alynde whitepaper - innovation and the cio - preparing for transformation

Leading Practices for Managing Innovation Date: 17 December 2010 DRAFT v.02

ALYNDe

Confidential ©2009 ALYNDe, LLC 2/10/2011

Glenn A. Bunker Partner ALYNDe, LLC [email protected] 770.377.7061 - Mobile

ALYNDe

Creating an Operational Nerve Center to Manage the

Balance Among Innovation, IT Complexity and Scarce

Resources

An Executive White Paper on Improving Organizational Effectiveness by Allowing Innovation to Become a Core Element of Your Business Strategy


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The “Innovation Nerve Center” and the role of today ’s Chief Information Officer

Leading practices in the field of innovation have evolved to the degree that today’s Chief Information Officer should consider becoming a partner in the Innovation function itself – possibly evolving into the role of Chief Innovation Officer. Organizations are learning that managing the “process of innovation” requires collaboration across non-IT working teams that should ideally be supported with an automation framework designed to support innovation success. A proper automation framework will function as an “Innovation Nerve Center” by reducing process cycle times and non value-added work that ultimately hampers time-to-market performance. Whether success is defined as:

� Achieving “1st-mover” status (time-to-market performance), � Achieving quality expectations (establishing brand valuation), � Performing with agility in turbulent economic markets (achieving operational equilibrium), � Maximizing profitable revenue potential (optimizing the product portfolio), � Satisfying shareholder expectations (creating long-term value), or � All of the above…

The innovation function should benefit from new solutions in much the same way that IT operations learned to better align with the businesses they support via use of enterprise IT Governance (ITG) and Portfolio/Program/Project Management (PPM) frameworks. Forward-thinking CIO’s who have elected to implement organizational work management solutions with leading ITG/PPM frameworks to manage demand, programs, projects, resources, budgets and non-project work can apply lessons learned when supporting the Innovation function within their organizations. Since the Innovation process touches both business units and product teams that do not traditionally utilize such management frameworks, a critical-to-success factor will be the willingness of the CIO and his or her organization to assist in the deployment and support of emerging Innovation Lifecycle Management (ILM) solutions. So as not to confuse the role of ILM with current PLM (Product Lifecycle Management) solutions, let’s look at some definitions:

� Product Lifecycle Management is a category of software and services that uses Internet technologies to tie together product marketing, sales, design, engineering, manufacturing, purchasing, field services, customers and suppliers into a global knowledge net.

� Product Lifecycle Management provides a framework for capturing, managing and sharing knowledge and business intelligence within the company, throughout the extended enterprise and across the supply chain.

� Product Lifecycle Management, frequently called Collaborative Product Commerce, enables all stakeholders in the manufacturing value chain to collaborate in real time along the product lifecycle continuum.

� Innovation Lifecycle Management utilizes an “Innovation Nerve Center” as a management ‘hub’ for Demand, Program, Portfolio, Resource, Change, Issue, Risk, and Launch Management activities. The Nerve Center will support and facilitate institutionalization of Innovation strategy with governance best practices needed to ensure company-wide adoption.


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Management of the Innovation function itself, supported by a Stage-Gate™ process model versus an IT-centric SDLC such as RUP™, can now be supported by leading ITG/PPM solutions from firms such as PowerSteering, CA, Planview, Instantis and Oracle when configured as the organization’s “nerve center” for managing the innovation process itself. CIO’s should consider the following shift in emphasis:

From… To…

Viewing your business through a technology lens

Viewing your business through a customer lens – ensure that technology decisions lead to improved innovation capabilities

Supporting growth through traditional technical approaches (i.e. reactive services to business unit demands)

Supporting growth based on helping to eliminate waste in the innovation lifecycle with effective use of new program management frameworks

Developing solutions based on what you think is the next great technology advancement

Validation of solutions based on multiple market & customer criteria. Ensure that technology is used to drive performance results that align with business strategy by managing product offerings as a portfolio

Basing solutions on incremental improvements

Basing solutions on innovation that is focused on the “Big Problems” your company’s customers are wrestling with. Remember… invention is easy, innovation is hard!

Ad hoc process for solution development – multiple technology platforms within business units, lack of end-to-end visibility

Framework approach / planned innovation supported by an integrated Stage-Gate™ process model embedded within a framework designed to support performance measurement

In additions to the shift in thinking above, there are three critical steps to building an innovation foundation that will position an organization to develop and implement a growth strategy of “continuous innovation”. The CIO will become a key partner in this strategy, whether as a sponsor or in concert with the Chief Innovation Officer.

I. The 1st step is to Make Innovation the Strategy . “Invention is easy… Innovation is hard”. From the October 2004 75th Anniversary Issue of Business Week, “Inspiration is fine, but above all, innovation is really a management process”. To build a strategy that focuses on growth through innovation, organizations should establish internal and external alignment around this strategy including leadership development, core competency focus, performance metrics and goals and incentives alignment.

II. The 2nd step is to Develop Organizational Capabilities and Culture . To develop a culture of

continuous innovation within the enterprise, organizations should establish managerial and operational processes and infrastructure to support growth through innovation. It is here that the CIO can become an influencing factor in the organization’s success. Companies that understand the need to differentiate themselves via innovation need to establish an organizational structure that rewards innovative thought and execution.

III. The 3rd step is to Manage Innovation . The objective here for organizations is to institute a

culture of innovation. To sustain growth in today’s challenging global markets, CIO’s (both Information and Innovation) should effectively manage the transition from old to new performance-driven infrastructures, sustain executive commitment throughout the organization, motivate employees, understand customer needs and identify product ideas to bridge “needs gaps”. This will aid in keeping the organization focused on continuous improvement.


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Adoption of these strategies results in the creation of a dedicated organization that serves as the ‘hub’ for innovation activities emerging throughout the company and greatly facilitates institutionalization of Innovation. A few final recommendations:

� Create a cross-functional organization to monitor, manage and drive innovation initiatives within your company.

� The “nerve center” framework should have a small, dedicated organization of full-time resources, supplemented by initiative-specific resources from divisions / departments across the organization

� The Innovation function should be headed by an Chief Innovation Officer � Should be a full time position � Should report to the CEO � Should command the respect of department / divisions � Should have the authority to make cross-functional decisions (as it pertains to Innovation

within your business) � Key responsibilities

� Create, develop and nurture the Innovation foundation � Identify, evaluate and prioritize Innovation initiatives � Manage staffing and implementation of Innovation initiatives

What kinds of companies can benefit from these prac tices?

In the Consumer Products space, many firms are engaged in operational effectiveness initiatives geared to improve competitive performance. In one case, a global firm had a highly compartmentalized infrastructure that limited their ability to create and launch successful new products. This infrastructure created non-aligned processes across the geographic markets it served and it became difficult to transfer ideas, best practices and an ability to leverage their global network in support of the innovation process. Core branded products had achieved market dominance and future growth targets were deemed only possible via the launch and acceptance of new products within new channels, market segments and even via new business models. By adopting many of the practices stated above, this firm has created a framework to manage the innovation process from idea through launch. By having a common framework, the company will be able to have global visibility into the entire product development lifecycle across all geographies and product lines as well as internal business functions and organizations. They have created:

� A disciplined, cross-functional approach to manage projects for greater marketplace success � A criteria-driven method of decision making yielding an efficient, effective portfolio � Process governed by operating teams to prioritize resource allocation

Benefits they expect to achieve are:

� Increased leverage of solutions across markets to reduce duplication and improve speed through the product development lifecycle

� Improved system-wide strategic portfolio decision-making to drive pipeline value � Capability to invest in fewer bigger initiatives that leverage scarce resources across markets � Elimination of non value-added work from the New Product Development Lifecycle


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How will these practices change over the next few y ears? If so, how?

Leading practices will continue to evolve as product and service-centric organizations transition into true innovation-centric enterprises. Leading “1st-Mover” competitors within their market segments will be driven to make Innovation their core strategy, although culture change remains a major obstacle. This does not mean that the key attributes of product quality, cost management or time-to-market that define your firm to the customers you serve are made less important. Innovation simply becomes the foundational value stream in your business that drives these critical differentiators. Traditional organizational structures will become leaner in an effort to eliminate the inherent waste involved in managing today’s innovation practices across existing barriers. Achieving this new operational balancing act will require Executive leadership that understands the need to topple traditional barriers inherent with “silo’ed” Business Units and Product Teams. Due to these somewhat autonomous structures, it is not uncommon today to find that “necessity has been the mother of invention” when we evaluate technology infrastructures that have been created to manage current-state innovation practices. This leads to a lack of cohesion that impedes time-to-market, product quality, feature content and other key competitive metrics. Chief Information Officers will need to work closely with business units engaged in the innovation process to streamline existing management infrastructures into measurement-enabled end-to-end frameworks designed to eliminate waste from the innovation lifecycle. The next five years will bring an even heightened level of global competition to the world of product development, as companies that are typically focused on enhancements and development of new products alone will need to create products that penetrate new channels and markets in order to achieve growth objectives – even via adoption of new business models within their existing organizations. An example of this shift can be seen in the Telecom segment as traditional Telephone companies transition into BSP’s (Broadband Service Providers) that compete with disruptive new players. The “Triple Play” concept of voice, video and data will need to be packaged in a manner that allows these traditional firms to even exist in the future, yet alone, compete. The ability to innovate new product and service offerings will be fundamental to survival. The advent of social networking and increased

CostTime-to-Market

Quality

Traditional competition has been based on one of four

primary dimensions:

Traditional Strategy:Focus on one at the

expense of the others

Innovation

Future Strategy:Make Innovation the

cornerstone yet focus on balancing all four

InnovationCore StrategyCore Strategy

Time-to-Market

Cost Quality

Future Strategy:Make Innovation the

cornerstone yet focus on balancing all four

InnovationCore StrategyCore Strategy

Time-to-Market

Cost Quality


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mobile utilization for all things involving communication means innovation will, indeed, be paramount for survival. An example of the needed change from current to future-state over the next few years can be seen below with practices aligned with a representative New Product Introduction Process.

How does governance play a role in a company’s ques t to enhance innovation?

Good program management does not “just happen”. Managing innovation is a skill and discipline as with any other complex operational competency. ALYNDe recommends deployment of an operational “nerve center” framework configured to manage the complexities of innovation and the resources engaged in the collaborative product development process. This means that new governance practices supported within this framework will be required to mitigate the risk associated with market adoption and continued technological development of differentiated new products. Effective Governance practices will address the issues shown below.

STAKEHOLDER ISSUES

DECISION MAKING ISSUES

PLANNING AND EXECUTION ISSUES

� Business objectives are sometimes unclear - information dissemination difficult

� Stakeholders do not agree on objectives or priorities

� Roles, and especially responsibilities, are unclear

� Once there is trouble, assigning blame is more important than solving problems

� Program status, issues, and risks are not cohesively tracked, clearly communicated or consistently understood

� Decision making is slow and often not based on facts

� Issues do not reach the leaders who can resolve disputes and problems

� Unreasonable expectations and poor planning prevail

� Plans and teams focus on building a better mousetrap, not catching the mouse

� Priorities change, so projects change, but without coordination

� Once in fire-fighting mode, it is hard to see the forest from the trees

A “nerve center” model, as referred to in this paper, is recommended when implementing any large R&D-centric initiative consisting of multiple projects (often global in nature) that must be managed in

IdeaGeneration

IdeaGeneration

Concept DefinitionConcept

Definition

Development Planning/

Scheduling

Development Planning/

Scheduling

Initial Volume

Production

Initial Volume

Production

Sourcing & Production Placement

Sourcing & Production Placement

ConceptScreeningConcept

ScreeningDevelopment

ExecutionDevelopment

ExecutionProduct Launch

Product Launch

New Product Introduction Process

All concepts are developed through a

common process

Concept screening via

presentations to executive

management

Single Process, managed via

overall project plan performance

with variable milestones

Sourcing done by development

staff or Purchasing. Not

an integrated effort

Development staff not involved

in production efforts

So much time spent in

development that launch phase

gets short shrift

NPD group relies largely on internal

resources for ideas

Current S

tate

All concepts are developed through a

common process

Concept screening via

presentations to executive

management

Single Process, managed via

overall project plan performance

with variable milestones

Sourcing done by development

staff or Purchasing. Not

an integrated effort

Development staff not involved

in production efforts

So much time spent in

development that launch phase

gets short shrift

NPD group relies largely on internal

resources for ideas

Current S

tate

NPD is the hub of an outward-

reaching, multi-dimensional

demand strategy creation effort

Concepts are directed through

tailored development

processes: new, change, etc.

Development decisions made against Demand Strategies and Business Case justifications

Stage-Gate process, managed via performance

metrics and integrated workflow

Sourcing through

integrated efforts of Development

and Procurement

Development and Introduction

teams committed through Initial

Production Efforts

Introduction efforts well balanced between

development and launch phases

Desired S

tate










Sourcing through


and Procurement



Production Efforts



Desired S

tate










Sourcing through


and Procurement



Production Efforts



Desired S

tate


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a collaborative manner to maximize the achievement of product launch objectives while mitigating risk and managing organizational change. When considering the function of governance, it is important to recognize that there are several complimentary functions that should be considered in order to create a more functional management framework. These complimentary functions include: Communication/Change Management, People, Projects and Measurement. Regarding the Governance function, there are specific leading practices that should be considered:

� Establish a centralized Program Office to serve as a “nerve center” to manage all Innovation activities (based on Stage-Gate™), process contributors (resources), product programs (projects) and performance data (product portfolio management) to ensure effective allocation and use of budget dollars across all development programs.

� Define a clear governance structure outlining principles and processes for: � Decision Making (manage gating criteria) � Budget Utilization (go/kill decisions) � Resource Management (improved capacity planning of scarce and constrained resources) � Communication with Leadership Teams (ensuring that all product development programs

remain aligned with business strategy and that changes/issues are immediately visible for resolution when captured)

� Internal Communication (collaboration across product teams and business units) � Partner (Vendor) Management (extending the idea capture function outside the enterprise

as well as including partners in the development lifecycle) � Knowledge management � Change Control � Data Storage (Work, Resources, Artifacts, etc)

� Develop Guidelines for: � Issue management � Risk management � Stage-Gate process monitoring and Progress reporting

PeopleCommunication /

Change Management

Governance MeasurementProjects

alynde whitepaper - innovation and the cio - preparing for transformation

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