Tools for Innovation Management

1. Tools for Innovation Management Prasada Reddy Lund University, Sweden

2. Tools for Scanning Internal Environment • Audits • What is an audit? • - inventory of resources, assets, systems and procedures of an organization; • What is the purpose? • - identify what a firm has • - identify how firm utilizes them • - improve/learn - basis for betterment • - provide background for identification of core competences.

3. Audits • How to use an audit? • - Audit collects data and is based on questionnaires designed mostly ad hoc. • - Audits need to be related to the objectives of the firm. • - Audits can be performed for the entire organization or just for parts of it (departments).

4. Types of Audits • Skills/Organizational Capabilities Audit • Technology/Innovation audit

5. Organizational Capabilities 1 • Source: Ulrich, D. & Smallwood, N. (2004) • What people respect is not how they are structured or their specific approaches to management, but their capabilities - an ability to innovate or to respond to changing customer needs. • Such ‘organizational capabilities’ are key intangible assets (one cannot see or touch them). But they make all the difference in the world when it comes to market value.

6. Organizational Capabilities 2 • Organizational capabilities - the collective skills, abilities, and expertise of an organization - are the outcome of investments in staffing, training, compensation, communication and other human resource areas. • They form the identity and personality of the organization by defining what it is good at doing and what it is. • They are stable over time and difficult for competitors to imitate. • They are not easy to measure.

8. Organizational Capabilities 3 • 1. Represents a person’s functional competence, such as technical expertise in marketing, finance or manufacturing. • 2. Refers to a person’s leadership ability - to set direction, to communicate a vision or to motivate people. • 3. Comprises a firm’s core technical competencies, e.g. Financial firm’s risk management knowledge. • 4. Represents an organization’s underlying DNA, culture and personality and may include such capabilities as innovation and speed.

9. Organizational Capabilities 4 • A firm typically excel in as many as three of the following 11 capabilities, while maintaining industry parity in others. • Talent (attracting, motivating and retaining); Speed (in making changes); Shared Mind-Set and Coherent Brand Identity (employees and customers have positive images); Accountability (high performance); Collaboration (working across boundaries); Learning (generating ideas); Leadership; Customer Connectivity; Strategic Unity; Innovation (new in content and process); Efficiency (managing costs)

10. Organizational Capabilities - Audit Process 1 • 1. Determine which part of the business to audit - division, region or the entire company. • 2. Create the content of the audit - adapt the 11 generic capabilities listed to the organization’s requirement.

11. Organizational Capabilities - Audit Process 2 • 3. Gather data from multiple groups on current and desired capabilities. • - For a 90-degree assessment, collect data only from the leadership team of the unit under audit. Quick, but deceptive as leaders’ self-reports may be biased. • - For a 360-degree assessment, collect data from multiple groups within the firm. Different groups may tell different stories, but can provide insights that might otherwise be missed. • For 720-degree assessment, collect data from internal and external groups such as investors, customers and suppliers.

12. Organizational Capabilities - Audit Process 3 • 4. Synthesize the data to identify the most critical capabilities requiring managerial attention - Look for patterns in the data and focus on not more than three capabilities required to deliver on strategy goals. Identify those with most impact and the easiest to improve. • 5. Put together an action plan with clear steps to take and measures to monitor, and assign a team to the job of delivering on the critical capabilities. • - Actions - coordinating education or training events, setting performance standards, creating task forces, investing in technology, etc.

13. Organizational Capabilities - Audit Process 4 • 4. Synthesize the data to identify the most critical capabilities requiring managerial attention - Look for patterns in the data and focus on not more than three capabilities required to deliver on strategy goals. Identify those with most impact and the easiest to improve. • 5. Put together an action plan with clear steps to take and measures to monitor, and assign a team to the job of delivering on the critical capabilities. • - Actions - coordinating education or training events, setting performance standards, creating task forces, investing in technology, etc.

14. Organizational Capabilities - Audit Process 5 • Lessons Learned: • Get focused; Recognize the interdependence of capabilities; Learn from the best; Create a virtuous cycle of assessment and investment; Compare capability perceptions; Match capability with delivery; Avoid underinvestment in organization intangibles; Don’t confuse capabilities with activities.

15. Technical Innovation Audit 1Source: Chiesa et al. (1996) • Core Processes: • Concept generation - identification of new product concepts • Product development - taking the innovation from concept, through development and transfer to manufacturing and use • Process innovation - the development of innovations in manufacturing processes • Technology acquisition - the development and management of technology per se.

16. Technical Innovation Audit 2Source: Chiesa et al. (1996) • Enabling Processes: • Resources - the deployment of human and financial resources • Systems and tools - the effective use of appropriate systems and tools • Leadership - providing the top management leadership and direction.

17. Technical Innovation Audit 3Source: Chiesa et al. (1996) • Detailed Audit • Assessing the current innovation practice and performance; • Identifying the gaps between current and targeted practice and performance and the reasons for gaps; • Defining the action plans needed to close these gaps.

18. Technical Innovation Audit 4Source: Chiesa et al. (1996) • Audit - Two Dimensions: • 1. Process audit: • - the degree to which there are appropriate business processes in place; • - the deployment of good practice - the breadth of use in the company; • The degree to which each practice meets known best in class or world class standards.

19. Technical Innovation Audit 5Source: Chiesa et al. (1996) • Audit - Two Dimensions: • 2. Performance audit - • Focus on the outcomes: i) of each individual core and enabling process; ii) of the overall process of technological innovation; and iii) the impact of this on competitiveness. • Produced quantitative results that facilitate comparison between and within organizations and monitors trends. • Weaknesses - insufficient as basis for learning. It does not specify extent of gaps or how to cover gaps.

20. Technical Innovation Audit 5Source: Chiesa et al. (1996) • Innovation Scorecards: Process Audits • Provide a rapid overall assessment of the practices adopted with respect to the known best practice and whether or not the required managerial processes are in place. • The basis of the score card is a description, for each process of innovation, of the characteristics of good practice and poor practice. • This description can be translated into scales against which companies can review themselves.

21. Technical Innovation Audit 6Source: Chiesa et al. (1996) • Performance Audit • 1. The performance of each core and enabling process that is relevant for firm; • 2. The global result of the innovation process, that is how it impacts on the competitive ability of the firm. • - the performance of innovation in financial terms; • - the impact of the innovation on the competitive performance of the product portfolio to which the innovation belongs; • - the contribution to firm’s process of learning.

22. Technical Innovation Audit 6Source: Chiesa et al. (1996) • Testing the Audit Tool: • Functionality - i) test the basic functionality of the tool and the functionality of the support process; and ii) to test the degree to which the tool was generic and thus appropriate for firms from different sectors, sizes and technologies. • Usability - i) the degree to which users are able to use the tool properly without support from experts; and ii) clarity of language and terminology. • Usefulness - Short term, whether companies found it useful? Did it lead to effective action plans? Long term - measuring the effectiveness of the programs that resulted from the assessment.

23. Group Exercise • Conduct 1 Audit in a Firm • Make Analysis of the results - Graph • Prepare presentation • Include advantages and inconveniences of a) the technique; and b) the exercise.