Innovating To Win

Green Innovation Drivers – What Do Your Votes Say?

The question asked in our most recent informal innovation poll was “What drivers of Green Innovation do see in your organization?”  What did you say about this?

Two green drivers stood out in your responses: customer demand and competitive pressure.  This is good news to advocates of green as it shows free market forces are aligning with the socially responsible business movement.  This also suggests that the early claims of Porter and van der Linde^1,2 may be proven true with a change in tide.

The debate over whether green innovation is compatible with the mission of business has been raging for years as has the debate over the role of environmental regulation.  But, here we see that market forces out strip regulatory issues by a two to one margin.  This suggests that there is a quantifiable value to going green.

At the end of the day, companies are faced with the challenge of finding the optimal strategy for responding to the pressure to go green.  Regardless of the source of the impetus, the problem remains the same.  Any investment is green must meet the same rigorous standard of return on investment as any other product investment.  Whether the company is trying to minimize the eco-impact of its manufacturing process or attacking the bigger downstream issues of product operation and disposal footprint, the company’s scientists, designers, and engineers must find ways to change the future product that are cost effective and deliver value to the customer and the company.

In 1995, Alex Krauer, then Chairman and CEO of Ciba-Geigy, stated "Financial performance and environmental performance can go hand in hand. Eco-efficiency is the key to sustainability, in both economic and ecological terms. The key to eco-efficiency is innovation and productivity improvement."  Mr. Krauer was spot on in his advice.  Companies must move to green, sustainable business practices.  Companies that have a strong innovation culture are more likely to success here.³  Building a sustainable innovation program is an important step on the path to green.

1 M. E. Porter and C. van der Linde (1995a), 'Green and Competitive - Ending the Stalemate', Harvard business review 73: 120-134.

2 M. E. Porter and C. van der Linde (1995b), 'Toward a New Conception of the Environment-Competitiveness Relationship', Journal of Economic Perspectives 9(4): 97-118.

3 Thomas Bernauer, et al. (2006), ‘Explaining Green Innovation Ten Years after Porter’s Win-Win Proposition: How to Study the Effects of Regulation on Corporate Environmental Innovation?’, CIS Working Paper No. 17.

Green Innovation Poll Closing Soon

Our informal poll on green innovation drivers closes next Friday.  I just read an interesting new report on green innovation, and it should be interesting to see how our answers compare.  So if you haven’t cast your vote yet, you better hurry!  You can cast your vote using the Vizu poll widget in the side bar on the left.

A new poll will start on Monday, June 26th.

Thinking About Metrics

Paul Sloan considers innovation metrics on his BQF blog.  This question comes up quite frequently as companies need to be able to justify their investments in innovation and R&D.   As Paul notes, the Boston Consulting Group recommends in a related report that companies should select a small number of metrics appropriate to the business.

Here are some thoughts I have had on the subject of metrics.  Tell me what you think.

Process metrics – these are raw performance measures of ideation and conceptual solution process
- Number of concepts identified (measures quantity of work output)
- Quality of concepts (subjective measure of quality of work output)
- Percent of concepts from outside of domain of expertise (“out of the box” measure)
- Resources to complete project (an efficiency measure)
- Percent concepts to survive first filter (a more objective quality measure)

Project impact – these are measures of how the innovation effort impacts the effectiveness of your product development process and accelerates market entry
- Cycle time to product delivery (are you impacting time to market)
- Prototype cycle reduction (are you achieving a direct cost reduction benefit)
- Process milestone attainment (are you impacting your NPDI process efficiency)

Value building – does innovation result in revenue or market share growth
- % revenue from new products (an old but useful way of looking at innovation impact)
- Individual project ROI (a more direct way of assessing impact on a per project basis)
- Successful launch rate (a key metric to show improvement in effectiveness of go-no-go decision process)
- Patents (an important measure of efficiency, particular as compared to peer organizations on a patents per revenue dollars basis)
- Revenue & market share growth (are you driving the top line)

Developing Innovation Skills

This is installment three in my series on building a sustainable innovation culture.  In installment one, I outlined the Five Pillars of Sustainable Innovation Culture.  Installment two examined Executive Leadership, the first pillar.  Here, we will look at the next pillar-- Skill Development.

There is a widespread belief that innovation just happens—somehow some bright person gets an idea out of nowhere.  This notion could not be further from the reality of innovation.  Innovation is a process; innovation is hard work; innovation is a transferable skill.  In my recent post, “Can Innovation Be Learned,” we explored the rationale for why innovation can be viewed as a learned set of behaviors and something which can be mastered.  Organizations need to understand this and develop the training and resource development programs to build innovation process skills as a core competency in the product research and development teams.

In approaching the issue of skills development, the organization must consider the variability in roles and needs of different innovation workers.  There are several ways to look at this.  First let’s consider the hierarchy of problem solving complexity.  Consider the pyramid of problem complexity below.  Here, complexity is a measure of solving difficulty that may involve may attributes.  However for purposes of discussion, I will focus on one attribute—the accessibility of the solution. 

At the top of the pyramid, we have the most complex problems.  Denoted as star-complexity problems, these problems are beyond the capabilities of conventional solution because the knowledge required to solve the issue is beyond the scope of known science.  These problems will wait for many years before the requisite information is defined at which time they can be solved with thanks to the discovery of new phenomenon.

At the other extreme, we see non-complex problems.  These are issues that are easily addressed within the local knowledge of the solver.  These are issues that we have seen before and when presented with the same situation can readily say, “Oh yeah, we addressed that issue before, and here’s what to do.”

For those familiar with the concept of levels of inventiveness, this classification will make a lot of sense.  The key take away from this model is this.  The higher you move in the complexity pyramid, the less frequently the class of problem is encountered.  Conversely, the higher the problem occurs in the pyramid, the greater the potential value of the solution.  Lastly, no one really needs to be trained to solve non-complex problems.

So, what does this tell us about planning a strategy for building innovation skills within an organization?  Simply, not every one needs in depth innovation skills.  That’s right.  Problems at each level of the pyramid yield to different strategies of solving.  Simple strategies should be used for more simple problems; more robust methods for more complex problems.  The importance of this is to work with human nature.  If you feel you must bring out a highly complex method for what feels like a relatively simple problem, you are less likely to go through the process.

Beyond complexity, there is another dimension to the innovation skill landscape.  This is inherent in the diversity of the innovation tasks that different innovation workers perform.  This point should require no explanation.  It should be fairly obvious that the task of identifying a new application for a core technology is quite different from the task of improving production efficiency.  Both tasks may lead to innovative solutions, but each will follow a very different path of discovery.

With this in mind, I recommend a tiered innovation skills program.  At the first level of skills development, knowledge workers should be trained in the basics of innovation methodology.  They should be given the tools they need to address medium-complexity problems that are common to their job function and low-complexity problems with facility.  This will allow them to experience early success and practice their innovation thinking on a daily basis.  Additionally, the newly trained innovation worker should be shown how to identify problems beyond their current grasp and how to seek help elsewhere in the organization to tackle these issues.

As innovation workers gain skill, advanced training should teach the methods of solving problems into the high-complexity range and specific methods related to common cross-functional problem sets.  Finally, innovation workers that show the desire to master the full gamut of innovation methods can be trained in the low-frequency innovation methods as well as facilitation skills.

Following such a template helps the organization build pervasive basic innovation skills and also a core team of high-skill, leveragable innovation resources.  The cultivation of innovation skill in the enterprise is important for developing a sustainable innovation culture.

Field Notes – June 2008

Sitting in the airport isn’t the way I like to enjoy San Francisco, but as I wait for the plane that is to take me back to Boston after a few days in California, I have plenty of time to reflect on the past three days.  So far this week, I have visited with four multi-billion dollar manufacturers across three distinct industry segments, talked with dozens of people about sustainable innovation practice, and presented at PTCuser World Event 2008.  Here are a few observations from some of the discussions of the past few days.

Even organizations that are highly committed to building innovation competence can get derailed by changes in circumstance.  In one organization, ownership of the innovation agenda was moved from an R&D focused functional group to a reliability focused group.  The consequences of this move were quite predictable.  The innovation agenda suffered, and momentum was lost.  This was a major setback for the company’s innovation objectives. 

In another organization, the responsibility for driving innovation fell into the IT group.  This too led to a problem.  While the IT group wants to help build the organization’s innovation capability, there isn’t a sense of urgency to deliver results.  I believe that is because the IT group didn’t have line of sight responsibility for delivery of innovation outcomes.

The lesson to glean from these examples is that it is important to make sure that the organization responsible for innovation is one that has goals which are aligned with your innovation goals.  Fortunately for the first company, responsibility for the innovation initiative has moved back to an R&D focused group.  So, it looks like momentum can be recaptured.