1. Beyond Process: Innovation Center Culture & Value
Caroline Little, MDes 2009
IIT Institute of Design, Chicago
With assistance from: Professor Jeremy Alexis and Hanna Korel
Innovation centers today are at a crossroads; some have already evaporated, and
those that are still in existence are working to define their true purpose in this state
of heightened economic insecurity. Using examples from (6) innovation centers,
this article describes how centers are adapting and what makes them successful, as
well as providing insight around how design can best be used to create change inside
organizations.
A few years ago, before the housing market bubble burst and onset of a major
financial crisis, organizations were looking for ways to make innovation an internal
part of their processes. After all, design (along with its arch-angel, innovation) was
seen as the way to stay competitive in a world increasingly saturated with products
and services. Organizations as diverse as the Mayo Clinic, T-Mobile, SAP, and
Safeco (now Liberty Mutual) began investing in making design integral to their
organizational structure. Innovation centers seemed to be the new hot commodity,
displacing R+D labs as companies took a risk on using design to help solve problems
and shape their future. Design had a moment. But did it have staying power?
If we fast-forward to today’s increasingly challenging business environment
those innovation centers seem fraught with fragility. SAP’s Design Services Team
announced its disbanding in April of this year, and many of the representatives at
the (8) innovation centers interviewed for this article report a change in their role
or scale-back to the types of projects they are assigned. Business Week reports that
for the first time since 2005 (when the survey began), companies estimate that their
innovation spending will be flat or down in 2009. After 2 to 3 years of rapid growth,
innovation centers may be a casualty of the new economic reality. However, beyond
their return on investment potential, innovation centers seem to fail or succeed
based on how well they leverage design’s strengths. For the discipline to continue its
progress being integrated into the business world, practitioners and advocates must
recognize how design can best be utilized.
It helps to first understand why companies wanted to make design thinking internal
to their organizations in the first place. For the companies that support innovation
centers, design is no longer considered a solely aesthetic pursuit, separate from the
whys and the hows of the development process. Instead, design is utilized as a core
innovation tool- a process in and of itself. This “Design with a capital D” is founded
on a few main principles that make it different than traditional business strategy:
a deep understanding of user needs (achieved primarily through ethnographic
research), a long tradition of cross-functional and disciplinary teamwork, and rapid
and iterative prototyping. While design thinking remains fuzzy, its definition and
discussion beyond the scope of this paper, most everyone can agree it is one possible
method used to structure innovation.
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2. Examining the dissolution of the SAP Design Services Team (DST) provides a good
start to the discussion. Hasso Platner, co-founder of SAP, initiated the formation
of the DST to bring design thinking to software development. The team was
designed on the model of IDEO University as an in-house training center tasked
with spreading design thinking throughout SAP. From the beginning, the DST
was positioned as an outside advisor- first as an educational team, and later as
an in-house consultancy. The DST focused on new market entry or long-range
projects (3-5 years out from implementation) and, like true consultants, ended the
relationship with the business unit once recommendations were made. The team
earned the moniker “Hasso’s boys,” from the idea within the SAP organization that
DST employees were put in a position of power based on their association with the
company co-founder, not because they added real value to SAP enterprise. In fact,
a major challenge for DST transitioning to an in-house design consultancy role
was the team’s initial lack of credibility. Consider that SAP was doing quite well
before a small group of designers (not even industry experts) decided they could do
better. It’s no wonder there was some derision and apathy towards DST on behalf
of the rest of the SAP enterprise. It should be noted that these feelings are in no
way a reflection of the type of employee hired to work at the DST, as SAP had strict
standards including not only a background in design thinking but also a depth of
understanding in technology and business processes. The hurdle that the DST could
not seem to overcome was in expecting the 50,000-strong SAP to listen to the cries
of a small team of 20. Does this mean that large organizations can’t have small
innovation centers? Of course not. But it does mean that the innovation center
team must in some way lay the groundwork for future success before expecting an
organization to change on their say-so.
Kaiser Permanente’s Garfield Center for Innovation succeeded in using an
educational component as a key part of their service to the main organization by
keeping their user base engaged in the process. The Garfield Center is a prototyping
space, outfitted with different medical environments, that allows a range of KP teams
to test ideas and quickly see the results of the design process in action. Tim Brown of
IDEO, who worked with KP to design and structure the Garfield Center, notes in his
2008 HBR article “Design Thinking” that KP’s prototyping of service innovations (he
uses the example of a nursing shift changeover) “will of course not be physical, but
must be tangible.”
SAP’s DST focused on higher-level strategy innovations while the Garfield Center
looks at problems closer at hand for users of the KP system. While both innovation
centers had an initial goal of training large organizations in the practice and
importance of design thinking, KP successfully began this integration by showing
results in a way its users inside the organization understood and respected.
Fundamentally changing the way SAP does business (putting design before
engineering), without a clear value proposition didn’t foster widespread support
for the DST group. SAP employees could not see the value in knowing this new
process, or understand how it would have a direct and immediate impact on their
professional goals. Furthermore, the DST did not help its cause by continuing to
work on high-level projects that did not provide immediate support to problems
at hand.
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3. A weakness of design thinking overall, especially in contrast to traditional business
strategy, is a lack of measurability, or “proof.” SAP was asking business units to
embrace a process that hadn’t been tested, at least in their own minds. Much as it is
difficult to put a definition for design thinking down on paper that doesn’t include
several sentences, its value is similarly hard to speak to without examples. Innovation
centers that rely on design to change organizational behavior without showing direct
outcomes of the process often realize too late that their strategy is flawed. A core
competency of the design thinking, at least the kind taught at the Institute of Design,
is the ability to take a complex situation and make it understandable and relevant
through storytelling, diagrams, and prototypes. Design, even that of the strategic
realm, still relies on tangible outcomes to provide context and clarity.
The innovation center employees at both T-Mobile and Liberty Mutual began as
high-level strategy consultants much like SAP’s DST. However, both the Creation
Center (T-Mobile) and Open Seas (Liberty Mutual) have since re-calibrated their
innovation center strategies to better relate to organizational needs. Both centers
were designed as physically and operationally separate entities from the mother
organization. While T-Mobile’s main headquarters are in the suburbs, the Creation
Center opened in swanky new offices in downtown Seattle. The philosophy behind
this separation was to keep innovation center employees unconstrained by day-to-
day details, as the both Creation Center and Open Seas were originally expected to
generate radical and experimental ideas. For example, Open Seas initially researched
areas tangential to insurance (e.g. moving, or sending a child to college), and later
explored how created concepts would fit in with current practice and business
strategy.
This retrofitting of ideas more commonly found in R+D lab technology innovations
is problematic for a few reasons. As we’ve seen from the SAP example, if innovation
centers are not relevant to the mother organization, they lack a clear purpose for
being and the credibility necessary to affect real change. And even though existing
company employees were integrated into the centers, because the staff members are
all not subject-matter experts, the ideas generated have an even harder time gaining
traction. It is important to remember that while an innovation center may be charged
with creating the strategy for new concepts, it is ultimately the main organization
that must move these ideas into implementation. The relationship between
innovation center and mother organization exists on more than an operational
level; it’s about day-to-day, personal interactions. Creating and maintaining positive
collaborations with organization staff is critical; a failure to leverage the institutional
and subject matter knowledge of organization staff is not only foolhardy, it can
keep ideas stuck behind innovation center walls. Both T-Mobile and Liberty
Mutual realized the lack of connection between their innovation centers and main
organizations was causing friction, and have begun to draw the Creation Center and
Open Seas into more supporting roles. Ideas are now expected to have a higher “hit”
rate, and there is more focus on communication with and solving problems for the
main organization. Open Seas’s separate facility has been shuttered and the team has
been reintegrated into Liberty Mutual’s main offices.
Being too close (a part of the main organization) and being too far way from
(separate from the main organization) is a tightrope act most Innovation Centers
must walk on a daily basis. By their name, Innovation Centers are expected to think
long-range and blue sky, but design thinking works better in a more discrete and
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4. constrained environment. Taking the risk of sounding trite, design is fundamentally
about solving problems; when innovation centers aren’t set up with a problem (or
set of problems) in mind to solve, or at the least a core, shared vision, they tend to
flounder. The main business is frustrated with a lack of “success,” and innovation
center employees feel limited and underutilized.
The SPARC design group at Mayo Clinic has made relationship management a key
part of their practice. SPARC considers the units it serves not as clients, but as true
partners the journey to make the Mayo Clinic experience better for all constituents.
SPARC currently works around (5) practice areas: culture and competencies,
wellness, prediction and prevention, delivering care away from the Mayo campus,
and revitalizing the patient experience. Incorporating design thinking into the Mayo
Clinic operation is less of an educational task in the eye of the SPARC team than
a change management process; having good concepts is of course important, but
only if the proper foundation is laid to help Mayo units understand how the change
can support their work. This kind of relationship building is important for not only
gaining trust and access, but for eventually creating a larger strategic presence in
the organization. SPARC is on its way to achieving this overarching goal; due to
the group’s early success, SPARC was absorbed into a larger unit- The Mayo Clinic
Center for Innovation- in 2007.
The McDonald’s Innovation Center, by far the most mature center in existence,
began in 1994 as a four-person team asked by the CEO to imagine the restaurant of
the future. This specific project focus, while remaining relatively low-cost and low-
risk for the McDonald’s organization, allowed the center to gradually ramp in staff
and capacity based on success, employee initiative, and enthusiasm from the mother
company. We can only speculate at the reasons for such positive organic growth,
but it may be related to the initial projects staffed with individuals direct from the
McDonald’s organization, a large number of constituents to serve (restaurant crew,
customers, and franchisee owner/operators), and a clear corporate value proposition.
The McDonald’s Innovation Center currently operates a very sophisticated system
of test kitchens that allows the center to test service operations and procedure from
restaurants around the world. McDonald’s Innovation Center’s clearest sign of
success is the “pull” they have from the field (nationally and internationally) to solve
new problems and prototype potential solutions. Far from being detached from the
everyday business, McDonald’s encourages innovation center employees to observe
and participate in McDonald’s restaurants (to fully understand the process), and
hires crew for their test kitchens that also work shifts in real world restaurants so
they have added perspective on innovations tested. Indeed, the innovation center
has become a key part of McDonald’s overall business strategy.
Ironically McDonald’s Innovation Center’s formula for success is also its Achilles
heel; their ability to solve existing problems so effectively means they don’t always get
the support or freedom to explore longer-term ideas. Design thinking is encouraged
and lauded, but is it at the expense of a larger culture of innovation? McDonald’s
monitors its failure rate for their ideas in the same way newer centers might measure
their success rate, just to make sure a certain percentage initiatives are pushing the
envelope and promoting longer-term thinking. McDonald’s Innovation Center has
almost institutionalized the three key attributes of design thinking noted earlier in
this article: user research, iterative prototyping, and cross-disciplinary teamwork
(in the case of McDonald’s- representatives from design, operations, business
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5. and human factors). SPARC at Mayo Clinic shows the same promise of the early
McDonald’s team: both centers emerged out of an initial small team, and are a
lesson in the importance of nurturing design internally before asking it to operate
on a systemic level. Having a strong core vision, even if it comes from foundational
project- for McDonald’s, the restaurant of the future, for SPARC, understanding
the relationship between patient understanding of their condition and their
satisfaction scores with Mayo- seems key for design to have the biggest impact on an
organization.
We’ve seen that while certainly design can be integrated into, recognized by, and
relied upon by corporations, hosting an innovation center alone does not seem
to be enough to keep sparking new, fresh ideas. The friction that exists between
forward-thinking “innovations” and day-to-day challenges, including understanding
how the business operates and the constraints around new idea implementation,
prevents innovation centers employees from acting as in-house design consultants.
This keeps the door open for external design consultancies to provide the range of
thinking and execution necessary for concept development and evolution. These
two groups dovetail well, as innovation centers that understand and promote
design internally can use external consultancy work to further initial projects,
validate concepts, or provide fresh insight. This may beg the question- why create
an innovation center at all? One could argue that any funding for a dedicated team
devoted to using design is a statement of purpose rather than the accomplishment
of any final goal. Innovation centers represent an opportunity for future growth by
reshaping how organizations use design and think about their next wave of products
and services. As a long-term investment, an innovation center cannot be slotted into
a predetermined function, but must and grow and change in role and scope based on
success with and buy-in from the supporting company. Truly successful innovation
centers do not have to convince or coach organizations to change, but see this shift
occur naturally over time.
Special thanks to:
Maggie Breslin, Mayo Clinic
Maura Collins, T-Mobile
Enric Gili Fort, SAP
Matt Guilford, City of Chicago
Sue Jin Kim, Microsoft
Jeanne Liedkta, UVA Darden School of Business
Chris McCarthy, Kaiser Permanente
Rob Moore, Liberty Mutual
Elisabeth Power, Liberty Mutual
John Reinertsen, McDonald’s
Contact:
Caroline Little - carolinejlittle@gmail.com
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