Enabling Mechanisms Strategic options for the successful management

Enabling Mechanisms Strategic options for the successful management of innovation

Types of enabling mechanisms • • Dedicated organizational units Acquisition/divestiture Financial mechanisms Technological mechanisms Strategic alliances Corporate governance Management practices Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 2

Examples of the use of enabling mechanisms from those companies researched by CIO Corporation 3 Enabling Mechanism Comment (Slide number) Uber New CEO from outside (20), core values addressed (21), strengthen Board role (19) GE New CEO from the outside (20), Divestiture (8) Acquisition (8) RIM (now Blackberry) Listen to the customer (21) 3 M Measuring innovation progress (23), Spin-off (9), Dual career paths (23 ), Encourage small SBUs (7), Reinforce importance of innovation (21), use of task forces (4), skunk works (5), business start-ups (6) Starbucks Deere Solid management of innovation overall Amazon Listen to the customer (21), use of task forces (4), importance of innovation (21) Rolls Royce Minimizing hierarchy (22) P&G “Connect” initiative (17) DSM Innovation Centre at corporate level (13), Regular use of attitude surveys (22) , venture capital (10) For a more comprehensive list of ‘enabling mechanisms’ in use by these and other companies researched by CIO, please refer to ‘IM Reports’ and other research available on the web site.

Dedicated organizational mechanisms Individual champion/Task force • Individual champion • Part or full time responsibility for developing, promoting and implementing an idea • Some individuals voluntarily assume this role, others are designated • Some operate without official sanction and support • Companies especially good at innovation have networks or technical business and executive champions • Task force • Issue-oriented, problem solving group • Members from several functions and levels • Part-time job for members (in addition to day-to-day responsibilities • Limited duration of activity; temporary life • Focused on diagnosis and possibility on implantation • Power dependent on where they report Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 4

Dedicated organizational mechanisms Venture team/skunk works • Venture team • Project/product oriented organizational unit • Members from several functions and levels • Full-time participation by members • Duration limited to the life of the project • Focused on project management and implementation • Have executive power and resources • Skunks works • Isolated venture group • Typically dealing with new, unproven technologies • Members often from outside the main organization • Isolation aimed at reinforcing own culture Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 5

Dedicated organizational mechanisms New venture division/business start up • New venture division • Permanent nursing ground for new business/products • Has the status of an operating division but different performance expectations • Often spins-off business to other parts of the corporation after start-up • Management typically from within the parent company and may return to others positions in the parent • Business start-up • Separate organizational unit to launch a new, green field business • Mirrors the characteristics of the new industry • Wholly owned, sometimes a modification of an existing New Venture Division • The management of the new business is sometimes thrust outside the parent company, often giving up the right to return • Provision is made for appropriate rewards for successful completion of start-up tasks • Typically involves major allocation of resources and a long-term investment perspective Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 6

Dedicated organizational mechanisms SBU proliferation • Company’s basic principle of organization is to develop and maintain a large number of relatively small, focused strategic business units • As units grow beyond a certain size (sales and employment) they may be subdivided • Corporate concept of limited scale • Focus on specialization and niches • Typically requires headquarters to develop a holding company mentality • Often associated with fast moving technologies and markets Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 7

Acquisition/Divestiture Enabling acquisition/Spin-off(partial or complete • Enabling acquisition • Spin-off (partial or complete • Purchase a new business/company to have access to its talent resource (technologies and markets) • Business divorced from existing operations and given its own identity • Typically involves a 100% acquisition; can be 10% or greater ownership • Divorce to improve performance by attracting money or motivating talent • Sometimes implemented to limit the legal, financial or image liability of the parent company Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 8

Acquisition/divestiture Support employee spin-off/Spin in • Support employee spin-off • Financial and managerial backing by the corporation of a new venture to be launched by company employees • Typically done when the new venture does not fall in the main realm of current corporate interests • Often used to exploit the “byproduct” technology of an existing program • Spin-in • Integration within the corporation of a previously external start-up operation/business • Start-up may have received financial or other support from parent-to-be • Often involves hiring an entrepreneur or entrepreneurial team to manage the venture temporarily until past the startup phase when it is spun-in Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 9

Financial mechanisms Corporate venture capital/Venture capital partnerships • Corporate venture capital • Venture capital group Use corporate funds to set up a traditional wholly owned venture capital firm Use as a window to new technologies and markets, possible source of acquisitions and investments • Venture capital partnership • Similar to Venture Capital Group but as one of several partners Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 10

Financial mechanisms Seed investment/R&D limited partnership • Seed investment • Minority investment in a business/corporation to gain a “window” on emerging technologies • Often used when there are “antitrust” or regulatory constraints on outright acquisitions • Way to manage risk and uncertainty • Allows for cultural differences between partners • Sometimes done to obtain privileged access to scarce new product • Generally less than 10% ownership • R&D limited partnership • Formalization of a cooperative R&D effort for the development of new technologies or products • May take the form of: joint funding of a specific R&D program shared between the partners Creation of a joint R&D venture Creation of a new R&D company • Provides off-balance sheet financing for innovation development Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 11

Financial mechanisms Licensing • Purchasing a right to sell of market an innovation developed outside the company Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 12

Technological mechanisms Central R&D/Decentralized R&D • Central R&D • Establishment of a central R&D unit to pursue long germ programs aiming at the development of new technologies or products • Usually at arms length from operating units • Often pursues basic research, usually managed by scientists • Decentralized R&D • Little or no R&D facilities at corporate level, almost all R&D done in divisions or operating units • R&D tends to be focused in areas of direct relevance to the division, less basic science research Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 13

Technological mechanisms Balanced R&D/Contract out • Balanced R&D • Centralized approach to R&D involving basic research and investigation into area of concern to the company that may fall between the cracks • More applied R&D based on SBU or division level • Contract out • Specific arrangement to subcontract research and development activity to an outside organization e. g. Traditional contract research firm Entrepreneurial company University Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 14

Strategic alliances Joint venture/Three tier venture • Joint venture • Creation of a jointly-owned company for the development and management of a new business opportunity • Three tier venture • Pooling of financial, managerial and technological resources for the development of a new business opportunity • Involves typically three types of partners An investor company providing the necessary cash An operating company providing the managerial skill A start-up company providing the technologies, facilities, specialized talent Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 15

Strategic alliances Supplier partnership/Customer partnership • Supplier partnership • Set up a project team jointly staffed and funded by corporation and a supplier to develop a new product • Customer partnership • Start a collaborative effort with a customer or group of customers to develop and innovation benefiting all parties • Often provides a useful “window on the marketplace” Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 16

Strategic alliances Union partnership/Privileged partnership • Union partnership • Work with existing unions to jointly develop and launch innovative businesses aimed at providing employment security and long term earnings • In some cases these partnerships are oriented at finding new products that can be manufactured in existing plans threatened with closing • Funding for these products tends to come from the corporation; the development and review of the innovation and procedures for implementing them are the joint responsibility of labor and management • Privileged partnerships • Establishment of a privileged relationship with a source of technology/knowhow, e. g. Supplier of materials/components University research organization in exchange for a long-term purchasing or financial commitment Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 17

Strategic alliances Government-supported venture • Government supported venture • Development of a research program with the support of a public agency or the government • Typically undertaken in areas of national interest with a long-term payback, e. g. Alternative energy sources Environmental protection Space exploration Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 18

Corporate governance Outside advisory group/Strengthen Board role • Outside advisory group • Limited-purpose adjunct to the Board of Directors • Member are not directors but “outsiders” • Source of ideas on new technologies or markets • Act as a review group for current corporate projects • Strengthen Board role • Introducing new Directors into the Board to bring in perspective on new technologies or market • Restructuring of the current Board by creation of “Innovation Committee” • Identifying a clear role for the Board in stimulation and oversight of innovation • Changing the selection criteria for Board members to include ability to contribute to some aspect of innovation Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 19

Corporate governance New top management position/Top management change • New top management position • Reinforcement of the top management team by introduction of new position • Often linked to the creation of a new staff function • Top management change • Replacement of existing CEO or division head to accelerate the pace of change and its innovation performance Chief technology officer Innovation director Corporate development director Technology Czar Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 20

Management practices Reorient corporate values/Adopt the viewpoint of the customer • Reorient corporate values • Continual articulation by senior executives of the importance of innovation to company performance • Reinforcement of this view through rewards, recognition, career advancement • Setting of “stretch objectives” to promote innovation • Threat of withdrawal from slowgrowth, low innovation businesses • Adopt the viewpoint of the customer • Systematically debrief field engineers, customer relations and sales personnel • Keep senior executives in regular contact with a wide range of customers • Add an internal marketing arm to central R&D; build the R&D budget through an in internal “free market” • Put satellite R&D units in each factory • Create an entrepreneurial environment by selling (internally and externally) selected “overhead” services Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 21

Management practices Streamline organization structure/Manage people flow • Streamline organization structure • Reduce numbers of management layers • Limit size and scope of headquarters staff • Manage people flow • Planned rotation of employees from field to lab to factory to field • Require all employees to spend a minimum amount of time each month on innovative projects they select • Develop mechanisms to involve all employees in idea generation activities • Use regular employee attitude surveys • Cross-train employees in several functional specialities Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 22

Management practices Fund and measure innovation/Provide incentives for innovators • Fund and measure innovation • Corporate “loans” to divisions for product development • Use innovation budgeting • Develop performance measures to track progress of innovations • Measure revenues produced by recent products • Provide incentives for innovators • Cash and stock awards • Publicity and special recognition events • CEO spotlight • Dual career paths • Employee competition for corporate development funds Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 23

Management practices Create special forums • Internal trade shows • Users conferences and roundtables • Cross-company technical presentations, networks, designated knowledge centres overlaid on regular organization Thought starters. Strategic options for the management of innovation; Created by ADL. Updated by CIO 24