Innovation Management : By Jayabalaji Sathiyamoorthi

INNOVATION MANAGEMENT: HOW IDEAS GET TRANSFORMED INTO INNOVATION

SCIENTIFIC ENGINEERING PROJECT REPORT

Done by:

Jayabalaji Sathiyamoorthi Mat Nr: 5019665

Submitted to:

Prof. Dr.-Ing. Agnes Pechmann Technical Management FH OOW, Emden UNIVERSITY OF APPLIED SCIENCES Constantiaplatz 4, D-26723 Emden Germany

Contents 1.

INTRODUCTION ............................................................................................................................... 3

2.

INNOVATION ................................................................................................................................... 5

3.

4.

2.1.

KINDS OF INNOVATION ........................................................................................................... 7

2.2.

MISUNDERSTOOD TERMS ....................................................................................................... 9

GENESIS OF AN IDEA ..................................................................................................................... 10 3.1.

IDEA GENERATION PROCESS ................................................................................................. 11

3.2.

PHASES OF IDEA .................................................................................................................... 12

METRICS FOR GENERATED IDEAS ................................................................................................. 20 4.1.

QUALITY BASED METRICS ..................................................................................................... 20

4.2.

QUANTITY BASED METRICS................................................................................................... 22

4.3.

INNOVATION METRICS FRAMEWORK ................................................................................... 26

4.4.

GUIDELINES FOR NEW METRICS ........................................................................................... 30

5.

LATEST TRENDS & FUTURE OF INNOVATION ................................................................................ 31

6.

QUESTIONNAIRE RESULTS ............................................................................................................ 34

7.

CONCLUSIONS ............................................................................................................................... 38

8.

ACKNOWLEDGEMENT ................................................................................................................... 39

9.

REFERENCES .................................................................................................................................. 40

APPENDIX – A ........................................................................................................................................ 44 APPENDIX – B ........................................................................................................................................ 47 APPENDIX – C ........................................................................................................................................ 63

Table of Figures

Figure 1: Ideas to Innovation phases in different stages of business ........................................ 13 Figure 2 : R&D Return, Productivity and Yield Framework ......................................................... 26 Figure 3 : Resource View .................................................................................................................. 27 Figure 4 : Capability View ................................................................................................................. 28 Figure 5 : Innovation Metrics Framework ....................................................................................... 29

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INNOVATION MANAGEMENT: HOW IDEAS GET TRANSFORMED INTO INNOVATION 1. INTRODUCTION No distance is too far and no dream is too large because the cycle of life keeps changing.

Certainly, changes bring improved lifestyle and technological

progress, consecutively to keep the momentum of improvements one has to really appreciate innovation. But where does the innovation come from?

An apple in

Newton‟s head sparked to deliver an Idea, which plays a vital role in everyone‟s life till today. Innovation can be considered to be as creativity, i.e., to create new ideas and knowledge creation. However it goes beyond idea generation to putting those ideas into action. So it is important to evaluate the ideas in order to yield good innovation. An idea that is developed and put into action creates innovation. Moreover, “seamless flow of new Ideas is the vital source” for sustained innovation.

In order to gain advantage of sustainable innovation, we need to evaluate the ideas and organizations‟ need to have some metric in place to access the progress. Metrics can be customized by the managers to keep track on innovation success in their companies. These metrics can help senior executives assess their company‟s innovativeness and hence combat the insidious strategy decay that often afflicts a company‟s business.

According to Hamel and Valikangas (2003) the organizations' strategies can be decayed mainly by four reasons. 

Over time they get replicated and they lose their distinctiveness and, therefore, their power to produce above-average returns or better strategies supplant them



Strategies also get exhausted as markets become saturated



Customers get bored, or optimization programs reach the point of diminishing returns



Finally, strategies get eviscerated. Customers or suppliers become so powerful that they can dictate much lower prices than before.

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So, how to tackle this situation? The only solution to combat strategy decay is to keep innovating. There comes the importance of knowing what is a good idea, how it is created and gets transformed into innovation. All these aspects form the syllabus of this paper. First the theoretical aspects of the idea to innovation phases were discussed, then the industry approach is explained with examples and it is supported by a survey. Additionally, a modified framework for the idea assessment is also proposed.

SCOPE AND METHODOLOGY In this paper, I would like to analyse how ideas could be generation, what are all the significant techniques for idea generation, different phased involved in transformation of ideas into innovation. Most importantly, I tried to evaluate the existing methodology to assess ideas; furthermore I propose different metrics for idea evaluation. Idea is more often one‟s brainchild, so how can we evaluate it? As George Bernard Shaw quotes “if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.” A forum to share ideas will help to pick the good ideas. But to evaluate it we need to see the outcome of the idea with supporting factors. Thus the phase by which the simple idea is getting transformed into an innovative idea is discussed. The innovative idea will help the company to bring out its new products. To prepare this topic, I evaluated many technical literatures, technical books, Government reports of EU and US, companies‟ survey reports for the theoretical concepts and its practical implementations in the industry. In the beginning chapters of this paper, I discuss about what innovation means to industry and market, later I divulge the factors which calls for innovation, followed by the idea generation process and in the later chapters I discuss about factors supporting new metrics for Idea evaluation. In the final chapters, I review the existing surveys and also a dedicated questionnaire. A questionnaire is developed and it is circulate among the companies whom appreciate Innovation and believe innovation leads to sustained growth. All of these companies were representing their presence in European Union, Americas and Asia

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market regions. The feedback from the companies are thoroughly evaluated in the later chapters and analysed how far ideas are measured till it becomes innovation.

2. INNOVATION DEFINITION - “INNOVATION” The US federal advisory committee on measuring innovation defines innovation as follows. “The design, invention, development and /or implementation of new or altered products, services, process, systems, organizational structure or business models for the purpose of creating new value for customers and financial returns of the firm”. The definition of innovation can be divided into two perspectives, namely Opportunities to exploit and Opportunities to explore (Amy Wong, 2001). Let‟s try to understand both of them. First perspective, opportunities or changes to exploit are those where most of the parameters are well defined and understood. It is something like improving an ongoing process, reducing cycle time, increasing throughput or reducing cost. So these are basically incremental improvements. On the other hand, opportunities/changes to explore are those areas, where we have newly started and have little information about it. Here we have ideas and solutions which are applied in new ways to solve new problems. It creates the environment for transformational innovation. For this paper, I adopt Peter Drucker‟s (1993) definition of Innovation, who defines Innovation in business terms as the fundamental to the quest for profitable and sustainable growth. Precisely one of the important business competencies needed for the future, it implies that innovation is not all about marginal improvements on some unimportant products.

OTHER CLASSICAL DEFINITIONS OF INNOVATION ABS, the Australia's most comprehensive Innovation Survey (1996) defines, “An innovation is any new or substantially improved goods or services which has been commercialised or any new or substantially improved process used for the commercial production of goods and services. New means new to your business”

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UK Govt, Department for innovation, universities & skills, has two perspective definitions for innovation. First at the level of an individual firm, Innovation is defined as the “application of ideas that are new to the firm, whether the new ideas are embodied in products, processes, services or in work organization, management or marketing systems.” Second at the business perspective, “Innovation is something that is new or significantly improved, done by an enterprise to create added value either directly for the enterprise or indirectly for its customers.” NEED FOR INNOVATION Why that innovation is playing a vital role in companies now? What is the need for innovation and how does it impact companies‟ growth?

Horibe (2001)

emphasizes “What is likely to kill a company in this new economy is not somebody doing something better, it‟s somebody doing something differently.” So is it all about being different in the market, may be true for some industry sectors but not applicable for general industries. In today‟s fast moving economic situation, mostly category breaking business environments meet their objectives.

Only such companies meet their estimate

growth, gain profit, out run their competitors and show excellence in execution. They achieve by the culture of “INNOVATION”. In every industry, the leading companies are the innovators. However the cadre of innovators keeps changing. For example, Thomas J. Peters and Robert Waterman (1982) cited that companies like Amdahl, Texas Instruments, Eastman Kodak, and Maytag as exemplars in their business classic, In Search of Excellence. They achieved that stage by extensive innovation and market presence for years. Meanwhile, today‟s innovators such as Wal-Mart (chain of retail shops), Southwest Airlines (good service for low fare), eBay (online auctions), and the University of Phoenix (degree programs for working adults) are themselves relative newcomers. Such high turnover at the top suggests that the real problem is not with the lack of innovation, but it is “Sustained Innovation”. Companies may seize upon a good idea that gives them an advantage for a while, but sooner or later, they cede this advantage to a competitor who has found an even better idea. As Nicholas Stein (2000) correctly mentioned, “Innovation is at the heart of sustaining a company‟s competitive advantage”. This holds very true as [ Jayabalaji Sathiyamoorthi ]

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long as any company wants to stay on top of their competitors and win the innovation game. Innovation is very important criterion for success in the future, (Horibe, Frances Dale Emy, 2001) an important study done on the rate of return of 17 successful innovations shows a mean return of 56% in comparison with an average Return on Investment (ROI) of 16%. It is clear that organizations need to innovate to survive and achieve good profit figures. WHAT TO INNOVATE Now we understood the importance of the role that innovation plays in an organization. The next important question now arise is where and which things to apply innovative ideas in a big organization. Suggestion and recommendation for where to apply innovations are as follows, 1. Innovation can be applied to products, services, design, invention, development, process, and systems. 2. To make a product/ service compete with the new economy. This is essentially to educate organizations to move out of their traditional old habits1 to the new innovation culture. 3. To avoid high risks – Avoiding high risks involving money, staying ahead of competition and high pay off opportunities are the essence of the innovation 4. To gain long term market focus, as a result the company can save money. 2.1.

KINDS OF INNOVATION

Based on the way, it is implemented Innovation can be divided into two major categories namely, 1. Incremental Innovation and 2. Radical Innovation Let us discuss about how these innovation methods are applied in the industry and which are the companies adopt them. 2.1.1. INCREMENTAL INNOVATION Incremental innovation projects are built upon an existing knowledge and resources within an organization.

As a result the existing competencies of the

company are being enhanced. There is a modest technological change and the 1

Traditional myths & habits may change firms incompetent to the current market and it is no longer useful [ Jayabalaji Sathiyamoorthi ]

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existing product remains competitive in the market. Literally, these organizations don‟t work against their competitors, instead build innovation groups among their own different kind of products and be an active competitor for their products. For example, the Hewlett-Packard2 Company produces both laser and ink jet printers. These products equally compete in the market. They came up with a plan, to divide the markets of both the ink jet and laser divisions. As a result, HP has become the leader in both laser and ink jet printers. 2.1.2. RADICAL INNOVATION On the other hand, Radical Innovation projects are developed and implemented in a completely new area of operation. So organizations require to completely acquiring new knowledge and resources. In the execution, it involves large technological advancements. As a result the existing competence of the organization might get turmoil and become obsolete. For example, Intel, one among the largest PC processor manufacturers, appreciates radical innovation. It initially developed single core processors, however as soon as it released its dual core processors, the former became obsolete and the later gained its market. This process is endless, as Intel recently released its multi core processor, which might cease the interest of dual core processors in future. Literally, Intel cannibalizes its own business by constantly bringing out better processors to replace the ones that are once market leaders. PROBLEMS WITH CHANGE As we discussed about the types of innovation, now it is important to find out which method does an organization need to select. There arise the problems with managing changes, which are the results of innovation activity. Most organizations are resistant to rapid and discontinuous change, because of many factors like its traditional values, business strategies etc.; moreover it is difficult for them to find solutions in a new direction in which their business is not focussed. The fear of chance makes many companies to stick in their standard mode of operation. They work hard to bring up existing model work better and don‟t spend time looking for a better model, or a better method of operation.

2

Popularly called as HP [ Jayabalaji Sathiyamoorthi ]

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Gary Hamel (2003) puts forward, “Most companies are built for continuous improvement, rather than for discontinuous innovation. They know how to get better, but they don‟t know how to get different.” But successful companies deploy their managers to take responsibility for initiating and directing change in addition to their objectives. Successful companies believe that they need to do something that the world has not seen before. They change and innovate so that they are first and unique in this wild and competitive market. Let us analyse this with the scenario from software industry. Yahoo first released its popular instant messaging program Yahoo! Messenger (YM). This is a GUI based beta release of the software, which became very popular in late90‟s 3. Though YM is more popular, it had many bugs reported by the customers, so YM has to develop and release bug fix and patches. The lesson learnt is being ahead in the market and managing chance to sustain. Lately, YM introduced voice and live video messaging options, all as a result of adapting to chance and applying innovation. 2.2.

MISUNDERSTOOD TERMS

There are few terms which are normally misunderstood in context. Perhaps this section will address those terms and avoid confusions of the same. 2.2.1. CREATIVITY AND INNOVATION Creativity and innovation might sound similar in contextual meaning. Ofcourse, innovation typically involves creativity but it is not identical to it. Linda Naiman (2005) defines, “Creativity is typically used to refer to the act of producing new ideas, approaches or actions, while innovation is the process of both generating and applying such creative ideas in some specific context.” In simpler words, innovation involves successful implementation of creative ideas. We can say that creativity is the act of producing new approaches and imaginative ideas. But, Innovation is the production or implementation of an idea in some specific context. So if we have ideas, but don't act on them, then it means that we are simply imaginative but not creative.

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Source: http://yhoo.client.shareholder.com/press/ReleaseDetail.cfm?ReleaseID=173501 [ Jayabalaji Sathiyamoorthi ]

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2.2.2. INNOVATION VS INVENTION Following the above mentioned concept of creativity, the next similar misunderstood concepts are Innovation and Invention. Fagerberg (2004) distinguishes them as; “Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice". Interesting thing is that, Innovation does occur when someone uses an invention or an idea to change how the thing it works. So to make it more precise, invention is a ladder to reach the spot called “innovation”.

3. GENESIS OF AN IDEA The types of innovation helped us to understand the methodology in which the innovation is applied in industry. This also helped us to understand the risks involved if the organizations resist changing. This is a business view of innovation, now let us look it from the conceptual view of innovation. The basic building blocks of innovation are IDEAS. Ideas are basically the outcomes of the thought process. The quantity and quality of idea does have a direct impact in innovation, so it is important to classify ideas. As supported by Paulo Matos (2002) that is if a company classifies a good idea it means that there is little evaluated risk involved to achieve excellence in execution. Therefore, to come up with good ideas and concepts for new products, CEOs have to encourage break through thinking. So to be innovative, the idea has to be creative and implemented. The core discussion of this paper is to analyse the ideas process and to apply suitable metrics to evaluate whether the germinated ideas is a good or not.

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3.1.

IDEA GENERATION PROCESS

The idea generation process is nothing but the whole process from thinking to action, i.e., from the generation of first ideas to the final innovative result. Understanding these phases will helps us to review the ways of combining and creating knowledge that can relate to reality. People/ team’s role in Idea generation process The idea generation process and thereby innovations are strongly connected to people's attitudes. As Peter Drucker (1993) points out that in order to organise work, it is necessary to start with a specific task/problem, to then make the information input and finally develop the necessary human relations to get the work done. But who has to take the ownership of this task? Druker (1993) reinforces the people's role, according to him it is necessary that someone takes matters into his won hands and make them happen. A simple NO answer must always be confronted to get to know the underlying reasons and ease the search for answers. In other words it just means that "people and organisations have to exceed what is pre-defined in their functions." So people have to think that a problem is in place not to fail but as an opportunity to seize for growth. If such an attitude has to be in people, then their motivation level needs to be higher. Thus innovation should be attractive and beneficial for the owners/ managers involved, for this there must be a clear definition of the innovation's importance and its dimension in the global setting. Human relations are based on communication. Thus effective communication between the employees and top management will certainly impact the idea generation process and to get appropriate solution in case of problems.

Organisation role on innovation In this section, let us discuss about the strategies and tactics that organizations need to follow in order to gain advantage from idea generation process. According to Paulo Matos (How to improve management of ideas, 2002), One important skill that organizations‟ need for idea generation and Innovation are [ Jayabalaji Sathiyamoorthi ]

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

The long term vision,



The ability to identify or even anticipate market tendencies and



The will and ability to gather and integrate the process.



Additionally, the EU innovation manuals states the other necessary skills that organization needs to posses are



The ability to take risk (Calculated risk)



Internal co-operation between the different functional department and



The external cooperation, with public investigation, with consulting services.

Therefore, when developing new ideas it is important to understand the organizations‟ skill and it is a good idea to have a list that allows controlling the critical factors for the idea implementation. One among the critical factor is controlling the change. So to handle this change, a good method could be to inherent organisation change process into small entities such that it does not cause any ruptures with the on going procedures, articulating, and sequencing them so that in the long term the desired result is achieved. Once the tactics are set, organizations need to employ appropriate tools and methodologies which are discussed in the later chapters. Summarizing the organizations‟ role from the strategic point of view, an organization necessarily has to define the evaluation system towards the initial set goals. The system will include the aims to be attained, manage change, and organize the skill of the company and the indicators to consider in the innovation activity analysis. 3.2.

PHASES OF IDEA

There are many theories about the individual phases of ideas; different authors postulate different number of phases in the idea generation process. For this paper, I adopt Professors Hansen and Birkinshaw (2003) work on innovation values chain. They divide innovation process as a sequential three phases. 1. Idea Generation 2. Idea Conversion 3. Idea Diffusion Additionally, for this discussion I tried to add one more phase, 4. Idea Assessment [ Jayabalaji Sathiyamoorthi ]

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Now let us review the above mentioned phases in detail and find out how ideas are moulded into innovation.

Figure 1: Ideas to Innovation phases in different stages of business Project Charter

Idea Generation

Launch Proposal

Idea Conversion

Idea Diffusion

Business Plan

Product Launch

Idea Assessment

Evaluation

3.2.1. IDEA GENERATION “A good start is half of the work”4, says an old Albanian adage. Similarly a good start for an innovation/ innovative product is GOOD IDEAS. But where do these good ideas come from? People who make difference in an organization are the key resource of idea generation process. So the fragments of ideas that come across the organization will influence in generating a creative idea. For the idea generation phase, the financial, practical, physical limitation and other business parameters are not considered, this is to ease seamless flow of ideas and to encourage out of box thinking. Sources of ideas Besides depending on the internal sources, organizations need to be open to gain information from external sources for idea generation. This could be from customers, end users, competitors, universities, independent entrepreneurs, investors, inventors, scientists and suppliers who play a vital role. The common fallacy among companies‟ is that outside ideas were not good as in-house ones. 4

Famous proverb from an unknown Albanian author [ Jayabalaji Sathiyamoorthi ]

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The common techniques used in this phase are brainstorming, or individual team meetings. 3.2.2. IDEA CONVERSION Now we have lots of good ideas, but how are we utilize it? This is handled by this phase. The main objective of this phase is to filter out ideas, so that only feasible and refined ideas are selected. Refined ideas are the ones identified to be financially successful and technically viable. It doesn‟t mean that ideas are simply put away, but it is in this phase ideas are turned into revenue generating products, services and processes. Typical methodology that could be used in this phase is brainstorming, to analyse the feasibility and problems. The possible problems might vary from one company to the other. It has to be noted the tight budgets, conventional thinking and strict funding criteria caused many novel ideas to shut down. Tips5: Involving people with differences (can be based on lingual, cultural, geographical, ethnic etc.,) can be used in such brainstorming discussions/ sessions constructively. Because this gives room to ask as many weird and challenging questions about the ideas, which involve people‟s educational, professional and cultural diversity. For instance, British Telecom, the UK telecommunications group doesn‟t lag with good ideas for its business; however its division providing services to multinational companies failed to hit targets6. We can infer such problem arise due to the inadequate commercial/ business skills to tackle such projects.

Significant Tools & Techniques for Idea Conversion Process According to Robert & Cordeiro (2005), the generation of high number of ideas depends on the tools & techniques that an organization adapts. Consequently, this helps to avoid strangling the innovation process for lack of ideas. Thus the idea generation can be done in several ways namely,

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This is my personal learning from Global Management group discussion while forecasting periods in FHoow. Source: http://www.independent.co.uk/news/business/news/bt-issues-surprise-profits-warning-980548.html

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1. Market surveys According to Robert, market surveys can be done through interviews, through panels or by monitoring the evolution of a set of demographical, economical and consumption indicators as well as others. In this paper, there is a survey appended which helps us to understand the organizations‟ perception on idea generation and innovation. 2. Benchmarking Benchmarking Benchmarking

is

an

important

tool

for

competition

analysis.

is an ongoing process of measuring and improving business

practices against the companies that can be identified as the best worldwide. It emphasizes the importance of improving, rather than maintaining the status quo. It addresses searching worldwide for the best companies. Hence, the more innovative the ideas that are discovered, the greater the potential rewards that can be gained from the adaptation of the ideas.

3. Collecting Ideas from a. Employees The collection of employee‟s ideas can be done through a specific programme or through more informal methods in smaller groups. The more ways to participate in the company the employees have, the bigger employee participation leads to a decrease in administrative staff (Paulo Matos, 2002)

Stewart (1997) quotes the General Electric process, where, through series of continuous meetings in several cities, employees propose several ideas and the bossed have to approve or reject them right there on the spot. These programmes are successful as they allow people to have a safe place to share ideas without any kind of restriction.

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b. Suppliers In business terms, competitive suppliers usually have a better knowledge of what they are selling and how the client can obtain better benefits. When suppliers are experts on their area, they may even present solutions for the company‟s specific needs. So collecting ideas from the suppliers is very important.

c. Customers Customers are the important source of proposals concerning changes in products and services. According to Peter Drucker (1993), building relationship with clients is also an important criterion as it creates a strong information source. However getting inputs/feedback from the end customers is not easy. For example in consumer products business like tooth paste etc., so in those cases mediums like suggestion boxes, suggestion phone lines will help the organization to address the complaints and feedback.

4. Co-operation with institutions Certain institutions like universities and industrial associations help the organization to have new ideas through co-operation settlements/agreements. Industrial forums like IEEE, NASSCOM7 etc., where organization get and provide inputs. Member organizations participate and form an ideal source for development of innovative ideas. For instance, Infosys, a multinational software services company, started a campus-company programme by the name “Campus Connect8”. This is to bring up ties with the academic institutions and there by creating a platform for information sharing. However, there is a notable problem with having co-operation with academic institutions, relating to the data security. Because at the university level, there is an interest in divulging as much as possible the information 7

National Association of Software and Services Companies (NASSCOM) http://www.nasscom.in/Nasscom/templates/LandingPage.aspx?id=50154 8 More info about the program can be found at http://campusconnect.infosys.com [ Jayabalaji Sathiyamoorthi ]

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obtained, while at the companies‟ level there is an important set of information that the company does not want to see in the hands of competitors. This is evident during seeking surveys/interviews for this paper, as most of the companies don‟t wish to keep their information confidential. 5. Brainstorming Brainstorming is a widely used technique, in which a group of people were put together and discuss their ideas that they can think of, even if apparently foolish. The important thumb rule of this technique is not to criticise ideas presented until the discussion ends. An advantage of this method is the fact that the association of several ideas can trigger new ones. 3.2.3. IDEA DIFFUSION As we have reviewed how to select ideas for funding and developing into products. Now, in this phase we diffuse those products and practices. Thus Professor Hansen (2003) added that, organizations must get the relevant constituencies within the organization to support and spread the new products, business and practices across desirable geographic locations, channels and customer groups. This phase is particularly important for the large companies who have their divisions in many geographical locations. So the biggest question that I am interested is “what is the impact of diffusing of ideas within the organization?” This question is not part of any of the author‟s research paper; however it is just to quench and explore the intuitions behind. One possible negative upshot could be leaking of your idea to the competitors, as happened in case of Procter & Gamble (P&G). The company first launched Pampers diapers in Germany, and then it developed ideas to establish the product in France. However it has taken long time to do so, P&G can able to launch its product only after five years. Meanwhile, Colgate Palmolive sensed that idea and launched its line of diapers in France two years before to P&G‟s launch9. This is a typical example of improper diffusion of ideas.

Idea specification is important in case there are several ideas to change a given product, service or process. Idea specification consists of choosing the idea 9

Source: http://www.unitedbit.com/idea-diffusion-3rd-phase-in-the-innovation-chain/ [ Jayabalaji Sathiyamoorthi ]

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that will have better advantages in being applied or combine existing ideas, to find a solution that is superior to each idea by itself. There are several tool and techniques for idea selection process, which an organization can avail. In this paper, two techniques are detailed. 1. Feasibility Analysis Feasibility analysis is a preliminary study undertaken to determine a project's viability, which helps to ensure the successful completion of specific project goals and objectives. In addition, feasibility analysis gives a clear picture, if an existing system is worth upgrading or not. Feasibility analysis can be done in two perspectives, technical perspective and business perspective (Paulo Matos, 2002). However feasibility analysis can be done in many kinds. In the technical point of view, the feasibility study is carried out to check if it is possible to implement the idea at an acceptable cost. This involves questions such as whether the technology needed for the system exists, how difficult it will be to build, and whether the organization has prior experience using that technology In the business perspective, the feasibility study is conducted to check the factors affecting the commercial viability of the business. Also to ensure the cost-effectiveness of the proposed system i.e. if the benefits of the new idea do not outweigh the costs, then it is not worth going ahead. So it could be precisely called as a cost benefit analysis.

For example, car manufacturers are now greatly involved in making use of hydrogen as the fuel source (Robert Boyd, 2007). But its use in cars is highly conditioned for safely. Thus, hydrogen fuel project is stronger in the technical point of view, but weaker in the business point of view.

2. Financial and Risk Analysis In a financial analysis, there is an attempt to project all the predictable revenue in relation to the predictable costs. Then it is applied financial calculation to evaluate the process‟s profitability towards a value. From the comparison between the idea‟s profitability and the risk associated to the [ Jayabalaji Sathiyamoorthi ]

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same, a decision can be made about the idea. With a raising number of ideas analysed and processed there is a better understanding of the risk level of several types of ideas and the costs each one brings. The study of this technique is strongly supported by a wide bibliography related to the economical and financial areas.

3.2.4. IDEA ASSESSMENT From the previous discussion, it is clear that Innovation develops through an evolutionary, interactive process between actors and between different stages in the development of an idea into innovation. Now lets us discuss Idea assessment which is one among the core topics in this paper. So the later part of this paper is structured to address the following questions. 

What is idea assessment?



Why organizations need to adopt Idea Assessment?

The word „Assessment‟ in this context refers to Metric and Measurement of Ideas. Idea Measurement is a simplified & quantified observation of ideas. Idea Metric is a comparative measure of the performance of the ideas and product or process. By using metrics we can find the deviation i.e., what is planned against what is achieved? Idea Assessment is very important to any organizations to monitor the trends in the actual effort spent on Idea generation process. This helps to understand where does company stand and find areas of improvements. It also helps to re-plan or alter the ideas so that it is more technically viable. Significance of Idea Assessment The US government advisory committee‟s report on measuring Innovation, stresses the importance of measuring the innovation. They add that the outcomes of innovative activity need to be tracked and measure to determine fully the impact of innovation on the economy. This is on a macro level, simply means to evaluate the variations. Considering companies at a micro level, it is indeed important that Idea Assessment need not be made with the variations but also from customers (internal & external) survey and feedbacks. A typical feedback will help the organization to [ Jayabalaji Sathiyamoorthi ]

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identify the areas of improvement and areas of strength. The important aims of idea assessment process are as follows, 1. Ideas need to be Optimally Quantitative, i.e. it will stretch out to the maximum possible extent to guide decision making based on measurable and quantifiable criteria 2. To help in addressing ideas submitted for the organizational perusal, minimizing the scope of escapes in estimating the organization‟s potential long term returns, i.e., to ensure some business important factors doesn‟t left unnoticed.

4. METRICS FOR GENERATED IDEAS Innovation metrics are important for at least two reasons as stated by Amy Muller (2001). First, metrics help managers make informed decisions based on objective data, which is especially valuable given the long-term nature and risk associated with certain innovation projects. Second, metrics affect behaviour by helping align goals and actions with the best interests of the company. Defining metrics is a bit risk and misleading task for the fact that if some of the important indicators if left unnoticed will lead to a major confusion. Such indicators can consist of measure of the intensity or quality of innovation. Innovation indicators should also be able to differentiate between innovation as adoption and innovation as a creative activity (A. Arundel, 1998). In this paper, I try to propose the metrics for IDEAS based on two majors, namely

4.1.



Quality based metrics



Quantity based metrics (Metrics driven by figures)

QUALITY BASED METRICS Let‟s discuss about how to measure the quality of an idea, which leads to

innovation. A single indicator cannot provide all of the information that is needed, although traditional indicators such as R&D expenditures or patents can serve a variety of purposes. There has also been some success in developing techniques to extract more information out of traditional indicators such as patents (K.Smith 1998). Nevertheless, new indicators are required to meet policy needs and to test innovation theories. [ Jayabalaji Sathiyamoorthi ]

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First, many innovation activities are not directly measurable. Organizations use some codified knowledge to assess such activities. Codified knowledge is a kind of tacit knowledge, which is generally undefined and firms have some internal methods for determining them. So, literally codified knowledge can be indirectly measured. For example, Informal contacts between firms are more likely based on some tacit knowledge. 4.1.1. INDICATORS BASED QUALITY METRICS There are certain indicators which can be made used to certify how much does an idea qualifies for its succession into a product. But these indicators can‟t be standardised entities as it is affected by type of innovation, like a product innovation or a process innovation. For example, consider the case of a substantial improvement in which an organization, just want to make some minor adjustment to an existing product, in comparison with a company developing revolutionary product that is completely new. In such a scenario, A. Arundel, (1998) proposes some possible indicators one can adapt to measure. They are as follows, o Number of patents filed o R& D performance o R&D intensity o Proportion of employees who are scientists/ engineers It has to be noted that categorizing a common indicator is always a difficult task. It has a serious drawback as the indicators fail to identify all firms that expend some creative effort on innovation. In brief, using R&D as an indicator is biased against firms that develop mechanical innovations, which is often based on design and complex production systems and underestimate innovative activities in small firms. 4.1.2. KNOWLEDGE BASED QUALITY METRICS This metrics is designated to measure the organizations‟ performance based on the knowledge they can generate and the ability to use them. The learning capacity of an individual company plays a vital role in measuring the ideas. People are assets in such metrics, because they create ideas and transform that basic knowledge into desired product. So the rate in which people learn new skills to keep pace with chances in technology really matters. [ Jayabalaji Sathiyamoorthi ]

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A. Arundel, K. Smith, R. Patel, G. Sirilli claim that knowledge based metrics acts as the root for other innovation indicators like patents, bibliometrics, and adsorptive capacity, because all are the results of knowledge creation or the activities that produce new knowledge. The knowledge based metrics are however affected by “Absorptive Capacity” and degree of diffusion of the organization. For our discussion, the absorptive capacity gains more interest. So let us try to understand what absorptive capacity is and how does it affect? According to Patel and Pavitt, (1995), some technical information is freely available to all firms, in the sense that it can be used without paying a fee for the use of the information. However, even freely available knowledge is rarely completely free because of the effort that is necessary to understand and exploit technological knowledge. So the organization has to necessarily invest time, effort and money to understand the freely available knowledge and make use of it for its future products. Amy Muller (2001) defines absorptive capacity as the ability of a firm to effectively use external knowledge, ranging from basic research and reverse engineering to the implementation of new production equipment. This capacity varies with a firm‟s experience and the range of its innovative activities. So higher the absorptive capacity of an organization, better is the companies knowledge scale. Disadvantages of this metric on innovation are that the boundaries are artificial. For example there is no obvious demarcation line between knowledge creation and dissemination or between dissemination and absorption. 4.2. QUANTITY BASED METRICS We need to understand that risk of qualitative judgment in evaluating the goodness of an idea to fit in the organization‟s interest, and hence to pursue it. Hence, the need on evolving a model which can be measured at each stage is important. The idea is to set quantifiable parameters to measure the potentiality of an idea and also to judge an idea‟s goodness of fit in the organization‟s context. We know ideas root from individuals; teams make it through to customers, while the organization provides a facilitating environment for all these activities. But evaluating the first fit of an idea in line with the organization‟s business interest

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brings in a challenge, especially if decisions have to be based on a quantified metric. Because all the success factors of an organization can‟t be quantitatively measure. 4.2.1. MEASURE OF FIRST FIT The methodology followed here is more extracted from general financial concepts. The rate of return or return on investment is calculated from one idea stage to the other (see figure 1 for the idea stages), so that it can aptly be measured by its contribution. If the contribution is acceptable for the organization then the ideas can be forwarded to the next phase, else it could be filtered. Groppelli and Ehsan Nikbakht (2000) concept of determining the present value of the future income is adapted to explain this metrics. So let us see how the return on investment is calculated. Business domain is a unit of the business model where there is a defined set of tasks and milestones. Business Domain Contribution, DC = (Gross Investment – Net Returns), from the domain of practice.

If R be the net revenue earned after tax and expenditure deductions, across all domains of practice of the organization, and then a new metric, called “Domain Identification Scale factor” is added. It can be mathematically explained like, Ω = DC / R This aptly signifies the importance of the return value and there by we can find the importance of the domain in an organization‟s current business practice. Ω=

.

Gross investment – Net Returns

.

∑ (Net revenue earned after tax and expenditure deductions) Where, ∑ is the summation of returns across all business domains of practice of the organization. Next the profitability of pursuing the idea in terms of the organization‟s funding or financial venture is calculated by Return on Investment (ROI).

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ROI can be formulated by a simple and easy to evaluate metric of standard practice, as follows:

ROI =

Σ Cumulative Net Profits from New Products

.

.

(R&D Costs + Incremental Production Investments + Pre-launch Costs)

The first fit of a submitted idea can be quantifiably judged from the following novel metric, as: Measure of first fit, λ = Ω x ROI Where, Ω serves as the scaling factor (as Ω <= 1) against ROI.

As innovation encompasses a broad variety of process, product, technology, strategy, organizational, business and marketing innovation, the Measure of First Fit (λ) can not be made too specific to cover all of them. This is the biggest setback of metric based calculation. Thus providing an example to workout the above formulae may not accurately work, hence sample calculations are not included in this paper. However, through empirical surveys, a standard exit criterion, say A, can be defined, such that, whenever, λ >= A, Submitted idea can be regarded as a “Fit to innovate” & innovation to be pursued, and will meet the acceptance criterion at the first gate. But, ideas for which λ < A, those ideas need to be filtered10.

4.2.2. R&D YIELD - US PERSPECTIVE The Centre for Innovation Management Studies, North Carolina state university arranged a workshop on innovation metrics in US industries in June 2006. The excerpts from the workshop are adopted for the discussion of the quantity based metrics, which is totally based on R&D returns. Let us discuss how it is implemented. R&D returns framework is a quantified approach to measure ideas and innovation. This links and relates organizations‟ profits to the R&D investment. In this method, each and every idea generation process is considered as an R&D activity. So the

10

Managing filtered/ eliminated ideas are discussed in the later part of this paper [ Jayabalaji Sathiyamoorthi ]

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calculations are carried out for specific innovation activities. It is given by the following formulae, 

R&D Returns = Profits / R&D investment



R&D productivity = Technical progress / R&D investment



R&D yield = Profits / Technical Progress

Once the specific R&D investment is devised for specific innovation activity, and then a financial output metrics is defined, which are Net Sales Ratio (NSR) and Cost Savings Realized (CSR). It is given by the following formulae,

New Sales Ratio (NSR) = Revenues realized this year from new products introduced in last 5 years Total revenues realized this year

CSR = cost savings realized this year from process improvements introduced in last 5 years

Gross profits11 realized this year

The chart in the following page will help us to understand way the R&D returns are calculated. The factors which affect/influence the R&D productivity and R&D yield are displayed.

11

Gross profits = Sales Revenues – Cost of Goods sold [ Jayabalaji Sathiyamoorthi ]

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Figure 2 : R&D Return, Productivity and Yield Framework

Source: Innovation Metrics in US Industry: http://www.nsf.gov/statistics/workshop/innovation06/bean.pdf

4.3. INNOVATION METRICS FRAMEWORK In this section, I try to propose a simple model of the innovation framework. To develop this framework, the three views on innovation (Amy Muller, 2001) are adapted, besides the innovation theory. So the three views on innovation are combined to form a framework which is used to measure the ideas and access the companies‟ capacity for innovation. 

Resource view



Capability view



Leadership view

4.3.1. RESOURCE VIEW Resource view assesses the proper allocation and utilization of the companies' resources. It helps companies to allocate its resource in a way that it is [ Jayabalaji Sathiyamoorthi ]

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balanced with the existing business and also the new business. Balance optimization of the resources like capital, labour, time etc., is very important in this state. The metrics for the resources can be sub divided into inputs and outputs. The resource view inputs measures the resources that are allocated by the company for innovation. And like wise, the resource view output measure the company‟s success at innovation.

Figure 3 : Resource View Capital Talent

Resource View

Return on Investment

Time Inputs

Output

Key indicators Based on this view, the possible key indicators for innovation metrics are listed below. This list has indicators for both inputs and outputs of this view. Please note that company doesn‟t really need to measure & adapt all the indicators mentioned below. However, under their own discretion suitable indicators can be followed, so that they have a simple and better metrics for innovation. The key indicators are as follows, 1. Percentage of capital that is invested in idea generation, idea conversion, idea diffusion and Idea assessment phases for new products and services. 2. Number of talented workforce in the company, i.e. individuals who have prior knowledge of business, either within the company or before joining the company. 3. Percentage of workforce time that is currently dedicated to innovation projects. 4. Number of new products, services, and businesses launched in the past year. 5. Share of wealth, which is nothing but the change in the company‟s market value during the past year divided by the change in the total industry‟s market value during the same period [ Jayabalaji Sathiyamoorthi ]

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6. Percentage of revenue from products or services introduced in the past three to five years. 4.3.2. CAPABILITY VIEW The capability view assesses the extent to which the

company‟s

competencies, culture, and conditions support the conversion of innovation resources (see resource view) into opportunities for business renewal.

Figure 4 : Capability View Preconditions Capability View

Tools

New competencies

Trainings Inputs

Output

Like that of resource view, the capability view can also be sub-divided into inputs and outputs. The capability view inputs measure the company‟s culture and innovation competence. This also involves the employee access to innovation training, tools, and methodologies. On the other hand, the outputs of the capability view measure the company‟s success at providing renewal options. For example, it might measure new competencies in comparison with the existing business. The key indicators for capability view are as follows, 1. Percentage of employees who have received training in innovation, for instance, instruction in estimating market potential of an idea. 2. Percentage of employees for whom innovation is a key performance goal. 3. Number of innovation tools and methodologies available to employees. 4. Number of new competencies (i.e. distinctive skills and knowledge domains that spawn innovation) measured as a simple count among a threshold proportion of employees. 5. Number of strategic options (i.e. newly created opportunities to significantly advance an existing business). 6. Number of new markets entered in past year.

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4.3.3. LEADERSHIP VIEW The leadership view helps to evaluate leaders‟ involvement in innovation activities, the establishment of formal processes to promote innovation, and dissemination of innovation goals. The leadership view assesses the degree to which a company‟s leadership supports innovation.

Figure 5 : Innovation Metrics Framework

(Source: Amy Muller 2001)

DISCUSSION ON METRICS As discussed earlier, simple and straight metrics are always beneficial. However, selection of the optimal metrics and the optimal value of any particular metric will be varying from company to company. There is no fit to all metric available. For example, innovation for a cement producer will require different skills, resources, and competences than in comparison with an automobile producer. Thus, the goals and targets of the innovation will vary from industry to industry. However, the generic indicators that are measured by the innovation metrics will be quite similar across most industries. The financial analysts

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of the company must analyse several metrics in order to develop a comprehensive view of the company‟s innovation capability. 4.4. GUIDELINES FOR NEW METRICS Robert Tucker (2002) proposes few Guidelines for the organizations for design of an effective metrics for Ideas and innovation. The key insights of the guidelines are as follows. 4.4.1. Comprehensive set of metrics. Organizations‟ need to build a comprehensive set of metrics so as to get everyone involved in the innovation initiative. Organizations can consider including at least one metric for each of the idea generation stages.

So with such a

comprehensive set, companies‟ will be more likely to detect problems (for example, a lack of leadership involvement or a bottleneck in the innovation process) before they become too serious. 4.4.2. Assessment of existing metrics. Innovation has to be managed as a discipline, as a holistic process. So organisations need to study and improve the existing metrics which is already in place. They need to find whether these metrics suit their needs. In the interests of standardization, they can seek consensus on a set of metrics with other managers working in their firm. 4.4.3. Avoid complex metrics. The simplest metrics are the best, so having a complex metrics for innovation is totally irrelevant. Organizations have to ensure that the metrics are meaningful, and intuitive. Such a metric will have greatest impact if they become a common entity throughout the company. 4.4.4. Don’t measure every conceivable parameter. Organisations need to resist the temptation to track every conceivable parameter. So they need to select a manageable set of metrics (say not more than 8 to 10) and measure them diligently. 4.4.5. Purpose of metrics Organizations need to keep in mind that creation of metrics is to measure their progress, and analyse the results for comparison purposes only, not as a stick to 'motivate' compliance

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4.4.6. Include a few customer-driven metrics. Organization can consider measuring customer driven metrics such as sales from new products to complement the internally focused metrics such as the number of new competencies under development or undue emphasis on customer-driven metrics; otherwise these metrics will stifle innovation projects with a longer-term return on investment [Amy Muller, 2001].

5. LATEST TRENDS & FUTURE OF INNOVATION 5.1.

IDEA BACKUP MANAGEMENT The concept of idea backup management is to track & manage filtered out

ideas. An idea which might not fit into the organization‟s context in the present scenario might reward it with unanticipated gains in future. Hence, tracking and managing filtered out ideas is equally important. In this paper, a three fold ways are proposed for handling filtered out ideas management. • R&D Support • Product/ Practice Line Diversification • Sponsoring and/or sourcing All of these are much discussed topics in themselves, and if dealt with details here, might lose the relevance and context of the paper. So it is left for future work. 5.2.

OUTSOURCING INNOVATION Outsourcing innovation and research activities of a company might yield to

long term budget savings and it is an eminent cost cutting measure. The great opportunity is that we can get multi -dimensional solution for a problem. The possible advantages that an organization might gain by outsourcing innovation include a reduction in technological and market uncertainty, cost sharing, risk spreading, and reduced duplication of research, economic of scale and an ability to combine different expertises. (A. Arundel, K. Smith, 1998) However the biggest threat is that those solutions and ideas shouldn‟t reach your competitors. This was evident from the questionnaire results as well, as most of the organizations think that outsourcing innovation is not an opportunity but a mere

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threat. The more detailed discussion of the questionnaire will be done in the later chapters and also in appendix B. Thus we can conclude that a company can outsource the contextual activities, but it has to in-source the core activities. Those are what give the company a competitive advantage. 5.3.

NATIONAL INNOVATION INDEX The National Innovation Index is just like an indicator to show the innovation

capability of a particular nation. We can compare with any other parameters like GDP, GNP etc. It is a concept to have a coordinated emphasis on innovation measurement and to evaluate nation‟s stand on innovation. This might help the organizations and researchers of a country to create a strong framework for identifying and measuring innovation in the national economy. But generating such an index itself is not an easy task, as it requires better existing data from the statistical agencies to allow for the consistent estimation of the contribution of innovation in the gross domestic product and productivity accounts and to develop greater understanding of innovation. The US innovation advisory committee (2008) also supports the idea of development of a National Innovation Index and they strongly believe that having a National Innovation Index will help to assess the innovation capability of a nation and also help them in calculating the contributions of innovation in the gross domestic product 5.4.

CO-OPERATIVE R&D Co-operative research and development is a programme which was

introduced by European Union (EU). According to this, all the supporting nations of EU made a contract to use the information services and markets, while at the same time remaining closely tied to national infrastructure. K. Smith (1999) claims, that this co-operative R&D is originated in a politically driven effort to encourage contacts between firms in EU. One advantage is such programmes are the improved relationships between large firms and sub contractors, producers, consumers and collaboration networks. On the other side of the coin, there is a “policy myth” which is stated by A. Arundel (1998), co-operative R&D could be a panacea that will help European firms to turn the fruits of research into competitive products, however this can be only [ Jayabalaji Sathiyamoorthi ]

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achieved through a good indicators, good theory (which is actually missing), and a good analysis on co-operative R&D against its alternatives. 5.5.

IDEA MANAGEMENT SOFTWARE SYSTEMS In the current market trend, companies are competing based on the speed at

which they can generate and implement ideas for new products or services, so there comes the need of the IDEA MANAGEMENT SOFTWARE SYSTEMS. The idea management technology is a new type of enterprise software that can help to make such an innovation strategy possible. Idea management systems are basically web based applications, thus enabling organizations to gather, share, and evaluate ideas from all employees, regardless of their geographical locations. All the ideas are then collated and stored into a centralized online database. These systems enable managers to measure the bottom line impact of ideas collected and implemented, thereby making it easier to determine the return on ideas. There are few major vendors of web based idea management applications, o “IdeaCentral” by Imaginatik12 o “NextNet” by General Ideas13

5.6.

INNOVATION BY ACQUISITION Innovation by acquisition is adopted when an organization wants to retain its

leadership position in the innovative product arena. So it buys innovation off the shelf by acquiring the firms. This strategy is effective in short term and will put the parent organization in the leadership position. In the long run, this strategy of innovation through acquisition usually fails because the acquiring corporation overestimates the value of synergies and underestimates the post-merger integration difficulties. Inmost of the cases, innovation by acquisition is always at enormous cost, either in cash or stock, to the shareholders of the acquiring corporation. Shareholders see far higher returns when companies successfully innovate organically For example, as the carbonated drinks market went down in recent years, Coca-Cola acquired Mad River Traders and PepsiCo bought South Beach Beverage 12 13

For product information visit, http://www.imaginatik.com/webdoc_prod_overview For product information visit, http://www.innovationtools.com/Resources/ideamgmt-details.asp?a=82 [ Jayabalaji Sathiyamoorthi ]

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Company, both makers of alternative beverages such as bottled waters, juices, and teas laced with ginseng. (Amy Muller, Liisa Valikangas, Paul Merlyn, 2001).

6. QUESTIONNAIRE RESULTS The innovation survey/questionnaire is drafted to get inputs from various organizations. As a result we can understand their views on innovation and how do they manage the idea generation process of innovation. This questionnaire was framed merely to get inputs relevant to the course of this scientific report, and thus other concepts were not included. Moreover, companies were reluctant in sharing their method or model of innovation, which they implement. Therefore, a real-time implementation for the proposed “Innovation Metric Framework model” was not possible.

Approach & methodology The questionnaire is framed with 15 simple self-assessment questions; nevertheless it addresses most of the critical to success factors of innovation. The survey is being filled by people at various levels within many organizations, so that based on the output of the questionnaire; we can understand what are the IDEAL models on managing ideas and innovations The questionnaire was circulated among different organizations across different geographical locations. The responses from the participants are captured over emails and phones calls. The participant companies are from various business fields like Automobile, Software Services, Software Consultants, Software Product development, Banking services and Semiconductor industry. See appendix B for the list of participant companies. The questions are devised and group in such a way that we understand what is the company‟s stand on innovation and the methodology adopted by them. In the following section, the important key competencies are discussed. The questions framed will act like an objective for the appropriate key competency items, the response from the companies are quoted under inference.

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Data Security Due to the participant organizations‟ concern about data security and data confidentiality, the results will be open only for the internal discussions of this paper only. Based on the request from the participant organizations‟, Information such as which organization expressed what kind of views on a particular question is kept hidden and therefore it is not disclosed. 

Organizational expertise on innovation Questions 1 to 4 are structured to understand the companies‟ expertise and

know how about the innovation trends. This will also help us to understand whether the company became innovative by choice or by chance. In other words, is it the company willingly adopted the innovation methods or out of competition it was forced to adapt Innovation, in order to in the market. o Responses: The responses for these questions were more positive. In fact, most of the companies‟ have a good understand about the need and urgency of innovation. Thus, most of the participants agreed on the organizational need to emphasis innovation. 

Concern about people Questions 5 and 6 are framed to understand how well the companies are

willing to take their employees and customers together in the innovation activities. From the employees‟ point of view, this will help us to know if the employees‟ have self interest towards innovation or they are just being driven by the order from their superiors. Next comes the customers, who are portrayed as kings by most of the companies. So hearing from them is certainly important. This question will help us to know how far the organization involves customers in discussing future ideas and opportunities. o Responses: There were different responses for question no 5, a few companies reported that they have to place some policies or some offers/ rewards in place to get passionate to towards work. Some companies reported that their biggest strength is [ Jayabalaji Sathiyamoorthi ]

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having people who are passionate about their current job. However for question no 6, most of the companies responded that they have a strong understanding of their clients and market. In case of new market they have understanding to some extent.



Innovation metrics in place Questions 7 to 11 are framed to address the organizations importance of

measuring innovation. With the help of these questions we can be aware of companies‟ alertness on Intellectual property and patents. Though most of the companies were not interested to share the type of metrics they use, nevertheless we can get an idea about whether the companies‟ believe strongly in placing a metrics for innovation. o Responses Each and every company have at least one metric in place to measure their innovation. However, they are so reluctant enough to share the kind of metric they adopt. Only two companies reported to use ROI based metrics, or more precisely, quantity based metrics. 

Process and methods adapted Questions 12 to 15 are framed to know whether organizations‟ equip

themselves to face the problems and difficulties of deploying the new ideas. The number of training programmes and workshops will give a clear picture on how much does companies‟ prepare their employees to implement the new ideas. The companies‟ view on the future of innovation is also captured by question no 15, which is to outsource innovation activities or not? o Responses Regarding cross cultural teams, most of the companies do accept that having cross cultural team helps in idea germination. Also during brainstorming, such intercultural teams will be of advantageous in bring out multiple view for an entity. Regarding outsourcing innovation, there are a lot of differences among the responses. A few companies think it is very risky to outsource innovate and some companies take it as an opportunity for sharing risks. Both the arguments are

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correct, so it all depends on the kind of business and also the competency area which is being outsourced. The detailed evaluations of the results are discussed in appendix B.

LESSONS LEARNT 

Most of the companies think that Outsourcing innovation is a mere threat. However few of the companies still agree to the contextual activities, but it has to in-source the core activities



Almost every organization have a very high absorptive capacity



Having the cross culture team in place doesn‟t directly influence the innovation process, however it does impact in idea generation process



Almost every organization has a defined and structured innovation process. They device a defined phase from idea generation to innovation.



Most of the companies, do believe in measuring their progress in innovation. So they certainly adopt an innovation metric system, whichever they feel it is good for them.



Most of the employees are not passionate towards innovations, unless driven by rewards.

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7. CONCLUSIONS From this study, it is indeed clear that the Long-term success of any organization in any competitive marketplace demands constant innovation. To have such a sustained innovation, the company should drive idea generation program, device appropriate metric for measurement and manage the innovation activities. It is also clear that the long lasting innovation requires a steady flow of new ideas. So we can conclude that the effectiveness of a company‟s innovation efforts is measured by how well promising ideas are selected, nurtured, and transformed into tangible products and services. Also it is understood that the entire process cycle of the idea generation till it developed into product is a continual process, so performing well in one stage of idea phase and doesn‟t necessarily promise success in the successive stages. This can be done by facilitating the awareness of opportunities, also by getting feedback from customers and foster the spread of entrepreneurial capabilities. Thus development of innovative capabilities is the only means by which companies can sustain a competitive advantage The simplest metrics are the best for different phases of idea, so usage of simple and suitable metrics to rank ideas and allow the best ideas to rise to the top. Emphasis on communication, organizations should listen to the feedback and comments from customers and partners. Besides, solicit immediate input from employees at any level and from any organization. Learning and improvement are to be gained from each stage of the process. So Implementation of pilot projects to gauge the costs and benefits of new data collection efforts could be encouraged.

Quote “The best way to start achieving a thing is to dream about it. Imagination together with innovation results in realization.” – Dr. APJ Abdul Kalam [ Jayabalaji Sathiyamoorthi ]

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8. ACKNOWLEDGEMENT The author gratefully acknowledge suggestion and guidance by Prof. Dr. A. Pechmann, FHoow, Germany, and sincerely appreciate the support and inputs provided by Mr. Swaminathan, General-Manager, TVS Motors Company, India and Mr. Selvam, Business Analyst, Airmiles - British Airways, UK. A special thanks to the organizations that have participated in the survey and expressed their valuable inputs. Besides, author wish to thank and appreciate the library staffs of FH-Emden, British Library- London and Uni-Library, Oldenburg for their support in finding literatures. The author owes lot of thanks to his parents, who are a constant source of support with their limitless love and care.

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Anthony Arundel, Keith Smith, Pari Patel and Giorgio Sirilli (1998), “The future of innovation measurement in Europe”, IDEA papers, viewed on 22 nd July 2008. http://www.pdfcoke.com/doc/239713/The-future-of-innovation-measurement-in-Europe

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Gary Hamel (2003), "The future of management”, ISBN 1-4221-0250-5, Harvard business school publication, p 27 – 45.

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Michael Diehl and Sabine Ch. Mueller, (2001) Cognitive Stimulation in ComputerSupported Idea Generation, view on 15th September 2008, http://www.psych.unito.it/csc/cogsci05/frame/poster/2/ma285-mueller.pdf

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Patel P, Pavitt K. (1995), Patterns of technological activity: their measurement and interpretation. In Stoneman Pub (ed) Handbook of the economics of innovation and technological change. Basil Blackwell Ltd, Oxford Paulo Matos Jorge da Silva e Sousa dos Santos (2002), “How to improve management of ideas”, ISBN 1-58112-606-9, published by Universal Publishers. PCT Board meeting (2007), “Fitness for purpose capability development plan” viewed on October 19th 2008, http://www.northsomerset.nhs.uk/Publications/meetings/PCT_Board_Meetings/2007/ July/13%20-%20Appendix%201%20%20FITNESS%20FOR%20PURPOSE%20CAPABILITY%20DEVELOPMENT%20P LAN.pdf Stein, Nicholas (2000), “The World’s Most Admired Companies,” In Fortune October edition, (2000), p. 183.

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Thomas J. Peters and Robert H. Waterman (1982), "In search of excellence", ISBN: 0-446-38507-7 published by Warner Books Inc. UK Govt, Department for innovation, “Report on universities & skills”, viewed on September 10th 2008, http://www.dius.gov.uk/policy/innovation.html US, Department of commerce, (2007) “Innovation measurement: Tracking the state of innovation in the American Economy”, the advisory committee‟s report on measuring innovation, viewed on October 18th 2008, http://www.innovationmetrics.gov/ Tucker, Robert (2007), “Innovation metrics: Embedding innovation in an organization‟s system”, weekly newsletter from Innovation Network, viewed on 19 th November 2008, http://www.thinksmart.com/newsletter

[ Jayabalaji Sathiyamoorthi ]

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APPENDIX – A QUESTIONNAIRE ON INNOVATION

PURPOSE This survey is solely circulated to companies whom appreciate innovation. The results of which are used to analyse and review the data for the scientific project (Project C), which is a mandatory subject in Master of Technical Management course, University of Applied Sciences, Emden, Germany

SIGNIFICANCE In today‟s economy, the importance of innovation is paramount in providing the organization the desired competitive advantage. The following questionnaire is structured to identify the significance of innovation and analyse the role of idea generation process.

DATA PROTECTION The data collected from this survey is strictly used for academic purpose and to analysis how really ideas contribute in achieving innovation. The author takes responsibility to ensure the confidentiality and privacy of the received information from the contributors.

METHODOLOGY What is your company‟s stand on managing ideas and Innovation? To get an answer for this question, we have compiled a simple questionnaire of 15 statements. We value your time, so we are not looking for elaborate answers; all you have to do is simple to answer – 1. Agree, 2. Agree strongly, 3. To some extent, 4.disagree or 5. Disagree strongly.

CONTRIBUTORS DETAILS Family, First name:____________________________________________________ Designation: _________________________________________________________ Organization‟s Name: _________________________________________________ Email: ______________________________________________________________ [ Jayabalaji Sathiyamoorthi ]

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QUESTIONS – Please select an answer for all statements

1. Our organization is known for its innovation and this is crucial to our success. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

2. The implications for the business of future trends and issues are analysed, with the participation of our design experts (internal and external) and technical specialists. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

3. All levels of the organisation are proactive in generating, evaluating and developing ideas for new products/services/processes. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

4. Your business domain schedule regular meetings among employees to share good & new ideas Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

5. Employees are passionate about what they do and really want to create something special. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

6. Ideas and Opportunities we identify are driven by our deep understanding of our customers, competitors and markets. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

7. Ideas has to be necessarily tracked and certain kind of metrics has to be adapted Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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8.

Do you think, once a good idea is deployed, and it will certainly help you to attain your organization‟s business goal? Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

9. Measuring idea quantitatively/ qualitatively help to assess your organization‟s innovation capability Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

10. Our intellectual property is at the core of our competitive advantage and we protect it accordingly in the most appropriate way. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

Disagree

Strongly Disagree

11. We have a strong „absorptive capacity‟14 Strongly Agree

Agree

To Some Extent

12. Our teams are usually made up of a broad mix of people from different cultural background Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

13. Trainings and workshops are consistent; people are developed for bigger roles in the organisation. Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

14. We have a defined and structured innovation process Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

15. In future, every organization might outsource Innovation Strongly Agree

14

Agree

To Some Extent

Disagree

Strongly Disagree

Absorptive capacity is the ability of your company to effectively use information from knowledge sources. [ Jayabalaji Sathiyamoorthi ]

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APPENDIX – B Question #1 Our organization is known for its innovation and this is crucial to our success. Sno

Responses

1

Agree

2

Strongly Agree

3

Agree

4

Agree

5

Strongly Agree

6

Strongly Agree

7

Strongly Agree

8

Strongly Agree

9

Strongly Agree

Six of the participant companies have Strongly Agreed.

Responses 6 5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

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Question #2 The implications for the business of future trends and issues are analysed, with the participation of our design experts (internal and external) and technical specialists. Sno

Responses

1

Agree

2

Agree

3

Strongly Agree

4

Strongly Agree

5

Strongly Agree

6

To Some Extent

7

Strongly Agree

8

To Some Extent

9

Strongly Agree

Five of the participant companies have Strongly Agreed.

Response 5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

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Question #3 All levels of the organisation are proactive in generating, evaluating and developing ideas for new products/services/processes.

Sno

Responses

1

Agree

2

To Some Extent

3

Strongly Agree

4

Agree

5

Strongly Agree

6

Strongly Disagree

7

Strongly Agree

8

Strongly Agree

9

Strongly Agree

Five of the participant companies have Strongly Agreed.

Response

5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree [ Jayabalaji Sathiyamoorthi ]

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Question #4 Your business domain schedule regular meetings among employees to share good & new ideas

Sno

Responses

1

Agree

2

Strongly Agree

3

Strongly Agree

4

Agree

5

Strongly Agree

6

Agree

7

Agree

8

To Some Extent

9

Agree

Five of the participant companies have expressed that they are agreed.

Response 5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree [ Jayabalaji Sathiyamoorthi ]

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Question #5 Employees are passionate about what they do and really want to create something special. Sno

Responses

1

To Some Extent

2

Agree

3

Agree

4

To Some Extent

5

Strongly Agree

6

To Some Extent

7

Agree

8

Agree

9

Agree

Five of the participant companies have expressed that they are agreed.

Response

5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree [ Jayabalaji Sathiyamoorthi ]

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Question #6 Ideas and Opportunities we identify are driven by our deep understanding of our customers, competitors and markets. Sno

Responses

1

To Some Extent

2

Agree

3

Agree

4

Strongly Agree

5

Strongly Agree

6

Agree

7

Strongly Agree

8

To Some Extent

9

Agree

Four of the participant companies have expressed that they are agreed.

Response

4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree [ Jayabalaji Sathiyamoorthi ]

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Question #7 Ideas has to be necessarily tracked and certain kind of metrics has to be adapted Sno

Responses

1

Agree

2

Strongly Agree

3

Agree

4

Agree

5

Agree

6

Agree

7

To Some Extent

8

Strongly Agree

9

Agree

Six of the participant companies have expressed that they are agreed.

Response 6

5 4 3

2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #8 Do you think, once a good idea is deployed, and it will certainly help you to attain your organization‟s business goal? Sno

Responses

1

Agree

2

Disagree

3

Strongly Agree

4

Strongly Agree

5

Agree

6

Disagree

7

Strongly Agree

8

Strongly Agree

9

To Some Extent

Four of the participant companies have expressed that they are „Strongly Agreed‟.

Response 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #9 Measuring idea quantitatively/ qualitatively help to assess your organization‟s innovation capability Sno

Responses

1

Agree

2

Strongly Agree

3

Strongly Agree

4

Agree

5

Strongly Agree

6

Strongly Agree

7

Strongly Agree

8

Agree

9

Strongly Agree

Six of the participant companies have expressed that they are „Strongly Agreed‟.

Response 6 5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #10 Our intellectual property is at the core of our competitive advantage and we protect it accordingly in the most appropriate way. Sno

Responses

1

Agree

2

Strongly Agree

3

Agree

4

Strongly Agree

5

Strongly Agree

6

Strongly Agree

7

Strongly Agree

8

To Some Extent

9

Strongly Agree

Six of the participant companies have expressed that they are „Strongly Agreed‟.

Response

6

5 4 3 2 1

0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #11 We have a strong „absorptive capacity‟ Sno

Responses

1

Agree

2

Agree

3

Agree

4

Agree

5

Agree

6

To Some Extent

7

Agree

8

Agree

9

To Some Extent

Seven of the participant companies have „Agreed‟ that they got a strong absorptive capacity.

Response 7 6 5 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #12 Our teams are usually made up of a broad mix of people from different cultural background Sno

Responses

1

Agree

2

To Some Extent

3

Strongly Agree

4

To Some Extent

5

Strongly Agree

6

Strongly Disagree

7

Strongly Agree

8

Strongly Agree

9

Agree

Four of the participant companies have expressed that they are „Strongly Agreed‟.

Response 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #13 Trainings and workshops are consistent; people are developed for bigger roles in the organisation. Sno

Responses

1

Agree

2

Strongly Agree

3

Agree

4

To Some Extent

5

Strongly Agree

6

Agree

7

To Some Extent

8

To Some Extent

9

Disagree

One set of three of the participant companies have expressed that they are „Agreed‟. And the other set of three companies expressed that they are agreed to some extent.

Response 3

2

1

0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #14 We have a defined and structured innovation process Sno

Responses

1

Agree

2

Strongly Agree

3

Agree

4

Agree

5

Agree

6

Strongly Agree

7

Agree

8

Disagree

9

Agree

Six of the participant companies have expressed that they are „Agreed‟.

Response 6

5 4 3

2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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Question #15 In future, every organization might outsource Innovation Sno

Responses

1

Disagree

2

To Some Extent

3

To Some Extent

4

Agree

5

To Some Extent

6

To Some Extent

7

Strongly Disagree

8

Strongly Agree

9

Agree

Four of the participant companies have expressed that they are „agreed to some extent‟.

Response 4 3 2 1 0 Strongly Agree

Agree

To Some Extent

Disagree

Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]

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SUMMARY OF THE QUESTIONNAIRE 

Most of the companies think, Outsourcing innovation is a mere threat. However few of the companies still agree to the contextual activities, but it has to in-source the core activities



Almost every organization have a very high absorptive capacity



Having the cross culture team in place doesn‟t directly influence the innovation process, however it does impact in idea generation process



Almost every organization has a defined and structured innovation process. They device a defined phase from idea generation to innovation.



Most of the companies, do believe in measuring their progress in innovation. So they certainly adopt an innovation metric system, whichever they feel it is good for them.



Most of the employees are not passionate towards innovations, unless driven by rewards.

[ Jayabalaji Sathiyamoorthi ]

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APPENDIX – C List of organizations participated in the innovation survey 

TVS Motor Company, India http://www.tvsmotor.in/index.asp



Wipro Technologies, India http://www.wipro.com/



Westpac, New Zealand http://www.westpac.co.nz/



HCL Technologies, USA http://www.hcltech.com/



Air miles, UK (A British Airways Subsidiary) http://www.airmiles.co.uk/home.do



Robert Bosch, Germany http:// www.bosch.com



Renault Nissan Technology and Business Centre India Private Limited http://www.nissan-global.com/EN/GLOBAL/



SAP Labs India (P) ltd http://www.sap.com/india/index.epx



Fastrack Design, Inc, USA http://www.fastrack-design.com/

[ Jayabalaji Sathiyamoorthi ]

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