IMPERATIVE DEFINITION

NGM companies must develop and maintain an environment that promotes, fosters, and rewards creativity and innovation. Success in the next generation requires a progressive innovation strategy that moves from being an art, as it is currently, to being a systematic discipline. Achieving this will permit companies to recreate innovation as a sustainable process, not dependent only on the creativity and determination of individuals who come and go. Innovation then would become a process on which company executives could rely and use to make rational investment decisions.

“Every organization - not just businesses - needs one core competence: innovation. And every organization needs a way to record and appraise its innovative performance.”¹ Companies are beginning to realize that ideas can come from anyone in the organization. However, there are problems that stand in the way of benefiting from these ideas because of a lack of vision, policy, practice, process, and management commitment to innovation:

• Most employees do not know that their ideas are welcome and needed.
• Management does not know how to manage the flow of ideas.
• Ideas that do get through to management are seldom implemented.
• Businesses of today have many challenges to face, including:²

• Accelerating rates of change
• increasing levels of competition
• Globalization of business competition
• Rapid technological change
• A more diverse workforce
• Resource shortages
• The transition from an industrial to a knowledge-based society
• Unstable market and economic conditions
• Increasing demands of constituents
• Increasing complexity of the business environment.

Through these changes, innovation emerges as the key competency that must be managed to lead companies into the next generation. In this new environment, companies must make strategic decisions as to where to place themselves on the Continuum of Enterprise Approach to Change and Innovation.³ (figure 1.0-1).

Drucker, Peter Fl, “The Information Executives Truly Need,” Harvard Business Review, January-February 1995.

Higgins, James M., Innovate or Evaporate: Test and Improve Your Organization’s IQ - Its Innovation Quotient, The New Management Publishing Company, 1995, pp.5-8.

Adapted from meeting notes of the Business Practices Thrust Team of the Next-Generation Manufacturing Project, 25 June 1996.

INNOVATION MANAGEMENT
A Next-Generation Manufacturing Imperative
January 1997

Prepared By:
The NGM Business Practices Thrust Team

EXECUTIVE SUMMARY

Innovation is the creative process of improving everything from business practices to the technology used to develop and deliver products and services to the development of the products and services themselves. Modern innovators have gone from creating products to creating solutions. Innovative solutions then become platforms for future innovations.

Innovation tends to flourish where fundamental constraints are lifted and/or where a sense of urgency is present. For a company to position itself competitively in the Next-Generation Manufacturing (NGM) environment, it is essential that everyone in that company be involved in modern innovation strategies and practices.

Why is it Important?

As the level of competition becomes more intense due to accelerating change in the global business environment, the ability to stay ahead of the wave is increasingly important. The NGM company must quickly generate solutions through use of evolving innovation techniques.

Key Concepts

Changes initiated to make people more motivated at work also serve to increase the level of innovation. People are the most critical element in the innovation process.

NGM companies must create an organizational structure, culture, and measurement and reward systems that encourage innovation. This includes placing value on risk-taking and learning from failure in the creative process of innovation.

What’s New?

• Innovative behavior can be taught and learned.
• Companies that apply a systematic approach and rapidly make use of emerging technologies dominate their markets. These companies maintain their competitive position by fostering an innovation-driven culture.
• Evolving information technology brings new opportunities to light through innovative knowledge management.
• Companies that understand the value of long-term effects of good innovation policy restructure their processes to facilitate strategic changes.

Action Recommendations

1. Individual companies can develop a process to promote and reward innovation throughout all the operations of the business. They can require innovation as a prerequisite for management positions and form or join consortia to develop mechanisms for stimulating innovation I all facets of enterprise operations - market development, product development, process engineering, manufacturing, supply chain management, customer service, etc.

Industry and academic associations and consortia can embrace forward-looking, cross-cutting programs like NGM as a way to institutionalize innovation in approaching problems that are beyond the ability of any one organization to solve.

ACTION PLAN RECOMMENDATIONS

Only two decades ago, the concept of producing defect-free products (zero defects) was at best a slogan - something to rally around, certainly not attainable or even necessary. Today it is part of the price of admission for manufacturing companies approaching six sigma (3 parts per million) quality levels; some are even beginning to take aim at 3 parts per billion! Fast cycle times, still a discriminator in the mid - 1990’s, is recognized by the pacesetters as a common trait of the NGM community. How were these kinds of improvements in achieved? Through innovations in how work was done, both on the factory floor and in the development process. The NGM company will look, think, and do work differently than today’s manufacturer and will be continuously changing.

The ability to innovate not only products and services, but also process, strategies, organizational structures, and enterprise designs, and to rapidly change them, will become the next discriminator, and perhaps soon the price of admission for U.S. manufacturers in the world market.

“It is important that comparative studies (between countries and companies) focus on the search for factors which determine innovation excellence, in particular properties such as ‘innovation power to initiate innovations’ and ‘effective implementation.’”39 Development of any innovation strategy should be viewed from both the micro- and the macro-economic levels.

Action Recommendations for Companies

There are a series of initiatives that can be taken from the individual company perspective, albeit with the “extended enterprise” in mind. A dynamic economy demands participation on regional, national, and global scales in order to optimize results. Thus, there are actions from the larger perspective that, if implemented, could directly impact the quality and effectiveness of local and internal innovation efforts.

One way to begin is to calibrate innovation capacity with the Knowledge innovation Litmus Test:⁴⁰

1. Is one person chartered with overall responsibility to manage the corporate-wide innovation process?
2. Are there performance measures - quantitative and qualitative - to assess your innovation process?
3. Do your training/educational programs have provisions to incubate and spin-out new products and businesses?
4. Does your local, regional, or international presence operate as a distributed network of expertise that learns from as well as distributes it to customers?

• Is there a formal intelligence gathering strategy to monitor the positioning of both current and potential competitors?
• Does the rate of production of new products and service exceed the norms of your industry and create new markets in which you can excel?
• Has a strategic alliance manager been designated to create and manage the network of partnerships and joint ventures to leverage your firm?
• Does your marketing image portray an organization with the capacity to create and move ideas into the marketplace to make your customers successful?
• Have resources be allocated to articulate a compelling vision internally and share company expertise externally through publications and participation in major forums?
• Is your computer/communications capability treated as learning tool for internal conferencing and external business leverage on the World Wide Web?

Cozijnsen, Anton and Vrakking, Willem, eds., Handbook of Innovation Management, Basil Blackwell Ltd., 1993, p.12.

http://www.entovation.com, Copyright 1996 Entovation International, All rights reserved.

The following ten steps can enable a company to see where it is on the scale of innovation management capability and how it can establish a strategy. These steps represent various aspects of the innovation process: creation, conversion and commercialization. They are not intended to be all-inclusive, but are a starter set of ways to think about the innovation process as a system of interdependent activities. As with any corporate-wide initiative, companies must establish key players, agree on a framework for dialogue, create an implementation strategy (ideally, after stakeholders have been interviewed), manage the process, evaluate results, and be open to new ideas and unexpected business opportunities.

1. Foremost, the innovation process should be made explicit by identifying a corporate officer and cross-functional team responsible for the process. Innovation can be stated as a core value of the firm, thereby ensuring that all participants in the process recognize its importance.
2. Once the process is defined, including the roles of all stakeholders, attempts should be made to define the metrics of progress - both tangible and intangible - that define the performance of the system. Recognize that metrics difficult to define may be the best measures of success. Develop the “business case” based on a new value proposition that promotes creation, exchange, and application of new ideas. Develop key indicators and early warning signals that might be tracked in a periodic review. Be attentive to what incentives can be built into the system to foster the behavior necessary in an innovative environment.
3. Take stock of the education/training capability of the firm and form where its ideas originate. Consider the implications of a “real-time” learning environment that may not be classroom-based. Provide an infrastructure the incubation of new business ideas that might develop into products/services and even new business that might contribute to the bottom line.
4. Consider your local, national, regional, and worldwide presence. How might these locations be converted into a distributed learning network that treats stakeholders, including customers, as sources of knowledge?
5. Pay attention to the competitive environment, but ensure your radar is wide enough to capture potential competitors who may not even be a factor in your industry today. Ensure that any intelligence activity is designed as a feed-forward system to those with the need to know. Where appropriate, rely on the finest computer and communication technology available to facilitate the process.
6. Review the metrics of your own product and service development - for example, the number of new products/services fielded in a given period as a percentage of sales. Perform a serious analysis of the knowledge economy and the implications for your business. Consider some new adaptations that capitalize on knowledge-based products and the knowledge delivery channel.
7. Take stock of the variety of alliance - research, joint venture, cooperative marketing, etc. Determine how they are being managed in ways that are consistent and provide documentation of successes and failures. Consider the portfolio of research alliances developed by your competitors, their inherent strategy, and potential impact on your performance.
8. Review your media/advertising strategy to see how it maps to the intellectual capacity and innovative environment you have or seen to establish. Review how marketing and public relations strategies are linked with other functions in the innovation process in ways that promote simultaneous development and optimize resource leverage.
9. Rethink your leadership strategy in an age that demands the visible sharing of knowledge. Determine your sphere of influence and how to best leverage the talents of your workforce.
10. Assess your technical infrastructure for internal and external communication (e.g., computers, software, multimedia, Intranets, Internet, videoconferencing, collaborative applications, etc.) capability and effectiveness of its management. Consider the overall behavior necessary in the innovative environment and determine if the systems afford opportunities to manage the corporate memory, enhance electronic dialogue, deliver on-site training, and learn from participation for continuous process improvement.

In plotting their course of action to embrace innovation management as a core competency, companies need to remember to:

• Place innovation management as an explicit priority in all strategic planning
• In managing change, ensure that the people within the company are motivated to enhance innovation
• Ensure that the concepts of innovation are crisp and clearly linked to business success throughout the company
• Make clear to all the company that innovation applies to all work, not just product and manufacturing processes
• Develop and implement metrics and performance measures that encourage innovative team work
• Avoid punishing failure when attempting constructive innovation
• Take into account the importance of innovation when designing and implementing Extended Enterprise relationships

Action Recommendations for Industry and the Nation

As with all of the NGM Imperatives, collective action by industry, government, and the academic community is required to drive the process of change and attack cross-cutting infrastructure barriers. A national strategy for innovation requires that the nation focus on:⁴¹

• Preserving core competencies in science and a professional cadre of scientists and engineers
• Facilitating ongoing technical innovation (e.g., the process by which knowledge is translated into technology)
• Building connectivity among the performers and users and knowledge and technology - a requisite of complex innovation systems
• Ensuring a policy environment that encourages and rewards investment in innovation
• Supporting an educational process in which individuals “learn how to learn” to adapt flexibly to change.

Note: This is the introduction to a major report produced for the ‘Innovation Imperative Paper’ for the Next Generation Manufacturing (NGM) project for which Debra M. Amidon was a co-author.

© 1996-2001 ENTOVATION^® International. All rights reserved.