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Copyright 2007 Markham
Pipeline Construction Innovation
Steve MarkhamNorth Carolina State University
Center for Innovation Management Studies
Copyright 2007 Markham
Personal Introduction
• Professor at North Carolina State University• Research Foundation President for the Product Development
and Management Association • BP’s Innovation Board• IBM’s Innovation Council• Nortel’s Business Venture Group• Innovation consultant for numerous fortune 500 companies• Founder/Director of 8 high technology startup companies• CFO for 5 startups, VP Product Development• Research: innovation, champions• Former Director of CIMS
Introduction
Copyright 2007 Markham
CIMS is a virtual research center
• CIMS network includes over 100 research investigators at 55 universities involved in CIMS research programs
• CIMS is located on the Centennial Campus of NC State
• First national research center (NSF sponsored IUCRC) devoted exclusively to research on the management of technological innovation
• The International Association of Management of Technology (IAMOT) rated the College of Management 1st in Technology Management
• Journal of Product Innovation Management article ranks College of Management 11th in the Management of Technology/ Innovation.
Located in the Research Triangle Park (RTP) CIMS is in one of America’s most dynamic technological environments
Introduction
Copyright 2007 Markham
Agenda
The Case for Innovation Growth The Innovation Cube
Definitions Innovation, Invention, Management, Ideas,
Opportunities, Radical,, IncrementalObjectives
Community: Individual/company/inter-companyChampioning Projects
Building the case Relationships
Selling Ideas Rational Ignorance Getting Approvals
Introduction
Copyright 2007 Markham
We must not always value experience above other attributes, such as a willingness to learn, a willingness to change, and new knowledge.
Phil Hopkins, Technical Director, Professorial Fellow at the University of Newcastle
Making the Case
Copyright 2007 Markham
The Case for Growth!
• Growth is dominating discussions in boardrooms around the world1
• Barriers to competition have fallen precipitously…
• 50% of sales of “successful” companies come from new products/services… over 60% for “most successful”2
• Next round of competitive positioning will be based on innovation
• Only innovation increases the size of the pie – making its mastery vital
Making the Case
1. 2004 Global CEO Survey, IBM Business Consulting Services
2. PDMA Handbook of New Product Development
Copyright 2007 Markham
Management is waking up to innovation
April 24, 2006 edition of Business Week magazine
Making the Case
Copyright 2007 Markham
Unfortunately many managers may be better at controlling costs
• Companies have invested considerable resources and energy in becoming leaner and more nimble
• The quest for productivity, quality and speed has launched a number of management tools: TQM, Reengineering, Six sigma, Outsourcing, etc.
• Senior management is frustrated by their inability to translate gains into sustainable, profitable growth
• The products and services of these firms are indistinguishable
Bit by bit these tools have taken companies away from viable competitive positions
Making the Case
Copyright 2007 Markham
But just “how to” innovate can be a difficult and complex problem
To get ahead of the pack, managers at leading companies are asking:
• How can they move beyond producing only incremental products and create more radical innovations?
• Which emerging technologies have the potential to be disruptive and generate breakout financial results?
• Are there adjacent markets where they can leverage existing platforms?
• What internal capabilities do they need to be successful innovators?
Making the Case
Copyright 2007 Markham
CIMS IM Framework provides a systematic way to think about managing innovation
Making Innovation Easier
It breaks IM down into elements that can be learned, practiced, measured, and improved i.e. managed
Competences:• Idea Management• Market Management• Portfolio Management• Platform Management• Project Management
Levels:• Firm• Industry• Macro-environment
Dimensions:• Strategy• Organization & Culture• Process• Techniques & Tools• Metrics
Copyright 2007 Markham
IM Assessment Tool – Maturity Model Definitions
Five levels of maturity separate ‘Ad hoc’ companies from those that are ‘Optimized’:
1. Ad hoc - Initial state; results from having no concerted focus on innovation.
2. Defined - Organization makes innovation a strategic imperative; resources are dedicated to improving the firm’s IM proficiency.
3. Managed – Manager’s actions reinforce the desired new behavior; their goal is to institutionalize the new innovation business model.
4. Leveraged - Synergies occur; company involves people / competencies from outside the boundary of the firm.
5. Optimized - New innovation model is fully internalized; business results are repeatable and predictable (This state represents CIMS knowledge of leading IM practice).
Determining IM Competence
Copyright 2007 Markham
What are your company’s innovation enemies?
Source: April 24, 2006 edition of Business Week
Your Questions & Challenges
Copyright 2007 Markham
First, some definitions…
Innovation Defined
• Invention is a new device or method derived through experimentation. Often confused with ‘innovation’
• Innovation is turning ideas into a business success; it must always be user focused. Innovation is much broader, it is ‘the commercially successful use of inventions’.
• Innovation Management is a multidisciplinary process that involves Strategy, Marketing, Finance, Economics, Logistics, Operations, etc. to create new and valued products, services, and business models.
• Idea is the recognition that something has a commercial advantage
• Opportunity is an idea grounded in needs and capability to deliver
• Incremental vs Radical
Few words are so ubiquitous…its on the minds of CEOs, government officials, and academic leaders as they search for a way to survive.
Sam Palmisano, IBM CEO
Definitions
Copyright 2007 Markham
Macro-environment
For incremental innovations, problems are structured at the corporate level and information flows outward to the organization
Boundary Spanners
GatekeepersProject-level
Decision Makers
Small Groups of Individuals
Boundary Interface Gate-keeping Interface Project Interface
Front End of Innovation
Corporate Decision Makers
Problems and opportunities are identified and directed to individuals/small groups for information search
Reid and de Bretani, The Fuzzy Front End of New Product Development for Discontinuous Innovations: A Theoretical Model. Journal of Product Innovation Management, May 2004.
You are here
Definitions
Copyright 2007 Markham
Corporate Decision Makers
However, for breakthrough innovations information flows inward and decision making is individual and fragile
Macro-environment
Boundary Spanners
GatekeepersProject-level
Decision Makers
Greatest source of discontinuous technologies/ideas
Small Groups of Individuals
Boundary Interface Gate-keeping Interface Project Interface
Idea Management
Search for new technologies; intuit unaddressed markets
Determine value to organization; reduce uncertainty
Reid and de Bretani, The Fuzzy Front End of New Product Development for Discontinuous Innovations: A Theoretical Model. Journal of Product Innovation Management, May 2004.
Definitions
Copyright 2007 Markham
Opportunities for Partnership Difficulties
• One partner has interest in radical innovation the other wants incremental
• One partner wants to talk about ideas, the other wants to talk about opportunities Neither partner knows the difference
• A partnership agreement includes a “development” project that could be an invention or an innovation project
• How Partners ability to go at the same speed differs• Boundary Spanners and Gatekeepers do not know
their roles – can’t talk to their partners or internally to their own companies
Definitions
Copyright 2007 Markham
Agenda
The Case for Innovation Growth The Innovation Cube
Definitions Innovation, Invention, Management, Ideas,
Opportunities, Radical,, IncrementalObjectives
Community: Individual/company/inter-companyChampioning Projects
Building the case Relationships
Selling Ideas Rational Ignorance Getting Approvals
Copyright 2007 Markham
Objectives
Build an Innovative Community Around On-Shore Pipeline Construction Innovation at this conference Innovation between companies Innovation inside your company
Objectives
Copyright 2007 Markham
Innovation at this Conference
Innovation in the next 36 hours – How do we use our relationships to increase value by jointly benefiting each other through adoption of new practices?
This is not a detailed technical discussion Not creativity by itself Not invention alone Not just new “ideas” Nor is it a “what are all the problems” session This is not just a brainstorming workshop This is a “how do we collaborate” discussion
– Individually, company, collectively
. . . But may include all of
these
Objectives
Copyright 2007 Markham
Individual Participation at this Conference
Open discussion – Offer ideas without fear of being assigned to do it– Talk about innovation without fear of competition– Suggest how we can work together without fear that your
company can actually deliver it– Talk about early concepts without fear of looking bad– Think about future opportunities without skepticism of the
past– Participate without worrying about language barriers– Help set expectations about what can be done
Innovation is a difficult choice we make
Objectives
Copyright 2007 Markham
Innovation Between Companies
Requires a community (This meeting?) Mutual interest Willingness to share
Requires trust Setting and meeting expectations Reassess what is competitive and what is cooperative
Requires a strong reason for doing things differently Risk Resources
Discussion: What do you hope to get out of this meeting?– System approach – not just doing things good for your
company but shifts problems/costs to others– No use to do it alone – needs other parts of the supply chain to
make an innovation work– Innovation Partners?
Objectives
Copyright 2007 Markham
Innovation in Your Company
Know what is needed to participate in the community
What is the advantage for your company Not obvious at first
– Automotive (Paint) / Electronics (SRC)
Identify what is negotiable and what is not
“Sell” innovation (building a community) to others in your company Discuss the obstacles
– Trust– Risk– Resources / Priority
Objectives
Copyright 2007 Markham
Res
ou
rces
Level of Development
ExistingResearchResources(Technical and Market)
ExistingCommercialization
Resources
Discovery Early Development Commercialization
Decision space between discovery and
development
Used by permission
The Valley of Death
The ProblemC
Copyright 2007 Markham
Res
ou
rces
Level of Development
ExistingResearchResources(Technical and Market)
ExistingCommercialization
Resources
Discovery Early Development Commercialization
Used by permission
Use relationships to prepare case and sell the opportunity
Championing Projects
The Problem
Decision space between discovery and
development
Copyright 2007 Markham
Rational people protect
their ignoranc
e carefully
Rational Ignorance
People can’t be experts about everything They are selective about what they care to be
knowledgeable about
Yet . . . People have opinions about everything They manage the world by habit
When people do not accept your ideas its because of rational ignorance They don’t know the value of your idea
Rational Ignorance
Copyright 2007 Markham
. . . but who is Ignorant?
Decision makers are rationally ignorant of the value of the idea
The inventors are rationally ignorant about how decisions are made
Effective selling requires knowledge of both sides of the decision
Rational Ignorance
Copyright 2007 Markham
Combined Ignorance
Discussion:
What don’t decision makers know that they should?
What don’t innovators know that they should?
How are these gaps closed?
Rational Ignorance
Copyright 2007 Markham
Selling Closes the Gap
All ideas must be sold to overcome rational ignorance FIRST - Selling provides a reason to transfer an idea
from a habit, relatively uninformed state, to an actively considered concept
SECOND – Selling provides salient information about the idea to decision makers. Requires both the decision maker and innovator to make sense.
Selling Ideas
Copyright 2007 Markham
Who is the intended customerWhy is your IDEA a necessity to them
Cost savings, Production improvement, HSE.
What is the decision process for adoption Who, Criteria, Process, Timing
Often there is an over emphasis on
criteria
Opportunity: Identify Your Company NeedsOpportunity: Identify Your Company Needs
Selling Ideas
Copyright 2007 Markham
Why do they need it?
Performance improvement (10X)Cost reduction (30%)Something new and valuable
Quantify in salient terms
Featuresvs
Benefits
Selling Ideas
Copyright 2007 Markham
Targets
Who are the decision makers Talk their language
Not technical capabilities or features but benefits assuming it works; simplify your information
Selling Ideas
Copyright 2007 Markham
Compelling Case• Explain so people can see
the value• Provide whole picture to
decision makers• Create an “object of
support”• Get other people to help
Elevator Pitch• Explain their opportunity in
less than 2 minutes
“Killer” Graphic• Make value obvious • Simple representation• Variables and relationships
SellSelling tools• Selling Tactics• Target identification• Safety Tips
The Story – the idea as a: Benefit, Problem, Solution, Opportunity, Indispensable, Interesting, Dramatic . . .
Value PropositionCompared to base line
Opportunity: Identify Your Company Need Selling ToolsSelling Tools
Selling Ideas
Copyright 2007 Markham
Safety Tip
Never go into a meeting to get an approval The meeting must be a formality of the decisions that
have already been made– Get buy in from decision makers before meeting– Count votes before the vote– No surprises
Don’t beg, grovel or tantrum Be willing to walk away Keep being genuine
Selling Ideas
Copyright 2007 Markham
Breakthrough Innovation - Objectives
Innovative companies will be able to: Create and evaluate innovative product ideas that are based upon unique
technology capabilities, and link these to partners. Research both the technology and the partner opportunity efficiently utilizing
an information-gathering hierarchy. Research and evaluate the business opportunities on operational and
strategic dimensions to uncover ‘fatal flaw’s at an early stage. Develop a business model and commercialization strategy for the best
opportunity. Build an appropriate business case for innovations, venture, alliance or new
line of business, with the case tailored to the appropriate decision-makers.
Conclusion
Copyright 2007 Markham
• Work as a project team -- locally or remote. Coordinate multiple, interdisciplinary tasks in order to achieve innovation in an action-oriented business setting. This includes familiarization with critical management issues such as governance and performance measurement.
• Conceive, develop and market innovations. Lead innovation projects including the design of the innovation team and use of effective performance metrics. This includes proficiency in quantitative and qualitative techniques in market research, technology commercialization, and portfolio optimization.
• Wire the organization for success. Participants will be able to assess the drivers of an organization’s culture, determine corrective actions, and facilitate organizational change. This includes dealing with the tougher HR issues that are often pushed under the rug.
• Create the case for change. Initiate the development of specific execution strategies to better align innovation activities with the firm’s business strategy. This includes being able to objectively assess the maturity of their own organizations IM competence.
i.e. you will be able to increase your organization’s capacity to innovate.
Result = acquiring new behaviors - collectively
Conclusion