The Management and Measurement of Innovation - Q&A with Chris Andrews of Forrester Research

Posted by Connie French on May 12, 2010 11:06:37 AM

Last week, InnoCentive hosted a webinar with Chris Andrews, Senior Analyst at Forrester Research, Inc., called Improving The Management and Measurement of Innovation.  We had more than 300 attendees for this session, and, during the Q&A, many more questions than Chris could answer.  Chris has kindly provided responses to the questions that he didn't have time to answer on the call. 

Q&A Session for Improving the Management and Measurement of Innovation, by Chris Andrews, Forrester Research

Some at my company have talked about "incremental innovation." Sounds like an oxymoron to me ... a euphemism for process improvement.  Am I being too cynical?

I think you have a good point, but the ability to create incremental innovation is actually an important part of business life.  Not all of us can hit home runs every day we go to work, so sometimes we have to be happy to hit singles and doubles – things that create innovation within our companies and for our clients that don’t necessarily re-invent our business.  We can see countless examples of innovations, particularly in the consumer product space, that have substantially improved upon old products without fundamentally changing their value.

I think your point highlights something important: there’s a pretty fine line between business-as-usual product improvements and real innovation, and it’s important not to confuse the two.

Who or which functional group should lead the innovation effort? Should there be leader(s) or is organic/dispersed the way to go? Is there a "best" model? ­­

I believe that for companies who are working on a transformation of their innovation capabilities – a stage many companies are at today – there needs to be a dedicated leader, with support from the CEO, who can identify structural problems that exist in a company’s ability to innovate, and seek to break down these problems. I think that more innovative companies (the minority) tend to see the role of innovation not as a distinct person or office, but the job of every individual within an organization.

­Please define 'whitespace shifts' - I am unfamiliar with this term­.

“White space” is a term that is used in a lot of businesses to define new business model opportunities.  When Apple created the iTunes music platform, it was building an entirely new market (though it did leverage existing products and services).  Many CEOs are seeking ways to build on existing capabilities in ways that reinvent the company’s market focus.   While the exact definition of whitespace is subject to some interpretation, an example of this is Microsoft’s announcement it was moving into the personal gaming space with the Xbox in the early 2000s. This move built on Microsoft’s existing capabilities, but was a big shift for the company in terms of its customer focus.

­On the stakeholder slide, seems like a conflict between executive leadership on transformational projects and other stakeholders who for example are building new products that fit current core business.  How does this tension get addressed? ­

This is a big challenge and one I’m glad you pointed out.  When executives solicit open-ended ­requests for innovation, they are often frustrated by the result they get. “The ideas are not strategic” is a complaint I hear from these executives.  I think, however, it is largely senior management’s job to identify and execute transformational opportunities.  They may get ideas from their workers and customers, and other stakeholders but it’s their responsibility to deliver.  At the same time, they need to create an environment that allows these individual stakeholders to contribute to innovation in ways that are relevant to the company’s broader innovation objectives.

Do you advocate a 'stage-gate' structure as a means by which to organize innovation efforts and define some measures of effectiveness? Is there something better? ­­­

I think stage gating is an effective tool, and a critical part of an innovation manager's portfolio.  But while stage gating has been a popular innovation methodology for years, I hear more complaints about it today. “There are too many ideas, not enough execution”…"It just takes too much time to move any one idea through to reality.”  People seem to underestimate just how much management stage-gating takes. I think in the future, we will see more models coming out of practices like agile development, to improve on the innovation process and make it faster.

­How great a risk is the need for cultural/behavioral shift in implementing innovation strategy?­

It is probably the great risk, and that’s why I think that companies need C-level support in order to be innovative.  You can’t change a culture without a very dedicated effort.  If you are interested in this subject, read some of accounts from leading executives about what it took to turn their companies around.  Take a read through Lou Gerstner’s “Who Says Elephants Can’t Dance” or AG Lafley’s “The Game Changer” if you want examples of companies that had to fundamentally change their culture with shifts led by the CEO.

­Output metrics have different time scales. Final results (sales, profit numbers) might take too long to show in order for corrective actions, if something is really going wrong. How do you balance uncertainty in the metrics (fast) with the time risk?

Yes, this is a common complaint about output metrics.  Another complaint is that given the diversity of inputs on these metrics (internal and external) its hard to judge someone on the outcome that the company delivers.  Yet, what are metrics except attempts to guide behaviors?  At the very least, managers should incorporate theses metrics into a broader set of innovation metrics.

­Doyou have any "scrubbed" examples of innovation strategies and corresponding that you could share? ­

There are many.  I would refer you to public literature, because it would be too much to go into in this Q&A session.  AG Lafley’s book, listed above. is a good, recent starting point. He transformed his company using open innovation as a management “philosophy”, and incorporating that openness into all aspects of the way his company innovates.   There are also detailed case studies of innovation at companies like Xerox, Harley-Davidson, GE, Maytag, Whirlpool, and many others online. Just conduct a search on “Innovation” and “Case Study” for many examples.   Harvard Business Review is also a valuable source of innovation cases.

How can you best involve B2B customers as stakeholders particularly regarding their latent needs­?

It’s very hard to identify latent needs, but I work in the B2B space, so I see a lot of interesting things going on to drive innovation. The most common is innovation jam sessions or workshops, which are typically created by a “vendor” to increase value (aka, sales) for their clients.  There are also more dedicated innovation methodologies being created – check out Capgemini’s TechnoVision as just one example. These are frameworks for sharing best practices across the vendors’ client base, while also providing a not-so-subtle link to the full suite of the supplier’s products and services.

What Fortune 500 firms in your view do the best job at measuring innovation?  Why do you name them? Can you be specific as to what innovation measurement strategy and/or tactics they do that cause you to name them?

There are many who measure innovation, but I see it done differently at different companies.  The thing I have noticed is that each company’s measurement approach reflects their history and focus as a company.  For example, companies like HP have very process-focused metrics for their innovation programs, while what I have seen about Google’s approach to innovation is that it is much broader. These different approaches to innovation are inseparable from the assets these companies hold, the business models they seek to commercializes, and stage they are  at in their growth.

Do you think that innovation process can be created from the bottom up starting with passionate lower level employees?  Do you have to start with upper level support?  Do you have any examples that would encourage employees to take steps on their own?

The entire social technology trend is grounded in the idea of empowerment for employees.  In fact, you might consider a book by Forrester analysts called “Groundswell.” But I remain a skeptic of the view that the transformation of an organization can really take place without executive-level support.  Smart executives will see the “Groundswell” of social technologies and openness taking place within their markets and adapt their strategies accordingly.  Without change, you get disconnects that can lead to frustration among employees, and the gradual decline of the organization.

We have executive support of innovation, but the middle level is too focused on current numbers.  How can that be addressed?­

Keep in mind that middle managers are just doing their jobs – managing the business in the most effective way possible.  But managers are also great at responding to the demands of their executive level bosses.  I would suggest that if your middle managers are not changing their behaviors rapidly enough, it is up to their executive-level managers to make this change happen faster.  The demands must be clear, tangible, and provided with a sense of urgency.

Topics: Innovation Insights

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