Whitepaper that discusses the impact of innovation management on today\'s CIO

1. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
ALYNDe
Creating an Operational Nerve Center to Manage the
Balance Among Innovation, IT Complexity and Scarce
Resources
An Executive White Paper on Improving Organizational Effectiveness by
Allowing Innovation to Become a Core Element of Your Business Strategy
Glenn A. Bunker
Partner
ALYNDe, LLC
Glenn.bunker@alynde.com
770.377.7061 - Mobile
Confidential ©2009 ALYNDe, LLC Page 1 2/10/2011

2. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
The “Innovation Nerve Center” and the role of today’s Chief Information Officer
Leading practices in the field of innovation have evolved to the degree that today’s Chief Information
Officer should consider becoming a partner in the Innovation function itself – possibly evolving into
the role of Chief Innovation Officer. Organizations are learning that managing the “process of
innovation” requires collaboration across non-IT working teams that should ideally be supported with
an automation framework designed to support innovation success. A proper automation framework
will function as an “Innovation Nerve Center” by reducing process cycle times and non value-added
work that ultimately hampers time-to-market performance.
Whether success is defined as:
st
Achieving “1 -mover” status (time-to-market performance),
Achieving quality expectations (establishing brand valuation),
Performing with agility in turbulent economic markets (achieving operational equilibrium),
Maximizing profitable revenue potential (optimizing the product portfolio),
Satisfying shareholder expectations (creating long-term value), or
All of the above…
The innovation function should benefit from new solutions in much the same way that IT operations
learned to better align with the businesses they support via use of enterprise IT Governance (ITG)
and Portfolio/Program/Project Management (PPM) frameworks.
Forward-thinking CIO’s who have elected to implement organizational work management solutions
with leading ITG/PPM frameworks to manage demand, programs, projects, resources, budgets and
non-project work can apply lessons learned when supporting the Innovation function within their
organizations. Since the Innovation process touches both business units and product teams that do
not traditionally utilize such management frameworks, a critical-to-success factor will be the
willingness of the CIO and his or her organization to assist in the deployment and support of
emerging Innovation Lifecycle Management (ILM) solutions.
So as not to confuse the role of ILM with current PLM (Product Lifecycle Management) solutions, let’s
look at some definitions:
Product Lifecycle Management is a category of software and services that uses Internet
technologies to tie together product marketing, sales, design, engineering, manufacturing,
purchasing, field services, customers and suppliers into a global knowledge net.
Product Lifecycle Management provides a framework for capturing, managing and sharing
knowledge and business intelligence within the company, throughout the extended enterprise
and across the supply chain.
Product Lifecycle Management, frequently called Collaborative Product Commerce, enables
all stakeholders in the manufacturing value chain to collaborate in real time along the product
lifecycle continuum.
Innovation Lifecycle Management utilizes an “Innovation Nerve Center” as a management
‘hub’ for Demand, Program, Portfolio, Resource, Change, Issue, Risk, and Launch
Management activities. The Nerve Center will support and facilitate institutionalization of
Innovation strategy with governance best practices needed to ensure company-wide adoption.
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3. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
Management of the Innovation function itself, supported by a Stage-Gate™ process model versus an
IT-centric SDLC such as RUP™, can now be supported by leading ITG/PPM solutions from firms
such as PowerSteering, CA, Planview, Instantis and Oracle when configured as the organization’s
“nerve center” for managing the innovation process itself. CIO’s should consider the following shift in
emphasis:
From… To…
Viewing your business through a customer lens –
Viewing your business through a technology
ensure that technology decisions lead to improved
lens
innovation capabilities
Supporting growth through traditional technical Supporting growth based on helping to eliminate
approaches (i.e. reactive services to business waste in the innovation lifecycle with effective use of
unit demands) new program management frameworks
Validation of solutions based on multiple market &
Developing solutions based on what you think customer criteria. Ensure that technology is used to
is the next great technology advancement drive performance results that align with business
strategy by managing product offerings as a portfolio
Basing solutions on innovation that is focused on the
Basing solutions on incremental “Big Problems” your company’s customers are
improvements wrestling with. Remember… invention is easy,
innovation is hard!
Framework approach / planned innovation supported
Ad hoc process for solution development –
by an integrated Stage-Gate™ process model
multiple technology platforms within business
embedded within a framework designed to support
units, lack of end-to-end visibility
performance measurement
In additions to the shift in thinking above, there are three critical steps to building an innovation
foundation that will position an organization to develop and implement a growth strategy of
“continuous innovation”. The CIO will become a key partner in this strategy, whether as a sponsor or
in concert with the Chief Innovation Officer.
st
I. The 1 step is to Make Innovation the Strategy. “Invention is easy… Innovation is hard”.
th
From the October 2004 75 Anniversary Issue of Business Week, “Inspiration is fine, but above
all, innovation is really a management process”. To build a strategy that focuses on growth
through innovation, organizations should establish internal and external alignment around this
strategy including leadership development, core competency focus, performance metrics and
goals and incentives alignment.
nd
II. The 2 step is to Develop Organizational Capabilities and Culture. To develop a culture of
continuous innovation within the enterprise, organizations should establish managerial and
operational processes and infrastructure to support growth through innovation. It is here that
the CIO can become an influencing factor in the organization’s success. Companies that
understand the need to differentiate themselves via innovation need to establish an
organizational structure that rewards innovative thought and execution.
rd
III. The 3 step is to Manage Innovation. The objective here for organizations is to institute a
culture of innovation. To sustain growth in today’s challenging global markets, CIO’s (both
Information and Innovation) should effectively manage the transition from old to new
performance-driven infrastructures, sustain executive commitment throughout the organization,
motivate employees, understand customer needs and identify product ideas to bridge “needs
gaps”. This will aid in keeping the organization focused on continuous improvement.
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4. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
Adoption of these strategies results in the creation of a dedicated organization that serves as the
‘hub’ for innovation activities emerging throughout the company and greatly facilitates
institutionalization of Innovation. A few final recommendations:
Create a cross-functional organization to monitor, manage and drive innovation initiatives within
your company.
The “nerve center” framework should have a small, dedicated organization of full-time
resources, supplemented by initiative-specific resources from divisions / departments across
the organization
The Innovation function should be headed by an Chief Innovation Officer
Should be a full time position
Should report to the CEO
Should command the respect of department / divisions
Should have the authority to make cross-functional decisions (as it pertains to Innovation
within your business)
Key responsibilities
Create, develop and nurture the Innovation foundation
Identify, evaluate and prioritize Innovation initiatives
Manage staffing and implementation of Innovation initiatives
What kinds of companies can benefit from these practices?
In the Consumer Products space, many firms are engaged in operational effectiveness initiatives
geared to improve competitive performance. In one case, a global firm had a highly
compartmentalized infrastructure that limited their ability to create and launch successful new
products. This infrastructure created non-aligned processes across the geographic markets it served
and it became difficult to transfer ideas, best practices and an ability to leverage their global network
in support of the innovation process.
Core branded products had achieved market dominance and future growth targets were deemed only
possible via the launch and acceptance of new products within new channels, market segments and
even via new business models.
By adopting many of the practices stated above, this firm has created a framework to manage the
innovation process from idea through launch. By having a common framework, the company will be
able to have global visibility into the entire product development lifecycle across all geographies and
product lines as well as internal business functions and organizations.
They have created:
A disciplined, cross-functional approach to manage projects for greater marketplace success
A criteria-driven method of decision making yielding an efficient, effective portfolio
Process governed by operating teams to prioritize resource allocation
Benefits they expect to achieve are:
Increased leverage of solutions across markets to reduce duplication and improve speed
through the product development lifecycle
Improved system-wide strategic portfolio decision-making to drive pipeline value
Capability to invest in fewer bigger initiatives that leverage scarce resources across markets
Elimination of non value-added work from the New Product Development Lifecycle
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5. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
How will these practices change over the next few years? If so, how?
Leading practices will continue to evolve as product and service-centric organizations transition into
st
true innovation-centric enterprises. Leading “1 -Mover” competitors within their market segments will
be driven to make Innovation their core strategy, although culture change remains a major obstacle.
This does not mean that the key attributes of product quality, cost management or time-to-market that
define your firm to the customers you serve are made less important. Innovation simply becomes the
foundational value stream in your business that drives these critical differentiators. Traditional
organizational structures will become leaner in an effort to eliminate the inherent waste involved in
managing today’s innovation practices across existing barriers.
Traditional competition has been based on one of four
primary dimensions:
Traditional Strategy: Future Strategy:
Focus on one at the Make Innovation the
expense of the others cornerstone yet focus on
balancing all four
Innovation Quality Innovation
Core Strategy
Time-to-
Time-to- Cost Quality
Market
Cost
Market
Achieving this new operational balancing act will require Executive leadership that understands the
need to topple traditional barriers inherent with “silo’ed” Business Units and Product Teams. Due to
these somewhat autonomous structures, it is not uncommon today to find that “necessity has been
the mother of invention” when we evaluate technology infrastructures that have been created to
manage current-state innovation practices.
This leads to a lack of cohesion that impedes time-to-market, product quality, feature content and
other key competitive metrics. Chief Information Officers will need to work closely with business units
engaged in the innovation process to streamline existing management infrastructures into
measurement-enabled end-to-end frameworks designed to eliminate waste from the innovation
lifecycle.
The next five years will bring an even heightened level of global competition to the world of product
development, as companies that are typically focused on enhancements and development of new
products alone will need to create products that penetrate new channels and markets in order to
achieve growth objectives – even via adoption of new business models within their existing
organizations.
An example of this shift can be seen in the Telecom segment as traditional Telephone companies
transition into BSP’s (Broadband Service Providers) that compete with disruptive new players. The
“Triple Play” concept of voice, video and data will need to be packaged in a manner that allows these
traditional firms to even exist in the future, yet alone, compete. The ability to innovate new product
and service offerings will be fundamental to survival. The advent of social networking and increased
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6. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
mobile utilization for all things involving communication means innovation will, indeed, be paramount
for survival.
An example of the needed change from current to future-state over the next few years can be seen
below with practices aligned with a representative New Product Introduction Process.
Development Stage-Gate Development and Introduction
Desired State
Desired State
Desired State
NPD is the hub of Concepts are Sourcing
an outward- directed through decisions made process, managed through Introduction efforts well
reaching, multi- tailored against Demand via performance integrated efforts teams committed balanced
dimensional development Strategies and metrics and of Development through Initial between
demand strategy processes: new, Business Case integrated and Procurement Production development and
creation effort change, etc. justifications workflow Efforts launch phases
New Product Introduction Process
Development
Development Development Sourcing &
Sourcing & Initial
Initial
Idea
Idea Concept
Concept Concept
Concept Development Product
Product
Planning/
Planning/ Production
Production Volume
Volume
Generation
Generation Definition
Definition Screening
Screening Execution
Execution Launch
Launch
Scheduling
Scheduling Placement
Placement Production
Production
Current State
Current State
NPD group relies All concepts are Concept Single Process, Sourcing done Development So much time
largely on developed screening via managed via by development staff not involved spent in
internal through a presentations to overall project staff or in production development that
resources for common process executive plan performance Purchasing. Not efforts launch phase
ideas management with variable an integrated gets short shrift
milestones effort
How does governance play a role in a company’s quest to enhance innovation?
Good program management does not “just happen”. Managing innovation is a skill and discipline as
with any other complex operational competency. ALYNDe recommends deployment of an
operational “nerve center” framework configured to manage the complexities of innovation and the
resources engaged in the collaborative product development process. This means that new
governance practices supported within this framework will be required to mitigate the risk associated
with market adoption and continued technological development of differentiated new products.
Effective Governance practices will address the issues shown below.
STAKEHOLDER DECISION MAKING PLANNING AND EXECUTION
ISSUES ISSUES ISSUES
Business objectives are Program status, issues, Unreasonable expectations and
sometimes unclear - and risks are not cohesively poor planning prevail
information dissemination tracked, clearly Plans and teams focus on
difficult communicated or building a better mousetrap, not
Stakeholders do not consistently understood catching the mouse
agree on objectives or Decision making is slow Priorities change, so projects
priorities and often not based on change, but without
Roles, and especially facts coordination
responsibilities, are Issues do not reach the Once in fire-fighting mode, it is
unclear leaders who can resolve hard to see the forest from the
Once there is trouble, disputes and problems trees
assigning blame is more
important than solving
problems
A “nerve center” model, as referred to in this paper, is recommended when implementing any large
R&D-centric initiative consisting of multiple projects (often global in nature) that must be managed in
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7. Leading Practices for Managing Innovation
Date: 17 December 2010
DRAFT v.02
ALYNDe
a collaborative manner to maximize the achievement of product launch objectives while mitigating risk
and managing organizational change.
When considering the function of governance, it is important to recognize that there are several
complimentary functions that should be considered in order to create a more functional management
framework. These complimentary functions include: Communication/Change Management, People,
Projects and Measurement.
Governance Communication / People Projects Measurement
Change Management
Regarding the Governance function, there are specific leading practices that should be considered:
Establish a centralized Program Office to serve as a “nerve center” to manage all Innovation
activities (based on Stage-Gate™), process contributors (resources), product programs
(projects) and performance data (product portfolio management) to ensure effective allocation
and use of budget dollars across all development programs.
Define a clear governance structure outlining principles and processes for:
Decision Making (manage gating criteria)
Budget Utilization (go/kill decisions)
Resource Management (improved capacity planning of scarce and constrained resources)
Communication with Leadership Teams (ensuring that all product development programs
remain aligned with business strategy and that changes/issues are immediately visible for
resolution when captured)
Internal Communication (collaboration across product teams and business units)
Partner (Vendor) Management (extending the idea capture function outside the enterprise
as well as including partners in the development lifecycle)
Knowledge management
Change Control
Data Storage (Work, Resources, Artifacts, etc)
Develop Guidelines for:
Issue management
Risk management
Stage-Gate process monitoring and Progress reporting
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