Enabling Systems, Practices, And Tools: The Art Of Innovating

The choice of practices and tools should always be informed by the organization's strategy and business needs. Overall, however, there are a number of methods that are important enablers of IM under the IC concept. These are presented next in three groups by reference to the IC they are designed to tap.

Human Capital—Idea Banks

Intellectual capitalism resulted in the multiplication of the number of ideas needed for successful projects. Research has shown it takes 3,000 ideas to come up with a good one for commercial­ization.48 It is not the quantity alone but also the quality that is directly affected by the source of ideas. Research has shown that 89 percent of successful new products are market driven as opposed to 11 percent that are technologically driven. Thus, an idea that may seem great in the lab or the boardroom with considerable technological (or social) push in its favor is no guarantee of market success. In contrast, ideas have more potential in achieving market success when gen­erated by employees who have more contact and thus knowledge about market needs. That emphasizes human capital as the richest source for ideas for new products as well as new ways of doing business.

To tap into human capital idea banks emerged in many organizations to collect ideas from everyone in the organization, filter these ideas for viability, and then transfer them to a business unit that can commercialize them. In cases in which the ideas generated are noncore and don't relate to any existing business, the idea bank can form a proj ect team, and later maybe a new busi­ness, to commercialize the idea or transfer it to the venture capital unit if one exists. An example is General Motors' (GM) idea bank, which GM calls "New Ideas Database."49 Ideas for new prod­ucts and new features are solicited from everywhere in the organization as well as suppliers. The ideas are entered electronically into an idea database, which a group of people from all functions and brands can access. This group evaluates the submitted ideas and then, if approved, transfers them to the appropriate engineering group for further development. More focus is introduced by providing that any new ideas that relate to the design of existing vehicles are transferred to a newly established department called Design and Technology Fusion where a number of "Creative Engineers" work on prototype development (see also about safe investments).

Though attractive, idea banks suffer from a number of shortcomings. Being removed from the NPD process with no transparent selection criteria, it seems to be on the fringe like the venture capital unit rather than a system engrained in daily business. Being a voluntary system, idea banks as described create the impression that employees' ideas are not really required, though welcomed. Thus, idea submission becomes more of a luxury activity of secondary importance to getting the job done. As such, it merely provides an outlet for employees who feel the urge to share their ideas, while shedding doubt on the seriousness that the organization accords to employee-initiated innovation.

To be more effective, idea banks should proactively encourage idea submission, by setting submission quotas or allowing employees free time to experiment with implementing their ideas. Otherwise, idea banks may undermine the empowerment promise and "we value your ideas" statements that top management make now, if seen as a charade. To avoid appearing apathetic to employee' ideas, Motorola uses an interesting method. Rejected ideas are placed in a database that later makes the substance of a Minority Report to be evaluated by the "boss's bosses." The importance of this procedure is that it shows that idea banks are not a mere venue for expression but a reservoir of resources that top management takes seriously in planning the innovation portfolio.

Customer Capital—The Malleable Innovation Resource

Increased customer awareness, sophistication, and knowledge make customers a valuable resource not only for ideas but, more importantly, for new product concepts51 and solutions. At the concept development stage, product concepts are evaluated on technical, financial, and mar­keting criteria. Involving customers at this stage has proven to help the NPD team to form better new product concepts and reduce time to market. Another indirect result is increasing customer loyalty by forging working relationships and supporting networks. This is of particular impor­tance for service organizations and has always been one of their strategies to gain customer loy­alty. Customer loyalty, however, is not the main motivator behind involving customers at the concept development stage. Developing a new successful or breakthrough product is. Two meth­ods are discussed here, value-chain management and the lead user methods. The value-chain management concept, while not new, has gained added popularity in the knowledge economy. In contrast, the lead user method emerged to enable organizations to tap into customer capital to develop platform technologies and breakthrough products. Both can be combined to manage an innovation portfolio with projects of varying levels of innovativeness, particularly for businesses that adopt a customer-driven innovation strategy.

Value-Chain Management—Where to Fit Customer Feedback. Value-chain management is not a new method, but one which experienced resurgence under the IC concept for its focus on customer capital. It is based on streamlining among the design phase, product development, and manufacturing and marketing/sales phases by co-coordinating input from suppliers, distributors, and customers into the NPD process. Feedback from distributors (distribution agents in service industries or distribution channels in goods manufacturing industries), being more aware of cus­tomer complaints and needs, has been found integral in raising customer satisfaction rate, and creating a trust relationship.52 Most organizations in the software industry open up their concept development stage as a general rule for all innovation projects, regardless of the level of innova­tiveness. Ideas are always sought from software users, developers, techies, and prospective cus­tomers. This increases market success rate as the product gets developed with users' needs in mind. Even in goods manufacturing and traditional industries, value-chain management has proven very beneficial both in introducing a more superior new product and increasing customer loyalty. For example, involving customers in the design of Motorola's ilOOO phone favorably impacted bottom line. Thirty-five percent of sales in 1999 were attributed to the design aspect, and Motorola received the equivalent of $2 million in free advertising.53

But the benefit goes beyond the introduction of one product, particularly when the ideas of parties closer in the value chain are sought. Take, for example, Patagonia, which works with 60 partners, suppliers, and distributors around the world. To tap their customer capital, Patagonia holds an annual conference where 260 suppliers from 175 countries are brought together. The attendees are allocated to various workshops where they are asked for their "input on specific challenges."54

The value of involving suppliers and distributors has been repeatedly affirmed and proven. The question, however, remains about the value of involving customers in the NPD process. This is demonstrated by 3M's experience with Post-It Notes. Prelaunch market research showed that consumers would not be willing to pay for the Notes when they could use free pieces of paper to mark pages. Two of 3M's product managers, not convinced by the research, still launched the product with huge success. There is considerable data that involving cus­tomers undermines market launch or success. How much you should be tuned to potential and current customers, and how responsive you should be to their expressed needs has been the subject of many publications. Most publications are heading toward incorporating within the concept development and other stages in the product development process ways to detect and respond to these needs. But other publications warn about being swayed by the divergent and sometimes conflicting needs that customers express or the needs of different customer seg­ments.55 A balance should be maintained between keeping a strategic focus—that is, not being swayed by conflicting customer needs and expectations—and remaining aware of market con­ditions and trends.

Other studies suggest that, when it comes to customers' involvement in the NPD process, it is not a question of whether to seek customer input, but rather how to define the customers that you really want to listen to. This is what the lead user method, introduced by Eric Von Hippel in 1986,56 aims to achieve by defining the customers as those users who are at the leading edge of their market segments, and who have innovated ways to address their most important needs. The lead user method has proved very effective in generating successful breakthrough products.

The Lead User Method—The Quest for Breakthrough Innovation. The lead user method for new product concept development, though introduced in 1986, did not gain wide popularity until applied by 3M in the mid-1990s. The method is similar to all customer-focused approaches. It targets prospective and current customers to assess their needs and to seek their contribution. What is different about it is the choice of these customers and the sort of information sought from them. Under the lead user method, information is sought from lead users, who are defined as those on the leading edge of a number of related markets, who face similar problems. Those cus­tomers are different from ordinary customers in that they are able to articulate their needs and usually develop their own solutions to deal with such needs ahead of everyone in the market. The main challenge is to find the lead users.

Once the NPD team finds the lead users they work together to develop new product concepts. The importance of tapping into the experience of the lead users lies in the depth of their under­standing of the problems faced in their respective markets. To detect such problems and needs after ordinary customers experience them is too late for the development of breakthrough prod­ucts or new markets. As John Pournoor of 3M Biomaterial Technology Centers explains, "by the time a trend shows up in a traditional market study, it's too late to create products that can change the basis of competition."57

Applied by 3M, the lead user method was proven to be very beneficial, particularly in pro­ducing breakthrough innovations and creating new businesses. 3M reported that its sales projec­tions for lead user projects are eight times higher than those for traditional projects.58 They are expected to generate $146 million after five years, with a 68 percent market share, as compared to 33 percent of market share for traditional projects. Another benefit is reducing the concept development time by half. Mary Sonnack, champion of 3M's lead user method, reports that the method is best for new-to-the-world products and breakthrough innovations that create new mar­kets under 3M's long-term growth strategy.59

Sonnack explains how 3M's Lead User Center, of the Strategic Business Development Department (central department) provides training to 3M businesses on the use of the method and provides support throughout the process. The project team that leads the search for lead users is composed of four to six people devoting a third of their time over a period of four to six months. Project teams "network their way up pyramids of expertise" to find lead users in a target market and other related markets.60 The lead user team usually brings together experts from various fields with their experiences and insights about problems that have a common solution. As a result, the team can demonstrably widen the scope and number of new product concepts.

3M's Medical-Surgical Division lead user team wanted to generate new product concepts for dealing with the global challenge of increasingly antibiotic-resistant bacteria. 3M wanted to be a world leader in the infection-control field. The project team traveled widely to meet users who faced the challenge of fighting resistant bacteria on a daily basis and had formulated ways to deal with it. First, the team met with medical practitioners of a Mobile Army Surgical Hospital (MASH) in Bosnia. MASH expressed a need for products that have a focus on speed, and rely less on antibiotics for their lifesaving mission. The team heard next from a leading veterinary surgeon expressing the challenges he faces dealing with "furry" patients. Finally, the team met with a Broadway makeup artist, who shared what he learned from attaching masks to skin. The team used the knowledge they gained from those and other experts to develop concepts for products that ranged from draping products to ways to reduce surgical site infections. The Infection Prevention Development Unit explained how this helped them to move from adding line extensions to devel­oping a new strategic platform with many new products in the horizon, in just three years.61

The variety of perspectives and depth and breadth of experiences that are presented by lead users enable the project team to generate many product concepts from one idea. A revealing example is Nortel Networks' lead user team, formed to develop product concepts for wireless communication. The lead user team comprised a broadcast engineer, an aviation specialist, a meteorological researcher, a storm chaser, an animal tracker, a mobile telemedicine researcher, and next-generation law enforcement researchers. The lead users in the group not only faced the same problem but each of them had used methods of dealing with its limitations. Exploring these methods and working with the lead users, the project team was able to decide on the technology they needed to use and the roadmap they should follow to develop their new products.62

If anything, the lead user method reveals the complex layers that an idea goes through before it can be the basis of one or more new product concepts. B esides the use of the knowledge of lead users, or customers on the cutting edge of their field, organizations in technological areas need to find ways to introduce their products in heavily patented technological areas.

Structural Capital. One of the most important functions and tools of IM is competitive intelli­gence. Though competitive intelligence is relevant to all the stages of an ICM model, its signifi­cance for IM lies in the fact that innovation involves both responding to change and anticipating change. In both cases, the organization's success relies on the speed and insight with which it is able to detect the competition's moves, market trends, and customer needs. Competitive intelli­gence for the purpose of IM is needed at both the strategic and operational levels. It is discussed in this section to highlight its use as an enabling tool in managing the innovation process. New technology management tools will also be discussed.