Organizations as Organizations as Innovation SystemsInnovation Systems

GE 393 DEGGE 393 DEG

Final ProjectFinal Project

Andy WilliamsAndy Williams

Innovate or Die?Innovate or Die?

Innovate or Die?Innovate or Die?

Everyone seems to agree, but…Everyone seems to agree, but…• Can’t agree on what innovation isCan’t agree on what innovation is• Can’t agree on how to measure itCan’t agree on how to measure it• Can’t agree on how to develop a clear Can’t agree on how to develop a clear

strategystrategy• Can’t agree on how to influence their Can’t agree on how to influence their

capacity to innovatecapacity to innovate

OutlineOutline

Defining InnovationDefining Innovation Measuring InnovationMeasuring Innovation Building a System of InnovationBuilding a System of Innovation Corporate Innovation StrategyCorporate Innovation Strategy Strategy Influencing Innovative Strategy Influencing Innovative

CapacityCapacity ConclusionsConclusions Future WorkFuture Work

Defining InnovationDefining Innovation ““Whatever changes the wealth-producing Whatever changes the wealth-producing

potential of already existing resources potential of already existing resources constitutes innovation” - Druckerconstitutes innovation” - Drucker

““Innovations take the form of producing new Innovations take the form of producing new commodities, organizing new technological commodities, organizing new technological changes in the production of commodities changes in the production of commodities already in use, opening up new markets, already in use, opening up new markets, discovering new sources of raw materials, discovering new sources of raw materials, and setting up new management and setting up new management organizations, like the creation of a organizations, like the creation of a monopoly position or the breaking up of a monopoly position or the breaking up of a monopoly position.” - Schumpetermonopoly position.” - Schumpeter

A Useful Definition for InnovationA Useful Definition for Innovation

To be useful it shouldTo be useful it should• Guide policyGuide policy• Be measurableBe measurable

Therefore innovation should beTherefore innovation should be• Something with a measurable amount of Something with a measurable amount of

newnessnewness• Resulting in a measurable business Resulting in a measurable business

advantageadvantage

Measuring Innovation? Measuring Innovation? PerformancePerformance QualityQuality TimingTiming FinancialsFinancials Development CostDevelopment Cost Cycle TimeCycle Time Resource CapabilityResource Capability Resource CapacityResource Capacity Team EffectivenessTeam Effectiveness Competitive ComparisonsCompetitive Comparisons

Measuring Innovation - NewnessMeasuring Innovation - Newness

Newness is relative to the firm, Newness is relative to the firm, industry, and worldindustry, and world

Subjective rating of project versus Subjective rating of project versus capacitiescapacities

Subjective rating is useful – when Subjective rating is useful – when consistentconsistent

Micro and Macro levelMicro and Macro level Technological and Market basedTechnological and Market based

Measuring Innovation - NewnessMeasuring Innovation - Newness

Categories Categories • Familiarity of technological environmentFamiliarity of technological environment• Fit of technological resourcesFit of technological resources• Familiarity of market environmentFamiliarity of market environment• Fit of market resources Fit of market resources

Measuring Innovation - NewnessMeasuring Innovation - Newness

Examples of MetricsExamples of Metrics• New customersNew customers• Class of products new to firmClass of products new to firm• Science new to worldScience new to world• Technology new to industryTechnology new to industry• Production processes new to firmProduction processes new to firm

Measuring Innovation – Business Measuring Innovation – Business AdvantageAdvantage

Increase Market Size/ShareIncrease Market Size/Share Increase Ability to Increase Market Increase Ability to Increase Market

Size/ShareSize/Share Decrease CostDecrease Cost Increase Ability to Decrease CostIncrease Ability to Decrease Cost Increase ProfitIncrease Profit Increase Ability to Increase ProfitIncrease Ability to Increase Profit

An Innovation SystemAn Innovation System

Establish your metricsEstablish your metrics Determine current state along each metric Determine current state along each metric

keeping in mindkeeping in mind• Fit and Familiarity Fit and Familiarity • Capacity and CompatibilityCapacity and Compatibility

Establish desired stateEstablish desired state Measure potential projects relative to Measure potential projects relative to

statesstates Predict how projects will cause state to Predict how projects will cause state to

evolveevolve

Innovation StrategyInnovation Strategy

Determine optimal portfolio of Determine optimal portfolio of innovationinnovation

Portfolio will lead to the desired state Portfolio will lead to the desired state along each metricalong each metric

Desired state may evolve over timeDesired state may evolve over time

Strategy Influencing InnovationStrategy Influencing Innovation

Hiring PoliciesHiring Policies SalarySalary IncentivesIncentives ReorganizationReorganization Team EffectivenessTeam Effectiveness BenchmarkingBenchmarking

ConclusionsConclusions

Need for a useful definitionNeed for a useful definition Need for firm specific metricsNeed for firm specific metrics Measurement systemMeasurement system Attribution issuesAttribution issues Systematic InnovationSystematic Innovation Innovation StrategyInnovation Strategy

QuestionsQuestions