Making Innovation Work

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Volume 25, Number 25

Maing Innovation wor How to Manage It, Measure It, and Profit from It Tony Davila, Marc J. Epstein, and Robert Shelton ©2007 Pearson Edction, Inc. Adapted by permission of wharton School Pblishing ISBN: 0-13-1 0-13-149786-3 49786-3

Reviewed by Lydia Morris Brown

I Althogh many myths srrond innovation, maing it appear more complex than it is, the athors believe that the exection of innovation is not any more difclt than the implementation of other management activities. Nonetheless, it seems as if the correct set of innovation rles has been misplaced, distorted, or simply misinterpreted misinterpreted.. Making Innovation Work challenges prevailing misconceptions and lays ot the tools and processes necessary for an organization to harness, manage, and execte innovation sccessflly and protably. It provides a start-to-nish process for dening innovation strategy, integrating innovation and bsiness strategy, balancing creativity and vale captre, eaving

innovation into the fabric of the bsiness, netralizing organizational “antibodies,” bilding innovation netors, and measring and rearding.

P I: T R  I For any organization, innovation represents the opportnity to srvive, gro, and signicantly inence the direction of an indstry. Blocbster development does not, hoever, garantee sccess, bt mst be folloed p ith sccessive streams of innovation, from the incremental to the radical. knoing that the only reliable secrity is the ability to innovate beer and longer than the competition, leading companies develop innovation portfolios that they can se to help sstain groth over the long term.

Business Book Review® Vol. 25, No. 25 • Copyright © 2008 EBSCO Pblishing Inc. • All Rights Reserved

Maing Innovation wor

A fndamental tenet of innovation says, “ How yo innovate determines what yo innovate.” The elements of innovation—leadership, strategy, processes, resorces, performance metrics, measrement, and incentive reards—and ho they are arranged (i.e., organizational strctre and cltre) have a hge eect on the qantity and qality of innovation that an organization achieves.

Tony Davila, Marc J. Epstein, and Robert Shelton

k C The elements of innovation--leadership, strategy, processes, resorces, preformance metrics, measrement, and incentive reards--have a hge eect on the qality and qantity of innovation that an organization achieves.

Given this reality, the athors believe that the ey to sccessfl innovation is hat they call the Seven Innovation Rules:

The ey to innovation is hat Davila, Epstein, and Shelton call the Seven Innovation Rules:

1. Exert strong leadership ith regards to innovation strategy and portfolio decisions.

1. Exert strong leadership ith regards to innovation strategy and portfolio decisions.

2. Integrate innovation into the company’s basic

bsiness mentality.

2. Integrate innovation into the company’s

basic bsiness mentality.

3. Align innovation ith company strategy.

3. Align innovation ith company strategy.

4. Manage the natral tension beteen creativity and vale captre.

4. Manage the natral tension beteen creativity and vale captre.

5. Netralize organizational “antibodies.”

5. Netralize organizational “antibodies.”

6. Recognize that the fndamental bilding blocs of innovation are netors that inclde people and noledge both inside and otside the organization.

6. Recognize that the fndamental bilding blocs of innovation are netors that inclde people and noledge both inside and otside the organization.

7. Create the right metrics and reards for innovation.

7. Create the right metrics and reards for innovation, as ell as a strctred process to gide the development of ideas.

Leadership is rst becase it is here an organization needs to start. Metrics and reards are last becase they close the circle, creating the motivational and behavioral lins to all of the other rles.

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Information abot the athor and sbject: .mainginnovationor.com

According to Davila, Epstein, and Shelton, strong leadership from senior management is essential to achieving innovation sccess. An important aspect of this ind of day-to-day leadership, hich happens throgh commitment, example, and solid decisions, is the creation of a portfolio of technology and bsiness model innovation.

Information abot this boo and other bsiness titles: .hartonsp.com

Bsiness model innovation is jst as important, and jst as poerfl, in driving bsiness sccess and revoltionizing indstries as technological innovation. A classic example of this is Dell Compter, an enterprise that radically changed the bsiness model of the cstomer interface in retail personal compter sales.

The Ten Faces of Innovation IDEO’s Strategies for Beating the Devil’s Advocate & Driving Creativity Through Your Organization Thomas kelley, ith Jonathan Liman

Related smmaries in the BBR Library: Driving Growth Through Innovation How Leading Firms Are Transforming Their Futures Robert B. Tcer


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knoing ho to change bsiness models and techsecond, dening the bsiness model, is strategic. Scnology together and individally is also a mar of cess depends on the integration of business model sccess. The athors’ Innovation Matrix illstrates and technology change into a seamless process. this interplay by highlighting the fact that not all innoHoever, this does not imply that innovation shold vations are created eqal. Three types of innovation be contained ithin one organizational nit. exist: (1) incremental, (2) semiradical, and (3) radical. Senior We define “innovation” as our ability to create new value at management bears the respon- the intersection of business and technology. We have to have sibility for creating a balanced new insights. We have to do things differently. We cannot rely portfolio, consisting of all three just on invention or technology for success. and for creating the appropriate options, both bsiness-model and technological. Innovation reqires resorces, competencies, and Innovation encompasses to established activities. experience that reside in dierent parts of the orgaThe rst, R&D, is thoght of as technological. The nization and in enterprises otside the organization. It also reqires coordination and synchronized eorts across these departments in order to transform an abstract idea into a tangible prodct.

A  A

Tony Davila is a faclty member of Stanford’s Gradate School of Bsiness. He ors ith both large indstrial companies and Silicon Valley startps to design management control and performance measrement systems that drive innovation. And, he has been pblished in Harvard Business Review , Research Policy , and other leading jornals. Marc J. Epstein has been a visiting professor and Hansjoerg wyss visiting scholar at Harvard Bsiness School, a research professor at Rice university’s Jones Gradate School of Management, and a professor at Sanford Bsiness School and INSEAD. Robert Shelton is managing director of Navigant Conslting’s Innovation practice, ith a client list that incldes Fortune 500 leaders in the electronics, energy, health care, atomotive, consmer goods, soare, and aerospace indstries. He has served as vice president and managing director of the Technology Management practice at SRI International. And, his or has been referenced in The Wall Street Journal , CNN’s “Financial Nes Netor¸” and other leading media.

The importance of innovation rises and falls ith time, depending on the conence of several factors, inclding the timing of the last innovation, the natre of the competition, and the overall bsiness strategy. Ths, the amount and type of innovation must align with the company’s strategy. The selected strategy has to t the bsiness sitation and it has to be clear (i.e., mst be measred and recognized ith proper reards lined to performance) throghot the organization. Companies also need to eep in mind that more innovation is not necessarily beer. Not all bsinesses need signicant, continal doses of innovation, especially the radical, game-changing ind. This level of change may case problems for the competition, bt it cold also brea the bac of the innovating organization. Constant, radical change not only represents a hge cost, it also creates hge organizational tensions and destablizations. Ths, innovation, lie most things, is best in the right proportions. Moreover, each enterprise needs to determine ho mch innovation it can handle in the present, ho mch more it needs in the ftre, and the dynamics of ho to get from here to there. wrongly assming that strctre and process are the natral foes of creativity, many people cannot imagine ho to manage the natural tension between


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creativity and value capture (i.e., commercialization). Hoever, strctre can, in fact, enhance creativity if bilt and sed in the right ay.

Too mch emphasis on delivering vale throgh exection can stie the creative processes. And, nstrctred creative processes can displace the eective vale management, yielding many great ideas bt inscient commercial sccesses. Innovation does not mean ignoring bsiness imperatives bt, rather, being aare of the processes ithin the organization that ill creativity. Commercialization processes also need to be managed so as to trn the best creative concepts into maretable prodcts and services qicly.


Sccessfl organizations nderstand that the primary nit of innovation is not the individal. Rather, it is a network that includes people and knowledge both inside and outside the organization . Innovation reqires cltivating and maintaining this netor as an open and collaborative force, hich is no easy tas, considering the complexities of relationships, as ell as diering motivations and objectives. Reards that focs on meeting bdgets and avoiding ris case managers to invest in safe prodcts here there is lile chance of a big loss bt also lile chance of a big prot. These companies reard the speed at hich lo ris prodcts are created and mareted, even hile they hope for radical ne ideas. The otcome is an overdose of incremental where taking ideas.

Organizations … need to create an environment risks on breakthrough innovations is recognized as valuable to the company. This recognition will help modify a unilateral short-term focus on results to a more balanced view that encompasses a long-term perspective. Senior management mst create a cltre that has the ability and corage to change and explore and, at the same time, remain stable enogh to deliver on its innovations. In other ords, companies mst neutralize organizational antibodies—the explicit rotines and cltral norms that act to bloc or negate change. In general, the more radical the innovation, and the more it challenges the stats qo, the more antibodies there are. Also, the greater the company’s past sccesses, the greater the organizational antibodies. Core capabilities can become core liabilities if they do not adapt and change, and this reqires cltres that are open to qestioning assmptions and to debating alternative bsiness approaches. Managers mst also nderstand that only by taing riss, closely observing reslts, learning from them, and trying again, can innovation occr. Cltres that foster innovation embrace commnication, not only ith the members of the organization, bt also ith sch external constitencies as cstomers, sppliers, niversities, competitors, or companies in other indstries. The not-invented-here syndrome is a sign of an arrogant cltre, and here there is arrogance, strong organizational antibodies exist.

To innovate sccessflly organizations mst create environments heretaingrisson breathrogh innovations is recognized as valable. Ths, they need systems in place that create the proper measurement, motivation, incentives and rewards , as ell as a strctred process to gide the development of ideas.

P II: S I - A M  P According to the athors, sccessfl organizations combine technology change and bsiness model change to create innovation. Rarely does a technology change occr ithot also casing a change in bsiness processes and vice versa. Both go together and, ths, mst be conceptalized and implemented as a hole. There are six levers that inence strategic innovation. Three of these levers are the basis for creating bsiness model innovation: 1. vale proposition—hat is sold and delivered to the maret 2. spply chain—ho it is created and delivered to the maret 3. target cstomer—to hom it is delivered. Sometimes ne technologies are a major part of an innovation, and they stand ot and garner signicant


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aention. At other times, the ne technologies are hidden and can only be seen by the technical people servicing them. Either ay, technology change can fel innovations throgh three additional levers:

semi-radical innovation is technology driven, there ill be small change in one or more of the bsinessmodel levers and signicant change in one ore more technology levers.

4. prodct and service oerings,

Some companies are adept at managing the change in either the technology arena or the bsiness model arena, bt seldom both. This pts then at a signicant disadvantage to the company that is able to manage change in both.

5. process technologies 6. enabling technologies. Althogh enabling technologies (technologies that help a company execte strategy mch faster and leverage time as a sorce of competitive advantage) are the least visible to cstomers, change in this arena can be very important becase it helps to ensre beer decision maing and nancial management. Another ey aspect of this model involves the generic types of innovation—incremental, semi-radical, and radical.

In order to collaborate eectively in semi-radical innovation, and avoid missteps, missed opportnities, and the inability to qicly and eectively captre the to-step process, grops ithin the organization need to have a map of both the bsiness model and technology space in hich they compete. A collaborative innovation map provides a common frameor for dierent grops to discss threats, opportnities, strengths, and eanesses that are crcial to sccessfl innovation.

Incremental innovation is the most prevalent form of innovation, receiving more than 80 percent of total innovation Southwest Airline’s move away from the traditional hub and investment in most companies. spoke business model is an excellent example of a semi-radical It is a ay to ring ot as mch innovation. … It has set the new direction from the industry vale as possible from existing prodcts or services ithot and established the competitive benchmark that others use to maing signicant changes or measure themselves. major investments. Radical innovation is a signicant change to one or Nonetheless, incremental innovation is not a minor more of the bsiness-model levers and to one or factor in the eqation bt its cornerstone. It is extremely more of the technology levers. Moreover, it sally valable in providing protection from the competitive brings fndamental transformations to the competierosion that eats aay at maret share, protability, or tive environment in an indstry. The introdction of both. By providing small improvements, via changes disposable diapers in the 1970s is a historical example in one or more of the six bsiness-model-technology of the combined changes in the technological and levers, a company can sstain its prodct maret share bsiness elements leading to a fndamental change and protability for a longer time. This reslts in beer in home baby care. Becase of the sccess of this cash o and a beer retrn on development and radical innovation, companies lie Procter & Gamble. commercialization investments. Nonetheless, compakimberly-Clar, and Johnson & Johnson (to name nies cannot scceed, or even srvive throghot the a fe) have invested massive amonts of money long term, ithot complementing their innovation and intellectal resorces in the development and portfolios ith other types of innovation. commercialization of advanced absorbent and containment technologies for disposable diapers. Semi-radical innovation can provide crcial changes

to the competitive environment that an incremental innovation cannot. If it is bsiness-model driven, the innovation is characterized by signicant change in one or more of the bsiness-model levers and small change in one or more of the technology levers. If the

Nonetheless, hile radical innovation can create tectonic indstry shis, and pt a company in the lead, investments in this arena need to be approached catiosly. Becase radical innovations are by natre,


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lo-probability investments, investing too mch, based on nrealistic expectations, can aste valable resorces that cold be beer employed on semi-radical or incremental innovations. The ey is to maintain a balanced portfolio so that the investment matches bsiness needs.

If the goal is to prodce signicant competitive advantages a PTw strategy is reqired. PTw, a maret-leading strategy that relies heavily on semi-radical innovation, is typical of high-technology startps. These companies are highly focsed on bringing one ne technology or bsiness model to maret. In fact, one ne thing is almost all they It is not enough to choose the right strategy once. You have to have, and their ftre is almost keep choosing the strategies to remain successful. … Starbucks entirely dependent on it.

provides a good example. … Starbucks has continually adapted, experimented, and regenerated its image and its focus to maintain its edge in the industry. Sometimes companies combine to semi-radical innovations to create a blocbster innovation that changes an indstry fndamentally. Davila, Epstein, and Shelton call this phenomenon “ersatz radical innovation.” Apple Compters too the indstry by srprise hen it lanched iTnes and iPod. It as not as thogh no one in the PC arena had ever thoght of these innovations before bt, no one had the radical idea of combining technology change and bsinessmodel change into this one-to innovation pnch. Selecting and integrating the priorities for bsinessmodel change and technology change, and dening the balance beteen the three types of innovation in the portfolio, constitte the basis for forming the innovation strategy and developing a portfolio aligned ith the company’s overall bsiness strategy. These are the fndamental responsibilities of senior management—ones that provide the context for decisions related to organizational design, the development of innovation netors, and the development and se of metrics and incentives to drive innovation. Becase there is no men of generic strategies from hich to choose, one of the rst responsibilities of senior management is to cra an innovation strategy that spports the bsiness strategy, adapts to changing conditions, and chooses the right time to mae ey moves. An organization may choose to devote most of its resorces to a particlar part of the innovation model or spread them ot over the entire frameor. Depending on the approach, one of to classes of innovation strategies can be considered—Playing-towin (PTw) or Playing-Not-to-Lose (PNTL).

The high failre rate for small companies folloing this strategy reects the high ris involved ith this approach—hether it comes from the technology delivering the vale promised, from the maret developing fast enogh to vale the technology, or from the management execting on the strategy. The other ey contribting factor in the high failre rate is a lac of depth in their innovation portfolios. The broader resorces of larger, more established rms allo them to cover a larger portfolio of investments, providing a hedge that signicantly loers the riss. Many large rms (e.g., GE, Apple, and Sony) have clear PTw strategies aligned ith their overall strategies. These companies have commied to an investment portfolio, designed to provide a formidable o of innovations that promise to help them dominate their bsiness sectors. For some companies, an intense or ncertain competitive environment, and/or signicant internal constrains, maes it more advantageos for them to adopt a PNTL strategy. This strategy typically incldes more incremental innovation in the portfolio than a PTw strategy and aims to ensre that a company can stay in the game by moving qicly, taing calclated riss, sometimes moving rst, or by matching or srpassing any moves by competitors. Folloing a PNTL approach, an organization can atch for improvements in the external environment, mae improvements in its internal capabilities, aempt to ear don the competition, and loo for opportnities to shi to a PTw strategy at the appropriate time. Sometimes PNTL strategies exist becase management cannot commit to a clear PTw strategy; ths,


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PNTL is a compromise among parts of the organization that do not have the same vie of hat shold be done to scceed. This sort of compromise is, hoever, a very dangeros strategic choice becase people cannot execte at maximm eciency, speed, or eectiveness if they are geing confsed signals. It is management’s responsibility to clearly specify and commnicate the innovation strategy throghot the company. Althogh PNTL is sometimes, called the “fast-folloer” strategy, PNTL is not limited to folloing another’s move. To be sccessfl, PNTL reqires a mix of preemptive and reactive moves, all aimed at not relinqishing advantage and, henever possible, casing competitors to expend more than their fair share of resorces. Organizations focsed on jst folloing eventally become limited in their competitive mindsets and innovation capability.

• innovation metrics se only capital-retrn tools sch as Retrn On Investment and Disconted Cash Flo; • innovation fnding is available only annally rather than at reglar intervals or henever great ideas emerge; • innovation is measred in terms of eciency rather than in terms of the vale of the portfolio; • managers are complacent abot good ideas; • managers criticize and ndermine innovators rather than serve as sonding boards, role models, and sponsors. A ey antidote old be the development of an internal maretplace here the ideas and fnctions of innovation can orish. In this atmosphere, trly valable innovations are fnded and advanced from concept to commercial reality, no maer ho threatening they may be to the existing bsiness. Critical to creating sch a maretplace is having a process for balancing creativity and vale captre so that both thrive.

Still, silled fast-folloers are oen more sccessfl than early innovators. They come behind PTw strategies, qicly deploying their on capabilities to copy and improve on sccessfl innovations, and conseqently beating the original For an organization innovator in the maretplace.

to innovate successfully, it needs to foster a balance of creativity and value capture. Maintaining that balance requires support from metrics and rewards, and also has cultural components. However, the organization is at the core of the internal marketplace that provides for balanced creativity and value capture.

The best innovation strategy, hether PTw or PNTL shapes the portfolio, is ltimately determined by a nmber of internal and external factors, inclding: technical capabilities, organizational capabilities, sccess of the crrent bsiness model, fnding, top management vision, capabilities in the external netor, indstry strctre, competition, and rate of technological change. These are the factors management mst address hen improving and pdating the company’s innovation strategy. In addition to craing an innovation strategy, enterprises mst choose, bild, and prepare the right organization and the right people. Hoever, many rms nd that the organizational components of innovation are oen rejected or marginalized by the antibodies of their mainstream organizations and, as a reslt: • crrent project portfolios consist almost entirely of incremental innovations;

The rst step in this process involves developing platforms for the dierent types of innovation desired. These platforms are organizational nits of netors nestled ithin a company that direct resorces toard specic areas of innovation. They ct across bsiness nit silos, provide an honest perspective on the vale of all proposed innovations, and they inclde: • broad areas of innovation that direct the platform’s activities; • both bsiness-model and technological change; • a portfolio of incremental, semi-radical, and radical innovations; • netors of people inside and otside the organization, ho can eectively contribte to dierent


Page 7


aspects of innovation (idea creation, selection, development, and implementation) and ho can also preserve the company’s intellectal capital and noledge dring donsizing; • metrics and reards that focs resorces on the potentially valable areas of innovation, captre the organization’s innovation performance, highlight gaps and areas of improvement, encorage the desired behavior and reslts, and mitigate organizational antibodies; and • management systems that promote and se learning and change to improve strategy, processes, organization, and resorces.


ithin the organization. The ventre capital strctre receives radical ideas, selects those ith the most potential, fnds them, and then sells them. Another alternative is the “ambidextros organization.” It is a model in hich the organization promotes innovation and operations ithin its architectre, throgh mltiple grops, handling dierent types of innovation and operation projects. with this approach, dierent innovation cltres and processes are promoted, and radical innovators are ept separate from the traditionalists ho rn the core bsinesses.

Strategic decisions ill gide here innovation eorts are focsed, and strctre ill act as a fondation for the innovation process. Two organizations with the same structure will get very differ- Hoever, innovation can still ent … results based in part on the systems they have in place fail if management systems are inadeqate. Innovation manageand the consistency with which they are followed. [However] ment systems are established for innovation to happen successfully, there needs to be an policies, procedres, and inforexplicit process in place to manage all the steps … from design, mation mechanisms that facilitate to measurement, to reward. the innovation process ithin and across organizations. They Balancing internal creative and commercial marets determine the shape of daily sta interactions and also involves creating portfolios of projects in each decisions, the order in hich or happens, ho it platform, and revieing each project to ensre that the is prioritized and evalated daily, and ho dierent creative and commercialization marets are aligned parts of the organization se the organizational strcand balanced. A portfolio overly rich in incremental tre to commnicate. projects signals an anemic maret for creative ideas. Many managers assme that strctre and process A portfolio that has an over abndance of radical and are the natral foes of creativity; hoever, if they are breathrogh innovations signals a hyperactive cre bilt and sed correctly, they can actally enhance ative process and an internal maret that disconts creativity by fllling ve important roles: commercialization. 1. moving great ideas from concept to commerIn addition to developing innovation platforms and cialization, qicly and ith a minimm se of creating portfolios, management mst also form interresorces; nal and external partnerships and netors, ensre 2. creating the appropriate lines of commnication that internal marets for creativity and commerithin the company, and ith otside constitencialization are open and transparent, and reallocate cies, so as to facilitate timely access to specialized resorces so as to gard against the reemergence of noledge; antibodies that may limit or destroy the company’s rejvenated creative marets and processes. 3. facilitating optimm coordination beteen projInnovation can also be organized according to the corporate ventre capital (CVC) model, hich is sefl for promoting radical innovation ithot hindering incremental innovation. It ors as a hybrid beteen an independent ventre capital rm and an incbator

ects and teams; 4. learning (i.e., managing the noledge that is constantly created in innovation); and 5. aligning the objectives of varios constitencies and reinforcing the most favorable individal and


Page 8



grop behavior so as to foster optimal innovation performance throgh ell-designed incentive and reard systems. Management systems are, therefore, the ey to balancing and managing the dalities of technology models and bsiness models, radical and incremental innovation, creativity and vale captre, and netors and platforms. Innovation can be envisioned as a o that starts ith a mltitde of great ideas, hich are innoed and rened ntil only the fe best are broght to commercialization. Systems manage this o. The rst stage, here management systems play a role is the ideation stage here ideas are generated and moved across the organization to here fnding decisions are made—the second stage. Here, selected innovations receive initial fnding to move ahead or are discarded. The last stage is the exection phase here the innovation project is commercialized. No maer hich innovation systems an organization chooses, the systems mst be eective in moving throgh all three stages from ideation to selection to exection and then on to commercialization.

specic innovation characteristics. The measres that are appropriate at the beginning of a project may not be adeqate in the later stages. It is also necessary to dissect measrement systems to ensre that they are conrming the right mix of planning, monitoring, and learning. knoing the specic prpose of each type of measrement system is essential for eeping the innovation from trying to achieve too many objectives. A corollary to noing the specic prpose of each type of measrement is to eep it simple. Becase too many can be more of a distraction than a help, it is beer to have jst ve simple measres lined to the strategy and the innovation bsiness model. Even if the additional measres provide a more complete pictre, they ill overhelm the decision-maers. It is a case of qantity being the enemy of qality. Finally, organizations mst be aare of the limitations of measrement systems and nderstand that they do not replace good management—only enhance it. Incentives and reards are some of the most poerfl management tools available. Incentives are designed before an innovation eort starts and lin performance measres and reards. Recognition reards, hich are based on sbjective assessments of the vale generated, occr aer the otcomes of the project are available, even if there as no prior contract in place lining performance to reards.

Measrement is one of the most critical elements of sccess in innovation. when measrement systems are not aligned ith the strategy, and not tailored to the portfolio’s mix of incremental, semi-radical, and radical innovation, managers lose a ey sorce of information. And, A fundamental rule of innovation is that linking strategy to this loss translates into loer perinnovation measurement with a few sharp metrics provides formance and decreased payos a clear picture of performance. … What gets measured gets from investments in innovation.

done—so be careful what you measure.

Hoever, measrement systems are not soltions bt are managerial facilitators that ll three roles: (1) planning—dening and commnicating strategy, (2) monitoring progress, and (3) learning—identifying ne opportnities.

Enogh variability mst be bilt in to allo valable measrement. Dierent innovation processes and dierent organizational levels need dierent measrement systems, and these can vary over time. Projects need measres that are consistent ith the bsiness nit bt dierent enogh to captre project-

Formal reward systems are ell-sited for incremental innovation, sch as increasing the eciency of a manfactring plant or improving qality throgh qality circles. Incremental innovation projects have a clear problem to solve, and the soltion to the problem can be translated into objectives and lined to reards.

Radical innovations also rely more on recognition. using recognition gives an organization the exibility to adjst the reard to each individal project, team, and person. In particlar, managers need to feel


Page 9



rearded for taing riss, even if the project is not sccessfl. And, if it is, they mst feel as thogh they received a fair share for the vale generated from the project.

critical insights into problems and opportnities and more complex learning systems that operate continally to provide feedbac and gidance. It also incldes:

Cash-based incentive systems, sing performance measres ith a large component of formla-based evalation, are best hen innovation initiatives have short-term reslts, smaller impact on overall organization, easily measred performance, and expected performance is relatively easy to describe. As innovation initiatives incorporate a larger amont of radical innovation, incentive systems shold be based on long-term incentives (stoc-based incentive systems) and sbjective evalations.

• specic processes for learning and change that lin to strategy and embody explicit and continal eorts to improve;

In fast-changing environments, the ability to learn faster, beer, and more cheaply than the competition can mean the dierence beteen retaining maret leadership and barely srviving. Becase innovation is all abot change—incremental, semi-radical, and radical change—driving innovation into the bsiness mentality reqires learning and change. Learning systems are reqired to manage the balance beteen creativity and vale captre; otherise, one alays dominates over the other. Information and learning are reqired to remodel and pdate innovation netors, hich tend to become breacratic, cmbersome, and ineective if not refrbished. Finally, learning systems and activities that allo the organization to dierentiate good change from bad are needed to control organizational antibodies. withot this dierentiation, the antibodies become nselective and aac and disrpt all change.

• a systems approach to complex organizational dynamics in hich actions and reactions are nderstood in terms of casal loops (actions, reactions, and eects) rather than in terms of linear case and eect; • shared vision, hich is critical for minimizing organizational antibodies; • exibility and agility that enhance changes and create an environment that is condcive to ongoing innovation; • proactively anticipating challenges and threats; • a collaborative bt challenging environment that maximizes creative tension and minimizes destrctive tension. The tools of innovation are also aected by cltre— the nrien rles, shared beliefs, and mental models of the people. A poerfl innovative cltre can be a vital sorce of competitive energy for the organization as ell as an energizing force for the people in the organization.

It is, therefore, ironic that the biggest threat to innovation is sccess. The very organizations that are riding high on the sccess of their innovation eorts are oen the organizations most You can’t improve any part of innovation—not the framework, in danger of falling prey to complacency. Sccessfl innovators strategy, processes, organization metrics, or incentives—and also ris sccmbing to dogma. expect to see good results unless you make sure that your The same vales that initially promoted innovation and sccess in organization knows how to learn and change. an organization can be the demise of that organization if they are not evalated and Properly conceived and exected, organizational adjsted on an ongoing basis. learning can nleash poerfl forces of creativity and the development of processes to focs them into According to the athors, managing innovation hile sccessfl commercial realities. In healthy innovative delivering performance is a paradoxical process. The companies, leadership spports learning and pts organization mst be stable in its identity and stratin place the systems for it to happen. This incldes egy and yet open to constant change. Sccess reqires “qic-and-dirty” diagnostics that are rn to provide managing this paradox by recognizing and managing Business Book Review® Vol. 25, No. 25 • Copyright © 2008 EBSCO Pblishing Inc. • All Rights Reserved

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the levers of cltre that positions the organization on a spectrm beteen conicting goals. An innovative cltre embraces:

the boo provides ne insights into ho to execte innovation and parses this how into manageable pieces that can be applied by any company.

• balance and diseqilibria

The lessons learned by this approach inclde:

• periods of stability and periods of change

• innovation does not reqire a revoltion inside companies;

• focs and diversity • discipline and srprise • condence and paranoia • conservatism and ris-taing • gidance and freedom • control and trst Nonetheless, it is the people in an organization ho adopt, adhere to, change, or reject a cltre. People are the vehicles throgh hich a cltre has impact and throgh hich innovation happens. Ths, the organization’s hman resorces strategies (recriting the right people, managing them to ensre satisfaction and ongoing motivation, and ensring that leaders flll a role that promotes innovation) are critically important. g g g g

F   B Reading Time: 30-32 hors, 350 pp.

Becase there seem to be so many half-trths and myths srronding innovation that have made it appear more complex than it actally is, Davila, Epstein, and Shelton present Making Innovation Work, oered to challenge prevalent misconceptions and to lay ot the tools and processes necessary for an organization to harness and execte innovation. The athors’ analyses of these tools and processes sho that the exection of innovation is no more or less diclt than the exection of any other management activity. Ths, e see innovation is not abot secret formlas; it is abot good management, driven by the Seven Innovation Rles. Essentially, e are shon that there is not mch that is trly ne abot innovation—the basics have not changed, only the ay innovation is managed. By analyzing hat has ored ell and hat has not,

• innovation is not primarily abot creativity and having a “creative cltre,” nor is it jst abot processes and “stage-gate” tools; • innovation does not focs exclsively on cool ne technology; • innovation is not something every company needs in large qantities. Becase the ho of innovation is so critical in determining reslts, Making Innovation Work does hat, according to the athors, boos focsed on innovation strategy cannot—oer the context, frameor, tools, and operating gidelines for sccessflly implementing innovation throghot one’s organization. Moreover, it provides the means for tailoring innovation to any company’s particlar sitation, bsiness strategy, cltre, technological acmen, and appetite for ris. Ths, as Jean-François Manzoni (Professor of Leadership and Organizational Development, IMD) stated in his praise of the boo, “If yo’re interested in improving yor organization’s innovation performance and potential, this boo ill tell yo ho. If yo’re not, it ill tell yo hy yo shold be!” with that said, e mst isse a caveat—this time in the ords of Le Pla (chairman of Boeing, former chairman and CEO of HP, and former CEO of kendall Jacson wine Estates), “It’s crammed [or emphasis] ith examples and practical ideas that can trigger improvements in innovation, starting tomorro!” Making Innovation Work is so densely paced ith so mch information, that or reading estimate probably far nderestimates the time it ill tae for yo to fully assimilate the ideas and examples, ithin the context of the frameor, so that yor innovation improvements can “start tomorro.” using chapter 2 as a representative example, e nd that each chapter contains a plethora of signicant insights: • Figre 2.1—“The Six Levers of Innovation”


Page 11



• Research Bite—“Innovation in Prodct Oerings”

C

• CEO Considerations

Chapter 1: Ho Yo Innovate Determines what Yo Innovate

• Figre 2.2—“The Innovation Frameor” • Figre 2.3—“The Levers for the Three Types of Innovation” • Research Bite—“Incremental, Semi-Radical, and Radical Innovation Investments” • Case Stdy—“Approaches to Incremental Innovation: Magna International”

Chapter 2: Mapping Innovation Chapter 3: Ho to Design a winning Innovation Strategy Chapter 4: Organizing for Innovation Chapter 5: Designing the Process of Innovation

• Case Stdies—“Semi-Radical Innovation: Sothest Airlines and Apple Compter”

Chapter 6: Ho to Measre Innovation

• Research Bites—“Enablers and Blocers of Radical Innovation”

Chapter 8: Learning Innovation

• Case Stdy—“Radical Innovation: Microso and its .NET Initiative”

Chapter 7: Rearding Innovation

Chapter 9: Cltivating Innovation Chapter 10: Applying the Innovation Rles

• CEO Diagnostic—“using the Innovation Frameor to understand Ho Yor Company Plays the Innovation Game”

Endnotes

The best strategy is to read the entire boo in the order presented (nless otherise indicated). The frameor, tools, and operating gidelines are so tightly integrated that sipping, simming, or the least bit of inaention ill get yo hopelessly lost in the thicets.

Sbject Index

Biography

As yo come across the varios boxed and highlighted sections (Research Bites, Case Stdies, CEO Considerations/Diagnostics, etc.), stop and read them careflly before contining on ith the primary text. Occasionally, these sections ill refer yo to other chapters or topics elsehere in the boo. when this happens, follo here the trail leads. As for the ealth of gres and tables, these are also not to be taen lightly. Stop, stdy them careflly and, hen called for, follo here they lead yo.


Page 12



A N  O R we at BBR encorage or readers to prchase the bsiness boos e revie. BBR Revies are intended as a service to bsy professionals, as e recommend only those boos that are orth yor time to read in their entirety. we apply stringent criteria in selecting only the best bsiness boos, and in that selection process, strive to help yo mae informed boo-prchasing decisions.

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Page 13

Making Innovation Work

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