Islands of Innovation

Richard Walton's phrase "islands of innovation" conveys the difficulty of diffusing innovations throughout a work group, department, company or market. The American Productivity and Work Center found that it takes, on average, two years for a company to implement innovations across work sites. There are at least four kinds of obstacles, as summarized by Zell (2001):
1. The Innovation itself. Advantages may be difficult to perceive, or the innovation may appear incompatible with other aspects of the organization. Problems of measurement, particularly of indirect benefits, complicate the clarity of advantages.
2. Transference. Top-down change may be resisted, while bottom-up change may take too long to implement. Communication barriers complicate matters.
3. Implementation. Lack of resources, commitment at all levels, leadership conflicts or inadequate training can reduce possibility of implementation. Employee turnover or the lack of long-term business practice/policy change also impede implementation.
4. Humans. Whether it's "not invented here" syndrome or just dislike, people undercut new policies and implementations and sometimes just won't adopt new methods. Overly successful pilot projects can alienate other members of the workforce and eventually isolate those who adopt the innovation.

HP in 1990: A decentralized, innovation-loving company that had sprawled beyond its means, according to Zell (2001). Not-invented-here syndrome impeded cross-departmental adoption of ideas. Consultants worked with small groups at individual sites and as success grew, a snowball effect developed and all groups requested consultations. The Work Innovation Network (WIN) was developed to overcome barriers to diffusion. Those principles, as described by Zell (2001):
1. Pull mechanism. Network and topics under discussion were driven by demand, not hierarchy; had to request to join, wasn't mandatory. Bottom-up, employee-driven approach. Rotating self-management. Knowledge brought in as needed.
2. Networking. Personal relationships and communication between divisions emphasized. Physical layout was arranged to encourage conversation. Lunches and small groups were encouraged. Social events planned and paid for. Learning periods were scheduled when bosses were coaches, not evaluators, and flexibility and openness to ideas was encouraged. The ranking system for employees was rethought to minimize competition and encourage teamwork.
3. Peer consulting. Knowledge sharing was encouraged by allowing employees and bosses to exchange tips for success. Bosses shared stories and then small groups discussed knowledge, blind spots, great ideas and strategies from the presentation. Peers became more trusting and told each other when language about innovations emphasized being radical or crazy, to prevent self-fulfilling prophecies.
4. Safe environment. Open sharing of mistakes. Honesty and freedom to admit error was highly prized by the WIN teams.
5. Action research. White papers were distributed at all meetings and collections of documents were created to track changes in thought.

Evidence of effectiveness came in several flavors. Internal satisfaction was high (80% said they received a full ROI, according to Zell 2001). Anecdotes were often shared at meetings discussing the success of WIN. Then in 1995, Zell reports that the project was cancelled and all funding cut. Infrastructure changes further reduced the possibility of meeting up in WIN-like groups, even informally. After a number of dormant years, the possibility of a virtual WIN was raised, but not executed. Zell summarizes the lessons learned by WIN's ending as a need for top-management support, the need of measures of success and the need for alignment with HP's end goals of customer satisfaction and improvement of products.

SOURCE: Deone Zell, “Overcoming Barriers to Work Innovations: Lessons learned at HP,” Organizational Dynamics, Vol. 30, No. 1, pp. 77–86, 2001

[Summary Prepared by: Caroline]

Welcome Pete...

I would like to introduce Peter Baloh (Pete) to all of you. Pete is a doctoral candidate at the University of Ljubljana in beautiful Slovenia. Pete is interested in the area of distributed and open innovation processes. Pete has already authored a number of articles this area, and has been gathering some rather interesting case studies. Pete will contribute to the project by also engaging in the analysis of the academic literature, along with doing interviews with Slovenian companies (so that we do get a European and International flavor) to the data. In addition, Pete will also be documenting case studies that he has come across in the past and from his current research projects.

"When do systems begin to change? When entrepreneurs decide it's time." - --Bill Drayton, founder of Ashoka (Quoted in Fast Company, 2005)

Bill Drayton's a visionary, encouraging the citizen sector to change the world through entrepreneurship. His group, Ashoka (www.ashoka.org), seeks and unites social entrepreneurs throughout the world. Anyone who's trying to change the world is a candidate for membership in Ashoka. The identified social entrepreneurs are given a fellowship, but that's not the really cool part. The best part of Ashoka is that the identified socially-focused businesses are given access to a business model that's only now emerging in the biggest companies in the world. Ashoka unites social entrepreneurial businesses through innovation and knowledge sharing.

Bill Drayton envisions Ashoka as an ever-increasing flow of ideas. The network links small and medium sized businesses across the world and identifies similarities in their problems, solutions, distribution networks or marketing. Then it links the practitioners and their ideas. The result is exponential knowledge, across the world. Drayton's emphasis is on innovation diffusion, which is a difficult thing to do. Most companies struggle with having employees accept new innovations, much less the marketplace. Ashoka links successful innovators to share that practice of innovation diffusion. And it works--both for the member businesses and for Ashoka. Drayton started Ashoka with less than $50,000 as a yearly budget. Now, Ashoka's Fellowships are over $17 million a year (http://www.ashoka.org/what_is/mission.cfm).

There are millions of good ideas out there, but implementing them successfully and well is a challenge for anyone. Ashoka strives to make social change through entrepreneurship as easy as possible by demonstrating that knowledge transfer can take place across the world. Bolivian farmers and Nepalese farmers can be taught in the same way, and Ashoka proves it. Ashoka is a "global accelerator" for innovation (See - Keith H Hammonds, “A Lever Long Enough to Move the World,” Fast Company; Jan 2005).

[Summary Prepared by: Caroline]

The Case of Edge Technologies...

In order to commercialize innovations there is a growing interest in the concept of edge technologies. “Edge technologies” that help the organization connect with customers and drives innovations in the organization (see Mui, C. (2006). “‘Edge’ Technologies Go Mainstream,” Optimize, April, 54. Website: ttp://www.optimizemag.com/article/showArticle.jhtml?articleId=184400256). For example, General Motors (GM) sends a monthly report to its customers via OnStar system, which allows GM to monitor performance, status, and locations of vehicles via censors on the vehicles and cellular connections. The monthly reports contain information such as conditions of vehicles, possible troubles, and reminder of maintenance checks. The report is generated based on the analysis of more than 1,000 trouble records. The application of IT to customer relationship management significantly changed the way GM to interact with customers. Traditionally GM only interacted with customers before purchase via mass advertisement and at purchase. Now GM keeps the relationship with customers even after purchase by providing information that helps customers.

The edge technologies bring tremendous benefits to GM. First, it improved GM’s customer relationships. OnStar system received 15,000 emergency service calls, 23,000 roadside-assistance, 29,000 diagnostic calls, 380,000 directions, etc. Second, the real-time observations of vehicles in various conditions provide knowledge to GM to improve vehicle designs. Third, it provides GM new income sources. For example, GMAC insurances offer different services for customers based on the car’s mileage. Customers who have lower mileage vehicles can get lower premium.

Edge technologies promise the above benefits to an organization, however, there are drawbacks too. First, it may increase the problem of information overload. Nowadays organizations have more data than they can analyze. Appropriately analyzing data and applying it to the right situations is important for the successful implementations of edge technologies.

There are organizations that have been successful in edge technologies. Amazon.com has a platform that records all transactions and product-evaluation history of active customers. Amazon analyzes the data and improves customer’s shopping experiences through sophisticated data mining technologies. As a result, Amazon keeps a high customer satisfaction evaluation. The Hartford Financial Service also has a platform that records all telephone calls between customers and service representatives. The details of conversations such as talk time, hold time, and outcome, snapshots, etc. are recorded and are available for learning practices by service representatives and supervisors.

Implementing edge technologies requires an organization a big change. For example, platform that supports edge technologies is a must. An organization’s information systems architecture needs to be flexible for a change. CIOs must design information systems architecture that can appreciate emergent knowledge. The change must occur in an organization level, not in an application or a department/function level. Implementing edge technologies in an application level may contribute to disasters such as inconsistent data, incompatibility of the different systems, etc. To use IT as edge technologies, CIOs must be aware of the following five trends. First, organizations must connect themselves with their external entities such as customers, business partners, competitors, suppliers, etc. Second, the connectivity must be established not only by infrastructure such as networks, but also in terms of software such as Web services. Third, to reach its customers, pervasive devices such as PDAs, mobile technologies, cameras, handsets, wallets, etc. are important. Forth, data mining capabilities need to be further developed in terms of cheaper storage and intelligence analysis. Fifth, knowledge from the collected data is important, since it was not available before in decision making. Such knowledge includes identity, location, preference, health, and quality of service, etc. However, these knowledge need to be treated carefully, since they involve the issues of privacy and security.

[Summary Prepared by: Yukika]

Welcome Yukika…

Yukika Awazu, doctoral candidate, at Bentley College (Waltham, MA) will be joining us on this project. Yukika and I have collaborated on a number of research projects in the past, and have even co-authored one book – Engaged Knowledge Management. Yukika’s research interests are in the areas of knowledge management, innovation management, strategic issues of information systems, and social policy. She has recently been appointed as a Special Advisor for the Benchmarking Study - Successfully Embedding Innovation in the Organization: Strategies and Tactics – being conducted by the American Productivity Quality Center. Yukika will be helping with the analysis of the academic literature on innovation and knowledge management. In addition, she will partake in some of the interview analysis and report writing.

Connect & Develop Innovations the P&G Way

Instead of formal alliances to find the best and brightest research and innovations, Procter and Gamble (P&G) now circulates problem stories amongst a network. The sources of innovation in the network are technology entrepreneurs around the world, suppliers and open networks (like NineSigma, YourEncore [retired scientists and engineers], and Yet2.com [an online marketplace for intellectual property exchange]). The problem stories are presented to these groups, and anyone with an answer can respond--and usually do, quickly. The traditional R&D department on site doesn't have the answers, but among the myriad small and medium businesses, someone does.
This strategy was developed to meet the goal of 50% of innovations coming from outside the company--a seemingly strange strategy for an industry-dominant research-based company! However, the goal was not to replace internal innovators, but to supplement. The strategy is called "connect and develop." It's part of a movement called "open innovation" by some, which allows the boundaries between internal and external knowledge to become porous in pursuit of market advances (see Henry Chesbrough "The Era of Open Market Innovation," Sloan Management Review, Spring 2003).
The nuts and bolts of execution depend upon the top 10 customer needs, which P&G identifies. Those needs are turned into "science problems" which are sent out to the network for solutions. When more innovation is sought, P&G experts analyze the products that appear next to their products on the shelves--like competitor's brands of toothpaste. They then pose a "science problem" to the network about a feature they'd like to adopt from that rival product. The science problems are ways of simplifying big questions so that knowledge can be easily transferred (see Geoff Walsham see “Knowledge Management: The Benefits and Limitations of Computer Systems," European Management Journal, 19(6), 2001.).
P&G's main cultural stumbling block was the "not invented here" syndrome, which made it hard for R&D to capitalize upon the solutions the network offered. Innovation diffusion had to be supported from the highest levels of the company, and jobs had to remain secure and interesting while the network solved some of the many problems P&G could think up. By expecting change and creating it instead of reacting to market shifts, P&G's innovative problem outsourcing succeeds. But don't listen to me. Listen to the company's vice presidents:
"The model works. Today, more than 35% of our new products in market have elements that originated from outside P&G, up from about 15% in 2000. And 45% of the initiatives in our product development portfolio have key elements that were discovered externally. Through connect and develop - along with improvements in other aspects of innovation related to product cost, design, and marketing - our R&D productivity has increased by nearly 60%. Our innovation success rate has more than doubled, while the cost of innovation has fallen. R&D investment as a percentage of sales is down from 4.8% in 2000 to 3.4% today. And, in the last two years, we've launched more than 100 new products for which some aspect of execution came from outside the company. Five years after the company's stock collapse in 2000, we have doubled our share price and have a portfolio of 22 billion-dollar brands." (see Larry Huston and Nabil Sakkab, “Connect and Develop,” Harvard Business Review, 84 (3), 2006).

[Summary Prepared by: Caroline]

Welcome Sanjeev...

I am happy to announce that Sanjeev Jha will also be collaborating with me on this project. Sanjeev is a doctoral candidate at the University of Illinois at Chicago (my alma mater). I have known Sanjeev for the past two years and have collaborated with him on several other projects. Sanjeev will be contributing to this project by helping us synthesize the academic literature on innovation and knowledge management. He will also play a critical role in analyzing the findings from the interviews and writing up mini-case studies.

Our Objectives

The objectives of this research project are as follows:
1. To describe the changing the nature of organizational innovation projects.
2. To compare and contrast various innovation models that have been developed in the academic and practitioner literatures.
3. To synthesize existing innovation models and identify gaps to propose a new model for innovation. The model proposed will account for the intricacies of managing information, knowledge, and work, in and around, innovation projects. In addition, the model will propose links between maturity in an organization’s innovation capability and business value measures
4. To seek exploratory support for the model via discussions with executives involved in innovation projects.
5. To propose pragmatic mechanisms by which the proposed innovation model may be operationalized accounting for situational and organizational realities.

The Research Project

In order to compete, and even survive, in today’s marketplace, organizations must be capable of innovating. More specifically, organizations should be able to innovate in a highly effective and efficient manner. Failure to innovate can lead to several undesirable consequences from loss of customers to extinction from the marketplace. While these realizations are pervasive among organizations, many have not yet identified how to address the innovation problem.

The innovation problem can be specified as follows: identifying ideas from internal sources (e.g. employees) and external sources (e.g. customers, suppliers, academia, etc), integrating and assimilating ideas to find patterns and trends, interpreting these trends and working on them to develop new products and services, and then conducting the appropriate actions to commercialize them, all of these activities must occur in a timely and cost-effective manner.

The above innovation problem is complicated by several recent developments: (1) organizations realize that good ideas that lead to successful innovations are found outside their boundaries, in addition to their internal sources, (2) organizations work in extensive webs of networked relationships thereby relying on the capabilities of their business partners, hence they must use external capabilities to leverage and build upon ideas even if they are discovered internally, and (3) organizations have come to appreciate the need to work in distributed settings, both across geographies and industries. The innovation problem therefore cannot be managed in a local and isolated fashion; instead organizations must appreciate the global and open nature of the innovation problem.

To date, most models of innovation have focused exclusively on understanding how to leverage ideas (knowledge) from within the organization. These models have had varying levels of success; however, they are at best incomplete. Models are needed that embrace the realities of the need to tap into external sources of knowledge, use external capabilities in the innovation process, and even bring external partners into the innovation cycles, while accounting for the headaches of managing in distributed environments. This research project aims to address this need.

Graduate Assistant for the Project

Caroline Dombrowski will be the Graduate Assistant on this research project. She is currently completing her MLIS Degree at the Information School.

Welcome to our Research Space

I will use this space to keep everyone up-to-date on the “Leveraging Ideas for Organizational Innovation” research project funded by the Institute for Innovation in Information Management (I3M), at the Information School of the University of Washington.