Xavier FerràsAssociate Professor, Department of Operations, Innovation & Data Sciences Innovation is tough because it shakes things up and creates new daily routines that undermine the old ones. Taking on risk takes guts, but how else can you get out of a rut if you do not create new competitive advantages? How long will it take your competitors to render your business model obsolete or sink your company with their cut-throat pricing? We need to bear several things in mind when innovating: First, take full advantage of technology. I know many businesspeople who are happy with their firm's innovation, and who are willing to innovate when it comes to the business, marketing or organizational model so long as it is part of the company's classic value proposition. However, we are in the throes of a technological revolution, and nothing confers greater competitive advantages than one's own technology. Proprietary technology erects the highest barriers to entry for a company's competitors. Nothing has as much disruptive potential as a new technology. Second, build a business ecosystem around your company. One compelling reason for doing this is that it is hard to change your mindset overnight. Inevitably, a firm's thinking and habits are strongly shaped by past experience. That is why it is unlikely that new knowledge will be found within the organization. The status quo will never lead the needed transformation. Fresh new ideas will be found beyond the firm's bounds - at technology centers, in research groups and among expert consultants. Choose individuals rather than institutions as your sources of innovation. A leading university may have outstanding faculty members, but that is little help if they are not interested in working with you. Hence the need to discreetly identify talented, highly motivated individuals working in scientific and technological circles. (Such people abound, if you know where to look!) Consult outsiders - people from beyond the firm, from other countries, other markets, other sectors - and set up open innovation teams to prospect for opportunities. Choose individuals rather than institutions as your sources of innovation Third, organize your sources of information. Make an effort to receive a strong stream of ideas - diamonds in the rough, as it were - that may well turn into priceless gems. Such ideas may come from within your company or from outside. Ideas from within the firm tend to yield incremental improvements rather than radical changes. Ideas from outside come from the business ecosystem and from strategic analysis and information. Fourth, act with a venture-capital mindset. Earmark resources (however modest) to explore opportunities away from your core business. When you identify such an opportunity, spend time so that you can fully understand and evaluate it. The first stages of innovation involve research: analyze the setting to reduce uncertainty. Money should only be spent - and even then, sparingly - once the opportunity has been pinned down. Provide funding in a controlled fashion as you get closer to market launch. Funding can be ramped up once the uncertainties have diminished. Fifth, commit talent. It is better to have one person working on the project full-time than ten people working part-time who only innovate when they are free from other commitments. Choose the right people. In the early stages, one needs visionaries with strong leadership skills to get projects off the ground. Innovation and leadership are two sides of the same coin. There can be no leadership if everything is going to stay the same. Change does not happen without leadership because energy, conceptualization and communication are all needed in order to persuade others of the need for change. In the early stages, one needs visionaries with strong leadership skills to get projects off the ground Sixth, protect your projects, especially when they are in the embryonic stage. In the beginning, disruptive innovation absorbs resources that would otherwise go elsewhere, yet the return on investment is not immediate. This is why some people are likely to oppose your pet project and try to get it scrapped. The old corporate culture will try to kill your brainchild before it even sees the light of day. Innovation triggers the organization's "immune system," with potentially fatal results for the new idea. If necessary, when projects are far removed from the core business, keep them separate (for instance, in labs, garages, incubators and the like). Seventh, use special methodologies. Conventional management often fails when it comes to disruptive innovation projects - especially the most disruptive ones. You cannot conduct classic market research for innovation projects because no customers are demanding the product. This should come as no surprise, since consumers cannot imagine or grasp something that is nothing more than a pipe dream. Likewise, five-year financial forecasts are worthless because your business model will have to change many times before you settle on what the market really wants. Hence the need for fast, cheap experimentation to find the right user profile and the optimum set of features for the product or service. This requires special methodologies, such as design thinking. Eighth, give innovation teams good incentives. If you really believe in your team, you should not only pick the most talented people but also make sure they are properly rewarded for their efforts. Human resources departments need to adapt to this approach. Why not give the team 1% of sales as a bonus if it comes up with a "killer product." Ninth, make the most of national and international public tools for innovation. There are big tax breaks, direct grants and soft loans at both the local and European levels. While more could be done, help is available if you know where to look for it. Good financial planning for innovation cuts costs. Believe it or not, tax incentives and public grants can add up to make an R&D project practically free for a firm. Yet this should not blind you to the fact that your strategy comes first - it must not take second place to securing public funding. Tenth, carefully establish your objectives, metrics and indicators. Be rigorous in analyzing the results: if they are not satisfactory, take corrective action until they are. This will help turn your company into a hive of profitable innovation. About the author Xavier Ferràs is a Professor of Operations Management, Innovation and Data Sciences and Executive Director of Business Custom Programs at ESADE. He previously served as Dean of the Faculty of Business and Communication Studies at the University of Vic. Until 2012, he served as Director of the Catalan Agency for Competitiveness, where he was responsible for technology transfer policies, R&D and the development of clusters in Catalonia. He previously served as CIDEM Director of Business Development, Head of Innovation and Coordinator of the Technological Innovation Plan for Catalonia (2001-2004) and was a member of the committee responsible for drafting the Research and Innovation Plan (2005-2008). Among other executive positions related to technology and innovation, he served on boards of trustees and executive boards at BAIE (aerospace cluster), Biocat (biotechnology cluster), CTM Technology Center (advanced materials), Barcelona Media (audiovisual), CTAE (aerospace), Leitat (manufacturing), the Microsoft Productivity Center in Manresa, the Catalan Foundation for Research, the i-CERCA Foundation (Research Centre of the Catalan Government), Invertec (Venture Capital Company) and Creafutur.

ESADE

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Innovation management: preparing your organization for disruption

06/2019


Xavier Ferràs

Associate Professor, Department of Operations, Innovation & Data Sciences





Innovation is tough because it shakes things up and creates new daily routines that undermine the old ones. Taking on risk takes guts, but how else can you get out of a rut if you do not create new competitive advantages? How long will it take your competitors to render your business model obsolete or sink your company with their cut-throat pricing?


We need to bear several things in mind when innovating:


First, take full advantage of technology. I know many businesspeople who are happy with their firm's innovation, and who are willing to innovate when it comes to the business, marketing or organizational model so long as it is part of the company's classic value proposition. However, we are in the throes of a technological revolution, and nothing confers greater competitive advantages than one's own technology. Proprietary technology erects the highest barriers to entry for a company's competitors. Nothing has as much disruptive potential as a new technology.



Second, build a business ecosystem around your company. One compelling reason for doing this is that it is hard to change your mindset overnight. Inevitably, a firm's thinking and habits are strongly shaped by past experience. That is why it is unlikely that new knowledge will be found within the organization. The status quo will never lead the needed transformation. Fresh new ideas will be found beyond the firm's bounds - at technology centers, in research groups and among expert consultants. 


Choose individuals rather than institutions as your sources of innovation. A leading university may have outstanding faculty members, but that is little help if they are not interested in working with you. Hence the need to discreetly identify talented, highly motivated individuals working in scientific and technological circles. (Such people abound, if you know where to look!) Consult outsiders - people from beyond the firm, from other countries, other markets, other sectors - and set up open innovation teams to prospect for opportunities.


Choose individuals rather than institutions as your sources of innovation


Third, organize your sources of information. Make an effort to receive a strong stream of ideas - diamonds in the rough, as it were - that may well turn into priceless gems. Such ideas may come from within your company or from outside. Ideas from within the firm tend to yield incremental improvements rather than radical changes. Ideas from outside come from the business ecosystem and from strategic analysis and information.



Fourth, act with a venture-capital mindset. Earmark resources (however modest) to explore opportunities away from your core business. When you identify such an opportunity, spend time so that you can fully understand and evaluate it. The first stages of innovation involve research: analyze the setting to reduce uncertainty. Money should only be spent - and even then, sparingly - once the opportunity has been pinned down. Provide funding in a controlled fashion as you get closer to market launch. Funding can be ramped up once the uncertainties have diminished.


Fifth, commit talent. It is better to have one person working on the project full-time than ten people working part-time who only innovate when they are free from other commitments. Choose the right people. In the early stages, one needs visionaries with strong leadership skills to get projects off the ground. 


Innovation and leadership are two sides of the same coin. There can be no leadership if everything is going to stay the same. Change does not happen without leadership because energy, conceptualization and communication are all needed in order to persuade others of the need for change.


In the early stages, one needs visionaries with strong leadership skills to get projects off the ground


Sixth, protect your projects, especially when they are in the embryonic stage. In the beginning, disruptive innovation absorbs resources that would otherwise go elsewhere, yet the return on investment is not immediate. This is why some people are likely to oppose your pet project and try to get it scrapped. The old corporate culture will try to kill your brainchild before it even sees the light of day. Innovation triggers the organization's "immune system," with potentially fatal results for the new idea. If necessary, when projects are far removed from the core business, keep them separate (for instance, in labs, garages, incubators and the like).



Seventh, use special methodologies. Conventional management often fails when it comes to disruptive innovation projects - especially the most disruptive ones. You cannot conduct classic market research for innovation projects because no customers are demanding the product. 


This should come as no surprise, since consumers cannot imagine or grasp something that is nothing more than a pipe dream. Likewise, five-year financial forecasts are worthless because your business model will have to change many times before you settle on what the market really wants. Hence the need for fast, cheap experimentation to find the right user profile and the optimum set of features for the product or service. This requires special methodologies, such as design thinking.


Eighth, give innovation teams good incentives. If you really believe in your team, you should not only pick the most talented people but also make sure they are properly rewarded for their efforts. Human resources departments need to adapt to this approach. Why not give the team 1% of sales as a bonus if it comes up with a "killer product."


Ninth, make the most of national and international public tools for innovation. There are big tax breaks, direct grants and soft loans at both the local and European levels. While more could be done, help is available if you know where to look for it. Good financial planning for innovation cuts costs. Believe it or not, tax incentives and public grants can add up to make an R&D project practically free for a firm. Yet this should not blind you to the fact that your strategy comes first - it must not take second place to securing public funding.


Tenth, carefully establish your objectives, metrics and indicators. Be rigorous in analyzing the results: if they are not satisfactory, take corrective action until they are. This will help turn your company into a hive of profitable innovation.


About the author


Xavier Ferràs is a Professor of Operations Management, Innovation and Data Sciences and Executive Director of Business Custom Programs at ESADE. He previously served as Dean of the Faculty of Business and Communication Studies at the University of Vic.


Until 2012, he served as Director of the Catalan Agency for Competitiveness, where he was responsible for technology transfer policies, R&D and the development of clusters in Catalonia. He previously served as CIDEM Director of Business Development, Head of Innovation and Coordinator of the Technological Innovation Plan for Catalonia (2001-2004) and was a member of the committee responsible for drafting the Research and Innovation Plan (2005-2008).


Among other executive positions related to technology and innovation, he served on boards of trustees and executive boards at BAIE (aerospace cluster), Biocat (biotechnology cluster), CTM Technology Center (advanced materials), Barcelona Media (audiovisual), CTAE (aerospace), Leitat (manufacturing), the Microsoft Productivity Center in Manresa, the Catalan Foundation for Research, the i-CERCA Foundation (Research Centre of the Catalan Government), Invertec (Venture Capital Company) and Creafutur.

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