Douglas Brockway

April, 2012

Integrating Process Improvement and Transformational Innovation

2

“The source of (corporate) wealth is something specifically human:  knowledge.  If we apply knowledge to tasks we already know how to do, we call it ‘productivity’;  If we apply knowledge to tasks that are new and different, we call it ’innovation’”

The Discipline of Innovation

Peter Drucker

3

Common challenges regarding innovation

Interest in innovation remains quite high But, fiscal budgets are tight Many companies are “out of shape” regarding Innovation

� Forward looking investments have been closely managed� Individuals and teams introduce new concepts when they can, but� Project timelines and budgets are tight as is the overall budget

Innovation research shows that when flexibility on “when” and “how” a solution is derived is removed organizations forfeit creativity

They are forced to use what is known, what has be tried and used before, to NOT innovate

4

Innovations can be very local or very transformational in impact

Organizations innovate in three main “scopes”� Internal Processes/Capabilities

Constant innovation Relatively low value, cost and risk Addressed through Six Sigma and similar approaches Drucker calls this “productivity”

� Products and Services Frequent innovation Moderate value, cost and risk Product marketing and engineering A middle form

� Business Models and Markets Least frequent innovation Largest value, cost and risk Strategic and transformational planning and analysis Most commonly desired form of innovation

Processes/Capabilities

Products/Services

Models/Markets

5

Any given innovation follows a predictable path from concept to broad use There are four main elements

that influence the spread of a new idea:� the innovation,� communication channels,� time, and � a social system.

Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system

In the context of business and IT, the innovations can be for external markets or internal consumption

Source: Everett Rogers’, Diffusion of innovations, appendix

The Diffusion of Innovations¹

6

Innovative companies must transform themselves to be accepted by the broader market as reliable vendors or suppliers

Geoffrey Moore’s adaption that describes the most challenging hurdle for technology-based innovations:

The majority has a different set of key values in making investments and a different sense of risk in a vendor and provider

Innovators must appear to be the kind of company a main stream market wishes to depend on

7

Organizations desiring transformations must learn internal/process innovation first, “cross” to products, then on to markets

You must be able to innovate at the Process level in order to see, understand, and take advantage of Product and Services opportunities that may arise

Similarly, you must be able to Innovate at the Product and Service level in order to take advantage of Game Changing business models and markets

Processes and Capabilities = Products and Services

Products and Services = Business Models and Markets

1

n

=

1

n

=

Integrals -The integral of Process innovation is new Products & Services. The integral of Products & Services innovations is new Business Models & Markets

8

What can be done on a tight budget?

Continue to focus on efforts to improve the Internal Process efficiency and capabilities� It is required to generate the resource/organizational capacity to do more

interesting work� This will burnish the skills needed to engage in Products and Services

innovation Find Product and Services opportunities, OR, uncover skunk works successes

running under the radar� Protect and support them

Use low-key, often university or vendor-based, frequently local and no cost external speakers to inject new ideas to internal discussions

Avoid getting sucked into “business transformational” or “business game-changing” innovations unless they:� Are clearly required� Have overt c-level involvement� Are properly, but not overly, resourced

How to contact the author

Doug Brockway is a partner with AKA Group, LLC he can be reached at:� (617) 834-0067� doug.brockway@akaplex.com� Twitter = @workingonstep2

� Find out more about AKA Group at www.akaplex.com

9