Types of innovation

From my previous post, Aditya has commented about innovation being as a result of disruptive thinking which means that you cannot plan it. As I promised in my answer to Aditya, in this post I will try to clarify the concept of innovation by providing some examples illustrating different kinds of innovation. If you are interested to read more about innovation and how you can manage it, I would recommend a book called “Making Innovation Work” by Davila, Epstein & Shelton. From my point of view, this book provides a very clear understanding of innovation, not only from the conceptual level but also from a practical level. To make things simpler, I will try to highlight some key points from this book (even though there are many other understandings what innovation is)

First of all, it is essential to understand that not all innovations are created equally. Hence, they do not entail the same risk or provide similar rewards. From a very basic conceptual (business) level, innovation is about change generated from a technological perspective and/ or a business model perspective. At a very generic level, innovation can be characterized into three types: 1) Radical; 2) Semi-radical; and 3) Incremental innovation.

Radical innovation:

Radical innovation is about significant change that simultaneously affects both the business model and the technology of the company. If the radical innovation also shifts an industry into another direction and brings out fundamental changes to the competitive landscape, it can also be called as disruptive innovation. Remember how it was when Amazon.com started out? It changed the way in which books are sold and pushed the publishing industry into another competitive environment.

Semi-radical innovation:

From a company’s perspective, semi-radical innovation involves substantial change in either technology of an organization or its business model- but not to both. Further, when substantial change happens at one level e.g. technology, it also involves small changes from the business level or vice versa. An example can be the success of Wal-Mart where the substantial change happened at the business model. With a souped-up supply chain that cut costs dramatically, Wal-Mart was able to apply the supermarket business model to retailing, opened large store space, and provided a wide variety of goods at discount prices. Another good example is DELL, its shift in business model is also substantial which required small changes to its process and enabling technologies (such as the supply chain management and internet technologies)

Incremental innovation:

This is actually the most prevalent form of innovation, receiving more than 80% of a company’s total innovation investment (Davila et al.). The goal is of course, to get as much as possible from an already existing innovation without making major changes in investment. Any product improvement can be characterized as incremental innovation. For example new car models every few years, upgraded version of a program, new service procedures from a company etc.

Can innovation be managed?

My honest answer would be yes and no! Yes because it is possible to manage e.g. incremental innovation as well as semi-radical innovation; meaning that you manage the process from idea generation to launch of a product/service. It is also possible for a company to “manage” radical innovation in a sense that it will invest heavily e.g. on a certain technology, with an expectation for some returns in the future. Typically, these companies are industry leaders (and they would like to stay in that position). But there are also higher risks involved and thereby this type of innovation cannot be easily managed. However, if we are looking at the effects of innovation, it is not possible to manage or determine which innovation can be disruptive as such! Therefore when talking about innovation, uncertainty will always be a certain(!) factor which any innovation manager must deal with.

It is also important to recognize that there isn’t a clear cut between the different types of innovation. Everything is relative, dependent on e.g. the lifecycle of a certain technology/industry and how it relates to another technology/industry etc. Further, it is also very important to acknowledge that it is the perceived degree of changes which matters (novelty is very much in the eye of the beholder). An innovation can be considered as incremental for the company who invented it but when launch, it can have major effect for the user or for another industry. Nevertheless, management of innovation to a large extent is possible because every company or organization has the capability to be in charge of their internal sources of change that can be related to their technology and business models. If not, creative thinking or ideas are great but they will stay as ideas if organizations don’t know how to realize ideas into actions and thereby achieve some tangible (and intangible) results.

Source-

 

Innovation Requires Trust

1. Many companies are using their innovation methods for cost cutting. These are the same methods that were previously used for product/service development. This is no surprise to TRIZ folks, who see that the approach to ideality requires both the improvement of the system and the reduction of costs (that ideality equation again.)
2. Innovation requires trust. Employees won’t share their ideas with the company if they don’t trust the company–this could be trust that they will get credit or rewards if the company has a reward system, or it could be trust that the idea will be developed and contribute to the creator’s professional pride. Lack of trust can be because of the employer’s past behavior, or, harder to counter, because of a previous employer’s behavior.

trizrealworld.blogspot.com

Lean talent demand surpassing Six Sigma

Avery Point Group finds Lean talent demand surpassing Six Sigma while companies increasingly leverage both methodologies in a down economyATLANTA, July 15, 2008 — After years of steady gains, Lean has finally achieved a slight edge over Six Sigma as the more desired skill set. According to an annual study by The Avery Point Group, a leading national executive recruiting firm, this is a strong indicator that companies are increasingly looking to Lean as a means to help them combat the current economic headwinds they are facing.

 

“As an executive recruiting firm, we have a unique vantage point from which to observe the latest trends taking place in industry,” says Tim Noble, managing principal of The Avery Point Group. “Trends in industry are often telegraphed into candidate requirements in job postings, and they can serve as a window into the latest corporate initiatives. Our annual study continues to offer useful insight into the latest trends taking place in the area of corporate continuous improvement.”

Based on its fourth annual study of Internet job postings, The Avery Point Group found that Six Sigma may no longer hold its once dominant position in the world of corporate continuous improvement initiatives, as was found in its three previous annual studies. For the first time, the study showed that demand for Lean talent has grown to eclipse and slightly exceed that of Six Sigma. The growth in interest in Lean talent has not, however, come at the expense of Six Sigma; rather, this year’s study continues to confirm an overall increasing demand for continuous improvement talent, with Lean driving most of the recent talent demand growth.

The study also found, for those companies seeking Six Sigma or Lean talent, fully 50 percent are looking for practitioners to have both skill sets. Further, the study indicated that job postings are making increasing demands on candidates, requiring them to possess a much deeper knowledge and experience skill set with regard to their Lean backgrounds versus prior years.

“No longer is it acceptable for candidates to claim to have a Lean Sigma or Lean Six Sigma background,” says Noble. “Companies want to see candidates that have the hardcore Lean experience gained in a true Lean transformation setting, and that can’t be gained from an environment where Lean is an afterthought or a lesser appendage to an existing Six Sigma program.”

Despite the rising prominence of Lean as the potentially new dominant continuous improvement methodology, Six Sigma is by no means past its prime, as evidenced by its continued talent demand resilience. It, however, means that companies, in the face of strong economic headwinds, are seriously rethinking the balance these two methodologies have with one another in their overall continuous improvement initiatives.

“This is certainly a major center of gravity shift from our first study in 2005 where Six Sigma talent demand outpaced Lean by more than 50 percent,” concludes Noble. “However, in the end, the real winner is any company that successfully engages in some form of continuous improvement, regardless of whether it is Lean, Six Sigma, or some other well-executed combination of both.”

Source – lean blog.org

Seven Myths of Innovation

Krisztine “Z” Holly, Vice Provost for Innovation and Executive Director of the USC Stevens Institute for Innovation, introduced “Seven Myths of Innovation” to newspaper editors at the Knight Leadership Conference this week.

“My goal is to help you inject some innovation into the work you do,” she said.

Myth 1 – Always keep your eye on the ball.

“It’s really hard to notice other things if you keep your eye on the ball. You need to focus to get your work done. But you might miss things that come out of left field. It’s really hard to balance that.”

Myth 2 – Failure is not an option.
“We can be paralyzed by fear as well. Fear of failure is probably the biggest impediment to innovation.”

Message to newsrooms: “The culture needs to embrace failure and trying.”

Myth 3 – Everyone loves an innovator.
“They’re rebels, they’re difficult to deal with sometimes. They’re not always fun to have around.”
Message to newspaper editors: “It’s important that you as a leader embrace the irritant.”

The irritant may push against the “typical traps:”
“That will canabilize our businessi
“That’s not the way we do it around here.
“We tried that and it didn’t work
“That will threaten our jobs.

Myth 4 – “Innovators are problem solvers”
Actually, innovators ask “why?” In the music business, people might ask “How do we sell more CDs?” The innovator might ask, “how do we provide the best music listening experience?” (and Napster did it.).

Myth 5 – Knowledge is Power.
Organizations may know too much. Funny example: A remote with 52 buttons on it. The designer knew how to use every one and thought you might want too as well. Similarly, sometimes the customer knows too much – think photographers who said the would never want a digital camera and fast forward.

Myth 6 – Innovation can be predicted.
Measurement and management may spell death of innovation. “When you try to manage it, you actually kill it.”.

Myth 7 – First place always wins.
“It’s not the person who comes up with the idea first. It’s the one who delivers the product, delivers the experience that the market want it. Innovation build on the successes and failures of the innovators before.”

Source -cyberjournalist.net

Involving Finance in Six Sigma – Do it Early and Fully

By involving the finance department from the early stages of the project, you can have appropriate data at all stages to ensure that the project is on the right track.

Involvement of Finance

Throughout the project phases, the finance department works with the various teams to identify the benefits of the project. Teams benefit from the additional input by the finance expert’s participation. They agree upon the calculation of benefits upon implementation of the project. Before transferring the ownership of the solution to the process owner, a second review of the expected benefits is done using the gathered data.

The Belts do not have to take care of this function, which would be done by the finance personnel. After the project is executed, a final review is done to verify if the expected benefits are being achieved. If there is a deviation, it is discussed with the process owner, the reason for its failure identified, and areas of improvement marked. 12 months after the implementation, the company finds and reports the benefits. After that, a baseline is calculated using the improved key performance indicator (KPI).

Only those benefits beyond that baseline are reported. If there seems to be any improvements needed, a new Six Sigma project is generated. Some benefits are also achieved during the DMAIC process. All benefits, as well as key performance indicators, are reported every month in a prescribed format.

The KPIs that need to be improved are then taken care of. A comparison of both with the target set is done to find any improvements.

Here are some of the advantages of full involvement of the finance department:

Reliability

The finance department will be calculating the benefits honestly. There will be no misrepresentation of the data for the sake of records. Rather, they will report correctly, as savings and cost reductions are a matter of importance for them.

With the finance department involved in finance activities, the responsible team would be free to concentrate on improvements expected of them.

Standardization

Standardizing the calculation of benefits is constructive. By have consistency in the data generated for comparison, the results can be reliable and meaningful.

Incorrect Benefits

A process owner calculating the benefits may not be considering the effect that the process has outside the project. This effect has to be calculated for the overall success and profit of the organization.

Audits

Like other financial activities, the project results and benefits are also available to internal audits and other reviews of benefits.

Budgets

A successful process improvement should be included in the next financial budget. This will ensure that the improved KPIs become a permanent part of the system.

Proactive Finance

As a member of the finance department will be involved in the project, they will be in a better position to understand the business, and the factors and results influenced by the project.

The department will have a proactive approach to overall business improvement.

Accountability

The finance department is responsible for calculating and reporting the benefits of the process changes at various departments in the organization. By using their financial knowledge, they are in a position to ensure that the Six Sigma project has accomplished more than the previous year.

Six Sigma projects can be successful if implementation is linked with quantifiable financial results. By involving the finance department fully from the beginning, companies can ensure that project becomes successful financially.

 

Source- accountingtips4you.com