Topic 4

Implementing Innovations
and Key Considerations
 Introduction
Turning an innovative idea into reality is bound to be a
unique experience that must be treated as a project.

Successful implementation of any innovation requires good

project management, nowadays properly regarded as a
professional discipline in its own right.

No project of any size has much of a chance without a well-

trained project manager empowered to get things done,
and having the support of higher management.

It also requires a clear set of management processes

appropriate to the degree and type of innovation involved.2
 Project Management Model
Sequential Model – also known as Staged Model
The earliest paradigm of project management was the so-called sequential
model.

The project is divided into phases, each of which is essentially self-contained

and finished with a defined deliverable to be handed over to the next stage.
E.g.-marketing would define what was to be done, engineering would
design the product, production engineering worked out how to make it

This ‘over the wall’ approach had the advantage of allowing the specialist
departments to develop and deploy deep expertise; and the relatively
formal handover between departments provided good overall control.

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 Project Management Model
Sequential Model (Staged Model)

It could be slow and inflexible.

It could also be very inefficient for innovative projects because since each stage was
done in isolation.

It was difficult to take account of opportunities or requirements arising from later

stages.
• to alter the design to make manufacturing easier
• change the requirement to take advantage of newly emerging technical
capabilities or market knowledge

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 Project Management Model
Cross-functional Team (will be further discussed later)

The deficiencies of the ‘over the wall’ model were addressed in the
1970s and 80s by use of cross-functional teams headed by an
empowered project manager.

This is regarded as a key component of the vast majority of

innovation projects (Takeuchi and Nonaka).

The team should include representatives from all the parts of the
company that would be affected by the innovation – sales,
marketing, R&D, operations and so on – working together, ideally in
the same location but at least in close communication
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 Project Management Model
Cross-functional Team (will be further discussed later)

In its extreme form, the team is deliberately separated from the main
organization in a separate building or location and given a great deal of autonomy
over what they do and how they do it.

Radical innovations may need this kind of isolation to allow teams to develop new
approaches and perhaps business models free from too much influence from the
established business.

The challenge, autonomy and feeling of shared responsibility can be very

motivational and lead to high levels of energy and commitment.

• e.g. IBM developed the PC and Canon the first copier for personal use.
However, most innovations need to be more closely integrated into the home
organization.
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 Project Management Model
Agile Models
The original motivation for agile methods came from the design of software for
consumer use. Such applications are difficult to specify fully in advance because it
is impossible to predict exactly how the user will react to them.

Designers found that however hard they tried, customer feedback after launch
always called for a long series of updates and modifications.

In the approach, software developer concentrates on the risky elements or those

that require prototyping. The easier parts are done later.

A deliberate process of ‘trial and error’ is used, in which preliminary versions are
prototyped and released for testing by potential – or actual users; modified if
necessary and then incorporated into a further, more complete version.

The basic model, usually known as the spiral model

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 Project Management Model
Agile Models
This is highly appropriate for software development where prototyping is easy
and cheap. The application to projects involving physical constructions is more
problematic, although not impossible.

Source: The Spiral Model for Agile Development Source: copyright © 1988 IEEE. Reprinted and
adapted, with permission, from Boehm, B. W., ‘A Spiral Model of Software Development and
Enhancement’, Computer, 21(5) (1988), 61–727
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 Choosing the Appropriate Project
Management Model
Agile methods are increasingly the norm in software projects.

Many companies are using the combination of agile with sequential project
management models in hardware projects, although the company should try to
strike the balance between the two models.

• E.g. for complex hardware projects – like designing an aero engine may be
quite impractical to build and modify a series of prototypes; and anyway the
requirements may be clearly specified.

A staged process will remain the norm for hardware project.

However, agile methods may be appropriate in the investigation phase of
innovation projects where the concentration is on gaining knowledge and
demonstrating feasibility.

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Size and Structural Dimensions of the Firm

Centralized and Decentralized R&D Activities

Access the text alternative for these images

Size and Structural Dimensions of the Firm

Centralization: The degree to which decision-making authority is

kept at top levels of the firm OR the degree to which activities are
performed at a central location.
• Centralized authority ensures projects match firm-wide objectives, and
may be better at making bold changes in overall direction.
• Centralized activities avoid redundancy, maximize economies of scale, and
facilitate firm-wide deployment of innovations.
• But, centralized authority and activities might not tap diverse skills and
resources, and projects may not closely fit needs of divisions or markets.
Some firms have both centralized and decentralized R&D
activities.
 Team structure and innovation
Team Structures- An organization can successfully innovate only if it is efficient at
managing teams and developing the necessary leadership skills within the organization.
Innovation requires a mix of skills and viewpoints and so the importance of cross-
functional teamwork is clear.

There are five different types of project team structure, each with advantages and
limitations. The most appropriate structure for each innovation project must be carefully
chosen.

– Functional teams
– Cross-functional teams
– Autonomous teams
– Virtual teams

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 Team structure and innovation
Functional teams
A functional team might be formed in any of the functional areas like with R&D,
operations, marketing and finance.

In the service sector, groups of operations employees may also work together
on improving a process in a function: AXA insurance has a ‘Taskmasters’
programme to encourage teams of employees from operations to identify
where they can eliminate non-value-adding steps in key processes.

Advantage: members have similar goals and few management actions are
required to form the team.

Limitations of functional teams: the perspectives and range of skills included

may be too narrow, or a suitable team leader may not be available. In this case,
a moderator could be assigned from another function.
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 Team structure and innovation
Cross-functional teams
For the majority of innovation projects, it is not feasible to rely on inputs from only one
functional area. So each functional area needs assigned people.

The project manager is normally from one of the functional areas and reports to their
normal manager; in this case, the project manager is assigned from R&D. As cross-
functional teams include people with different perspectives, it is less likely that key
points will be forgotten.
– e.g. team members from operations will start discussions about how a product (or
service product) can be produced.

Disadvantages: they need management attention to make them work and the project
manager does not have direct authority over the team members (not direct reporting
relationship).

Another limitations: the conflicts of interest that may arise. If the project manager does
not have charisma or persuasion skills, their lack of formal authority can be a problem.14
A Cross-functional Team

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 Team structure and innovation
Autonomous Team
Typically, an entrepreneurial project manager (new venture manager) is
assigned a small team, which is separated from the main organization.
Many of the ‘rules’ of start-ups apply to the design of an autonomous team. It is
crucial to have people experienced in certain functions. A small number of
participants is ideal and they need to define a simple and effective process for
driving an idea to market.
– Advantage: they can adopt different ways of working and do not have to fit
within the parent’s cost structure.
Limitations:
– Autonomous teams require an entrepreneurial style of management and
finding suitable candidates to lead them may be difficult.
– The autonomous teams working on innovation projects will come into
conflict with more operational units of an organization.
– Reintegrating members of the autonomous team at the end of the project
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An Autonomous Team

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 Team structure and innovation
Virtual Team
Very often, suppliers make major contributions to innovation projects. Sourcing
innovation expertise outside (open innovation) is increasingly important and
when resources from a number of different organizations are brought together
to form a virtual team.

Virtual teams are formed from a mix of organizations. Creating a virtual team
can be appropriate for developing innovations where not all the required
expertise exists in-house.

Limitation: they are not co-located, communication can be difficult, and

external resources can be costly.
e.g. A virtual team consists of experts from a number of IT companies and
launched an online bank within 90 days.

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 Team structure and innovation
Virtual Team
Virtual and globally dispersed teams are common – they are used by about 35
per cent of companies.

Their main limitations are that because they are not co-located, communication
becomes more difficult and a simple, effective innovation process is needed.
When open innovation is adopted, outside expertise can be expensive and
intellectual property rights need pay extra attention.

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A Virtual Team

20
The Right Type of Team

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 Recognizing and overcoming resistance
People are naturally averse to change. Significant innovations often cause disruption to the
established order of things, which is often uncomfortable to those involved.

Better planning by the management team can ensure that even a radical innovation meets
enthusiastic support by those affected, not obstruction.

Managers must understand who is interested in the project and how much power they
have to affect it.

Stakeholders may be directly involved in the project. The power/interest matrix separates
the stakeholders into four groups

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 Recognizing and overcoming resistance
Power/interest matrix

1. The bystanders are the least significant stakeholders. They have little interest
in the project and little influence over it, so they need no deliberate attention.

2. The supporters are more or less keenly interested in the outcome but have
little direct power over the project or policy.

E.g. In a company launching a new product, these might be service personnel

or the majority of the sales force.

Supporters are not powerful individually but they may carry influence
because of their number. They have a right to be kept informed and may turn
out to be important in influencing the more powerful stakeholders.

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 Recognizing and overcoming resistance
Power/interest matrix

3. The players are clearly the most important group. They have a strong interest in the
project and the power to affect it.
• includes the key staff and managers directly involved and others, such as trade union
representatives and key account salespeople, who represent important interests among
the supporters. They must be kept closely involved and consulted on any major change
of direction.

4. The outfield are those who have a powerful influence on the organization but are not
directly involved with this particular project.
-e.g. senior managers, non-executive directors, major investors or key customers.

Since they are powerful people, their public endorsement of the project may be helpful.
They generally do not interfere.

However, if their interests are threatened, they may move from a passive position to
become key players, and hostile ones at that.
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Implementing Innovations

People, culture and Organization

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 Organizational culture and innovation
Organizational culture has been defined as:

the set of values, understandings and ways of thinking that is shared by the
majority of members of a work organization, and that is taught to new employees
as correct.

A working definition is

‘a culture of innovation cultivates engagement and enthusiasm, challenges people

to take risks in a safe environment, fosters learning and encourages independent
thinking’

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 Assessing culture in the context of
innovation
There is a widespread opinion that culture is difficult to manage.
The cultural web is an effective tool for the diagnosis of cultural issues. It is
based on ideas from the social sciences, and it identifies six partially
overlapping aspects of culture.

1. Organizational structures: The formal organization is represented by the

organization chart. Formal structures are normally based around what is
important to an organization.

2. Power structures: These are related to the formal organizational structure

but are not easily recognizable from organization charts. Certain individuals
may have more power than their position in the hierarchy would suggest
because of their experience or charisma, or because they are responsible for a
particularly important client.
– E.g. HP was famous in the 1980s for being ‘an engineering company’
(R&D had more power than marketing). 27
 Assessing culture in the context of
innovation
3. Symbols: Symbols include advertising and logos, the style of offices, company cars,
titles and dress codes. The displays and photographs of a company’s products and
services in its facilities are always telling.
– E.g. As electronics giant HP was being split into two companies at the end of 2015, it
is interesting that its advertising used photographs of the garage in which the original
company was founded.

4. Stories and language: The language, terminology and acronyms strongly reflect
culture. And every organization has stories that capture the essence of key events. Such
stories are told to new recruits and visitors and act to reinforce behaviours.
– FedEx tells a story of an employee who organized a helicopter to get an important
package to a customer on time.
5. Routines and rituals: Routines are the ways employees learn to act towards each other
and to process work. In addition to formal processes, organizations develop unwritten
rules on how different departments interact during the innovation process.
– Routines can be difficult to change because they are often based on tacit knowledge
and may strongly support the overall process of the organization.
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 Assessing culture in the context of
innovation
6. Control systems: These include corporate objectives, measurement systems, and
reward and recognition systems. All of them maintain the focus of attention of an
organization. The most important control systems for innovation are those used to
select ideas and implement them efficiently.

7. Paradigm: Reflecting back to the definition of culture given above, the central
paradigm is expressed as a statement summarizing the main points about how an
organization ‘thinks’ and ‘acts’.

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 Assessing culture in the context of
innovation
Some approaches for the management to identify the suitable
attributes or characteristics of the other organization so that they can
apply to their organization for improving innovation performance
• Innovation culture is of course contextual. Therefore, the manager
should be advised against looking for a quick solution and a ‘recipe
list’.
• Many companies try to copy a few attributes from a famous
company
• An appropriate approach would be to analyse the current culture
of the company and its performance (track record of innovations).
From this a desired culture could be identified, using the cultural
web.

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 Innovation Culture Practices
Aspects of Culture / Best Practices
Organizational Structures
 Market-oriented structures
 Reduced hierarchy
 Frequent re-organizations
 Teams
 ‘Innovation managers’
Power Structures
 Training
 Cross-functional rotation
Symbols
 Communication
 Displays of innovation successes
and other artefacts
 Symbolic recognition and awards
 Explanation and Company Examples
 Market-oriented organizations engender focus and urgency. Strategic business units (SBUs) serve particular
markets and include typical business functions (for example, R&D, marketing, and operations). Miele, a
household products company, is organized by customer segments rather than technologies.
 Fewer levels of reporting increases flexibility. For example, Google has tried to maintain a flat organization.
 Large organizations can stay more adaptable through re-organizations (Motorola; Hewlett-Packard).
 Creating autonomous teams for new ventures (for example, IBM, DuPont, and Rank-Xerox).
 Formally appointing an innovation manager gives focus to performance improvements (GlaxoSmithKline;
AXA; Bank of America; Whirlpool). To tap outside resources more effectively, Proctor and Gamble created
the post of ‘Director of External Innovation’.
 ShinEtsu promote excellent R&D and manufacturing relationships through their ‘freshman’s program’ and
thus achieve a balance of power between these functions. 3M trained their top manager’s to ‘let go’ and
delegate authority more effectively.
 Sony managers place particular emphasis on managing cross-functional boundaries.
 Company logos and slogans are a symbol and some companies update them regularly to ensure the
typeface and style is modern. Hewlett Packard recently added a focus on invention with the line ‘HP
Invent’; AXA have developed the ‘Innovation Quadrant’, which has become both an internal symbol of
innovation (for example, as a screen-saver) and a tool for communicating the meaning of innovation.
 The workplace and the reception area should celebrate innovation by displaying relevant product and
process innovations: ‘artefacts’. Unilever has interesting displays of not only their products but also process
innovations. Artefacts are used to encourage experimentation at Ideo; Axa have an ‘innovation corridor’
(outside the staff canteen).
 Plaques, certificates and other recognition for innovative employees can become symbols. When Hewlett-
Packard introduced a new reporting metrics for NPD, every division manager trained in the approach
received a Perspex desk block with a diagram of the metrics.
 Cont.
Aspects of Culture / Best Practices  Explanation and Company Examples
Stories  3M ‘mavericks’; Sony Corporation’s Walkman. Managers can compare their style to Zien and Buckler’s
typology, in order to learn how to use stories more effectively.
Routines and Rituals
 Promoting ideas for new products,  ‘Fresh Eyes’ Joie de Vivre; ‘tinker time’ at 3M; NIH at Texas Instruments (see Mini Case 8.2 in this chapter).
new services and process Giving a sufficient challenge to employees is essential (Hamilton Acorn).
improvements  Internal venture management: making finance available for funding entrepreneurial ideas and
opportunities.
 ‘Failure is our most important product’ Johnson and Johnson; Dupont ‘good try’ language; ‘Bury the dead’
 Tolerating mistakes party HP (now Philips).
Control Systems
 Processes  Ensure that there are simple mechanisms for staff to propose ideas and obtain resources to investigate
them (AXA does this).
 Most companies have introduced Stage-Gate or other formal NPD processes. Leading organizations have
moved more to having a flexible process for the whole of innovation. Systems and processes to promote
entrepreneurial thinking (for example, Richardsons: see main case in Chapter 2).
 Metrics  Company goals and metrics are ‘cascaded to all levels’. Canon set notoriously tough NPD goals.
 Reward and recognition  Rewards and recognition are linked to innovation closely, including employee performance appraisals
(Fischer GmbH has an interesting approach described later in this chapter).
 Managing Relationships
In the forming phase, teams can develop their own ‘ground rules’.
Developing such rules early on can minimize the negative aspects of storming
and accelerate the transition to performing.
Once teams have been assigned to the innovation task, communication
becomes a factor that needs management attention.
The fundamental problem is that innovation is about creating new knowledge
and so significant amounts of knowledge need to be shared.
Individuals need to know much about the project they are working on.
If everyone receives all the information about a project, this leads to
information overload.
Mapping the flow of information and knowledge within a project can avoid
information overload and, crucial information not being shared with the right
people.

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Suggested ‘Ground Rules’
Economic Consideration
Development of the NPV of a Typical Project with Time
 Economics Consideration
Internal Rate of Return and Time to Break Even.

Internal rate of return (IRR) is the interest rate at which the NPV of all
the cash flows (both positive and negative) from a project or an
investment equals zero.
Extracted from: Handbook of Energy Efficiency in Buildings, 2019

Time to Break even is the amount of time required for the discounted
cash flows generated by a project to equal its initial cost.

E.g. a project takes 5 years to generate $5,000 on a discounted basis

while the start up cost is $5,000 start up cost, the time to break even
time is 5 years

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 References
• Goffin, K. and Mitchell, R. (2017) Innovation Management: Effective Strategy and
Implementation (3rd edition). Palgrave.

• Schillings, M. (2019) Strategic Management of Technological Innovation (6th

edition). McGraw-Hill Education.

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