1.STRUCTURINGFORINNOVATIONUNDERSTANDING HOW COMPANIES CANBEST APPROACH INNOVATIONTERM PAPER ANALYSIS FOR MANAGEMENT OFTECHNOLOGYBy Mike Johnson Spring Semester 2012

2. Agenda Why I chose this topic My experience and observations Innovation in Todays Companies Incremental, Radical and New Products Attitudes towards how to create innovation Typical structures to create innovation Examples of Success Key Insights A proposed model Additional Considerations 3. Why I chose this topicMy experience on innovation projectsInnovation Funnel LeadershiR& p SupportD Innovation Team Meeting s(a lot) Ideas Radical Incremental Incremental (low impact)(High impact)Output Never Usuall Rarely 4. How Companies View InnovationMy experience confirmedWhat Companies Often What CompaniesSay Typically DoOnly 27% state innovation isInnovation is top 3 priorityformally integrated into their towards growth strategic planning process. Focus primarily on developingView breakthrough innovationsnew products and serviceswould most impact performance(Incremental) Remain risk adverse at the topBelieve that accepting failure is a which cascades down the necessary means to innovation organization Believe that people and culture Dont incorporate innovationare core drivers towardsmetrics into performance reviews innovationSource: McKinsey Survey on Innovation 2007 (1) 5. Various Innovation StructuresAnd their characteristics Centralized DecentralizedHybrid26%41% 32%May have core Innovation embedded innovation team that Core Innovation Team in businesspushes innovationsunits/functionsthrough business units Budgets may be Dedicated innovationBudget are business shared between budget unit specificinnovation team andbusiness unit More focused onLess focused onStrategic direction game changing game changing typically centralizedinnovations innovationsSource: Innovation Industry Pulse Poll (5) 6. Common Sources of Innovations EthnographyTechnology ExternalResearch Changes Sources Internal Sources Internal Employees Brainstorming ReactiveCustomerSalesSolutions MarketStructure MacroChanges Trends and ShiftsFew companies create structures, processes and expertisearound innovating around external sources of innovation the typical source for break through innovations 7. The People Side of Innovation40% of top managers state they do not have the right kind of employees to foster innovation (1)The IdealInnovation Talent How many individuals like thisIntrapreneur mentality gravitate towards large organizations? Ability to turn ideas into How many large organizationscommercialized products provide a culture and capability(innovation)for this person to thrive?Risk taker 8. Innovation Traits and MethodsWhat companies valueKey Skill Sets Key Activities Forward-thinking (visionary) Brainstorming Highly strategic and creative Collaboration Big picture oriented Research Cross communicationProject management (knowledge sharing)Are these truly the best skill sets and activities to harness innovation? 9. Examples of Success CompanTheir Strategy yIntegration of R&D into the business units to remain closeto the market. Develop pull based solutionsEveryone is an innovator Allowing employees todedicate 20% of their time to self-directed projects to sparkinnovation.Super centralized approach dedicates funds and decisionmaking to dedicated innovation teams. Speed to market istheir aim. Pure passion, focus and excellence. The long benchmark for innovation, Apple has succeeded in innovation with a formula hard to duplicate. A founding CEOs passion and vision, focus on excellence and the next big thing. At Apple, Radical innovations are the expectation, not a nice to have.Source: The Organizational Structure of Innovation (4) 10. Innovation Traits and MethodsKey Insights Research has called into question the value ofcollaboration and teams as a means to innovationcreation (7)Work alone. Not on a committee, not a team Steve Wozniak onInventionKey Insight #1 Innovation is the commercialization of an invention. Companies may need to rethink theapproach of attacking both of these components as a team sport. There may betremendous value of singular focus on the invention of potentially innovative solutions. 11. Innovation Traits and Methods Key InsightsThe sources and risks of radical innovations are very different than those of incremental ones.Key Insight #2RadicalIncrementalIf companies wish to do a better Externally Internally job of identify and leveraging DrivenDrivenradical innovations, they mustCompetencyCompetencyacknowledge how different they MitigatingEnhancingare from incremental ones. ThisOutsidemay warrant structuringInternal expertiseinnovation resources for radicalexpertise OK needinnovations differently.Higher riskLower risktolerancetolerance 12. Innovation Traits and MethodsKey Insights The skill sets needed to identify, invent andcommercialize an innovation may be notably different.Key Insight #3 Companies may need to structure their innovation approach around the three very different phases of innovation.Identification. Development and Commercialization. Many companies center their innovation teams around forward thinking, customer oriented professionals. These teams may bestrong at identifying research/ethnography based innovations, but weak at recognizing technology driven. 13. Innovation Traits and Methods Key InsightsAsking internal innovation teams to identifytomorrows disruptive technologies that will mitigate the competencies theyve built around can createblinders.Key Insight #4Companies serious about identifying and leveraging disruptive (radical) innovations may have to adopt spin off or isolation strategies toensure current competencies do not interferewith future innovation opportunities. 14. The SolutionA Model Structure (proposed)External Inputs Technology and Market Changes Macro Trends and ShiftsRadicalBusinessInnovationIncrementalUnit Level TeamInnovation Team InputsInternal LocationExternal LocationIndependent Budget Independent Budget Report direct to C- Customer Internal developmentSuiteneedsInternal reportingExternalstructure DevelopmentNew productsCompany Level Inputs Innovation a part of all associates responsibilitySelf directed projects (Google 20% rule) 15. The SolutionA Model Structure (proposed) Benefits Multiple sources of innovation Focused innovation teams based on differing sources and needs for radical and incremental innovation Innovation embedded in culture at all levels Radical innovation externally focused Centralized decision making and budget to encourage speed to market Customer needs remain in forefront for incremental innovation and BU teams Dedicated resources to innovation teams 16. Additional considerationsAdditional Considerations when Structuring for InnovationNo one size fits all Industry considerations (Mature vs. Emerging) Resources and capability (financial, people, culture)Company size Competitive landscape 17. Questions? Mike JohnsonJohnsonmikec@gmail.com 18. Sources1. Barsh, Joanna, Marla Capozzi, and Lenny Mondonca. "How CompaniesApproach Innovation: A McKinsey Global Survey." Mckinseyquarterly.com. TheMcKinsey Company, Oct. 2007. Web. 29 Apr. 2012..2. Bessant, John, Kathrin Moslein, and Bettina Von Stamm. "In Search ofInnovation."WSJ.COM. Wall Street Journal, 22 June 2009. Web. 29 Apr. 2012..3. "8 Ways to Foster Innovation in Your Company." Inc.com. Inc Magazine, 16 Apr.2010. Web. 29 Apr. 2012. . 19. Sources4. Wentz, Dr. Rolf Christian. "The Organizational Structure of Innovation: HowToyota, Procter & Gamble , GE, 3M, IBM, Google, Microsoft, Sony, Hewlett-Packard, DuPont, Honeywell, Whirlpool." The-innovation-machine.com. 20 Apr.2007. Web. 29 Apr. 2012. .5. "Survey Reveals Corporations with Centralized Innovation Departments MoreLikely to Have Focused Efforts." Pitchengine.cm. InnovationEdge, 2011. Web. 29Apr. 2012. .6. Christensen, Clayton M. The Innovators Dilemma: When New TechnologiesCause Great Firms to Fail. Boston, MA: Harvard Business School, 1997. Print.7. Cain, Susan. Quiet: The Power of Introverts in a World That Cant StopTalking. New York: Crown, 2012. Print.