how do you build an innovation culture in your team? – an 8-step guide

Rishikesha T. KrishnanProfessor & Area Chair, Corporate Strategy & Policy, IIM Bangalore

How do you Build an Innovation

Culture in your Team?

An 8-Step Guide

Nov. 24, 2012

1

Build a

pipeline

3 Improve

Batting Avg

2 Improve idea velocity

THE IDEAS IN THIS

PRESENTATION WILL BE

ELABORATED IN A

FORTHCOMING BOOK

BY VINAY DABHOLKAR &

RISHIKESHA T. KRISHNAN

PUBLISHED BY

HARPERCOLLINS

WHAT IS INNOVATION?

3

Problem Idea Execution+

What is Innovation?

4

+ + Benefit

Novelty Utility

Application of new ideas to

solve problems resulting in

benefits to users

8 Steps to Innovation Excellence:

1

Build a

pipeline

3 Improve

Batting Avg

2 Improve idea velocity

Build a Pipeline

1. Lay the Foundation

2. Create a Challenge Book

3. Build Participation

6

Improve the Idea Velocity

4. Experiment with Low Cost at High Speed

5. Go Fast from Prototyping to Incubation

6. Iterate on the Business Model

7

Increase the Batting Average

7. Build an Innovation Sandbox

8. Create a Margin of Safety

8

LAY THE FOUNDATION

STEP 19

8 Steps to Innovation Excellence

Build a Pipeline

1. Lay the Foundation

Create Innovation Program

E.g. Jeff Immelt “Imagination Breakthroughs” - $1B potential

3 Key Processes

Idea Management

Buzz Creation

Training & Development

10

3 Key Processes

in an Innovation Program

Idea

Management

Buzz

Creation

Training &

Development

(who submits?

who selects?

who funds?)

(campaigns,

communication,

rewards,

innovation day)

(prototyping,

TRIZ,

design thinking,

idea communication,

leadership development)

Idea Box

source scope stages

technology selection funding

Idea Management

Source: Where will ideas come from? (Any

employee, Only certain employees (shop floor

workers), Employees and customers, Employees,

customers and partners, Anyone on the internet)

Scope: What is the scope of ideas? (Process

improvement, product improvement, new product,

customer experience, business models, any of these).

Stages: How many stages will an idea go through

before it is either implemented or parked? In M&M,

a new product idea would go through six stages.

13

Technology: In what form will ideas be gathered,

stored, searched, and presented? Will it be a

physical suggestion box, a bulletin board or an

Intranet web-site where people submit ideas?

Selection: How will ideas be selected for further

development? Will it be through a committee or

through open voting or through some other

mechanism? What is the criterion for selection?

Sponsorship: How and what kind of resources will

be allocated to the selected ideas? Will the

sponsorship be in the form of time-off from the

existing project or mentoring.

14

Year No of Suggestions Participation Adoption

suggestions per person Rate(%) Rate(%)

1951 789 0.1 8 23

1971 88,607 2.2 67 72

1986 2.6million 48 95 96

40 years, 20 million ideas

The Power of Small Ideas

“There is no genius in our company. We

just do whatever we believe is right, trying

every day to improve every little bit and

piece. But when 70 years of very small

improvements accumulate, they become a

revolution”

From Interview with Katsuaki Watanabe

in HBR, July-Aug 2007

16

Build a Pipeline

Lay the Foundation

Create Innovation Program

E.g. Jeff Immelt “Imagination Breakthroughs” - $1B potential

3 Key Processes

Idea Management

Buzz Creation

Training & Development

17

Buzz Creation (creative campaigns)18

Indian Railways in 2004

Market share 2004 (1951):

Freight: 40% (90%)

Passenger: 20% (70%)

Budgetary support went down 25%

Fund balance: Rs. 350 crore

Dr. Rakesh Mohan committee

declared “Terminal debt trap”

Recommendation: Downsizing

Sudhir Kumar’s study

Sudhir Kumar studies Rakesh Mohan report

Finds a curious contradiction

With increase in freight rates:

Market share of steel, cement declined

Iron ore, coal and other minerals stayed same

What could be the reason?

Door-to-door vs station-to-station

Door-to-door created more value

However, pricing didn’t differentiate

Why not focus on these customers?

Provide more freight per train

charge more

Increase number of trains

Heavier, faster and longer

Garib Rath

(Heavier & longer)Axle load

Build a Pipeline

Lay the Foundation

Create Innovation Program

E.g. Jeff Immelt “Imagination Breakthroughs” - $1B potential

3 Key Processes

Idea Management

Buzz Creation

Training & Development

24

Training & Development

Titan Innovation School of Management

“Everybody an innovator by 2015”

25

Focus area Techniques

Design thinking Immersive research, rapid

prototyping, brainstorming

Systems thinking TRIZ

Systems archetypes

Theory of constraints (TOC)

Lateral thinking Edward de Bono’s six thinking

hats

CREATE A CHALLENGE BOOK

STEP 226

8 Steps to Innovation Excellence

Build a Pipeline

2. Create a Challenge Book

U & I Portal at HCL

Petition Box at Tihar Jail

Feel the Pain

Sense the Wave

See the Waste

27

Build a Pipeline28

The Bajaj Pulsar exploited a discontinuity..29

7 Themes

Digital consumers

Emerging economies

Sustainable tomorrow

Smarter organizations

New commerce

Pervasive computing

Healthcare economy

30

http://jugaadtoinnovation.blogspot.in/2012/04/infosys-innovation-to-build-tomorrows.html

BUILD PARTICIPATION

STEP 331

8 Steps to Innovation Excellence

Build a Pipeline

3. Build Participation

Role model: People who inspire and then others

feel, “If he can do it, why can’t I?”

Community of practice: Places where

practitioners “hang out”, learn from each other

and together help others outside this community

Innovation catalyst: People who encourage idea

authors and offer constructive inputs

Rewards & recognition: Mechanisms through

which idea authors get appreciated

32

Build Participation33

Managerial Practices &

Intrinsic Motivation

Challenge

Freedom

Resources

Match people’s expertise & skills

in creative thinking with their jobs

Set goals, communicate them clearly,

but give autonomy regarding the means

Just right – too little dampens

creativity

No fake deadlines

34

Managerial Practices &

Intrinsic Motivation

Work-group

Features

Supervisory

Encouragement

Organizational

Support

Mutually-supportive groups of

people from diverse backgrounds

Freely & generously recognise

creative work; avoid long delays;

don’t over-do critiques; tolerate

honest failure

Facilitate information sharing

Don’t allow political problems to fester

35

Improve the Idea Velocity

4. Experiment with Low Cost at High Speed

5. Go Fast from Prototyping to Incubation

6. Iterate on the Business Model

36

EXPERIMENT WITH LOW COST

AT HIGH SPEED

STEP 437

8 Steps to Innovation Excellence

Improve the Idea Velocity

4. Experiment with Low Cost at High Speed

38

itchidea

demoimpact

Feasibility Loop Viability Loop

2 months

Sep2003

Nov2003

Feb 2004

3 months 2 months

Apr 2004

Creating a Climate for Experimentation

Failure plays a critical role in innovation

Post-It Notes & failed adhesives

Nylon: a lab experiment that went wrong

TVS Spectra failed, but Victor succeeded

Time-to-market is important…but don’t forget the role

of earlier innovations

Separate intelligent failure from unnecessary failure -

in language and managerial response

Create infrastructure, give resources for expts

Have a high trial rate: fail fast, learn fast

Can you do the “last” experiment first?

40

Avoid the “Failure Fallacy”41

GO FAST FROM PROTOTYPE

TO INCUBATION

STEP 542

8 Steps to Innovation Excellence

Improve the Idea Velocity

5. Go Fast from Prototyping to Incubation

43

Improve the Idea Velocity

5. Go Fast from Prototyping to Incubation

44

Make the story sticky45

Make Ideas Sticky46

Characteristic of

a sticky idea

Technique of improvement

Concrete

Prototype (Rajappa, Phalke),

“Before and after” scenarios,

Stories (Salt march)

Curiosity Curiosity flow (Steve Jobs iPod

launch)

Credible

Find a champion (Bose and

Einstein),

Testable credentials (idea per

person per year)

47

ITERATE ON THE

BUSINESS MODEL

STEP 648

8 Steps to Innovation Excellence

Improve the Idea Velocity

6. Iterate on the Business Model

49

Difficult to

make money

Holder of

complementary

resources makes

Money

(EMI, Coke)

Inventor

makes

money

Party with

Innov .+ Compl.

resources makes

Money

(Pixar vs Disney)

Freely availableor unimportant

Tightly heldand important

Low

High

Complementary Assets

Ease of Imitation

Inimitability/Complementary Assets Framework

Source: Afuah, 2004

Increase the Batting Average

7. Build an Innovation Sandbox

8. Create a Margin of Safety

51

BUILD AN

INNOVATION SANDBOX

STEP 752

8 Steps to Innovation Excellence

Increase the Batting Average

8. Build an Innovation Sandbox

53

“A near fanatical focus on cost reduction”

54

AT

LOW

COST…

German Companies’ Role in Tata Nano

Bosch

Fuel injection

Braking systems

Car electronics

Continental

BASF

55

“The Tata Nano engine lies in the heart

of the Bosch Engine Management System,

which meets Bharat Stage III and future

Euro IV emission norms. For the first time,

Bosch developed the two-cylinder

Common Rail Direct Injection (CRDi)

system with an enhanced Electronic

Control Unit (ECU). A new Starter Motor

was conceived, and the super efficient

Generator developed has optimized size

and innovative design that meet

target specifications and cost.”

Source:

http://www.boschindia.com/content/language1/html/715_13769.htm

Auto

Biocon’s Platform-based

Innovation Strategy

Expertise in Fermentation Technology Built through Enzyme Business

Production

of statins,

immuno-

suppressants

Novel process

for

R-insulin

Monoclonal

Antibodies

with

Cuban Inst.

2G Oral

Insulin

Generic drugs

Biosimilars

Novel cancer

treatment

Potential

blockbuster56

Source: Krishnan & Jha, 2011

7 Themes

Digital consumers

Emerging economies

Sustainable tomorrow

Smarter organizations

New commerce

Pervasive computing

Healthcare economy

57

WalletEdge

Platform Offering

http://jugaadtoinnovation.blogspot.in/2012/04/infosys-innovation-to-build-tomorrows.html

Open Innovation Procter & Gamble has radically

altered the way it comes up with new ideas & products. It now works with universities, suppliers and outside inventors. It offers them a share in the rewards. In less than a decade, half of P&G’s new-product ideas originate outside of the firm

Thus P&G has been able to grow at 6% a year between 2001 and 2006, tripling annual profits to $8.6 billion. The company now has a market capitalisation of over $200 billion.

Check out The Game Changer by Lafley & Ram Charan

58

CREATE A

MARGIN OF SAFETY

STEP 859

8 Steps to Innovation Excellence

Increase the Batting Average

9. Create a Margin of Safety

60

Measurement (Metrics)

Pipeline

Idea Velocity

Batting Average

Participation

61

62

No Parameter Lead indicator Lag indicator

1 Pipeline Number of challenges in the

challenge-book

Number of ideas in the

pipeline, Number of ideas per

person per year.

2 Idea velocity Average time to give idea

relevant feedback to the

idea author,

Number of experiments /

prototypes,

feasibility studies,

invention disclosures,

white papers in a year,

Average time for an idea to

reach the first experiment /

prototype, Frequency of

innovation review,

Average time to get support

from a champion

Number of experiments in

exploring new types of

customers, defining new

offerings / products, exploring

new partnerships and new

pricing models,

Average time from formal

approval to cash / saving /

impact

3 Batting average Number of innovation

sandboxes, number of

innovation platforms

Percentage of revenue from

innovations in the last 5 years

4 Participation Number of people giving

ideas / comments / votes,

Mentors / catalysts /

champions

Number of active

Communities of practice

(CoPs), Role models,

customers engaged

THANK YOU

63

rishi@iimb.ernet.in

http://jugaadtoinnovation.blogspot.in