In the first part of our series on innovation management, Simon Floyd, author of Microsoft's new Innovation Management Framework (PDF), discussed the evolution of innovation from the inspiration of a few contributors to the collaboration of the many.
Instead of relying on a single revolutionary founding vision to carry organizations forward, he argues, they now need a new one every two to three years. Rather than "resting on laurels," new market leading products need to be coming through the pipeline on a continual basis.
To achieve this "infinite journey," organizations must put in place an active innovation strategy, to encourage all employees to come up with new ideas and take ownership of them. Yet, as Floyd now sets out, knowing how to evaluate and select from the resulting flood of ideas is perhaps even more important than being able to think of them in the first place. The starting point: portfolio management.
"The vast majority of companies have more ideas than they have resources to act on. It is hard, but incredibly important, to determine the true financial potential of a particular investment," writes Floyd, Microsoft's Director of Innovation and Product Lifestyle Management, in the Framework.
A vital stage of the innovation management process is therefore turning an idea from an initial concept into a fully developed business plan.
"Businesses can't deal in ideas, but they can deal with proposals," Floyd explains.
"Once you have moved from an idea to a proposal, you are able to make an informed decision on whether or not to invest in it based on your wider strategy about where to focus the resources of your business. By taking away the subjective opinion and passionate debate, reducing it to the business facts of the idea, you can assess it within the context of the whole business and its needs.
"Having a disciplined portfolio approach is very important. If you create two or three top topics that you really want people to contribute ideas on, it allows you to pick the best suggestions and focus on your key areas of investment."
He argues companies need to go through a "fundamental mental shift" in order to handle new ideas with a portfolio management approach - and make sure they select the best strategic innovations to invest in.
"An idea is an investment, so you need to manage your ideas in the same way as you manage your investment portfolio," he explains. "New ideas have value because you are treating them in the same way as a real, tangible asset that has value to the organization."
Even if firms do have unlimited budgets to dispose on research, innovation cannot be simply bought. Without carefully evaluating rival proposals and choosing the best possible projects aligned with their strategic investments, success is always going to be elusive. "The Innovation Death Spiral," (PDF) a report from Accenture, has shown there is little or no correlation between R&D investment and revenue growth; the key to financially successful innovation is choosing the right investments and executing them efficiently.
Pcubed's Shan Rajegopal says innovation must be linked to project and portfolio management in order to do any good for an organization.
"Businesses today face no shortage of ideas; rather they lack the ability to determine their value in a systemic, timely, and cost-effective way," he points out.
"Pcubed's innovation and portfolio management landscape...creates an environment that fosters the flow of creative ideas across an organization while providing a structure to collect and evaluate investment ideas. Objective investment decisions maximise business benefits, balance risk, and address corporate constraints."
Indeed, Pcubed's innovation and portfolio management approach has been shown to reduce the time to successfully deliver innovation investments by 25 to 33 percent or greater and increase revenue contribution to lines of business by 200 to 300 percent.
The Infinite Journey
Once the most innovative ideas are selected and executed effectively, it is only the beginning of the process. Floyd says it is understandable that many companies have an unfortunate tendency to sit on their laurels after a burst of successful innovation.
"Of course, all of us want to make hay when the sun shines," he acknowledges. "When a product or a project becomes a big success, then there is a strong tendency to divert resources to it. But success can often become too comfortable; companies can feel like they're on a winning streak - and that's a dangerous trap to fall into.
"Kipling famously wrote, 'If you can meet with Triumph and Disaster and treat those two impostors just the same,' and that is very apt advice. At Microsoft we know the innovation journey is never complete.
"Once you get one innovative solution, you mustn't stop. If you have one successful product out there, you should already be well on the way to producing the next one.
"The big automotive and aerospace companies are very good at this. They're big traditional companies; but the minute a new vehicle or plane has been released they will already be well along the path to creating the next one. It is a difficult cycle to stick to, but once you have created the innovation capability, you need to make it part of your organization so it becomes self-perpetuating.
"High tech companies like Microsoft never stop innovating. Once the latest product is brought out, the next is already being tested as a prototype. It's something all companies need to learn from, regardless of what industry they are in. You always have to think ahead - or else you're just playing catch up."
The Tools for Managing Innovation
While it's important to make sure companies have the right tools in place to help manage innovation, Floyd says it should be the very last thing to think about.
"Everything else needs to be in place first," he insists. "It's very easy to install a set of software and inherit your practices along with it; but what you should do is decide on the kind of practice you want to use before introducing software to assist you.
"When I wrote the Microsoft Innovation Framework, I wrote the framework first and only then decided to write the software to support it to make sure I had a system doing exactly what I wanted."
A Collaboration Enabler
"If the software you're using connects people in the right way and provides an efficient means of sharing ideas, thoughts, and intellectual property - then that is what is most important," he says. "The tool needs to help organizations collect, share, and help evaluate ideas; if it's doing more than that it is superfluous.
"Fundamentally, you need a vehicle for people to articulate themselves - via the written word, video, voice, pictures. It should be effortless for people to put their ideas forward - and to provide feedback."
The Framework recommends companies "leverage the existing collaborative technologies [the] have in place, including Microsoft SharePoint among others. Then, augment those technologies with complementary solutions to enable an integrated platform."
Telecommunications firm Ericsson is quoted as a case study of an integrated innovation management strategy and software program in the Framework. The company introduced a system of "idea boxes" back in 2008, which have proved fantastically successful. Innovation managers appointed to lead initiatives open up a specific Idea Box to solicit suggestions responding to a targeted challenge. Managers promote their boxes through articles, marketing campaigns, and competitions. Any employee can submit ideas or comment on existing ones, and currently they have around 400 open boxes.
"Ericsson has, indeed, done a fantastic job with this," Floyd says. "The thought process is similar to Microsoft's Innovation Hub. Their Idea Boxes are specifically targeted to individual business challenges, and it is very easy for contributors to post ideas and to comment on existing ones, which is the key thing.
Business Transformation Approach
"Perhaps the biggest thing to remember, though, is that implementing new processes, culture, and technology requires work. Consider this a business transformation as opposed to a technology implementation. You must recognize the importance of managing change," the Framework cautions.
Pcubed's Dermot Brannock agrees. "Companies fail by going to technology first for innovation. This is a transformation, not just a technology."
The Future of Innovation Management
Traditionally management thinking about innovation has divided the process into two key areas - the front end, or generating ideas, and the back end, or choosing and executing those ideas. However, Floyd thinks the way we look at innovation is going to change radically over the next few years.
"Soon enough we'll stop talking about the front end and back end of innovation - engineering firms, for example, that know how to deliver but don't have enough ideas coming through, and smaller companies that have loads of ideas but can't afford to take too much on to develop because of limitations at the back end. Ultimately, the discipline of innovation will become intrinsic. We won't need to break it up in this way.
"If you are able to implement a sustainable culture of innovation then it really is an endless journey. Rather than being divided into sections, innovation will just be threaded through everything we do, continually challenging us to ask ourselves: How could I do this better?"
Advises Floyd, "Organizations need to start getting better about thinking about end to end innovation. I like to visualise the process like a coil, going around and improving each time, with the process on the outside holding everything together and wrapping around a cylinder in the middle, the core filled up with innovative thinking.
"The process needs to be intrinsic, to everything you do."
Simon Floyd is the Director of Innovation & Product Lifecycle Management Solution Strategy at Microsoft. Simon has 22 years of experience in product development spanning automotive and architectural products, to software for 3D visualization, design, and collaboration. He holds patents in residential solar electric power generation and enterprise software methods.