Innovation Value Chain

1. Innovation Value Chain Mohammed Alshamrani Ahmed Danaf WabelBahanshal Keo Ros

2. Think Innovation Value Chain • Idea generation • Idea conversion • Idea diffusion

4. Focus on the Right Links • Executives need to view their companies’ innovation processes as a value chain, engaging in a link-by-link analysis • It doesn’t matter how great a company’s selection process is if only a few good concepts are on the table, or if the subsequent development process is weak • Managers need to stop putting all their efforts into improving their core innovation capabilities and focus instead on strengthening their weak links • Research shows that a company’s capacity to innovate is only as good as the weakest link in its innovation value chain

6. Focus on the Right Links • “Weakest Link” scenarios • Idea poor • Conversion poor • Diffusion poor

7. Focus on the Right LinksIdea-Poor • Idea poor company spends a lot of effort and money developing and diffusing ideas that result in mediocre products and financial returns • Problem is in idea generation, not execution

8. Focus on the Right LinksConversion-Poor • Conversion poor company has good ideas, but managers don’t screen and develop ideas • Management needs to engage in a link-by-link analysis • Example: Computer hardware manufacturer • > 50 very good ideas for new products • Managers did not screen the ideas properly • Few ideas took hold and new ones kept coming in • Failed to recognize the weak link • Focused more time and resources on strong link • Resulted in undermining the company’s innovation efforts • Required better screen capabilities

9. Focus on the Right LinksDiffusion-Poor • Diffusion poor company has trouble monetizing its good ideas • Decisions about what to bring to market are made locally • “Not invented here thinking dominates” • New products and services not pushed out across geographic regions; localized products

10. Fixing the Idea-Poor Company • Ways to generate ideas – • in-house • cross-pollination • external sourcing • Research indicates due to inadequate networks • Examples– • Managers fail to forge quality links with others outside their company • People prefer to talk to their coworkers rather than reach out to coworkers in other departments • Build External Networks and Internal Cross-Unit Networks

11. Fixing the Idea-Poor CompanyExternal Networks • Build External Networks • Solution Network geared toward finding answers to specific problems • Example – Eli Lilly • Developed InnoCentive, a solution-seeking website used by Eli Lilly, P&Gand other companies to find answers to specific technical or scientific problems • Discovery Network geared toward uncovering new ideas within broad technology or product domains • Example – Intuit • Developed Simple Start edition of QuickBooks – best seller for the company • Developers observed business owners to learn accounting practices

12. Fixing the Idea-Poor CompanyInternal cross-unit Networks • Build Internal cross-unit Networks • Generates new ideas inside organizations by building cross-unit networks • Continuous dialogue and knowledge exchange between people from different units • Example – • Proctor & Gamble’s development of Olay Daily Facials • Collaboration among team members from different product lines

13. Which P&G groups worked together to develop Olay Daily Facials?

14. Fixing the Conversion-Poor Company • Conversion-poor • Multichannel Funding model opens up options outside the boss’s immediate authority • Example –Shell Oil’s GameChanger unit developed in 1996 to fund radical ideas that lead to entirely new businesses • Safe Havens – • Companies build safe havens for emerging concepts • Critical to the successful conversion of good ideas into profitable product or business lines

15. Fixing the Diffusion-Poor Company • Why do some companies find it so difficult to gain traction for their new ideas? • In decentralized organizations, managers are granted considerable autonomy, including the freedom to say “no thanks” to new ideas • Even when managers have less formal control over which new ideas will be implemented, they can still delay or sabotage projects they don’t believe in

16. Fixing the Diffusion-Poor Company • Executives can’t just order a companywide rollout of developed ideas, instead, they need to create buzz for new concepts by using variety of catalysts (incentives) • They need to use their deep high-touch personal networks to increase awareness among employees and persuade them to adopt a new product or business concepts (phone calls, emails, sales calls, and in meeting)

17. New Measures, New Roles • Managers who adopt the innovation value chain perspective will need to implement new key performance indicators that focus on the specific deliverables from each link in the chain • Managers will need to determine what constitutes a good idea versus a trivial one • Companies may have to start out with internal surveys and then accumulate information as they go • Managers who adopt the innovation value chain need to cultivate new roles for employees

18. Conclusion • Management needs to strengthen all phases of the value chain in order to make their companies successful • Idea generation • Idea conversion • Idea diffusion • Executives need to assess each of the 3 phases and focus more attention on the weakest links • Successful companies come up with good ideas, convert those ideas into products and services, and finally diffuse products & services both nationally and globally

19. Questions? Comments