Stuart Stevens

Jun 072013

cartoon of people communicatingDuring the 20th Century, companies achieved competitive advantage by funding their own research laboratories. Many carried out fundamental research (often undirected), developing new technologies out of which spun new products – even new industries. These proprietary, even monopolistic, products generated large profit margins which funded more research.

This is known as the ‘closed’ model of innovation. Research and development were vertically integrated in this innovation model, and barriers to market entry were huge. In the early evolution of this model, market research played little part.

The concept of closed innovation
Only a proportion of completed research projects resulted in patents, and only a fraction of these patents were taken on to the development stage – no marketable products were identified or capital was lacking. There were no specialists whose job it was to look at technologies and envision products. IBM famously carved its initials on a slice of silicon at the atomic level, but at the time few, if any, realized where it would lead.

In many cases, companies have developed ground-breaking technologies, but have failed to capitalize on them. How about Xerox – they make photocopiers, don’t they? Yes, but they did more – the ‘GUI’ user interface concept was first developed in the Palo Alto labs of Xerox. It was Apple that made it a marketable concept in their ‘Lisa’ computer. Then Microsoft’s ‘Windows’ followed on Apple’s heels and the rest is history – including the lawsuits.

Although Apple had Steve Jobs, who was a true product visionary, a company cannot count on having one. Keeping a technology within a firm’s boundaries limits opportunities to harness external expertise, generate visions and exploit cross industry-sector opportunities.

Other companies that could have utilized a proprietary technology by leasing it would have created a win-win situation for both. Similarly, the firm itself could have licensed technologies created by other firms.

As the 20th Century ended, many notable failures to capitalize on technology opportunity were raising questions about the closed innovation model, whilst the business landscape was changing, with:

  • Increased options for unused technologies.
  • Increased availability of venture capital.
  • Increased mobility of skilled & knowledge workers.
  • Increased availability of outsourcing partners that are highly capable.
  • Increased strategic market research into social, technology and lifestyle trends.
  • This led to the concept of open innovation.

Open Innovation
In this concept, the boundaries of the firm are porous. Un-utilized technologies in the firm are now licensed to other firms, saving revenue and time. Importantly, the firm (the technology owner) is able to capitalize on market opportunity. Internal focus is on those technologies that are useful to the firm’s core business – effort and capital is not diluted.

The Innovation Business Model
In business, technology is only useful if it is commercialized. The ways of doing this are to:

  • Use the technology in the existing business operations.
  • License the technology to other firms.
  • Launch a new venture using the technology.

These innovation business model options closely couple entrepreneurial inputs and economic outputs.

Rather than seeing entrepreneurs and venture capitalists as threats, technology owners can use them to test-market new products. Optionally, they may then bring the products back into the mainstream business.

Many large firms take the open innovation path by acquiring start-ups or forming alliances; others have set up their own internal venture groups which power their own innovation process.

The advantages of the open model are:

  • Monetization of non-core technologies.
  • Shorter time-to-market for promising technologies.
  • Multi-market potential is explored and exploited.
  • Testing alternative business models for new product/service concepts.

Clearly, it is the flexibility of the open innovation model that makes it so powerful, and it works well in negating the disadvantages of the closed model.

Are you interested how your company can grow by improving the way it does innovation? Would you like to learn how to more consistently turn your promising ideas into profitable products, processes and services?

About The Author:
INNOVATIVITY is a leading innovation program designed to give Australian businesses of all sizes the tools and techniques to turn their good ideas into profitable new revenue streams. Contact us today by visiting for more information.

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Apr 022013

business charts about strategyWidely viewed as the key to corporate success, innovation has become a constant topic of discussion in business. Sophisticated investors need to understand the relationship between the R&D investment and corporate success, so that they can properly appraise investment opportunities. For example, they may find an under-performing company and be able to turn it around by injecting R&D funds – or so it would seem. It is not quite that simple.

R&D spending and growth
Received wisdom had been that improved company performance automatically followed increased R&D spending, but no research supported this. Throwing money into R&D does not guarantee positive results. Rather, for positive returns from increased R&D spending, more than cash is required. The company has to effectively exploit the technology outcomes of the R&D.

Some of the biggest innovation successes in recent years were not produced with big budgets, and extra resources could actually impede effective innovation. Free-issue resources tend to get squandered, and when cash is plentiful, it can get wasted too.

Threshold of R&D spending
Although R&D spending and corporate success are not closely coupled, analysis has shown that a threshold exists. Performance suffered if the company fell into the lower 10% of R&D spending in its peer group. However, there was no serious impact on the performance if the company was in the middle or the top 10% of the peer group. Interestingly, this might also suggest that there is an upper threshold.

So, it is not about how much a company spends on its R&D. Rather, it is about how the company goes about utilizing what it possesses. These are: the tools, the processes, the culture, the organization, and the shape of its product portfolio.

High-leverage innovation
Studies have identified companies that consistently outperformed their rivals even while spending less on R&D (we talked earlier about an upper threshold). These companies were significantly different from their competitors in several aspects. What they were doing was utilizing a model for high-leverage innovation.

Another misconception is the role of patents as an indicator of the success of innovation. The number of patents was closely linked to R&D spending, but shareholder returns, profitability and company growth were not linked to patent registration rates.

New technology and innovation
New technology is not synonymous with innovation unless it starts to drive significant new revenue streams. Otherwise, it cannot be considered as real business innovation.

MP3 players existed before the iPod, and so did online purchasing and downloading of music. The iPod was not really innovative. Rather, it was iTunes and the easy to use one-stop shop for music which was the real innovation – a business model innovation. The innovation transformed the digital music industry.

It is a stark example of taking the customer’s perspective and innovating.

Clearly, the more closely linked the innovation strategy and the business goals, then the better the performance in terms of income growth and shareholder value. Companies that are the most fanatical about satisfying customers tend to be the sector leaders.

Fundamental innovation strategies

There are three distinct fundamental innovation strategies:

  • Technology driven innovation.
  • Market based innovation.
  • Need based innovation.

Technology-driven innovation is a ‘push’ strategy and does not succeed unless an effective innovation capability exists: ‘we’ve invented this, now what can we do with it?’

Need-based innovation strategies are ‘pull’ strategies where R&D seeks to satisfy an existing need: ‘People want to buy music from one online store – any music, any time. How can we satisfy that need’?

Market-based innovation strategies can use marketing to create a need. In this respect it sits between the other two. Feminine hygiene/deodorant products are an example of a need being created by marketing, and a whole new product category being created which leveraged existing technology.

About The Author:
INNOVATIVITY is a leading innovation program designed to give Australian businesses of all sizes the tools and techniques to turn their good ideas into profitable new revenue streams. Contact us today by visiting for more information.

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Mar 122013

woman scientist looking at test tubesDeveloping a new technology or solution which meets customer needs is rewarding in its own right. The innovation process has produced a result – but for it to be truly innovative the new product innovation effort must be successful commercially.

New product innovation is a team effort.

It is far from easy to convert a concept into a profitable product, requiring that people from multiple disciplines work together, sometimes over very long periods of time. New product development follows a complex, collaborative process focusing the innovation efforts of many people. The launch of a new product might include Design, Engineering, Suppliers, Sales, Marketing, Procurement, Manufacturing, Finance, Regulatory and Legal staff.

There are complex inter-dependencies between those functional areas during the project. A review of the companies that are the best in their class for new product development and market introduction, illustrates some common features:

  • Focused Responsibility: A senior manager is entirely responsible for overseeing the total process of innovation, from concept to product/service launch.
  • Process and Structure: Product development is governed by Product Lifecycle Management (PLM) related technologies.
  • Centralised Control: Innovation strategy is controlled and coordinated centrally.
  • Continuous Monitoring: Innovation performance is measured frequently at an enterprise level.

To become true innovators and bring profit-generating products to the market in a repeatable and predictable way, companies need a robust and formal product development process.

Product development must improve.
The product development process must itself be under continuous scrutiny, so that new tools and techniques can be used to refine the gathering of ideas and their appraisal, product design, prototyping and testing, even through to distribution and marketing – and this thinking applies equally to new service concepts (and service extensions), too, in all those aspects.

Best practice analysis by study of sector leaders, and involvement within industry groups are also useful ways of gleaning intelligence to enable improved PLM.

Measurements which are not specific to the new products themselves, but measure the PLM process efficiency should be used. ‘Time to Market’ is one such measure, though with innovative products this has to be assessed carefully if comparisons are to be meaningful.

Lastly, the product development process may need coordination between a range of third-party suppliers, particularly at the design and prototype stages; if the overall product development process is to improve, then that may demand process changes at those suppliers themselves.

Successful product innovation is also about allowing all departments to view product development as part of the value chain, and the link they represent in that chain. Every link has to be improved.

Teamwork requires coordinated efforts.
Collaborative working has been made easier by a range of new software tools from online meeting software to collaborative design systems. Such tools can improve the PLM process efficiency, but also deliver improved monitoring with earlier problem identification such a late design finalization, test failure rates and so on.

Improving the level of collaboration requires some basic metrics for assessing collaboration, and new toolsets can help assess that. For example, how much time can be saved by not having to physically attend meetings?

In today’s markets, such tools are available economically to all levels of organization, whatever their budgets.

New products, new processes
In summary, to be successful at new product innovation in the medium to long term, a company has to invest in an innovation strategy embracing formal product lifecycle management. It also has to keep the PLM process itself under continuous review. This continuous process review is an important concept, not to be neglected if a company wants to win with its new product development strategy.

About The Author:
INNOVATIVITY is a leading innovation program designed to give Australian businesses of all sizes easy-to-apply tools and practical techniques to turn their good ideas into profitable new revenue streams. Contact us today by visiting for more information.

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Feb 262013

cartoon of two people collaboratingInnovation embraces the ability to pre-empt markets; foster, protect and license ideas and know-how; source funding; and execute a timely, profitable commercialization strategy.

Collaborative innovation is successful when it bridges the gap between flexible organization structure and a quality-driven workforce whose imaginative capability is freed but focused. The synergy is achieved through a top-down drive encouraging participation and stimulating creativity, with ideas being created, nurtured and harvested.

Reaching this performance nirvana usually needs more than an organizational overhaul. It needs to be embodied in the mission statement and buried in the DNA of the management. Continuous quality improvement will be a focus of action, with the entire organization configured for quality, but this alone is not enough.

Many organisations have effective quality systems, quality circles and formal quality accreditations. What they do, they do well. They continuously improve product quality, they diversify their designs and models ranges. Then a decline starts. Why? Markets changed, others innovated and grasped the nettle. What had once been a successful organisation loses its way, its customers switch and its profitability declines.

For many organizations, transforming to live and breathe collaborative innovation will require a profound culture change.

A conceptual framework approach
A conceptual framework is just a model that helps us understand a process, how to implement it, tune it, and re-engineer it when change is necessary. In organizations, a useful model combines social systems (people, structure, policies and procedures) and technical systems (technology).

The organizational culture is defined by the human relationships, inter-departmental and internal stakeholder linkages, and most importantly, the characterization of relations between the employer and the employees.

Most successful organizations ‘do technology’ competently, and the social systems are comprehensive and mature. Culture, though, may not be what it should for optimal performance. That is when it becomes an obstacle to the collaborative innovation transformation.

Culture is analogous to the lubrication of the overall machine that is the organization. In some organizations, it is thick and glutinous, slowing the organization down. In others, it is tuned to the machine in the same way that sewing machine oil is perfect for its job.

An integrated approach
The integrated approach to innovation sees the organization as an organism where the components of people, technology and culture cannot be separated, and are interdependent.

Structures either enable and promote innovation, or stifle it. For a long-term and sustainable change in an organization, therefore, an integrated approach is seen as the crucial model.

In either model, culture is the key, and that is why so many leading organizations formally analyze their culture, and even re-engineer it.

Human talent is the tool for innovation
As of today, computers cannot generate ideas. In this respect, at least, people still rule supreme.

There are techniques and structures which stimulate the sparking of ideas – even talking to customers. To innovate continually, an organization must be flexible in a way that allows this sparking of ideas, and their commercial exploitation.

Traditional structures which relied on the ideas of Frederick Taylor, and sewing needle manufacture, focused on specialization and production efficiency. For organizations which want to innovate services or products on a regular basis, a different model is required.

This model has to engage the imagination and enthusiasm of the workforce (culture), engage with potential customers, identify trends in technology and lifestyle and build up a bank of ideas.

Then, that bank is continually drawn upon, as ideas are turned into new service offerings or products. A culture of innovation has been established, with the processes to support it, including appraisal, business modelling, funding, prototyping and delivery. Each idea or concept becomes a project, with its own team bringing it to market. People become specialists in innovation – collaborative innovation.

About The Author:
INNOVATIVITY is a leading innovation program designed to give Australian businesses of all sizes easy-to-apply tools and practical techniques to consistently turn their good ideas into profitable new revenue streams. Contact us today by visiting for more information.

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