Making Innovation Work: How to Manage It, Measure It, and Profit from It [Englisch] [Gebundene Ausgabe]

A book's subtitle is often very informative and that is certainly true of this book. I also appreciate the fact that its co-authors explain why their book was written, what its key points are, and how its material has been organized. According to Davila, Epstein, and Shelton: "The truth is that there is not much that is truly new about innovation. The basics have not changed for centuries. However, we have become smarter about managing innovation." There is a compelling need in 2005 to view it from different perspectives. The co-authors suggest three:

"Innovation, like many [other] business functions, is a management process that requires specific tools, rules and discipline -- it is not mysterious."

"Innovation requires [accurate] measurement and [generous] rewards to deliver sustained, high yield."

"Companies can use innovation to redefine an industry by employing combinations of business model innovation and technology innovation."

It is impossible to exaggerate the importance of these three separate but interdependent perspectives when attempting (struggling?) to determine how to manage, measure, and profit from innovation. The co-authors have obviously done some innovative thinking about innovation, especially in terms of its practical applications. The most valuable business books tend to be those whose narrative is driven by a question. In Jim Collins' Good to Great, "How can a good company become a great company?" In Jason Jennings' Think Big, Act Small, "What traits do America's best performing companies share?" In this book, the co-authors seem to be primarily interested in answering two questions: "Why is innovation a necessary ingredient for sustained success?" and "Why is innovation an integral part of [any] business?" When responding to these two questions from the three aforementioned perspectives, they reveal the most effective strategies and tactics for managing, measuring, and profiting from innovation.

There is overwhelming evidence that almost all process simplification initiatives have failed. Why? Several reasons but the most common one seems to be that the process by which change agents attempted to simplify process was itself too complicated. "Old wine in new bottles" is still old wine. As with process simplification, the ultimate result -- quality of wine -- also requires a sequence of initiatives and is determined by many factors which include ingredients (i.e. grapes), soil, climate, timing, etc. The same is true of innovation initiatives. I wholly agree with the co-authors that "how you innovate determines what you innovate." So to repeat: In 2005, there is a compelling need to view innovation from different perspectives. In other words, to think innovatively about innovation. Obviously, easier said than done. Much easier. Those initiatives are most effective when they involve communication, cooperation, and collaboration between and among everyone involved. Hence the importance of what Davila, Epstein, and Shelton offer in this book.

As I read their informative and thought-provoking book, I was again reminded of the fact that the same principles which they cite and then explain have -- for decades -- guided and informed the pragmatic innovation of countless teams and even communities. For example, those which Warren Bennis and Patricia Ward Biederman examine in their book, Creating Genius: the Disney studios which produced so many animation classics; Xerox's Palo Alto Research Center (PARC) which developed the first personal computer; Apple Computer which then took it to market; those in the so-called "War Room" who helped to elect Bill Clinton President in 1992; the so-called "Skunk Works" where so many of Lockheed's greatest designs were formulated; Black Mountain College which "wasn't simply a place where creative collaboration took place" for the artists in residence from 1933 to 1956, "it was about creative collaboration"; and Los Alamos (NM) and the University of Chicago where the Manhattan Project eventually produced a new weapon called "the Gadget."

Those who share my high regard for this book are urged to check out the aforementioned Organizing Genius as well as Evan I. Schwartz's Juice: The Creative Fuel That Drives World-Class Inventors; three volumes in the Harvard Business Review Paperback Series on Breakthrough Thinking, Innovation, and The Innovative Enterprise; Tom Kelley's The Art of Innovation: Lessons in Creativity from IDEO, America's Leading Design Firm; Seeing What's Next: Using Theories of Innovation to Predict Industry Change co-authored by Clayton M. Christensen, Scott D. Anthony, and Erik A. Roth; and The Design of Things to Come: How Ordinary People Create Extraordinary Products co-authored by Jonathan Cagan, Craig M. Vogel, and Peter Boatwright.

Many CEOs speak of the need for innovation in their companies, but few know how to sustain such a nebulous culture especially during economic downturns. There is a commonly held perception that allowing such creativity necessitates a laissez-faire atmosphere, but co-authors Mark Epstein, Robert Shelton and Tony Davila offer the counterintuitive belief that a culture of innovation requires focused leadership, creative but viable metrics, an emphasis on business models rather than individual products and an incentive program that rewards the high-stakes innovation that is lacking within a company. It's a relatively daring concept but a vital one well researched and succinctly presented by this trio - Epstein and Davila are academics teaching at Stanford and Harvard and Shelton is a managing director of Navigant Consulting's Innovation practice.

What becomes clear from this treatise is that innovation is a process that only starts with creativity, which includes idea generation, prototyping, experimentation and idea selection. But it needs to end with value capture, which encompasses project management, market planning, manufacturing, and commercial rollout. Often a company is good at either end of this spectrum - creativity or value capture - but not both. Epstein, Shelton and Davila assert that it is not an either-or proposition that companies need to pay attention to both to succeed in the long term.

The co-authors credibly attribute one of the failures to sustaining innovation to what they call "rampant incrementalism". How they define this concept is the idea that people get so focused on incremental innovation that they cut off the bigger, more revolutionary ideas that could reap bigger rewards. The key is to have the right balance in the product portfolio - enough small projects to bring in steady revenue in order to support riskier projects that have the potential to produce the huge profits if they succeed. The fulcrum will be how much risk a company is willing to take and for someone to push the envelope to realize that optimal balance.

The co-authors go as far as anointing a chief innovation officer, whose role is to stimulate the desired behavior companywide and eliminate constraints by integrating the technology and the business-model thinking. The new "CIO" can help the company focus on three particular aspects of the innovation rules:

-- Networks that link the internal and external partners in the collaborative activities required to bring about innovation

-- Balance in the processes that deliver creativity and capture value, from idea generation to commercialization

-- Metrics that provide feedback and guidance to management

The third element is the most intriguing component as it is essential in ensuring innovation thrives given that true innovators must be rewarded. Deciding what to measure is the most critical step. For example, many companies only measure whether projects are on time and on budget. But proper measurement has to occur at the company-wide level. The co-authors stress that heretofore nebulous factors need to be quantified, for example, measures around questions such as "Am I having the right type of ideas, selecting the right portfolio of products, and delivering on the innovations and the ideas that the organization is coming up with?"

Many companies measure results in the traditional sense by using finance-based metrics. But Epstein et al state convincingly that non-financial measures are preferable because they give better real-time, granular evaluations of progress and likelihood of success. Creating the right innovation model and measuring its performance are crucial.

The best advice in the book is reserved for the CEO, who has to take a good, hard look at the company and assess the innovation inputs, processes, outputs, and outcomes needed to meet business objectives. The CEO then needs to populate those four categories with measures that make sense for the company's innovation portfolio, at which point the creativity and value capture, culture, and overall business strategy will follow suit. Epstein, Shelton and Davila have convinced me that innovation has to start at that fundamental level to succeed.

There is a dire need for a fresh look at innovation.

Contrary to popular belief, the authors assert, much of what is held as common wisdom regarding how innovation is managed is wrong. Tony Davila, a faculty member of Stanford's Graduate School of Business, Marc Epstein, a research professor at Rice University's School of Management, and Robert Shelton, managing director of Navigant Consulting's Innovation practice write that contrary to popular belief, innovation:

* Does not require a revolution.

* Is not alchemy

* Does not require a "creative" culture.

* Is not solely about processes and stage-gate tools.

* Does not focus exclusively on new technology.

* Is not needed in copious quantities.

The authors write that innovation, like many business functions, is a management process that requires tools, rules and discipline. It needs to be measured and promoted if sustained, high yields are going to be delivered. It is a necessary ingredient to safeguard an organization's tangible and intangible assets. In short, it is a vital and must be managed.

To do so, the book identifies seven rules:

1. Strong leadership encourages value creation.

2. Innovation is a vital part of an organization's mentality.

3. Innovation matches the organization's business strategy.

4. Creativity and value creation are balanced.

5. Seek to neutralize forces that discourage good ideas.

6. Networks, not individuals, are the building blocks of innovation.

7. Metrics and rewards make innovation manageable.

Execution of innovation is not difficult, the authors conclude. It is similar to other management activities, such as manufacturing or financial control. There are no secret formulas. This book replaces the myths and half-truths with clear and concise thinking on how to manage and execute innovation.