Portfolio Management

How to Innovate and Invest in Successful Projects

Shan Rajegopal

• Publisher: Palgrave Macmillan
• Year: 2012
• ISBN:
  9781137023346
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

In Portfolio Management, Shan Rajegopal, a leading authority on innovation and project portfolio management, provides an integrated project portfolio management framework which links innovation, investment and implementation.A successful tried and tested method, this blueprint willbe a hands-on guide forbusiness executives.

PART I

Innovation Decision as a Discipline for Business Success

Amazon currently lists 8000 hardcover books that cover the topic of innovation management. Dozens of conferences include the term “innovation” in their titles. New applications and technology-based platforms surface regularly that promise to capture the innovations that surface in the course of our operations. This is a subject that endlessly fascinates business leaders: all of us want to know how to instill innovation – the effort of altering products, technologies, services, processes, or business models – as a practice into our organizations.

In this book we do not want to cover innovation in detail, but what we want to do is to identify that innovation is not the classical thinking of someone working isolated in the research and development (R&D) department and coming up with a breakthrough product.

Innovation in the most generic sense is the conversion of knowledge and ideas into new or improved products, processes, and services to gain a competitive advantage or strategic leverage in the market. Milind Lele (1992) claims that companies need to have a thorough understanding of strategic leverage if they need to survive – let alone prosper – in a competitive environment.

How can companies be innovative in their thinking on the kind of strategy and tactic that can help to attain their objectives? How can the companies deploy their “competencies” (resources and skills) and how can they creatively disrupt an industry for benefits? These are some examples of innovative thinking that provide the competitive advantage companies are seeking.

From a portfolio perspective what we are interested in is how a company can capture “innovative demand” or “ideas” and convert that into actions. Interestingly, both Peter Drucker (1985) and Theodore Levitt (HBR 2002) note that creativity is only one part of successful innovation. They provide a treasure trove of practical insights into the notions of creativity, ideation, and innovation. It’s normally said: “People often confuse good management with a good idea that makes management look good”.

However, a good idea must be put into action. This requires hard work, processes, procedures, and a structure to make it all happen. Unfortunately, there are a lot of “idea people” but a scarcity of “innovators”. Organizations need people who can take a good idea and convert it into operating reality. This will require the establishment of a disciplined “innovation process” to make the right decisions to help us ensure that the right ideas are moved at the right time to gain maximum competitive advantage for us. By the end of Part I you will have a grasp on the innovation process that needs to be embedded in your organization.

Part I of this book will examine the following:

• Chapter 1: What Is Innovation and Where Does It Come From? – We will explore what creativities, ideas, and innovation are. We will also discuss the key innovative challenges that the management faces. This is followed by some examples of the different sources of innovation.

• Chapter 2: How Does One Create a Culture That Supports and Manages Innovation? – We evaluate how organizations support and what it takes them to support an innovative culture and the process of executing an innovation strategy. In this chapter, we also examine the organizational hierarchy and executive innovation intent. Typically we look at the executives from a top–down approach where they have organizational authority and access to the budget, and at how they can encourage and support innovative thinking. We also evaluate the second part, that is, the bottom–up approach, whereby an individual worker or project member who has limited formal power is empowered to leverage opportunity to change the culture of an enterprise from the inside.

• Chapter 3: How Does One Architect an Organization’s Innovation Landscape? – Here we review how innovators see things and how do we architect an innovation landscape? We will discuss the necessity for designing an innovation landscape in a structured and logical manner. The approach will examine in detail how companies engage, evolve, evaluate, execute, and empower innovation within their organization. We will also look at the role of a chief innovation officer and examine why innovators don’t see different things but rather see things differently.

• Chapter 4: How Does One Launch an Innovation Process in Your Organization? – We discuss the organizational awareness and innovation intent that can be used in identifying ideas, selecting ideas, and converting them into actions. As Drucker said, “Creativity does not automatically lead to actual innovation”, as such creativity or ideas generated without an investment case, business plan, and organizational structure to administer the plan (i.e., action-oriented follow-through) is meaningless. At best, creative ideas remain good intentions if not implemented.

• Chapter 5: How Does One Enable Good Innovative Habits? – Here we examine how to enable good innovative habits. A key essential is the change required in oneself to uncover one’s potential. This understanding of oneself is important and there are behaviours and practices that highlight this trait. We also discuss how in organizations there are “talkers”. They think of themselves as “idea people”. They complain about the stand-pat senility or massive inertia of the organization. They complain about management’s refusal to implement their ideas. They complain, complain, and complain. In short, they take no responsibility for implementation. There is no shortage of creativity or of creative people. That’s the reason why we propose the ideation-capturing process so that people do not have the particular notion that their jobs are finished when they suggest the idea, but that if they want their ideas to be accepted they need to work out the details, implement the proposal, and finish what they suggested.

CHAPTER 1

What Is Innovation and Where Does It Come from?

Over the last decade, there has been an increased focus on innovation in many businesses. Several factors have contributed to this increased attention:

• The increased rate of change in competition, especially the growing capabilities of India and China.

• The fall of information costs as the web becomes more fully adopted, and consumers are demanding more.

• Greater focus on cost-cutting with a spike in outsources/near source/far source. Most of the things that could be cut, trimmed, or outsourced have been done. Many businesses are relatively lean and need to return to growth and differentiation.

All of these factors contribute to the need for innovation. However, there are ongoing trends that will continue to increase innovation focus now and in the future. These can include, for example, focus on global warming, reduction in carbon footprints, and poverty eradication – all of these mean new technologies are required to reduce emissions and genetically modify the food supply, among others. Another example is in the United Kingdom, where health care reform will mean new demands on an antiquated health care system. The banking sector is already undergoing change and disruption. All of these factors act as a catalyst for change in the government and in major businesses.

So it is not surprising that there are thousands of books that cover the topic of innovation management, with dozens of conferences including the term “innovation” in their titles. In the past we have found that managers of technology-driven businesses have traditionally had one major innovation cycle to worry about – the product innovation cycle. Several principles drive success: anticipate the next technology wave or new product opportunity, get to the market first, achieve relative market-share leadership in order to lower production costs, “cross the chasm” from early adopters to mainstream customers, and profit will follow. While this is much easier said than done, the rules of the game are relatively clear.

What has changed over the last two decades and has made management significantly more complex is the emergence of a second parallel innovation cycle – the business model innovation cycle. Many companies that formerly accepted their business model as a “given” now consider it to be a conscious choice and a competitive weapon. They are using creative business models to enter new markets, attack incumbents, and renew their own leadership positions.

The management systems for business model innovation are not as mature as those for product innovation. Yet it is easier to trace large shifts in the market value of major technology companies by the business model decisions that they have made (both good and bad) than by unique product inventions.

Allen Booz Hamilton (2010) and IBM (2006) global innovation surveys had indicated that innovation is being recognized as offering a competitive advantage, perhaps one of the few sustainable advantages, for CEOs. The Gartner Annual CIO survey (2007) showed that “improved competitive advantage, increased revenue growth, and faster innovation are among the top 10 issues for CIOs”. All the surveys point out that the majority of senior executives said innovation was critical to the success of their firms as they prepared for the market and economy to improve. An interesting theme that appeared in the surveys was that executives perceive that “the recession was a catalyst for increased innovation”.

What we can deduce from these surveys is that senior executives of companies are willing to invest in innovation during the economic downturn and the reasons can include the following:

• Innovation is becoming a core component of overall corporate strategy.

• There is recognition that product development cycles are longer than recessionary periods.

• Many see the recession as an opportunity to build advantages over their competitors.

We were at the Frost and Sullivan 2011 Innovation conference in San Diego, and during the CEO Forum what came out as very clear was that CEOs are willing to invest in innovations that can give quicker returns to help overcome economic recession.

One of the biggest impediments to innovation continues to be the “constraints of the product development lifecycle”. The product development life cycle in many industries is simply too long and too cumbersome, and any opportunity to shorten the development life cycle could mean real rewards. Conversely, any slacking off could mean falling behind the competition.

Charles Fine (1998) very eloquently argues that in businesses today all advantages are temporary. In order to survive, let alone thrive, companies must be able to anticipate and adapt to change or face rapid and brutal extinction. His inspiration to use lessons from “fruit flies” for industries was revolutionary. The overall emphasis was that innovation and creative thinking must move away from being an occasionally interesting sideshow that is not focused and not strategic to becoming a key focus of senior executives to ensure that their firms continually grow and differentiate.

Innovative thinking is rapidly becoming a capability or enabler that strengthens and focuses the corporate strategies and must over time become a key enabler of many corporate goals and strategies. Once more firms create a continuous capability for innovation and modify their cultures to embrace innovation, we’ll see the real transition occur. It is heartening to see that more and more firms are placing more emphasis on innovation at a strategic level. Companies must think of innovation in its broadest sense and our definition is:

Innovation is the conversion of knowledge and ideas into new or improved products, business models, processes, and services to gain a competitive advantage or strategic leverage in the market.

We believe that to do any good, innovation must be linked with Project and Portfolio Management (PPM). As you proceed you will realize that the book will underpin the argument that companies need to turn to PPM processes to help them select, invest, and execute their innovation strategies in order to be successful.

The innovation of bird spit

Innovation broadly shows up in two flavors: incremental or dramatic and game-changing. The incremental change side is where you’ll find tweaks and improvements to address shifting customer needs. Most mobile phone launches – but not all...