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Innovation Value Chain

Mohammed AlshamraniAhmed Danaf

Wabel BahanshalKeo Ros

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Think Innovation Value Chain Idea generation

Idea conversion

Idea diffusion

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Focus on the Right Links Executives need to view their companies’ innovation

processes as a value chain, engaging in a link-by-link analysis

It doesn’t matter how great a company’s selection process is if only a few good concepts are on the table, or if the subsequent development process is weak

Managers need to stop putting all their efforts into improving their core innovation capabilities and focus instead on strengthening their weak links

Research shows that a company’s capacity to innovate is only as good as the weakest link in its innovation value chain

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Focus on the Right Links“Weakest Link” scenarios

Idea poor Conversion poorDiffusion poor

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Focus on the Right LinksIdea-Poor Idea poor company spends a lot of effort

and money developing and diffusing ideas that result in mediocre products and financial returns

Problem is in idea generation, not execution

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Focus on the Right LinksConversion-Poor Conversion poor company has good ideas, but

managers don’t screen and develop ideas Management needs to engage in a link-by-link analysis

Example: Computer hardware manufacturer > 50 very good ideas for new products Managers did not screen the ideas properly Few ideas took hold and new ones kept coming in Failed to recognize the weak link Focused more time and resources on strong link Resulted in undermining the company’s innovation

efforts Required better screen capabilities

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Focus on the Right LinksDiffusion-Poor Diffusion poor company has trouble

monetizing its good ideas Decisions about what to bring to market are

made locally “Not invented here thinking dominates” New products and services not pushed out

across geographic regions; localized products

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Fixing the Idea-Poor Company Ways to generate ideas –

in-house cross-pollination external sourcing

Research indicates due to inadequate networks Examples –

Managers fail to forge quality links with others outside their company

People prefer to talk to their coworkers rather than reach out to coworkers in other departments

Build External Networks and Internal Cross-Unit Networks

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Fixing the Idea-Poor CompanyExternal Networks Build External Networks

Solution Network geared toward finding answers to specific problems Example – Eli Lilly

Developed InnoCentive, a solution-seeking website used by Eli Lilly, P&G and other companies to find answers to specific technical or scientific problems

Discovery Network geared toward uncovering new ideas within broad technology or product domains Example – Intuit

Developed Simple Start edition of QuickBooks – best seller for the company

Developers observed business owners to learn accounting practices

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Fixing the Idea-Poor CompanyInternal cross-unit Networks Build Internal cross-unit Networks

Generates new ideas inside organizations by building cross-unit networks

Continuous dialogue and knowledge exchange between people from different units Example –

Proctor & Gamble’s development of Olay Daily Facials

Collaboration among team members from different product lines

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Which P&G groups worked together to

develop Olay Daily Facials?

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Fixing the Conversion-Poor Company

Conversion-poor Multichannel Funding model opens up options

outside the boss’s immediate authority Example – Shell Oil’s GameChanger unit

developed in 1996 to fund radical ideas that lead to entirely new businesses

Safe Havens – Companies build safe havens for emerging concepts Critical to the successful conversion of good ideas

into profitable product or business lines

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Fixing the Diffusion-Poor Company Why do some companies find it so difficult to gain

traction for their new ideas?

In decentralized organizations, managers are granted considerable autonomy, including the freedom to say “no thanks” to new ideas

Even when managers have less formal control over which new ideas will be implemented, they can still delay or sabotage projects they don’t believe in

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Fixing the Diffusion-Poor Company

Executives can’t just order a companywide rollout of developed ideas, instead, they need to create buzz for new concepts by using variety of catalysts (incentives)

They need to use their deep high-touch personal networks to increase awareness among employees and persuade them to adopt a new product or business concepts (phone calls, emails, sales calls, and in meeting)

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New Measures, New Roles

Managers who adopt the innovation value chain perspective will need to implement new key performance indicators that focus on the specific deliverables from each link in the chain

Managers will need to determine what constitutes a good idea versus a trivial one

Companies may have to start out with internal surveys and then accumulate information as they go

Managers who adopt the innovation value chain need to cultivate new roles for employees

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Conclusion Management needs to strengthen all phases of

the value chain in order to make their companies successful Idea generation Idea conversion Idea diffusion

Executives need to assess each of the 3 phases and focus more attention on the weakest links

Successful companies come up with good ideas, convert those ideas into products and services, and finally diffuse products & services both nationally and globally

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