1. The I Word: Moving
Innovation from Research
and Development (R&D) to
Ideation and Realisation
(I&R)
Alan McSweeney

2. November 7, 2011 2
Innovation Has Become a Ubiquitous and
Meaningless Word
• The word Innovation is being used and misused pervasively without
clear definition, meaning or understanding
• Every organisation claims to be pursuing and driving innovation or
offering innovation development services
• But are they?
• Innovation is not just about ideas
• Innovation is about driving the generation of good ideas and
ensuring their appropriate adoption in order to generate value
• Innovation is or can be a process (that can be measured)
• Innovation is about generating business value – an idea without
implementation has little meaning

3. November 7, 2011 3
Innovation =
Good Idea That is Defined and Validated
+ Appropriate Implementation and Adoption
+ Generation of Value

4. November 7, 2011 4
Innovation Can Be …
A new idea
OR
An existing idea or process that is improved
OR
An existing idea or process implemented or applied elsewhere

5. November 7, 2011 5
Innovation …
• … Is not necessarily one big idea
• It can be lots of little ideas

6. November 7, 2011 6
Innovation Is All About Value
ΣValue
{ } >> Value
{ }
• Sometimes …

7. November 7, 2011 7
Innovation Extends Creativity To Implementation
And Generation Of Value
Discern
Creativity
Develop
Clarify
Verify
Implement
Market
Sell
Innovation
Value
It’s All About
The Value

8. November 7, 2011 8
Innovation Means …
• Acceptance of change – innovation implies and requires change
• Innovation exposes an organisation to change
• A secondary affect of successful innovation is the willingness of an organisation to
change
• To be good at innovation means to be good at change
• Innovation means welcoming change and being able to successfully deliver change
• Innovation means continuously challenging accepted conventions
• If you cannot change, you cannot innovate

9. November 7, 2011 9
Being Good At Innovation Creates a Positive
Feedback Loop (“Virtuous Circle”)
Employees
Customers
Organisation
Shareholders
Greater Recognition of
Contribution, Greater
Satisfaction, Greater
Experience, More
Interesting Place to Work
Better Experience,
Greater Satisfaction,
Greater Loyalty
Greater Long-
Term Value
Growth, Increased Market
Share, Improved
Perception, Increased
Revenue and Margin,
Customer and Employee
Loyalty

10. November 7, 2011 10
Being Good At Innovation Creates A Positive
Feedback Loop
Being Good At
Innovation Means
Accepting Change
Accepting Change
Reinforces, Fosters
And Encourages
Innovation

11. November 7, 2011 11
Strengths Of Being Good At Innovation
• Organisation leadership has a personal role in fostering a culture of openness and
risk tolerance toward innovation
• Use external partners and “open sourcing” to expand the pool of innovation ideas
• Use simple low-cost awards and recognition to encourage and reward innovation
• Ensure security policies do not inhibit innovation
• Set performance expectations for leadership traits that drive innovation
• Use lightweight, non financial criteria for initial evaluation of ideas
• Early-stage idea evaluation must rest on business judgement and not just
quantitative criteria
• Ensure there is a fast, lightweight process for testing innovation ideas
• Focus on generating learning when making early-stage investments in innovation
ideas
• Sequence the project to fail fast by testing for the most valuable learning first

12. November 7, 2011 12
Classification Of Areas To Look For Innovation
How Do Customers Feel When They Interact With Your Organisation
And Your Products And Services?
Customer
Experience
How Do You Communicate Your Core Products And Services?Brand
How Do You Get Core Products And Services to Market?Channel
Provision
and
Delivery
How Do You Provide Value To Your Customers Beyond Your Core
Products And Services?Service
How Do You Connect Or Provide A Common Platform For Your
Products And Services?
Product System
How Do You Design Your Core Products And Services?
Product
Performance
Products
and
Services
How Are Core Processes Supported And Enabled?Enabling Processes
How Do You Create and Add Value To Your Products And Services?Core Processes
Processes
How Do You Work With Other Organisations For Mutual Benefit?
Networking and
Alliances
How Do You Make Money?Business Model
Finance

13. November 7, 2011 13
Classification Of Areas To Look For Innovation
• Innovation can be pervasive across all aspects of the
organisation
• Opportunities for innovation exist everywhere
• Innovation can be a structured process that can be
learned, practiced, developed and improved

14. November 7, 2011 14
Types Of Innovation
Radical
Innovation
Fundamental
Change Or
Fundamentally New
Categories Of
System, Process,
Concept, Device
Disruptive, Radical,
Discontinuous
Incremental
Innovation
Incremental
Improvement
Existing Of System,
Process, Concept,
Device
Innovation By
Reapplication
Application Of
Existing System,
Process, Concept,
Device In A New
Domain

15. November 7, 2011 15
IT Innovation And Business Innovation
• IT innovation can drive business innovation
• Innovation is important to IT because of the very high rate
of change
• IT innovation can fundamentally change the way an
organisation operates
• IT can support business innovation
− Provide information and other support services
− Develop new systems, platforms, applications
• IT can be a catalyst to innovation
• IT can also innovate within itself

16. November 7, 2011 16
Analysis Of Volume Of Investment In Innovation
Across Innovation Areas
Customer Experience
Brand
Channel
Provision
and
Delivery
Service
Product System
Product Performance
Products
and
Services
Enabling Processes
Core Processes
Processes
Networking and Alliances
Business Model
Finance
Investment In Innovation Area

17. November 7, 2011 17
Analysis Of Volume Of Investment In Innovation
• Traditional R&D areas dominate
• Investment skewed in favour of products
• Narrow focus, especially on pure product

18. November 7, 2011 18
Analysis Of Return Of Investment In Innovation
Across Innovation Areas
Customer Experience
Brand
Channel
Provision
and
Delivery
Service
Product System
Product Performance
Products
and
Services
Enabling Processes
Core Processes
Processes
Networking and Alliances
Business Model
Finance
Value From Investment In Innovation Area

19. November 7, 2011 19
Analysis Of Return Of Investment In Innovation
Across Innovation Areas
• Returns do not match investment
• Small investment in non-traditional R&D areas
• Much greater return from smaller investments outside
traditional R&D areas

20. November 7, 2011 20
Comparison Of Investment And Return Across
Innovation Areas
Customer Experience
Brand
Channel
Provision
and
Delivery
Service
Product System
Product Performance
Products
and
Services
Enabling Processes
Core Processes
Processes
Networking and Alliances
Business Model
Finance
Return
Investment
Investment Greater Than Return
Return Greater Than Investment

21. November 7, 2011 21
Comparison Of Investment And Return Across
Innovation Areas
• Significant gap in returns across innovation areas
• Small investments in non-traditional areas yield significant returns
• Large investment in traditional R&D areas yield small returns
• Some of this can be explained by sustained pattern of investment in
traditional R&D and history of low investment in improvements
outside these areas
− Latent available improvements achieved easily
− Nonetheless demonstrates innovation can be successfully applied outside
traditional product-oriented areas to yield significant value
• Need a wider definition of R&D to I&R - Ideation and Realisation
− Identifying and implementing innovative ideas across the entire organisation

22. November 7, 2011 22
Eliminating The Disconnect Between Innovation
Investment And Value Generated
Innovation
Approach
Now
Develop
Structured
Approach
To Innovation
Decision-Making
To Maximise
Returns From
Investment
Decisions
Identify And
Develop Innovation
From Non-Traditional
Areas Outside
Standard R&D
Activities
Future
Innovation
Approach

23. November 7, 2011 23
Where And What Are The Innovation Ideas?
Incremental
Innovation
Radical Innovation
Innovation By
Reapplication
Innovation Area
Customer Experience
Brand
Channel
Service
Product System
Product Performance
Enabling Processes
Core Processes
Networking and Alliances
Business Model

24. November 7, 2011 24
Innovation Metrics – Measure Along The Innovation
Process
Innovation
Inputs
Innovation Process
Innovation
Outputs
People
Involved
Budget
Allocated
Number Of Ideas Generated
%Age Of Ideas Piloted
%Age Of Successful Pilots
%Age Of Pilots Commercialised
%Age Of Product/Services Launched
Number of
Innovation Projects
By Type
Cost of
Innovation
Projects
Speed of Innovation
Projects and Change
of Speed
Estimated Value of
Innovation Projects
and Change of Value
Revenue
Generate
Cost
Reductions
New
Business
Publications/
Patents
Innovation Library
Size
Innovation
Training Provided

25. November 7, 2011 25
Innovation Model For Ideation and Realisation (I&R)
Ideas Enter Innovation Process
From Multiple Sources
Innovative
Ideas
Validated
and Distilled
Ideas
Discarded Or
Implemented
In Other WaysSuccessful Ideas
Implemented

26. November 7, 2011 26
Innovation Model For Ideation and Realisation (I&R)
• Ideas analysed, validated and distilled as they move
through the process
• Ideas exit the process appropriately
− Not valid, not proven
− Not appropriate for the organisation but can be used or applied
elsewhere
− Partially implemented
− Fully implemented

27. November 7, 2011 27
Define Stage Gates For Ideation and Realisation
(I&R) Process
Idea Prototype
Business
Case
Detailed
Design
ImplementLaunch

28. November 7, 2011 28
Innovation Is About Value Obtained
• Value = Return - Investment Minimise
Investment
Maximise
Return
Point
of Best
Value

29. November 7, 2011 29
Achieving A Balanced Approach To Innovation
• Innovation needs to be balanced against run-the-business
activities
• Too much innovation and associated organisation change
can be disruptive and inefficient

30. November 7, 2011 30
Achieving A Balanced Approach To Innovation
Industry Profile
Project Load
Risk/Reward
Profile
Total Investment
Maintenance of
Operations
Cost of Support
Budget
Constraints
Resource
Constraints
Cost of
Organisation
Change
Ability of
Organisation to
Change
• Decide on your innovation profile

31. November 7, 2011 31
Attitude Inhibitors To Innovation And Change
• Adopting innovation requires learning, training and management
− “I’m not in product development. Why are you talking to me?”
− “I’ve been here for 20 years and I don’t see why we should change now.”
− “I am willing to support innovation 100% as long as it does not affect me.”
− “This is the way it’s always been done and it’s worked well up to now.”
− “I’ve got 15 minutes to talk to you. I’m very busy with important things.”
• Attitudes that require change
− Belief that you know best
− Focus on short-term returns with no long-term focus
− Innovation is not the job of senior management
− Process will slow us down

32. November 7, 2011 32
Organisation Process Models – Common Structure –
High-Level
• At their core, all organisations have a common structure
Vision,
Strategy,
Leadership,
Business
Management
Operational Processes With
Cross Functional Linkages
Management and Support
Processes

33. November 7, 2011 33
Organisation Process Models – Common Structure –
High-Level
Vision,
Strategy,
Leadership,
Business
Management
Operational Processes With
Cross Functional Linkages
Management and Support
Processes
Innovation
Leadership
Comes From Here
Direct Innovation – New
and Updated Products
and Services - Comes
From Here
Indirect Innovation –
New and Updated
Support Processes -
Comes From Here

34. November 7, 2011 34
Mapping Innovation Areas To Organisation Model
Business Model
Networking and Alliances
Core Processes
Enabling Processes
Product Performance
Product System
Service
Channel
Brand
Customer Experience
Vision,
Strategy,
Leadership,
Business
Management
Operational Processes
With Cross Functional
Linkages
Management and
Support Processes

35. November 7, 2011 35
Organisation Process Models – Common Structure –
More Detailed
Vision,
Strategy,
Business
Management
Operational Processes With Cross Functional Linkages
Management and Support Processes
Develop and
Manage
Products and
Services
Market and
Sell Products
and Services
Deliver
Products and
Services
Manage
Customer
Service
Human
Resource
Management
Information
Technology
Management
Financial
Management
Facilities
Management
Legal,
Regulatory,
Environment,
Health and
Safety
Management
External
Relationship
Management
Knowledge,
Improvement
and Change
Management
Vision and
Strategy
Business
Planning,
Merger,
Acquisition
Governance
and
Compliance

36. November 7, 2011 36
Core Cross Functional Processes
• Three cross-functional processes that are common to all
organisations
− Product/service delivery
• From order/specification/design/selection to
delivery/installation/implementation/provision and billing
− Customer management
• From customer acquisition to management to repeat business to up-sell/cross-sell
− New product/service development
• From research to product/service design to implementation and commercialisation
• These processes cross multiple internal organisation boundaries and
have multiple handoffs but they are what concern customers
• Cross-functional processes deliver value
− Value to the customer
− Value to the company
• Integrated cross-functional processes means better customer service
and more satisfied and more customers
• Innovation works best when it crosses organisational functions

37. November 7, 2011 37
Every Organisation Has Three Core Cross-Functional
Processes
1. Product/Service
Delivery: from order
to completion
2. Customer
Relationship
Management
3. New
Product/
Service
Development
The organisation sees the structure vertically and in a compartmentalised
view and all to frequently does not see the customer viewpoint
The customer sees across the structure and is not concerned with but is all too
often aware of the operational elements, their complexity and lack of
interoperability

38. November 7, 2011 38
Organisation Value Chains
Value Chains
• Value chains add value and confer competitive advantage when defined and linked
• Innovation needs to be cross-functional to add real value
• Cross-functional innovation team sees the complete picture and generates greatest value

39. November 7, 2011 39
Projects And Innovation
• Projects are about change and innovation
− Innovations or changes to existing processes, systems, applications, structures
• Organisations need to be good at two sets of skills
− Running the Business (RTB) – business as usual operations
− Change the Business (CTB) – changing existing operations to survive or compete
• Projects are the way of introducing innovation and change into organisations
• Projects tend to be multidisciplinary, involving some or all of:
− Requirements gathering
− Solution design
− Hardware installation
− Product selection
− Software development or modification
− Testing
− Process change
− Organisation change
− Data conversion
− Implementation
− Parallel operation
• Organisations need to be good at projects in order to deliver innovation and change

40. November 7, 2011 40
Dimensions Of Being Good At Innovation And
Change
• To be good at innovation
and change, three
dimensions must come
together within the
organisation:
− A clear vision for the
organisation and the set of
projects needed to deliver
on the vision
− A proven capability to
deliver projects quickly and
effectively
− Focus on the realisation of
expected business benefits
and business value
associated with the
implementation of
investments
Ability to
Execute Projects
Completeness of
Organisational
Vision
Effective and Proven
Benefits Realisation
Approach

41. November 7, 2011 41
Dimensions Of Successful Innovation
• Innovation Capability – tools, techniques, methodologies for
identifying and assessing innovation
• Innovation Process and Project Management – being able to
manage portfolio of innovation projects
• Implementation of Innovation – being able to adopt innovation
• Value Management – understanding and articulating business value
of innovation
• Innovation Within IT – being able to drive innovation within IT
• Innovation Measurement – being able to measure innovation
activities, skills and successes

42. November 7, 2011 42
Innovation Value Management
• Value management means being able to articulate the
business value of innovation and communicate in the
language of business
• Connect innovation activities to business value
• Use standardised measurements and metrics
• Create effective, appropriate and accurate business cases
based on accurate understanding of costs and value

43. November 7, 2011 43
Innovation Business Case
Simple Business
Case
Complex Business
Case
Low High
Limited
Pervasive
Impact
Extent of
Adoption

44. November 7, 2011 44
Challenges Of Developing Good Cost Estimates
• Requires detailed, stable, agreed requirements
• Agreed assumptions
• Access to detailed documentation and historical data for
comparison
• Trained and experienced analysts
• Risk and uncertainty analysis
• Identification of a range of confidence levels
• Adequate contingency and management reserves

45. November 7, 2011 45
Reasons For Good And Bad Cost Estimates
Detailed, Stable,AgreedRequirements AgreedAssumptions
DetailedDocumentationand HistoricalData
Effective Risk andUncertaintyAnalysis
Trained andExperiencedAnalysts
Identification of aRange ofConfidence Levels
AdequateContingency andManagementReserves
Complex Projector Technology Unrealistic ProjectSavings
New Processes Untrained andInexperiencedAnalysts
No or LimitedComparison DataAvailable
Project Instability
UnrealisticAssumptions Overoptimism
Unrealistic orUnreliable Data
UnfamiliarTechnology orFirst-Time Use
Problems GettingAccess to Data UnreasonableProject Baseline
Ineffective Riskand UncertaintyAnalysis
• Lost of reasons for and causes of inaccurate cost estimates

46. November 7, 2011 46
Sources Of Risk and Uncertainty In Estimating Costs
• Lack of understanding of the project requirements
• Shortcomings of human language and differing
interpretations of meaning of project
• Behaviour of parties involved in the cost estimation
process
• Haste
• Deception
• Poor cost estimating and pricing practices

47. November 7, 2011 47
Specific Risks
• Sizing and Technology
− Overly optimistic developers
− Poor assumptions on the use of reused
code
− Vague or incomplete requirements
− Not planning for additional effort
associated with packages –
integration, testing
• Complexity
− Tools
− Applications: software purpose and
reliability
− Hardware limitations
− Number of modules affecting
integration effort
• Capability
− Mixed skills of team
− Optimistic assumption on
development tools
− Optimistic assumption on productivity
− Geographically dispersed team making
communication and coordination more
difficult
• Management
− Management’s dictating an unrealistic
schedule
− Incorporating a new method,
language, tool or process for the first
time
− Not handling creeping requirements
and change proactively
− Inadequate quality control, causing
delays in fixing unexpected defects
− Unanticipated risks associated with
package software upgrades and lack of
support

48. November 7, 2011 48
Market And Organisation Capability Analysis
• Organisations need to understand what the opportunity from an
innovation is and what is needed to exploit it fully
• Analyses
−Growth-Share Matrix Analysis
−Marketing Strategy and Diversification Analysis
−SWOT (Strengths, Weaknesses, Opportunities, and Threats)
Analysis
−PEST (Political, Economic, Social, and Technological) Analysis
• Quick analyses that will define what is possible and achievable

49. November 7, 2011 49
Growth-Share Matrix Analysis
c
c
c
Relative
Market
Share
Market Growth
Question
Marks
Stars
Cash
Cows Dogs
LowHigh
High
Low
Value of
Product/
Service

50. November 7, 2011 50
Growth-Share Matrix Analysis
• Cash Cows – business units/products and service offerings with
high market share in a slow-growing industry
• Dogs – business units/products and service offerings with low
market share in a mature, slow-growing industry
• Question Marks – business units/products and service offerings
growing rapidly, consume cash but with low market shares and
not generating much cash
−Have the potential to gain market share and become a star and
eventually a cash cow when the market growth slows
• Stars – business units/products and service offerings with a high
market share in a fast-growing industry
−Stars become cash cows

51. November 7, 2011 51
Growth-Share Matrix Analysis For Innovation
• Where does innovation ideas fit into the Growth-Share Matrix
Analysis
• Where does the potential lie?
• What has to be done to actualise the potential?

52. November 7, 2011 52
Marketing Strategy And Diversification Analysis
Market Penetration
Market Development
Product and Service
Development
Diversification
Present New
Existing
Markets
New Markets

53. November 7, 2011 53
Marketing Strategy And Diversification Analysis
• Four possible growth strategies based on existing and new
markets and products and services
− Market Penetration - focuses on selling existing products and
services into existing markets
− Market Development - sell its existing products and services into
new markets
− Product Development - introduces new products and services
into existing markets
− Diversification – develops and markets new products and services
in new markets
• What approaches should the organisation take?
• What are the risks?
• What are the requirements?

54. November 7, 2011 54
Organisational Capabilities To Create And Sustain
Innovation
• Set of core capabilities within an organisation to create
and sustain an innovation function
• Being good at innovation means being having strong, well-
developed and well-functioning capabilities in these areas
• Use this as a check-list for creating and managing
innovation

55. November 7, 2011 55
Organisational Capabilities To Create And Sustain
Innovation
Communication of the impact from innovation to the business and to external
partners/organisations
Communication of Innovation
Value
Measurement of the impact from innovation through definition and use of innovation metrics
that align with business priorities
Innovation Value
Measurement
Identification and use of methodologies and tools for innovation
Innovation Frameworks and
Tools
Integration of innovation processes within the lifecycle of innovationInnovation Processes
Innovation
Process, Tools,
and
Metrics
Creating a scheme for recognising and rewarding people based on contribution to innovation
Innovation Recognition and
Rewards
Definition of innovation roles/organisational positions and penetration of innovation
activities as part of everyday work for all employees
Innovation Organisation Roles
and Responsibilities
Development of innovation skills and performance management for employees including
defining career paths and implementing innovation training programs
Innovation Capability
Development
Level and scope of collaboration and maintenance of good behaviour, processes and
practices that enable an environment of sharing, interaction and openness, fostering the
open exchange of creative information
Collaboration and Openness
Definition of appropriate attitude towards taking creative risks
Acceptance and Tolerance of
Risk Taking
Management and leadership support for driving innovation activities throughout the
organisation
Innovation Management and
Leadership
Innovation
Organisation,
People And
Culture
Management of the portfolio of innovation projects and activities
Innovation Portfolio
Management
Definition of sources of funding for innovation and appropriate allocation of resources based
on prioritisation
Innovation Funding and
Resource Allocation
Definition of the scope and nature of Innovation in line with business strategyInnovation Strategic Planning
Creation definition, communication and realisation of a vision for innovationInnovation Vision
Innovation
Vision,
Strategy And
Management

56. November 7, 2011 56
Innovation Organisational Capabilities - How Do You
Measure Up?
Communication of Innovation Value
Innovation Value Measurement
Innovation Frameworks and Tools
Innovation Processes
Innovation Recognition and Rewards
Innovation Organisation Roles and Responsibilities
Innovation Capability Development
Collaboration and Openness
Acceptance and Tolerance of Risk Taking
Innovation Management and Leadership
Innovation Portfolio Management
Innovation Funding and Resource Allocation
Innovation Strategic Planning
Innovation Vision

57. November 7, 2011 57
Mapping Organisational Capabilities To Dimensions
of Successful Innovation
Innovation
Process and
Project
Management
Innovation
Capability
Value
Management
Implementation
and Operation
of Innovation
Innovation
Within IT
Communication of Innovation
Value
Innovation Value Measurement
Innovation Frameworks and
Tools
Innovation Processes
Innovation Recognition and
Rewards
Innovation Organisation Roles
and Responsibilities
Innovation Capability
Development
Collaboration and Openness
Acceptance and Tolerance of
Risk Taking
Innovation Management and
Leadership
Innovation Portfolio
Management
Innovation Funding and
Resource Allocation
Innovation Strategic Planning
Innovation Vision
Innovation
Measurement

58. November 7, 2011 58
Summary
• The word Innovation is becoming devalued through meaningless use
• Innovation is about moving ideas to appropriate completion and
implementation
• Innovation is about generating value
• Innovation potential exists everywhere
• Innovation is not just about the one big disruptive idea
• Innovation is a process that can be implemented, measured and
monitored
• Innovation can be learned
• Innovation means change so to innovate effectively you must be
good at or get good at change

59. November 7, 2011 59
Next Steps
• Understand what you want to achieve from innovation and define
an innovation vision
• Establish a cross-functional innovation team and an innovation
progamme
• Measure where you are now to establish a baseline against which
progress can be quantified
• Develop the organisational capabilities that will make you good at
innovation
• Define a set of innovation metrics/KPIs and measure innovation
activities
• Understand your innovation strengths and weaknesses
• Learn from lessons such the strengths of being good at innovation

60. November 7, 2011 60
More Information
Alan McSweeney
alan@alanmcsweeney.com