Wednesday, September 27, 2006

Thought you'd be interested in the new report from Deloitte called the "Glittering Prize:
How financial institutions can drive growth through process and service innovation."

The comment by HSBC's Chairman "Product innovation gives less than three months competitive advantage. Process innovation gives at least 12 months competitive advantage" reminds me of the innovation challenges our financial services clients face and how they use Imaginatik's innovation infrastructure to turn consumer insights into service and process innovations, that are difficult for competitors to copy.

A major recommendation from the report that we've enabled our financial services clients to excel at is "Aligning infrastructure. Innovative companies often have dedicated systems and tools to support the innovation process. Their performance measures and incentive structures align with the organization’s overall innovation goals – rewarding employees for figuring out how to do things better. They also use knowledge networks, enterprise portals and other technology tools to promote collaboration and information-sharing – a critical first step on the road to innovation."

The outcome is an effective innovation process that produces a "steady stream of sustaining and breakthrough ideas: new products; new services; new processes; new business models — innovations that enable a company to create and capture value in entirely new ways, ultimately leading to continuous revenue growth."

Monday, September 18, 2006

Kimberly-Clark turns to outsiders on R&D

As more companies enter the Innovation Arms race, those with maturing Innovation Infrastructures are looking to increase their innovation capabilities. One such way that has been getting a lot of press recently has seen the promotion of open innovation with the likes of P&G, Kraft Foods and now Kimberly Clark openly reporting their capabilities.

This change has seen Kimberly Clark look outside its Research & Development (R&D) department for innovation by doing away with their vertically integrated model of product development with remarkable results. For example, by turning in part to people outside their organization, Kimberly Clark has managed to slash the time to bring new products to market by 30 percent.

One of the key reasons for the switch in strategy was due to the demand on the product pipeline that Kimberly-Clark’s senior vice president and Chief Innovation Officer (CIO), Cheryl Perkins, adopted three years ago when she began leading the company’s R&D operations. Like many companies, the demand for continual growth is leading to an increase in the Innovation Revenue Growth Gap, between known and unknown innovations, as companies struggle to find new sources for innovative ideas. Kimberly-Clark has overcome this by changing their focus and engaging with outside parties in the development and launch of products. Last year alone, Kimberly-Clark formed more than 30 partnerships. This has created some remarkable results, including; Huggies liquid baby powder, Huggies Cleanteam that hit the market shelves in 12 months instead of the typical 2-3 years and SunSignals, which have increased the sales of the Huggies swim pants whilst reaching a wider audience.

Crucially, Kimberly-Clark has not forgotten the importance of people in the process. They have assigned relationship managers for each of the partnerships and from a very early stage they agreed on who owns the intellectual property, before unresolved issues get a chance to erupt acrimoniously. Furthermore, whilst product and technology innovations have been the main focus, Kimberly-Clark have also looked at other Innovation Dimensions, including design. This has resulted in Kimberly-Clark planning to open a design studio in early September 2006. Such focus has created a more advanced, disciplined and successful innovation process. This is a great read. Open innovation is on the march….
Five Key Strategies for Making Metrics

One of the key things for any business serious about innovation is how to measure it, what metrics to use and where/when to use them appropriately. These of course need to be tied back some financial measure; such as the Innovation Revenue Growth Gap with key metrics and targets agreed with management at all levels of the organization. Without these being pre-defined what are organizations really aiming at? Committed targets for metrics are critical to driving innovation; having metrics will not drive it.

There are some nice points made in this article.

Firstly, rewarding innovative behaviors as people correspond to the metrics that you measure them against is key. If people aren’t rewarded and recognized, why should they participate? Also companies need to have meaningful/representative ways to evaluate ideas i.e. appropriate metrics for measuring new products, services and business models.

I find ‘connecting the metric to the rhetoric’ a facilitating point. If an employee is solely measured on the day-to-day performance, such as a call centre worker, or year-to-year performance targets such as a salesman without any tie to longer-term innovation goals - they are clearly not aligned with a company’s innovation strategy or the company with them. This is a very short sighted approach. Innovation should not be evaluated solely within such time limits as there effects, if given the appropriate time, can bring great rewards.

Having metrics that supports or can support all types of innovative ideas is critical. Otherwise great ideas maybe lost or cast aside as they don’t meet the criteria or have a process them forward appropriately if/once identified. This is not just about metrics that people can use to evaluate ideas but about the people who assess ideas themselves and their ability to reform the process to allow a great idea to be properly evaluated rather than dismissed out of hand for failing the current criteria.

Likewise having different measures for incremental and breakthrough innovation is key, as they need to be treated differently, not only in how they are measured but how they are developed. Breakthroughs can be hard to measure with precision, as a company may not have anything to compare with previous experiences on its performance. Although this can be grown as a company matures in producing breakthrough innovations.

Innovation process metrics are lead indicators of innovation success. Without them, how do you know you have arrived? How do you know if the process is working, how it can be imporved or what value it is returning for your investment?