Organizations as Innovation Systems

1. Organizations as Innovation Systems GE 393 DEG Final Project Andy Williams

2. Innovate or Die?

3. Innovate or Die? • Everyone seems to agree, but… • Can’t agree on what innovation is • Can’t agree on how to measure it • Can’t agree on how to develop a clear strategy • Can’t agree on how to influence their capacity to innovate

4. Outline • Defining Innovation • Measuring Innovation • Building a System of Innovation • Corporate Innovation Strategy • Strategy Influencing Innovative Capacity • Conclusions • Future Work

5. Defining Innovation • “Whatever changes the wealth-producing potential of already existing resources constitutes innovation” - Drucker • “Innovations take the form of producing new commodities, organizing new technological changes in the production of commodities already in use, opening up new markets, discovering new sources of raw materials, and setting up new management organizations, like the creation of a monopoly position or the breaking up of a monopoly position.” - Schumpeter

6. A Useful Definition for Innovation • To be useful it should • Guide policy • Be measurable • Therefore innovation should be • Something with a measurable amount of newness • Resulting in a measurable business advantage

7. Measuring Innovation? • Performance • Quality • Timing • Financials • Development Cost • Cycle Time • Resource Capability • Resource Capacity • Team Effectiveness • Competitive Comparisons

8. Measuring Innovation - Newness • Newness is relative to the firm, industry, and world • Subjective rating of project versus capacities • Subjective rating is useful – when consistent • Micro and Macro level • Technological and Market based

9. Measuring Innovation - Newness • Categories • Familiarity of technological environment • Fit of technological resources • Familiarity of market environment • Fit of market resources

10. Measuring Innovation - Newness • Examples of Metrics • New customers • Class of products new to firm • Science new to world • Technology new to industry • Production processes new to firm

11. Measuring Innovation – Business Advantage • Increase Market Size/Share • Increase Ability to Increase Market Size/Share • Decrease Cost • Increase Ability to Decrease Cost • Increase Profit • Increase Ability to Increase Profit

12. An Innovation System • Establish your metrics • Determine current state along each metric keeping in mind • Fit and Familiarity • Capacity and Compatibility • Establish desired state • Measure potential projects relative to states • Predict how projects will cause state to evolve

13. Innovation Strategy • Determine optimal portfolio of innovation • Portfolio will lead to the desired state along each metric • Desired state may evolve over time

14. Strategy Influencing Innovation • Hiring Policies • Salary • Incentives • Reorganization • Team Effectiveness • Benchmarking

15. Conclusions • Need for a useful definition • Need for firm specific metrics • Measurement system • Attribution issues • Systematic Innovation • Innovation Strategy

16. Questions