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Learning Based Project Management For Radical Innovation Gina Colarelli O’Connor Massachusetts Institute of Technology

Radical Innovation Research Program. Learning Based Project Management For Radical Innovation Gina Colarelli O’Connor Massachusetts Institute of Technology Systems Design and Management Program Alumni Conference October 2004. Where we’ve been…. Introduction.

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Learning Based Project Management For Radical Innovation Gina Colarelli O’Connor Massachusetts Institute of Technology

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  1. Radical InnovationResearch Program Learning Based Project Management For Radical Innovation Gina Colarelli O’Connor Massachusetts Institute of Technology Systems Design and Management Program Alumni Conference October 2004

  2. Where we’ve been… Introduction

  3. Rensselaer Radical Innovation Project (Phase I) Purpose: To identify and examine current managerial practices associated with radical innovation projects and eventually understand best practice. Introduction  Phase I

  4. Radical Innovation Research Project: Phase I • Longitudinal Study of 12 Radical Innovation Projects in Ten Mature Firms • Launched in 1995 • Multi-disciplinary team of faculty • Major grant from the Sloan Foundation • Partnership with the Industrial Research Institute • December 5, 2000: Harvard Business School Press released our book: RADICAL INNOVATION: How Mature Companies Can Outsmart Upstarts Introduction  Phase I

  5. Radical Innovations: Qualifying Projects • The project was established -- with an identifiable team and funding. The company perceived that the innovation had the potential for significant strategic impact, via development of: • new to the world performance features, • 5-10X (or greater) performance improvement, or • 30 - 50% (or greater) reduction in cost. Introduction  Phase I

  6. 1. Air Products Oxygen Separation Technology 2. Analog Devices Air Bag Accelerometer** 3. DuPont Biodegradable Polymer* 4. DuPont Display Technology 5. General Electric Digital X-ray** 6. General Motors Hybrid Vehicle 7. IBM Silicon Germanium Devices** 8. IBM Electronic Book 9. Nortel Networks Internet Software Rental 10. UTC / Otis Elevator Multi-directional Elevator 11. Polaroid Memory Storage Device 12. Texas Instruments Digital Light Processor** The Companies & their Radical Innovations Introduction  Phase I

  7. The RI Project Lifecycle: Dupont Biomax® Phase I  RI Lifecycle

  8. Defining Radical Innovation Technical Uncertainty Low High High Low RADICAL INNOVATION Market Uncertainty INCREMENTAL INNOVATION Phase I  Uncertainties

  9. Four Dimensions of Uncertainty    Technical Uncertainty Market Uncertainty Organization Uncertainty Resource Uncertainty    Phase I  4 Uncertainties

  10. Comprehensive Framework for Managing Radical Innovation Technical Uncertainty Resource Uncertainty Market Uncertainty Organization Uncertainty Challenge 1: Capturing Breakthroughs Challenge 2: Living with Chaos Challenge 3: Market Learning Challenge 4: Business Model Challenge 5: Resource Acquisition Challenge 6: Transition Mgt. Challenge 7: Individual Initiative Phase I  7 Challenges

  11. Building the Organizational Capacity for Capturing Radical Innovations Other RI Project Tasks Evaluating and Screening The RI HUB “gatherer” “hunter” “hunter” Business Unit A Central R&D Business Unit B “gatherer” “gatherer” “gatherer” “gatherer” Phase I RI Hub

  12. O R T M R&D SBU RI Project Team SR. MGT. SBU RI HUB Mfg Partner Early Adopter Partner Funding Partner Technology Development Partner Phase I RI Hub

  13. RI Oversight Board RI HUB II RI HUB III RI HUB I Evaluation Bd. Project 1 Project 2 Project 3 Project n Project Advisory Board 1, 2, 3….n Transition Oversight Bds. 1…n (Project Maturation) Phase I RI Hub

  14. The Radical Innovation Learning Curve:Radical Innovation Maturity Radical innovation maturity is defined as the degree to which the organization has embedded a system for initiating, supporting and sustaining RI activities Phase I  RI Maturity

  15. Early vs. Mature RI Capacity Executives act as provocateurs, patrons, and champions to compensate for lack of supportive culture Mavericks try to catch the attention of patrons. Lack of infrastructure and systematic approach. Acquisition of resources is ad hoc. Project teams often expect a budget allocation for funding. Completion of RI tasks, project staffing and champions rely on individual initiative. Communication difficulty makes transition difficult, often flounders, relies on intervention of senior mgmt. E The firm’s leader-ship sets expectations, develops RI culture, estab-lishes facilitating organizational mechanisms (hubs), develops goals and reward systems RI idea hunters seek opportunities. Hubs establish effective evaluation boards. Non-traditional mktg/ biz creation person- nel work with RI technical teams to develop biz model. Learning orientation to project mgmt. used. Individual mgrs. with authority to provide seed fund-ing and internal v.c. organizations provide multiple sources of capital for RI. The firm adopts a portfolio approach to funding RI projects. RI hubs work with HR to develop a strategy for identifying, selecting, rewarding and retaining RI champions, experts and team members Transition team established with funding and senior mgmt support continues development until uncertainty reduced for successful transition. M Phase I  RI Maturity

  16. Phase II Where we are now… Corporate Competency Development for the Management of Radical Innovation Introduction  Phase II

  17. Radical Innovation Research Project: Phase II • Study Objectives • The Companies • Preliminary Results • Organizational Structures • Not 1 Competency... But 3 • Approaches by Culture Agenda  Phase II

  18. I. Study Objectives TO UNDERSTAND HOW ORGANIZATIONS CAN SYSTEMMATICALLY DEVELOP, EVOLVE AND SUSTAIN THEIR RADICAL INNOVATION COMPETENCIES: • What are firms currently doing to develop and support radical innovation, as a distinctive activity, requiring distinctive management techniques? • Leadership and Culture? • Organizational Structure and Interfaces? • Governance and Decision Making? • Specific Processes and Tools? • Skills? • Metrics? • What mechanisms can be developed to enhance org’s RI capability ? • What are the most effective implementation techniques for instituting those mechanisms? Phase II  Study Objectives

  19. Participating Firms • 3M • Air Products • Albany International • Corning • DuPont • GE • IBM • J&J Consumer • Kodak • Mead-Westvaco • Sealed Air/Cryovac • Shell Chemical Phase II Participating Firms

  20. Organization Structure:I. Idea Generator Technology Board (Decides) Case #1 Idea Creation Idea Development Idea Screening External Scanning RI HUB BU’S R&D NBD BU’S/Divisions Case #2 Phase II Organizational Structures

  21. Organization Structure:II. Idea Manager & Incubation Idea review & elaboration Staffed full time External technology acquisition Incubation/Development Keep white space businesses through to initial commercialization Oversee incubation of aligned opportunities too far out for BU’s to handle. Growth Board/Corporate Renewal Team (Advisory) R&D Venture Board/Business Development Council Phase II Organization Structures

  22. Organization Structure:III. Wholistic Sequential Model Results  Organization Structures

  23. Organization Structure:IV. Corporate New Ventures (separate activity) CEO Venture Review Board (CEO, CTO, COO, BU VPs) NEW VENTURES • R&D • BU Related Projects • (1,2, …n) • Ventures Technology New division President Business 1 BU Business 2 Business 3 Phase II Organization Structures

  24. Organization Structure:V. R&D Management System Portfolio Governance Board (CTO, EVPs, & BU Leadership) Exploratory Marketing BU’s aligned projects “caught” by BU development group R&D Directors Projects 1, 2, 3 ….n Exploratory Research Incubator for unaligned business Inventory, Bench Phase II Organizational Structures

  25. Organization Structure:VI. Self-Similar Model Corporate Strategy Governance Board Strategy, Technology, Finance Corporate RI Hub staffed full time (Projects 1….n) – Funded in BUs Divisional Hub -staffed full time -project 1….n Divisional Hub -staffed full time -project 1….n Divisional Hub -staffed full time -project 1….n ………….. Phase II Organizational Structures

  26. Organization Structure:VII. Mirrored Model CEO CTO R&D Staff (Ops, funding, personnel mgmt.) … RI Program 1 & Team RI Program 2 & Team RI Program 3 & Team RI Program 6 & Team BU1 Acceleration activity mirror BU2 Acceleration activity mirror BU3 Acceleration activity mirror Planned Acceleration activity mirror Phase II Organizational Structures

  27. Not just one competency…but 3! Oversee Transitions/Interfaces Discovery Creation, recognition, elaboration, articulation of opportunities. • Incubation • Evolving the • opportunity into • a business • proposition Acceleration Ramping up the business to stand on its own Conceptualization Experimentation Commercialization • Basic Research • Internal Scanning • External Scanning /License/Purchase /Invest • Technical • Market Learning • Market Creation • Strategic domains • Focus • Respond • Invest Phase II  3 Competencies

  28. RI System Capabilities: 4 Approaches • Competency & Readiness Model: • Build technical competencies, and be prepared to sense opportunities as a result and react quickly. • Strategy Driven Model: • Define new technology growth areas, and put resources behind them from start to finish. Coach entrepreneurial individuals to explore in these areas and build external credibility in general science domain …work with BUs to connect to applications. Selection process driven by Sr. Mgmt. • Execution Driven Model: • Identify growth platforms based on independent initiatives underway throughout company, combine them, ramp them up into whole new businesses. • Focus on clarity of strategy & calling on the whole organization to make those businesses happen. • Rational Model: • CR&D is only about RI, & most RI is aligned with current businesses. Tight alignment with current business’ senior leadership, & getting senior leadership to think strategically about the future is key. • Have an alternative structure for unaligned opportunities ( Ventures Group, Bio-Based Materials) & increase Exploratory Rsrch $$ Phase II  Approaches by Culture

  29. Difficult to have all 3 competencies in place COMPETENCY EMPHASIS APPROACH TO RI Phase II  Competency X Cultural Approach

  30. Learning Based Project Management

  31. RI Lifecycle: Dupont Biomax® Detail Phase I  Learning Based Project Management

  32. Comprehensive Framework for Managing Radical Innovation Technical Uncertainty Resource Uncertainty Market Uncertainty Organization Uncertainty Challenge 1: Capturing Breakthroughs Challenge 2: Living with Chaos Challenge 3: Market Learning Challenge 4: Business Model Challenge 5: Resource Acquisition Challenge 6: Transition Mgt. Challenge 7: Individual Initiative Phase I  Learning Based Project Management

  33. Challenge #2: Living with Chaos -- Managing Radical Innovation Projects Keys for Successful Radical Innovation Project Management 2.1 Recruit the “right” people for the team 2.2 Manage internal and external interfaces 2.3 Track Uncertainty Reduction 2.4 Use a learning plan (vs. a business plan)  Learning about Markets for RI (Challenge 3)  Discover the Appropriate Business Model (Challenge 4)  Engage in Resource / Competency acquisition (Challenge 5) Phase I  Learning Based Project Management

  34. 2.1 Recruit the “Right” People for the Team Incremental Innovation Engrg Mfg Acctg Mktg Cross Functional Team VS. Radical Innovation Mfg Acctg Team of Cross Functional Team Members Mktg Engrg Phase I  Learning Based Project Management

  35. Characteristics of radical innovation team members: Superior technical capabilities Inquisitive Not afraid to be different Extremely bright Aggressive Risk taker Entrepreneurial Someone with passion Broadly educated Integrative Likes change Goal-oriented 2.1 Building the Radical Innovation Team Traditional NPD Teams: Cross Functional VS. Radical Innovation Teams: Cross-functional individuals Phase I  Learning Based Project Management

  36. 2.1 Building the Radical Innovation Team Core team of Multifunctional people Phase I  Learning Based Project Management

  37. 2.2 Manage Internal & External Interfaces 2.3 Track and Manage Uncertainty Reduction O R T M R&D SBU RI Project Team SR. MGT. SBU RI HUB Mfg Partner Repeat for t = 1  n Early Adopter Partner Funding Partner Technology Development Partner Phase I  Learning Based Project Management

  38. 2.4 Use a Learning Plan HI Org Unc Res Unc Tec Unc Mkt Unc Learning Plan Discovery Driven Planning Milestone Planning Business Plan Operating Plan LOW Phase I  Learning Based Project Management

  39. Three Dimensions of Project Uncertainty Dimension 1 Organization Categories of Uncertainty Resource Market Technical Unanticipated Dimension 2 Latency Anticipated - Routine Showstopper Criticality Dimension 3

  40. 2.4 Use a Learning Plan Phase I  Learning Based Project Management

  41. 2.1 Clarify Uncertainties –Management Checklist (I)

  42. 2.1 Clarify Uncertainties –Management Checklist (II)

  43. Comprehensive Framework for Managing Radical Innovation Technical Uncertainty Resource Uncertainty Market Uncertainty Organization Uncertainty Challenge 1: Capturing Breakthroughs Challenge 2: Living with Chaos Challenge 3: Market Learning Challenge 4: Business Model Challenge 5: Resource Acquisition Challenge 6: Transition Mgt. Challenge 7: Individual Initiative Phase I  Learning Based Project Management

  44. Learning about Markets: Different Questions INCREMENTAL INNOVATION • How much market share can we grab? • How fast will it grow? • How can we segment the market? • How should we position the product? BREAKTHROUGHAND RADICAL INNOVATION • What applications will this technology enable? • What is the potential impact of this technology on the market? • What technical hurdles must be overcome? (How can we demo?) • What is the order of magnitude potential market size? Phase I  Learning Based Project Management

  45. Market Learning: Different Methods for Seeking Answers INCREMENTAL INNOVATION • Market Research • Written Surveys • Concept Tests • Focus Groups • Secondary Research BREAKTHROUGH AND RADICAL INNOVATION • Past Experience • Demo/Prototype • Professional Meetings/Shows • Internal Networks • Observe Potential Users • Partner with Users • Probe and Learn Phase I  Learning Based Project Management

  46. Two Models of Market Learning TECHNOLOGY VOICE CUSTOMER VOICE • Breakthrough New Products • Visioning the Market • Building/Creating Demand • Incremental New Products • Listening to the Market • Effectively/efficiently addressing existing demand Phase I  Learning Based Project Management

  47. Maximize variation to gain a scan of the landscape High risk taking Experimentation Flexibility Discovery Focus on developing novelty Focus: new connections, new potential partners, new application arenas to maximize options Limit variety: gain deep experience. Refine: focus on a target market Choice/selection Efficiency Implementation Focus: Building loyalty, capturing market share, saturating the identified market, leveraging knowledge of current customers to maximize profits. Market Exploration vs. Market Exploitation Phase I  Learning Based Project Management

  48. GE’s Probing and Learning Process-CT Scanner Critical Events 1971 EMI Introduces CT Head Scanner Mid–Late 1970’s Government Regulations Certificate of Need Breast CT 1975 Neuroscan Head CT Late ’75 Body Prototype 7800 1976 Improved 7800 1977 Body Prototype 8800 1978 Body Prototype 9800 1982 = Probes = Learning Body Prototype 9000 Early ’80s Lynn, Morone and Paulson (1996), “Marketing and Discontinuous Innovation,” CMR. CT Max 1985 Phase I  Learning Based Project Management

  49. Searle’s Probing and Learning Process-Nutrasweet Discovery Sweet Taste Aspartame 1965 • Critical Events • 1970 Cyclamates Banned • 1974 FDA Approved • FDA Stay • 1981 FDA Approved • 1983 FDA approval carbonated beverages • Late ’80s FDA approval spoon-for-spoon Chewing Gum Ice Cream Carb. Beverages Powdered Drinks Cereal Whipped Topping Spoon For Spoon Tables Packet Chewing Gum Ice Cream Powdered Drinks Whipped Topping Tables Packet Chewing Gum Pudding Powdered Drinks Whipped Topping Tables Packet Carb. Beverages Spoon For Spoon = Probes = Learning Phase I  Learning Based Project Management

  50. Comprehensive Framework for Managing Radical Innovation Technical Uncertainty Resource Uncertainty Market Uncertainty Organization Uncertainty Challenge 1: Capturing Breakthroughs Challenge 2: Living with Chaos Challenge 3: Market Learning Challenge 4: Business Model Challenge 5: Resource Acquisition Challenge 6: Transition Mgt. Challenge 7: Individual Initiative Phase I  Learning Based Project Management

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