Innovations, by definition, produce something ‘novel’ that differs markedly from a previous state. The German economist Jürgen Hauschildt, a pioneer in the field of business innovation research, suggests that it is not enough to produce an idea – only its sale and/or use, differentiates innovation from invention.
Without innovation and development, even the strongest of companies will eventually be left behind. So how can established firms create the necessary conditions for innovation, to develop truly new and improved products?
Innovative products generate growth, and ultimately an increase in profit, but there are challenges that companies must overcome:
1. Resources are scarce. Sufficient development cannot take place with existing resources. The Research and Development Department requests more funding and the finance department can no longer handle the strain.
2. Resource costs in the Research & Development department are high, as these costs relate to highly educated and competent scientists/engineers, who convert problems into solutions and commercially viable products. In addition, there are the costs of the machinery and equipment deployed in research and development.
3. A great deal of time elapses between the emergence of an idea for developing a product until its successful market rollout. The longer the development phase, the greater the risk that a competitor will launch the development first onto the market, which will ultimately involve loss of market share and profit. In addition, along with an increased length of time, development costs rise and it becomes increasingly difficult to stop working on a project, even when it is not making any progress.
4. Every innovation involves risk: Many development projects are not seen through to the end. Others are not brought onto the market or do not sell well. The few projects that are successful, have to therefore compensate for the losses of the unsuccessful innovations.
5. Innovation projects are difficult to plan, are unreliable and involve delays. Safety buffers are scheduled to make the projects more reliable.
6. Senior managers complain that the company generates insufficient creative marketing ideas. Could it be the case that focussing too much on risk management and the high cost of failure, stifles creativity?
Often, the most creative ideas bring either tremendous change to something already in existence, or something completely new, and are therefore seen as more risky than small or gradual changes that appear to be more secure.
Can we develop an effective and improved process to deal with these challenges? It is important to address the speed, efficiency and reliability of innovation projects. In order to do this, we need to ask ourselves what limitations must be overcome by research and development departments?
Reduce the number of market failures
In order to generate sufficient cash flow and good resources, an organisation needs to have both a steady and a high rate of successful projects. Key performance indicators can show whether a target has been reached (number of successful innovations in terms of sales, or throughput within a specific time frame; market success/failure ratio; timely market launch, especially with seasonal innovations etc.).
The 6 Technology Questions by Dr. Eliyahu Goldratt is an excellent tool for ascertaining how a company can identify and resolve existing limitations and restrictions and thereby reduce market failures.
The following cause and effect diagram shows the logical association between the intention to pursue an innovative idea and positive or negative results. This analytical thinking tool helps the innovator and corporate management to determine whether an idea should be pursued or not. It is read from bottom to top as follows: ‘If entity 1 and entity 2, then entity 3, etc.’
By carrying out the first six steps in the above cause and effect diagram, a document is created, which describes not only the advantages of the innovation, but also the limitations, which are resolved as a result. It also defines why and how a limitation is resolved – an analysis that is much stronger than merely an innovative idea. By following the action suggested in the 7th step, the causes and effects of any possible negative effects are considered and results in a balanced view of the pros and cons of the innovation. At this point in time, using this as a base, a decision can be made: Which innovation projects should be implemented and prioritised (11) or which ideas should be rejected (12).
Shorten the completion period of innovation projects
The Five Focusing Steps serve as a process for continual improvement.1. The constraint is identified and a decision made on how best to exploit it.
2. A decision is made on how to best exploit the constraint.
3. All other decisions are made subordinate to the constraint.
4. In the fourth step, the constraint is elevated.
5. The steps are repeated until the constraint has shifted, to prevent inertia becoming the constraint.
Several other approaches to continual improvement require everything within the company to be continuously improved. The Theory of Constraints improvement approach, on the other hand, focusses attention and energy on one point: the point of maximum influence, the constraint of the system.
What else can you do to implement more innovative projects in a shorter period of time?
- Reduce WIP (Work In Process).
- Ensure the full kit is there, i.e. that everything needed to accomplish the task with the highest priority, is there before commencement of the task.
- Establish working methods to prevent detrimental multitasking.
- Avoid spreading resources too thinly.
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Further articles on multitasking and resource management can be accessed here:
http://uwetecht.de/tag/multitasking/
http://uwetecht.de/die-7-todsuenden-im-multiprojektmanagement-1-kampf-um-ressourcen/
