data in order to arrive at an estimate for how the Innovation will perform in the market. Referring back to Section 3.3.3.1 Decision criteria for Incremental Innovations, the methods for Measuring the decision-making model against the actual real-world output of the decision need to be analyzed in-depth. This will give the organization a good opportunity to assess the Actual Financial Information for the Innovation effort and measure those numbers against what the decision model indicated that they would return. All decision criteria where the input was not absolute when the decision model was run should be analyzed in this phase. The point is that each criteria needs to be analyzed post execution of the project decision due to the fact that there is always the possibility that the projection of these criteria could be wrong and that information will need to be used as feedback for future decisions. Points where the decision-model failed to give Management an accurate projection of what might happen if they make a certain decision need to be analyzed to figure out the causes and see how this knowledge can be fed back into the system. Organizational decisions are categorized into a Go/No-Go decision for a single project or prioritizing initiatives based on predefined criteria with weights. In the Go/No-Go decision analysis for a project, the way in which the process will work is that the decision financial criteria is projected to determine the feasibility of the initiative. After the projected earnings for the project are computed, what will happen is that the actual returns of the project will be measured against what the projections. The next step is to analyze the differences between projections and actuals for each criteria to determine what factors cause the deviation. This is the point in the model where questions and much more research need to be performed. How can these discrepancies be fedback into the process so that the next time that projection simulate the financial benefit of a project it works out in a more realistic manner? The model may have entirely missed some risk factor or it is also possible that there may have been some dependencies between variables, meaning that if a certain event occurs, the impact of another financial variable is heightened. The reality of the situation is that for an organization to learn from Innovation efforts, they will need to analyze their measurements and discrepancies very carefully to improve their decision making process. Additionally, there can be many permutations that could have an impact on the overall value that is created by the effort. Refer to Figure 12 for a diagram of this process.
Figure 12 Single Initiative Measurement Process

The other situation is when a prioritization model is run. After selected initiatives are are closed, the value that is created is measured against the projections in the prioritization model. It may turn out that projects that werent prioritized as high as others may ending up creating more value for the organization. Some correlation between these projects may be drawn to figure out which factor played a vital role in the ultimate end result of the value that is created by the initiative. Once these factors are identified, they can be weighted higher in future prioritization models. Refer to Figure 13 for a diagram of this model.

Figure 13 Prioritize Multiple Initiatives

3.5.2Measuring and Providing Feedback for Radical and Semi-Radical Innovations As discussed earlier, the Theory-Focused Planning framework will be used for Innovation initiatives that can be categorized as either Radical or Semi-Radical. The key here is that the metrics to be tested at this point are not at the project level, but at the initiative level and their goal is to test the viability of the effort.
3.5.2.1Analyze Disparities Between Predictions and Outcomes

Now that you have been implementing the Innovation effort, it will be time to perform the measurements and compare the findings to the predictions that were made earlier using TheoryFocused Planning. It is important to note that it is still the trends that are being tested and not just a measure at a given point in time. Decisions need to be made to determine the frequency of the performance measurement tests. Ultimately, the historical data must be saved, because it is just as important to be able to analyze going forward as it is to be able to look back on trends. It is important to understand that when discrepancies are assessed, that there are two separate perspectives to look at the discrepancy with. The first is to look at the discrepancy from the perspective that the management team underperformed. The second is to view the discrepancy from the perspective that the predictions may have been unrealistic. This allows you to separate between these two separate factors and isolate the root cause.
3.5.2.2Revise the Plan

Once the logic behind the discrepancy is understood, it is time to look at the plan and revise it where necessary. This is a very important step, because this is where the learning of the organization takes place. The following steps are performed:

Update the theory of the business Reassess the measures Reconsider the goals Reevaluate the spending guidelines Update your predictions Update the list of critical unknowns

Refer to Section 3.3.3.2 Decision Criteria for Radical and Semi-Radical Innovations for a detailed discussion on each of these steps.

4.0Lessons Learned to Share with Other Students

When you get a chance to do a Graduate Research Project, the best thing you can do is take on a large topic where the scope seems almost endless and learn as much as you possibly can. I was nervous about this project from the day I got into the Graduate Information Systems Program at Marymount University, since I had no idea what I would do to complete this degree requirement. Then one day, in my knowledge management class, we watched a Nightline video where Ideo was tasked with re-designing a shopping cart in 5 days. Watching that video and seeing the output of their collaborative work inspired me to dive further into the realms of Innovation. I wanted to be able to take that same magic and spread it with the teams that I lead and this paper was born. What I wasnt aware of when I started researching this topic, was the fact that so much of Innovation is based on marketing and industry research. As I kept purchasing more and more books and periodicals to get my arms around this topic, I began to feel hopeless, until one day I sat down and put together my first outline, which changed numerous times. As I kept scanning the environment for new information about Innovation, I kept modifying the outline. Finally I decided that I wanted to outline a high level process that would discuss the marketing and strategic aspects of Innovation and place them into a coherent process that shows how ideas are generated and implemented. I also wanted to present how the impact of these Innovations can be measured and how that measurement can impact the ongoing Innovation process within an organization. After taking the time to research and write this research paper, I feel that I have built skills that I will be able to utilize throughout my career as I continue my growth. The best advice that I can give to someone is challenge yourself and take risks when it comes to your final research project. It will be difficult while you are working on the project, but I promise that you feel the impact in your daily activities.

5.0Final Project Proposal

Objective:
To Research some of the most innovative practices throughout all industries and analyze both Program and Project Management processes outlined by the Project Management Institute in an effort to find the most relevant application for innovative practices.

Scope:
The scope for the study of Innovation will be to define the term and then research Innovation practices from both the marketing and operational perspectives. The scope for the Program and Project Management research will be two PMI publications, the PMBOK Guide to Project Management and the OPM3, Organizational Project Management Maturity Model Overview.

Methodology:
The Plan for this Graduate Research project is to study Innovation from both the marketing perspective as well as the operational perspective and have the ability to theoretically apply the knowledge that is gained about Innovation to develop guidelines for managing the Innovation process within an organization.

Finished Product:
The Finished Product will be Research Report that defines a process for Innovation. Innovation Overview - An executive level overview of Innovation, including a definition of Innovation, the impacts of Innovation on the global marketplace and national economies. This section will give examples of Innovations and detail their impacts on the organizations that implement them. Innovation Process A process that details how to develop an Innovation strategy, given the industry analysis as well as how to foster a culture of Innovation. Additionally, this process will detail the steps to generate innovative ideas, while selecting the ideas that will have the most impact. Once the decision to implement an Innovation has been made, the process details methods for managing the effort. This includes innovative Risk Management Strategies as well as separate methods to measure both incremental and radical Innovations.

6.0Appendix A: Innovation Assessment Form

1. Industry Analysis: 1. Define the relevant industry 1. What products and services are involved? Are any of these products and

services part of another distinct industry? 2. What is the geographic scope of the competition? 2. Identify the participants and segment them into groups, if appropriate: 1. Who are the customers/clients? 2. Who are the suppliers?

Who are our competitors? Who could potential develop substitute products and services? Who are potential industry entrants? 3. Assess the underlying drivers of each competitive force to determine which forces are strong and which are weak and why: 1. Threat of New Entrants, strong or weak and why? 2. Bargaining Power of Buyers, strong or weak and why? 3. Bargaining Power of Suppliers, strong or weak and why? 4. Threat of Substitute Products or Services, strong or weak and why? 5. Rivalry among Existing Competitors, strong or weak and why? 4. Determine overall industry structure, and test the analysis for consistency 1. Why is the level of profitability what it is? 2. Which are the controlling forces for profitability? 3. Is the industry analysis consistent with actual long-run profitability? 4. Are more-profitable players better positioned in relation to the five forces? 5. Analyze recent and likely future changes in each force, both positive and negative? 1. Threat of New Entrants 2. Bargaining Power of Buyers 3. Bargaining Power of Suppliers 4. Threat of Substitute Products or Services 5. Rivalry among Existing Competitors 6. Identify aspects of industry structure that might be influenced by competitors, new entrants or your company. 1. Shifting threat of new entry 2. Changing Supplier or Buyer Power 3. Shifting threat of substitution 4. New bases of rivalry 2. Client Needs Analysis (For each potential Client) 1. Organizational Mission: 2. Alignment of Project to Mission: 3. Planned Value Proposition: 4. Total Cost of Ownership 3. Analysis of Proposed Innovation Initiative 1. Initiative Classification (Incremental or Radical) 2. Predictive Measures (Incremental) 1. Aligns with overall Corporate Strategy 2. Currently have experienced resources in place 3. Allows the organization to move into a new Market Segment 1. Size of that New Market Segment 2. 5 year projected growth of that New Market Segment 4. Allows the organization to shift work from their organization to another organization. 5. Unforseen Costs that may be added to the process 6. Financial figures 1. ROI Return on Investment 2. NPV Net Present Value
3. 4. 5.

3. Payback Period

Risk Factors and the Impacts of the Risk Needed in order for the organization to compete in their market space Time to build the project Cost to build the project Capabilities to be developed 3. Predictive Measures (Radical) 1. Describe how the business works 2. Identify metrics 3. Establish goals 4. Create Spending Guidelines 5. Predict Performance 6. Identify Critical Unknowns 4. Industry Factors to Monitor 1. Unexpected Occurrences 2. Incongruities 3. Process Needs 4. Industry and Market Changes 5. Non-Market Contexts 6. Demographic Changes 7. Changes in Perception 8. New Knowledge
7. 8. 9. 10. 11.

7.0Appendix B: Works Referenced

Bernstein, Amy. Why the United States Needs an Innovation Strategy. Strategy + Business, October 30, 2007. Christensen, Clayton. (1997). The Innovators Dilemma: When New Technologies Cause Great Firms to Fail. Boston, Massachusetts, Harvard Business School Press. Christensen, Clayton, & Raynor, Michael E. (2003). The innovators solution: Creating and Sustaining Successful Growth. Boston, Massachusetts, Harvard Business School Press. Christensen, Clayton, Anthony, Scott D., & Roth, Erik A. (2004). Seeing whats next: Using the theories of innovation to predict industry change. Boston, Massachusetts, Harvard Business School Press. Davila, Tony, Epstein, Marc J., & Shelton, Robert. (2006). Making Innovation Work: How to Manage It, Measure It and Profit from It. Upper Saddle River, New Jersey, Wharton School Publishing. Drucker, Peter. (2002) The discipline of innovation. Harvard Business Review, August 2002, reprint.

Garvin, David A., Edmundson, Amy C., & Gino, Francesca. (2008) Is yours a learning organization?: Using this assessment tool, companies can pinpoint area where they need to foster knowledge sharing, idea development, learning from mistakes, and holistic thinking. Harvard Business Review, March 2008. Govindarajan, Vijay, & Trimble, Chris. (2005) 10 Rules for Strategic Innovators: From Idea to Execution. Boston, Massachusetts, Harvard Business School Press. Gratton, Linda & Erickson, Tamara J. (2007). 8 ways to build collaborative teams: Even the largest and most complex teams can work together effectively if the right conditions are put in place. Harvard Business Review, November 2007. Hamel, Gary. (2006). The Why, What, and How of Management Innovation. Harvard Business Review, February 2006, reprint. Hargadon, Andrew & Sutton, Robert I. (2000). Building an innovation factory. Harvard Business Review, May-June 2000, reprint. Hoque, Faisal. (2006) Winning the 3-legged race: When business and technology run together. Upper Saddle River, New Jersey, Business Technology Management Institute. Kelley, Tom, & Littman, Jonathan. (2005). The ten faces of innovation: IDEOs strategies for beating the devils advocate & driving creativity throughout your organization. New York, New York, Doubleday. Kelley, Tom, & Littman, Jonathan. (2001). The art of innovation. New York, New York, Doubleday. Macdonald, Nico. (2007). Innovation and the prosperity of Nations: At the recent competitiveness summit, the connections between business and innovation were made starkly clear. BusinessWeek Online, January 24, 2007. Retrieved July 17, 2008, from http://www.businessweek.com/innovate/content/jan2007/id20070124_344192.htm. Porter, Michael E. (2008). The five competitive forces that shape strategy. Harvard Business Review, January 2008, pp 78-93. Shenhar, Aaron J., & Dvir, Dov. (2007) Reinventing Project Management: The Diamond Approach to Successful Growth and Innovation. Boston, Massachusetts, Harvard Business School Press. Von Hippel, Eric, Thomke, Stefan, & Sonnack, Mary. (1999). Creating breakthroughs at 3M. Harvard Business Review, September October 1999, reprint.