Innovative Organizations PDF

Innovative Organization INNOVATIVE ORGANIZATIONS A brief summary Belén Goñi Content 1 INNOVATION...........................................................................

Innovative Organization INNOVATIVE ORGANIZATIONS A brief summary Belén Goñi Content 1 INNOVATION.........................................................................................................................2 2 INNOVATION TYPES...............................................................................................................6 3 WHAT DO INNOVATIVE COMPANIES HAVE AND DO?........................................................10 4 CONTEXT..............................................................................................................................11 4.1 Strategic surveillance..................................................................................................12 4.2 Ecosystem....................................................................................................................15 5 ORGANIZATION...................................................................................................................16 5.1 Organization & structure.............................................................................................16 5.2 The optimal organization to innovate.........................................................................17 5.3 Innovation culture.......................................................................................................18 5.4 Measuring innovation.................................................................................................20 5.5 The innovation process...............................................................................................21 5.6 Operations...................................................................................................................32 5.7 Involving stakeholders.................................................................................................34 5.8 Learning.......................................................................................................................34 5.9 Portfolio management................................................................................................34 5.10 R&D projects (Research + Development)....................................................................35 5.10.1 Technological maturity........................................................................................35 5.10.2 Investment maturity............................................................................................38 5.11 Protection and exploitation of results: Industrial property........................................38 5.12 Innovation Financing...................................................................................................40 5.13 Tools, infostructure, and innovation support systems...............................................41 6 PEOPLE.................................................................................................................................41 6.1 The managers..............................................................................................................42 6.2 Innovation competences.............................................................................................43 6.3 Teams..........................................................................................................................44 6.4 Change Management..................................................................................................46 6.5 Some tips on neuroscience and change......................................................................47 7 CONCLUSIONS.....................................................................................................................48 7.1 Innovation killers.........................................................................................................48 8 Other approaches to the attributes of an innovative enterprise.......................................50 8.1 The 8 essentials for innovation McKinsey...................................................................50 8.2 Boston Consulting Group’s most innovative companies............................................51 9 Bibliography on innovation.................................................................................................53 1 1 INNOVATION There are many definitions of innovation, but we will stay with these two: "The ability to turn ideas into actions with results that add value, tangible and intangible “ "Innovation is all change (not only technological) based on knowledge (not only scientific) that generates value (not only economic)" (COTEC) Based on these definitions, to better understand them, we are going to break down some related concepts and we are going to explore some of their characteristics. Creativity and innovation are not the same. Creativity is a process of generating ideas, which are the raw material for innovation. Innovation, however, is about turning ideas into something valuable for our organisation: savings, profitability, growth, loyalty, new markets, new products and services, new revenue streams, new customers, new knowledge and capabilities... It involves taking risks by implementing new ideas, to turn them into positive results for the organisation. Innovation is not just about launching new products or new services. Innovation can occur in different areas of business activity and not only in the generation of new products or services: new processes, new partner networks, new sales channels, new customer experiences or new business models to generate revenue in different ways are some of them. In fact, although companies tend to concentrate their innovation efforts on products and services, long-term value accumulation comes to a greater extent from innovation in other areas, as Monitor-Doblin's work has shown after analysing the innovation of different companies over 10 years. See Figure 1. Figure 1: cumulated value after 10 years- Monitor-Doblin Innovating is not just about research and development (R&D) or incorporating technology. 2 Not so long ago, innovation was defined as the result of bringing research and development to the market, R&D&i (I&D&i in Spanish) and innovation was that small i. Later, it was realised that there were value-generating innovations that did not necessarily come from research and the concept was broadened. Studies now show that the most innovative companies in the world are not necessarily the ones that invest the most in R&D. Figure 2: Most innovative companies outperform the Top 10 spenders. Source: Booz Allen Innovating is not a fad; is profitable and necessary for survival. As IESE demonstrated in a study conducted over 18 years with 3,400 SMEs and 1,200 large Spanish companies that have innovated in their processes or created new products and services, those that innovate frequently, obtain a higher margin than the others. Figure 3“Innovation and Markups: Firm Level Evidence”. Bruno Cassiman con Pankaj Ghemawat and Stijn Vanormelingen. IESE 2011 3 According to the study, Spanish companies that innovate in product enjoy an increase in margins of 5.2% while companies that innovate in the process enjoy an increase of 3.7%. After the 1st product innovation margins grow by 2-3%, while after the 11th innovation margins grow by 10%. This positive innovation effect is even more pronounced in smaller companies where the effect of the 11th innovation is a 20% margin increase. Innovation does not only increase margins. Innovative companies "maintain employment better in a crisis, create more stable employment, the average skill level of their workforce increases faster and their margins, productivity and sales increase above average" 1 Figure 4: Most innovative companies outperform MSCI World Index. Source Innovating is within the reach of companies of any size. It is not necessary to be a large company with many means to innovate. The market is full of startups that bring innovative solutions to the market. Large companies have more resources, but their routines and bureaucracy often slow down their innovation. For this reason, it is common for them to organize contests and challenges to be near innovative startups. The great challenge to innovate is knowing how to make mistakes quickly and cheaply and... learn. Innovating is difficult and challenging and not always successful - in fact, an innovation is more likely to fail than to succeed. There are many different statistics on the % of innovations that succeed and almost all of them refer to product innovation. The range is between 30% and 80%2 1 (La importancia de la innovación en la creación y mantenimiento del empleo. Institución Futuro. December 2013) 2 https://newproductsuccess.org/new-product-failure-rates-2013-jpim-30-pp-976-979/ 4 Therefore, any company that wants to promote innovation must be aware that failure is inherent to it and that accepting this and learning from it is fundamental. In the words of Luis Pérez-Breva, head of innovation at MIT, innovation is about being productively wrong. It is not about punishing the mistake but about punishing not learning from the mistake. We don't need to do it alone. Not too long ago, innovation was done internally with company resources. But little by little companies like Philips realized that limiting themselves to internal resources closed many opportunities and they began to incorporate external ideas and research. In addition, and taking advantage of the impulse of the Internet, companies were born capable of connecting business needs with "solvers" from all over the world. An example of this is https://www.wazoku.com/. In the graph below you can see that 65 "solvers" from all over the world have responded to the challenge: Rapid, Simple, and Accurate Detection of Legionella in Water. Figure 5 Challenge solvers from all over the world You learn to innovate by innovating. Innovation is practical knowledge. You learn by doing. As we will see later, for it to be a part of the company's DNA, it must be part of its culture, and this can only be achieved by practicing it. VUCA environment: innovation is no longer optional The environment in which organizations currently move is volatile, uncertain, complex and ambiguous (VUCA). ❖ Globalization ❖ More competition ❖ Digitization ❖ Difficulty to differentiate in the market: Value vs Price ❖ The client handles more information 5  ❖ Shorter product and strategy life ❖ More technologies ❖ More business models… The dilemma about whether to innovate or not is no longer valid. The challenge today is how to do it faster than the competitors. The challenge is how to innovate continuously and systematically to stay in the market. Innovation is a continuous and unstoppable process of renewal, opening and connection. 2 INNOVATION TYPES Research on innovation management has grown exponentially in the last decade. By applying artificial intelligence to all published papers, up to 70 different types of innovation can be found. Figure 6 Innovation types found by CREAX. Source. But we are going to focus on the most cited and popular ones. Clayton Christensen describes these 3 types: Disruptive innovation: Explores opportunities outside the traditional field of the enterprise. Involves creating entirely new products or services (or significant changes to existing ones) that create entirely new markets or significantly alter existing ones. It is difficult, and risky, it takes time to obtain revenues and needs dedicated teams with easy access to internal resources. But if it works, it gives a long-term competitive advantage. Sustaining innovation, new products/services, new channels, new technologies. This type of innovation involves improving existing products or services to meet the needs 6  of existing customers or to stay ahead of competitors. This is the type of innovation that most companies focus on, as it helps them to maintain their market position and grow their business. It is less risky, gives more immediate revenues and is more predictable. This type of innovation should be extended throughout the company. Efficiency-based or incremental innovation. it involves making small, incremental improvements. It carries a small risk and does not give a great competitive advantage, but it is necessary to be able to continue in the market. It should occur across the company at every level. According to the object of the innovation we will consider the Ten types of innovation ™ from Doblin 7  Table 1 Doblin Ten types of innovation TM Other types of innovation are the following: Open innovation: This type of innovation involves seeking out and incorporating ideas from outside the organization, either through partnerships, acquisitions, or other forms of collaboration (and also selling the innovations generated inside). Open innovation can help companies access new ideas and technologies that they might not have been able to develop internally. Henry Chesborough, a professor at Harvard and Berkeley, coined the term in 2003 to reflect that innovation is not a company's internal process but rather that it can have multiple inputs and outputs. Figure 7 The open innovation paradigm. Henry Chesborough 8  Corporate entrepreneurship (or intrapreneurship) is actually a type of open innovation and one of the most recurring areas of action in any big Corporation's Strategic plan. It refers to the process by which established companies engage in entrepreneurial activities, such as innovation, venturing, and strategic renewal, to drive growth and maintain competitive advantage Frugal Innovation refers to the process of developing products or services that are simple, affordable, and easy to use, with a particular focus on serving the needs of low- income or disadvantaged communities. This approach to innovation is often associated with developing countries, where there is a need to create solutions that can be accessed and used by people with limited financial resources. Frugal innovations are typically designed to be resource-efficient and may involve repurposing or adapting existing technologies in new ways. The goal of frugal innovation is to create products and services that meet the needs of underserved or unserved markets affordably and sustainably, it implies: Simplification: Designing elementary products Utilisation of minimum resources widely available Accessibility: accessible to as many customers as possible Figure 8 Frugal innovation examples If you are interested, you can help being a “social solver” Reverse innovation: It refers to innovation created in and for developing countries that later spreads to the industrialized world. The term was coined by Dartmouth professors Vijay Govindarajan and Chris Trimble after the publication of their book Reverse Innovation. Figure 9 Reverse innovation 9  Social innovation “refers to the design and implementation of new solutions that imply conceptual, process, product, or organisational change, which ultimately aim to improve the welfare and wellbeing of individuals and communities” OECD. 3 WHAT DO INNOVATIVE COMPANIES HAVE AND DO? Innovation is based on three pillars and the most innovative companies work on their development: An organization connected with the outside world to anticipate and detect threats and opportunities. An organization that promotes and drives innovation: agile, flexible, open, and profitable. People who know how to, can, and want to innovate. Figure 10 Innovation pillars Innovation aims to create value and sustain the company's present and future competitive advantages. It is necessary to have a focus that orders innovation and a certain methodology to bring ideas to market, but: Flexibility is an essential element since the uncertainty that surrounds innovation forces rectifications and changes that a very rigid process would make impossible. The company's strategy must be clear and give focus to innovation and also flexible enough to allow us to take advantage of the opportunities that may arise. The tools or methodologies that we use are a means, not an end in themselves. They serve us to the extent that they contribute and help us innovate. Innovation is like riding a bicycle, you must keep pedalling so as not to fall and that implies that you must continue to challenge yourself, solve problems, address new needs, create new proposals... Error is inherent to innovation. Innovative organizations do not punish mistakes, they punish not learning from them. Rectifying and learning continuously is part of success. 10 4 CONTEXT Companies operate in a global environment that affects them. Figure 11 Factors and agents in the enterprise environment (based on Strategyzer) We can summarize the main global trends affecting them today as follows: Demographic changes. Aging in the West, growth in emerging countries, life in cities. Globalization and new markets, especially those of the middle classes in emerging countries Scarcity of some resources: water, energy, minerals…. Climate change Global knowledge society: networks, open science, knowmads Global social responsibility and quickly organized social mobilizations. Technologies in constant change and exponential growth. Figure 12 Roland Berger's main trends for 20503 3 More information https://www.rolandberger.com/en/Insights/Global-Topics/Trend-Compendium/ 11 Given this context, many large companies do prospective to define the strategy of their organization. It's about researching and exploring to try to anticipate what's to come. Multiple new technologies are already available to companies and that is breaking through with force in many sectors and causing profound changes in them: nanotechnology; new materials such as graphene or plant plastics; biotechnology to "repair" genetic mutations that produce diseases that had no cure; a blockchain that can disintermediate many brokers and notaries and that will be of great help to guarantee the reliability of multiple transactions; the technologies called 4.0 (the cloud, IoT, 3D printing, big data, AI, augmented & virtual reality, simulation) or cybersecurity. And many other advances in all branches of science that need to be followed minimally. Furthermore, companies must also be up to date with their industry changes: legislation that applies to them, customers, suppliers, competition, current, and potential markets... 4.1 Strategic surveillance Given this environment, it seems clear that it is not easy to keep up to date with so many things, so companies should have a strategic surveillance process in place: a process (organized, selective, permanent, coordinated, and systematic) that captures data (from outside and inside the organization itself), classifies it, analyses it and disseminates it to convert it into knowledge to make Figure 13 Strategic surveillance process decisions with less risk, and to be able to anticipate future changes. Having appropriate information within the company at the right time to make the most suitable decision involves implementing a set of interrelated, organized, and properly directed processes to achieve this, that is, the implementation of a strategic surveillance system. A strategic surveillance system pursues two fundamental objectives: Monitoring the environment, which means: o Searching for relevant information 12  o Collecting/capturing useful information for the company o Analysing and validating the collected information Exploiting the information, which means: o Distributing the information to those who need it o Using that information o Making strategic decisions o Adapting the company's activities to detected changes To be effective and efficient: Strategic surveillance must be an organized system integrated into the company's usual procedures. Surveillance should be systematized through the use of a methodology that allows its regular monitoring and exploitation The implemented system must adapt to the company's environment and culture. Strategic surveillance must be focused, that is, it should be centered on certain company aspects and its environment. It is not possible to monitor everything. Types of Surveillance Based on the determinants of a company's competitiveness, the company can organize its strategic surveillance around four axes: Competitive surveillance: deals with information about the company's current and potential competitors and those with substitute products Commercial surveillance: studies data related to customers and suppliers. The commercial aspects that need to be monitored are: o Markets o Customers, the evolution of their needs, their solvency, etc. o Suppliers, their product launch strategy, their suppliers, etc. o Labour in the sector, etc. Technological surveillance: focuses on available, emerging, or recently appeared technologies to the extent that they can impact new products or processes of the company. The main technological aspects that need to be monitored are: o Scientific and technical advances o Products and services o Manufacturing processes o Materials and their transformation chain o Information technologies and systems, etc. Environmental surveillance: deals with external events that can condition the future in areas such as sociology, politics, the environment, regulations, and laws. The main environmental aspects that need to be monitored are: o Legislation and regulations o The environment and its care evolution 13  o Culture, politics, sociology, economy, etc. Expected results The expected results of the strategic surveillance can be classified as follows: Figure 14 Strategic surveillance process: What for? Anticipate and timely detect relevant changes in the company's environment Minimize risks, detect threats to the company from new products, regulations, and competitors, and make appropriate decisions when opting for one technology or another Compare, and recognize strengths and weaknesses against the competition and the needs of customers Innovate and identify improvement opportunities and innovative ideas in the market Cooperate, detect cooperation opportunities and find the most suitable partners There are numerous software that help obtain data and information (idiogram intelligent watcher, hontza, vicubo, miraintelligence, vigiale, xerka, innguma, i3vigila, intool, mussol), to which we must add the information collected all over the company by its workers through fairs, their networks, contacts… The company must decide how to design and implement this strategic surveillance process in its organization and what aspects it needs to be well informed about. The strategic surveillance process As with any process, the strategic monitoring process consists of several steps, as illustrated in the following figure: 14  Figure 15 Strategic surveillance process Consult and study the document: “Key enabling technologies”. In the ppt “Context” you will find a lot of examples on technologies and innovations in many sectors. 4.2 Ecosystem An ecosystem is a complex set of related elements that belong to a certain field. Innovation also has its ecosystem, which comprises different agents that interact with each other. All these “ingredients” are different and may not be available in all places. Table 2 Innovation Ecosystem: source World Economic Forum Change rarely succeeds without collaboration and collaboration is not accidental, it is created in a carefully nurtured environment. Companies must build and rely on this ecosystem to succeed in their innovations but building an innovation ecosystem requires leaders' attention and investment (time, money, people…). 15 5 ORGANIZATION 5.1 Organization & structure Innovation aims to create value and sustain the company's present and future competitive advantages. As we have mentioned previously, it is necessary to have a focus that orders innovation and a methodology to bring ideas to the market. The organization to innovate. There is no single recipe, so we are going to see several, but always keep in mind that the point of arrival is to achieve an agile, flexible, open and, of course, profitable organization. Regarding the general organization of the company (the organizational chart) from a vertical organization to the "holacracy" (a structure without bosses), all combinations are possible. Each one has advantages and disadvantages. Innovative companies usually have flatter and more adaptable structures where it is easier to share and collaborate. Their project teams have a certain autonomy and responsibility for the results. Figure 16 Different organizational charts (O.C Ferrell Business in a changing world) As regards how to organize innovation internally, there are also several options: Innovation department in charge of innovating. Innovation catalysts to help anyone innovating in the enterprise Multidisciplinary innovation committee that meets regularly and promotes innovation, approves new projects, monitors results... Assignment of multidisciplinary teams for each new project or request for volunteers Anyone in the company within the given parameters and criteria Cell of intrapreneurs. Innovation from outside that is carried out with Universities or Technology Centres or via Start-up incubators or project competitions. Etc 16 As for the project teams, it is important to form them with complementary profiles that provide their different capabilities in the needed project phase. Thus, creatives should be more present in the ideas and prototyping phases whereas finishers and "bucklers" would be more necessary in the launching phase. But all of them must be duly informed and in constant communication with the rest of the team. (You can read “Ten faces of innovation” by Tom Kelley if you want to delve into this topic) 5.2 The optimal organization to innovate If we had to describe the optimal organization to innovate, we would say that it has all these ingredients: Vision A defined and shared strategy that focuses on innovation. Focus is necessary. Clarity on its value chain and business model (the way it creates, distributes, and captures value, and the way it seeks to generate income and benefits). In other words, it knows perfectly: o Who its customers are, what value the company brings them, why they buy from it, how it relates to them, how it reaches them, and what income it gets. o On the other hand, everything it must do to keep on delivering such value: resources, activities, expenses, and also alliances with others who help it. The business model canvas is a good tool to easily reflect all this information, and to look for new opportunities. Figure 17 Business model canvas. By Alex Osterwalder & Yves Pigneur Currently, many companies have seen their business model profoundly altered by new participants who have taken advantage of the possibilities brought by new technologies. An example, hotels disrupted by Airbnb 17  A dynamic and flexible structure. Defined and shared processes. Quality system. Project management methodology and experience. Transparent and accessible information that allows project teams to easily access the data they need. Flexible allocation of resources. Teams with the autonomy of action and responsibility for results. Performance evaluation system that fosters innovation. Training and learning are key elements and constant concerns of all. Strategic surveillance of the environment that allows the elaboration of information to take advantage of opportunities and make better decisions. A good network of external contacts of the company and its workers that facilitate knowledge about what is happening, the search for partners and allies, and the "know who". 5.3 Innovation culture But it is not enough to have the organization, structure, or tools to innovate, it is necessary that innovation permeates the company people and marks their way of doing and relating: it is necessary to have an innovation culture. Culture comprises the values, norms, practices, and behaviours of a company’s staff Figure 18 Peter Drucker It is not easy to measure and improve innovation culture but it can be done by breaking it down into factors and measuring them across the entire staff. These would be the factors: FACTOR DEFINITION How people interact with the environment and how they manage internally the Connection with information that comes from abroad to foresee, anticipate, and react to threats the environment and opportunities. Proactivity and Staff freedom to organize their work and to propose new ideas. Initiative and autonomy dynamism to question what already exists and propose new and better solutions. Internal Collaboration and fluidity of information among areas and trust among people to cooperation join forces in the face of challenges, projects, and objectives. Learning and The habit of acquiring and sharing new skills and knowledge through experimentation experimentation and the integration of diverse perspectives and profiles 18  FACTOR DEFINITION The existence of people who motivate others to innovate by supporting them in Leadership taking risks and in turning mistakes into learnings Motivation & Ability to propose challenges that make the job attractive and to motivate the staff challenges It is about having a basic purpose and values that everybody knows and that guide the company's innovation and its employees' activities. It implies the definition of Focus how to compete and generate value for the customer and the knowledge of the reasons for innovating as well as the establishment of objectives Organization of the areas and activities that promote the flow of ideas and the Structure & management of innovation projects. Transparency and flexibility to detect process opportunities and address them, regardless of the hierarchical level. It is about the resources to innovate and the ease of access to them: time, space, Media tools, training, money, and knowledge. Assessment and recognition of innovative attitude and aptitude, either through Recognition & formal measures (awards, remuneration, promotions, training) or informal (public incentives appreciation, explicit recognition of those responsible). Table 3 Innovation culture factors Depending on the greater or lesser degree of these ingredients, the company culture will be closed, efficient or innovative. Figure 19 Compared culture 42 enterprises from Navarra 19 As for the person in charge of innovation, some medium & big companies have a CIO (Chief innovation officer) although some experts think that for the transformation of organizations to work, this role must correspond to the CEO. Whatever the figure, the functions for which he will be responsible would be: Creation of a connected ecosystem source of ideas and opportunities. Prospecting of new technologies and their potential. Alignment with the strategy: innovate with a focus. Design and coordination of the system for the generation, collection, and screening of ideas, its development, testing and readiness. Detection of innovative people. Training and monitoring of innovation teams. Coordination of the innovation projects portfolio and their budget allocation. Management of the company's R + D + i scorecard and monitoring of its results. Knowledge of tenders, grants, deductions... for R + D + i. Intellectual property management. Organizations must simultaneously combine the day-to-day cycle that feeds them today with the cycle of innovation that will do so in the future. Deciding whom to get out of the daily work to work on innovation projects is not easy and usually, in small organizations, the same person works in both cycles. The problem is that usually the day-to-day is very tight and it is also responsible for the income statement and therefore always wins in the battle and innovation projects slow down. For this reason, the person in charge of innovation must be very attentive and firm with deadlines and dedication. 5.4 Measuring innovation We said that innovation must have focus, objectives, actions, deadlines, and responsible parties and that its results must be monitored. There are many ways to measure innovation in a company. The most widespread are the number of innovation projects in progress, the sales volume due to innovation, or the savings it produces, but there are many others. Each organization should choose the most appropriate ones for them: Investment in R&D Number of patents made/exploited/licensed New ideas addressed / new ideas obtained Opportunities analyzed Project success rate Number of innovation projects in progress Time to market route Time/money savings due to internal innovation Billing for new products or services. 20  New customers for new products and services. Resources obtained from external sources for R&D&I People trained in creativity and innovation. New business generated. Number of alliances achieved to address new challenges. Customer satisfaction due to the improvement of our products/services Supplier satisfaction due to the improvement in our order schedules, communication, flexibility, etc. Employee satisfaction with the improvement in their workplaces, their training, their versatility, their professional development...¡ Table 4 Innovation indicators 5.5 The innovation process In many cases, ideas never reach the market because they get lost along the way. Innovative companies have a flexible innovation process to which they submit their ideas, and which takes viable ones to market. Innovation requires flexibility but also a certain method that ensures that the ideas we want to implement do not get stuck. The innovation process that helps us follow this path could be broken down into the phases shown in this graph. First, it should be remembered that: Company innovation should be based on addressing needs, desires or new solutions to existing internal or external problems. Creativity and the generation of ideas should be to propose these new solutions. 21  Those who innovate are people, so our teams must know, be able, and want to do so. Let us remember that according to Amar Bidhé's study, 71% of the successful innovation ideas came from the workers themselves. Let us train, inform, involve, give tools, and recognize those who innovate. And don’t forget to Figure 20 Innovation process involve all the shareholders needed for your innovation to be a success. The process we describe here contains the steps necessary to innovate based on an opportunity. It is valid for the launch of new products and services, but also for innovations of any kind and in any part of the value chain. Customers (often internal), objectives, and scope will change, and the opportunity may be a well-known problem. The process is similar to that of other methodologies such as design thinking. You have undoubtedly heard about this methodology, which is very useful for the introduction of innovations. “Design thinking” has already been installed in many companies such as BBVA, which has already trained more than 13,000 people and has 1,000 DT ambassadors. It also begins to be used in schools and colleges. You can find a good and clear summary from the Stanford Institute of design here Figure 21 Design thinking phases 1. Opportunities detection There are many ways to spot opportunities. Let's see some of them: Business model. A business model describes, as a system, how the different pieces of a company fit together to deliver value to its customers at an appropriate cost to obtain a benefit. The canvas is a way to represent the business model in a simplified way that allows you to see it at a glance. We said that business model innovation cumulates more value in the long run than product or service innovation. When a new business model changes an industry’s economics and is difficult to replicate it can create a strong competitive advantage. It has been the case with all the platforms that connect individuals such as bla bla car, Airbnb, Wallapop, crowdsourcing; Apple who disrupted the record companies’ business 22  model; Zara with its fast fashion model; the Rolls-Royce servitization; low-cost airlines, and so on. Going through each one of the “boxes” of our business model, keeping external trends in mind, always putting the customer at the centre and, above all, asking ourselves good questions, we can find many opportunities. Can I attack other customer segments? Can I engage with my customer in a way that improves their shopping experience? Can I give them payment facilities? Can I make myself known in another way? can I be more efficient? Can I find alliances that allow me to improve my offer? etc. If we are creative using our capabilities and those of our partners, we can innovate and generate new value propositions. Figure 22 Business model canvas innovation (Osterwalder, Pigneur) Empathy map (either Dave Gray Xplane's one or the more simplified version of Pigneur and Osterwalder's value proposition). It is about observing the client (be It current or new), empathizing with him, understanding what he hears and sees around him, what he says and does in public, what he thinks, what his problems and needs are... The better we get to know him and put ourselves in his place, the more opportunities we will find to offer him greater value. An example is the empathy map prepared by the twittermometer company for the head of marketing and social networks 23  Figure 23 Empathy map. Xplane by twittermometer Or this one made in class some years ago Figure 24 Empathy map: new student Empathy maps must be validated with clients to be sure that what we believe corresponds to reality. In addition, the more we focus the exercise on a specific client, the easier it will be to put ourselves in their place. 24  Figure 25 Value proposition map. Alex Osterwalder & Yves Pigneur Customer journey map. Very useful especially for services. It is about examining the entire customer experience by analyzing all the steps he takes, his emotions in each one of them, and all our interactions with him. The objective is to detect opportunities to improve his experience with us. Figure 26 Simplified customer journey map: fast food restaurant Innovation efforts can also be aimed at solving existing internal problems or challenges within the company. For example, why does this piece come out defective and twist from time to time? Jobs to be done framework. (JTBD) is a business theory stipulating that consumers don’t purchase because they want a product; they purchase because they want to fulfil a specific job they have. It helps you get to know your consumers better, to identify what the consumers want to solve in their lifes, and, from there, to understand what product or service can help them better. That means you don`t have to focus on what the customer says he needs but on what he wants to accomplish. 25  “A ‘job to be done’ is a problem or opportunity that somebody is trying to solve,” Christensen says. “We call it a ‘job’ because it needs to be done, and we hire people or products to get jobs done An example: the older customer of your luggage company will tell you “I want a suitcase”. Then you will focus your innovation efforts on manufacturing the suitcase that best suits him (lighter, that does not get lost...). Now let's think about what the customer wants: a suitcase? or having his personal belongings with him wherever he is traveling? If we think of this second approach, we will find more opportunities for innovation: perhaps you can carry his belongings in a box from one place to another avoiding him carrying the suitcase… There are three types of jobs-to-be-done: functional, emotional and social. The functional dimension is the practical role a product or service fulfils. In our example: transporting your belongings safely wherever you go. The way customers want to feel and be perceived constitutes their emotional and social jobs-to-be-done. Regarding the emotional jobs-to-be done, we can talk about the fear of not having enough space in the train for your luggage or of losing it. So the best solution would do the “job” and eliminate the fear. Identifying what the customer wants to achieve with that product/service gives you a lot more information about your customer’s needs and leads you to think differently. Redefine the problem and find other problems. An example: the problem is that the bus runs too late and I'm late for work. We can think of the bus starting its route earlier. But we can think of other problems: o Perhaps it is that the bus route is very congested, we can work with alternative routes o Maybe it's that the workplace doesn't have flexible entrance hours o Perhaps it is about going to sleep earlier and getting up earlier to use another means of transport… Another method to find opportunities is to list the main characteristics of the business, cross them with each other and explore the crossroads not yet exploited. We also can find opportunities (always with a customer-centric mindset): Benchmarking Mixing diverse things up Applying technology Simplified version of something that already exists Looking for niches things not well solved by others Being attentive to day-to-day problems… In any case, when an innovation process is initiated, the management of the company must provide the strategic focus and the field in which to work so that the innovations are aligned with the company vision and that everyone knows the criteria by which these ideas will be 26  judged and prioritized: Financial criteria, geographical, technological or industry boundaries… And in any case, be sure that the problem is a problem, the need is a need… don’t act only based on your perceptions or understanding. 2. Ideas generation. Once an opportunity/problem is found or proposed by the organization, it is time to generate ideas that allow us to take advantage of this opportunity or to solve this problem/challenge/threat. There are numerous techniques to do this, some simple and others more complex. Here you can find some of them: Functional analysis Inventory of characteristics SCAMPER Discovery matrices TRIZ Brainstorming Phillips 66 635 Delphi The analogies … Here you can find lots of them with a definition and an example https://neuronilla.com/desarrolla-creatividad/tecnicas-creatividad/ At this stage of the process, it is good to have as many ideas as possible. It doesn't matter if they seem unfeasible or extravagant. It is a phase of divergence, later we will have to converge and choose. 3. Ideas selection. The resources of a company are limited and usually, it is not possible to implement many ideas at the same time, so it is necessary to decide on which ideas we will continue working on. On the other hand, most of them will not be successful, so it is necessary to place several bets to obtain the expected profits from at least one of them. There are many possible criteria to consider, here you can find a few: Is it aligned with the company's strategy? Will it contribute to achieving the vision for the company's future? Do we have (or can we access) the necessary resources to start it up? (People, funding, partners...) What future earnings or savings will it provide? What risk are we willing to take? Can we de-risk it? Is it possible given the culture of the company? What do customers or beneficiaries say about this idea?... At this last point, it is advisable to do a little testing to ensure that we are getting our idea right, but you have to know how to ask to get good answers. 27  You can classify them using a table like the example below: Necesidades vs disponible Objetivos/ Ideas visión Euros RECURSOS Personas Físicos Alianzas Ganacias futuras Riesgo TOTAL Valoración clientes Table 5 Ideas prioritization The problem at this stage is that you don’t have enough information about the ideas and you may discard some valuable ones. But resources in a company are limited, so we need to be clear about how many ideas we can work on at the same time. 4. Development and prototyping At this stage you need to shape the chosen ideas. You begin to work with different ideas/projects; the important thing is to de-risk them to make good decisions. You need to be sure of: Desirability: the targeted clients like it and they will pay for it and your market is big enough to scale. In the case of innovations such as process improvement, customers are internal and must also approve and be willing to implement the solutions. Viability: your business can generate good revenue streams Feasibility: You can do it efficiently, reaching the necessary resources or partners Flexibility: The environment changes and your new project has to be able to adapt. To explore a business idea, you need to break it down into hypotheses that you can test. These hypotheses have to do with desirability, feasibility, viability, and flexibility. You have to ask yourself: What are the things that need to be true for that idea to succeed? There may be a lot of them, and you need to prioritize them This matrix can help you: 28  Figure 27 Hypothesis prioritization We have to develop that initial idea and prepare the pretotypes, prototypes, or minimum viable products that will allow us to gain knowledge about our innovation. As Luis Pérez Breva (from MIT) says, “it is about being productively wrong” We always think of product prototypes but there are many easy and cheap ways to test. An example: is including a dish on the menu to see how many people ask for it before deciding to cook it. Once you know which main Hypotheses to test. Do it! Do as many experiments as you can. Try cheap ones that can provide strong evidence. Do more than one for each hypothesis including a “call to action” one. Pay more attention to what people do than to what people say. To measure if you are doing well, metrics at this stage should be related to the idea of de- risk: investment so far, time spent learning made expected profitability. 5. Testing and adjustments. The test must be designed, followed, and measured so that we know if it has been successful. We must be systematic when testing. Testing will give us more information to decide if we have to pivot or adjust de idea, if we need more information or if it is better to abandon it. Usually, after the adjustment, it is necessary to test it again and successive iterations take place. It is important to think very well about the clients with whom we will test it and their profiles. You can find an explanation of the adoption of innovation here: https://youtu.be/9QnfWhtujPA 29  Figure 28 Innovation adoption curve When you already have your product or service well defined, you still have to make adjustments: you need to consider feasibility and scaling. You have to be able to produce enough quantity to meet the demand of the market in which you have chosen to launch your product or service and therefore you must have the resources, capacity, processes, people, and costs perfectly prepared to be able to respond. Going through this de-risking process means that some of the ideas you decided to test in the beginning will no longer be in your innovation funnel. Take a look at the Bosch funnel, only 2,4% of the initial ideas exited the acceleration program. Figure 29 Bosch innovation funnel It is important to note that in the VUCA environment, projects require greater agility. The use of “agile methodologies”, which were born for software projects, but have spread to all sectors, is becoming more and more frequent. According to the Project Management Institute, more than 70% of organizations have incorporated an Agile approach, and Agile projects are 28% more successful than traditional projects. As an example, BBVA is using them for its digital transformation in every department. “Agile” involves cutting up the project in parts. Each part is taken by a multidisciplinary team that makes fast and continuous deliveries and modifies what is necessary on their part. And all these involving clients, Figure 30 Agile methodology suppliers, and other colleagues. It is an iterative development, where requirements and solutions evolve through collaboration between self- organizing cross-functional teams. 6. Launch. We have already tested and adjusted our innovation and now we consider we have a good product or service and we have also fine-tuned our processes and costs. 30  Table 6 Launching phase It’s time to implement now the entire marketing strategy that we have been preparing in parallel with the testing: price, sales channels, how we will make it known, and how we will train the sales team... Don´t forget that people evaluate the attractiveness of a new solution based on perceived value, taking as a point of reference the products they currently use and finding it difficult to abandon. Many innovations require changes in consumer behaviour. The expected profit and the effort needed to change mark success and the speed of introduction of a new product/service. That’s why it is critical to communicate your solution’ added value. If our innovation is an internal one, now it is the time to put it into practice: to explain the reasons for the change, to train all those involved in its execution, to support its implementation, to collect suggestions… Hopefully, the team working on the project had members from all the departments involved and they have already been informing their colleagues. Before launching there are two important things to do: Metrics: define SMART objectives and the indicators you will use to measure the success of your innovation. You need to “track” your innovation. Business model canvas: consider and be clear on how this innovation will affect your existing business model. What you have to change if you add new customer segments if it will require you to admit new forms of payment if you will need other partners, new alliances, new resources, etc., or if you will have to manage two different business models. 31  Figure 31 New and today's business models We already saw that innovation extends throughout the entire value chain and to all departments of the company. This process is not only valid for the launch of products and services but any of these innovations. In the case of process innovations, for example, those opportunities or needs may come from a specific department, and we will also have to understand them, generate ideas to solve their problems, do tests, etc. As an example of an innovation process, take a look at the one at Bosch: Figure 32 Innovation process at Bosch4 5.6 Operations Once the decision is made to go ahead with an innovation, it becomes part of the company: its processes and its portfolio. It is necessary to carefully assess the processes and costs that this product, service or improvement will entail. During testing, if we have done it well, we will have seen it in part, since we will have involved the operations department, but now is the time to calculate it in detail. Operations include four concepts: Infrastructure and facilities, manufacturing process or service provision, supply and logistics. 4 https://www.bosch-innovation-consulting.com/our-services/innovation-process-design/ 32  Figure 33 Operations: work areas The production plan is used to detail how the products to be sold are going to be manufactured or how the service in question is going to be provided, as well as the material resources that are going to be necessary to do so. It also defines all the costs associated with producing our product/service (COGS or Cost of Goods Sold). This concept is essential to establish the sale price. It is also important to calculate the maturity period (the time that elapses from the purchase of the raw material until we receive payment for the product or service) which will have a great impact on the treasury. Always remember that innovations have to add value to the company and that innovations should be desirable, feasible and viable! Operations is one of the fields that is being strongly affected by technology. In the following figure, you can see the latest trends in this field. Figure 34 Last trends in operations 33 5.7 Involving stakeholders Innovation projects usually require the assistance of other people, not only from the team but from other departments, from your boss who has to give you resources or allow you to put aside other tasks, from clients who have to try it, etc. It is very important to take this into account and involve all those people that you will need. Some advice: Find out what are their worries and keep that in mind. Convey the benefits that your innovation project will bring them When you present your innovation project to whoever must approve it, start sharing the problem. If everyone agrees on the problem, it will be easier to support a solution. Involve them by letting them give their opinion and participate in some way in the project: it will be easier for them to share it later Tell them clearly what you will need from them. 5.8 Learning Innovative companies are organizations that learn. Innovating is complicated and many of the ideas and projects end up being a failure. But one of the most important things, when we talk about innovation, is the need to learn along the way, from successes but above all from failures. Sometimes you win and sometimes you learn. And for this, it is not enough to make a point at the end of the project, it is necessary to do it at each stage. Learning will help us progress in our projects and also to avoid future mistakes. On the other hand, innovative companies are organisations that learn. They must do so in order to keep up with technological, social and economic changes and to remain competitive. 5.9 Portfolio management 34 An innovative company does not exploit a single opportunity but usually has different projects underway. This requires being able to manage a portfolio of innovations and manage the resources necessary for them, as well as their progress and results. Mapping and following all of them is necessary considering their possible return and the risk and de-risk path. In the following table, you have an example of an innovation initiatives portfolio Table 7 Innovation projects portfolio, example 5.10 R&D projects (Research + Development) R&D projects present some differences from the projects that are usually undertaken in companies, the main ones would be: Greater uncertainty in scope, objectives, etc., and therefore higher risk. Possible need for highly qualified and external technical personnel Greater need for surveillance and strategic intelligence Know who may be more important than know-how. The results can be valuable, even if they differ from what you initially expected. 5.10.1 Technological maturity If we said in the ideas selection phase that an organization normally cannot start many ideas at the same time, in the case of R&D projects it is much more accentuated: they are difficult projects, riskier, require a lot of investment and, therefore, the choice of the portfolio of projects, and the monitoring of their results and consumption of resources must be very rigorous. The concept of technological maturity (TRL) was coined by NASA and was used in high technology sectors (space, aeronautical...) today, it is used as a scale to know the degree of 35 maturity of the technologies, both in the project portfolio, as well as when valuing technology from the point of view of funders, investors, or buyers. Each level characterizes the progress in the development of technology, from the idea (level 1) to its complete deployment in the Market (level 9): Table 8 TRL definitions The technological advances of virtual simulation and 3D are being of great help to reduce costs and test times. For certain technologies, tests and trials may even require a pilot plant. Figure 35 TRL scale When these projects involve emerging technologies, it is difficult to evaluate their risk and if their commercial promises will be fulfilled. A useful tool to know the technology state is Gartner’s Hype Cycles. The Gartner hype cycle graph represents the maturity, adoption, and commercial/social application of specific technologies. Each Hype Cycle delves into the five key phases of a technology life cycle: 36  Figure 36 Gartner hype cycle. Source: Wikipedia No. Phase Description A potential technology breakthrough kicks things off. Early Technology proof-of-concept stories and media interest trigger significant 1 Trigger publicity. Often no usable products exist and commercial viability is unproven. Early publicity produces a number of success stories—often Peak of Inflated 2 accompanied by scores of failures. Some companies take Expectations action; most don't. Interest wanes as experiments and implementations fail to Trough of deliver. Producers of the technology shake out or fail. 3 Disillusionment Investment continues only if the surviving providers improve their products to the satisfaction of early adopters. More instances of how the technology can benefit the enterprise start to crystallize and become more widely Slope of 4 understood. Second- and third-generation products appear Enlightenment from technology providers. More enterprises fund pilots; conservative companies remain cautious. Mainstream adoption starts to take off. Criteria for assessing provider viability are more clearly defined. The technology's Plateau of 5 broad market applicability and relevance are clearly paying off. Productivity If the technology has more than a niche market then it will continue to grow. Table 9 Gartner hype cycle phases. Source Wikipedia 37 What Gartner does each year is to place emerging technologies in different parts of the chart. It is less risky to invest in those that are already in the "plateau" than to do it in those that are in previous phases, but an early adoption also brings knowledge and can give a great competitive advantage to a company. An example: in this hype cycle of 2017, augmented and virtual reality were already reaching the "plateau". In 2020 they are no longer in the hype cycle; they are no longer emerging but highly used and commercially and socially adopted. Figure 37 Emerging technologies 2017 Gartner 5.10.2 Investment maturity The IRL (Investment Readiness Level) is the maturity scale for investment and measures the market potential rather than the degree of technological development. It relates the investment to the canvas. IRL 1 and 2 indicate that the value proposition is understood and that the business model makes sense in the market. IRL 3 and 4: A solution to the problem that fits, and its minimum viable product has been identified, it works IRL 5 and 6: The market need for this developed product has been verified. IRL 7 and 8 There is a recurrence in the use of the product IRL 9 product launched and selling Figure 38 IRL definitions 5.11 Protection and exploitation of results: Industrial property As we have said previously, in the innovation process launching phase, before going public, there is a decision to make whether to protect your idea. Industrial property (IP) grants exclusive rights over certain intangible creations that are protected as true property rights. Industrial property rights allow whoever owns them to decide who can use them and how. For 38 them to take effect, a registration procedure must be followed. In Spain, this registration is carried out by the Spanish Patent and Trademark Office (OEPM), which grants this protection for the entire Spanish territory. If you want this protection to be extended to other countries, you need to go to other registries. There are several types of Industrial Property rights as described by the OEPM: Industrial designs: protect the external appearance of products Trademarks and Commercial Names (Distinctive Signs): they protect graphic and/or word combinations that help distinguish some products or services on the market from similar ones offered by other economic agents. Patents and utility models: they protect new inventions consisting of products and procedures that can be reproduced and reiterated for industrial purposes. Semiconductor topographies: they protect the (layout) of the different layers and elements that make up an integrated circuit, their three-dimensional arrangement, and their interconnections, that is, what ultimately constitutes its "topography" Copyright does not require registration since it exists automatically when a work is created. They offer protection to any original and creative expression (music, art, books...) Trade secrets (customer lists, formulations, etc.) are not registered but are usually protected by internal protocols (cangreburger formula?) Table 10 Rights protection types 39 5.12 Innovation Financing Innovating has a cost and before starting to do so, it is necessary to consider how it is going to be financed. The main sources of financing used by companies to innovate are the following: Internal funding: capital and own income. A part of the enterprise’s annual budget is dedicated to innovation activities or the profits are reinvested on innovation initiatives. Some big companies have their own venture capital fund5 to invest in startups or innovative projects that align with their strategic objectives while potentially gaining financial returns and access to new technologies. Figure 39 The top Corporate Ventures Capital funds. Source: CB Insights' Government funding through subsidies, grants or tax policies. It can be at regional, national6 or international level7. Strategic Alliances and Licensing: Forming strategic alliances or licensing agreements with other companies can provide financial support for innovation. These partnerships can involve sharing costs, accessing intellectual property, or jointly developing and commercializing new technologies or products. Example: In 2021 AB InBev, the Coca- Cola Company, Colgate-Palmolive and Unilever partnered to make an attractive offer for startups focused on sustainability. This has led to 70 pilot projects in domains like smart agriculture and water stewardship8 Banks loans 5 Examples https://medium.com/touchdownvc/corporations-launched-140-venture-capital-funds-in-2021- 93372b1b061a 6 Example: https://www.cdti.es/index.asp?MP=100&MS=812&MN=2 7 Example:https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes- and-open-calls/horizon-europe_en 8 https://www.iese.edu/insight/articles/unlock-innovation-corporate-venturing-squads/ 40  Contests, challenges, hackathons... launched by different organizations according to their interests can finance innovative projects and startups. Venture capital and Business angels: Investors who provide capital in exchange for an equity stake, generally in companies with growth potential. Crowfunding, crowdinvesting, crowdlending: In this case, the financing comes from a large group of people who contribute small amounts Corporate bonds: Issuing bonds to raise capital from investors. This option is more viable for established companies that have the capacity to issue debt. 5.13 Tools, infostructure, and innovation support systems Today many tools can simplify the tasks around innovation. But we must never forget that culture is not given by tools, but by action, behaviours, and leadership. The main tools cover these areas: Idea management Innovation Management Surveillance and strategic intelligence Project management Knowledge management Communication and collaboration management 6 PEOPLE As we said, one of the three pillars of innovation is the people who make it up. They should know how to, be able to, and want to innovate. We live in a rapidly changing society where it is essential that everyone can act upon opportunities and ideas, work with others, manage dynamic careers, and shape the future for the common good. Clayton Christensen (Harvard) conducted a study with thousands of innovators to find the characteristics common to their profiles and he answered the question “Is the innovator born or made?”. The culmination of such research is reflected in the book, "The innovator’s DNA: Mastering the Five Skills of Disruptive Innovators" written by Jeffrey Dyer, Hal Gregersen, and bestselling author Clayton Christensen Innovators, as he demonstrated, practice 5 behaviours: Associate scattered concepts. They are curious and question things They observe the environment and are alert. They network with ideas and with people. They experiment and validate hypotheses: they act. 41  Figure 40 The innovator's DNA book Things are made by people. If our teams get used to practicing these behaviours, the company will assume innovation as part of its daily activity: it will connect, explore, devise and act to anticipate and adapt. On the other hand, Professor Amar Bidhe studied the origin of the ideas that had been successful in the market, and in his book “the venturesome economy” he found that 71% came from workers. All that potential cannot be lost! But we must be aware that innovation is change and it is difficult. In every company, there are enthusiastic people about innovation, others more neutral who can join it, and a percentage of around 15% that we will never get to participate. No organization is innovative if the people who work in it are not. But many times, people are innovative outside their scope of work because the organization, structure, or culture prevents them from being so when working. If we want innovative people, there are many actions we have to undertake: Incorporate innovative capabilities validation into our selection processes Generate the conditions so that company workers can practice the 5 behaviours of innovative people Rotate positions Set challenges Give flexibility and autonomy Recognize the merits of innovators Do not penalize the mistakes that are inherent to innovation, penalize not having learned from them instead. Listen to new ideas Give people time to innovate Generate a “long life learning” culture Innovating is more difficult than doing the usual, so it requires leadership that challenges people but also helps and accompanies them. Ask for ideas but don´t forget to answer them, and acknowledge the effort. 6.1 The managers Innovation should be supported from the top of the organization. People move considering how they are going to be evaluated, so if innovation is not a valuable activity, only innovation enthusiasts will innovate. So, managers are the ones who must be convinced of the need to innovate and who have to promote it. Without achieving an innovation culture throughout the company, it will be difficult to become an innovative organization. 42 The management style must be participatory, and supportive and generate and promote trust, collaboration, mutual learning, and personal improvement. Communication is an essential element in innovation management. It must flow in all directions to share information and achievements and for employees to know the whys and whatfores of the actions and projects that are being launched. Each company is at a different stage of innovation and has a different culture and idiosyncrasy, so there is no single recipe to drive innovation. In organizations not accustomed to innovating, it will be necessary to start with small projects and communicate the quick wins very well so that they permeate the organization. The indicators at this stage will be simpler: number of ideas or people involved. As innovation takes hold, it will be structured, more people will be involved, projects will be more complex and disruptions can be addressed and ecosystem agents incorporated, etc. Consult a study the document "navigating the maze of corporate innovation" by Innovation Leader and XPLANE from ADI. 6.2 Innovation competences The EU has set a framework called Entrecomp to define the competences of entrepreneurs and Intrapreneurs. Their objective is to develop an entrepreneurial mindset in every aspect of life in people, teams, and organizations.”EntreComp offers a comprehensive description of the knowledge, skills, and attitudes that people need to be entrepreneurial and create financial, cultural, or social value for others” 43  Figure 41 EntreComp framework 6.3 Teams Innovation requires teamwork, so it is very important to form multidisciplinary teams capable of working together to achieve a final goal. Furthermore, innovating often doesn't pay off, so it is essential to have team leaders who motivate, support, and guide the team in times of difficulty. Each person in the organization has a different profile. The teams that carry out an innovation project need different profiles to go through the whole process: promoters, auctioneers, coordinators… when the teams are out of balance, they do not reach term or do it inefficiently. An example: this graph shows that in this team the profiles “creative” and “finisher” are underrepresented. 44  Figure 42 Example: innovation Teams' Belbin roles Read more in “The ten faces of innovation” by Tom Kelley. He defines 10 different roles to make innovation flourish. It doesn’t mean that we need 10 people to form an innovation team. Each person can manage several roles. Here you have a summary by James Stuber: The Anthropologist brings new learning and insights into the organization by observing human behaviour and developing a deep understanding of how people interact physically and emotionally with products, services, and spaces. The Experimenter prototypes new ideas continuously, learning by a process of enlightened trial and error. The Cross-Pollinator explores other industries and cultures, then translates those findings and revelations to fit the unique needs of your enterprise The Hurdler knows the path to innovation is strewn with obstacles and develops a knack for overcoming or outsmarting those roadblocks. The Collaborator helps bring eclectic groups together and often leads from the middle of the pack to create new combinations and multidisciplinary solutions 45  The Director not only gathers together a talented cast and crew but also helps to spark their creative talents The Experience Architect designs compelling experiences that go beyond mere functionality to connect at a deeper level with customers’ latent or expressed needs. The Set Designer creates a stage on which innovation team members can do their best work, transforming physical environments into powerful tools to influence behaviour and attitude. The Caregiver builds on the metaphor of a health care professional to deliver customer care in a manner that goes beyond mere service. The Storyteller builds both internal morale and external awareness through compelling narratives that communicate a fundamental human value or reinforce a Figure 43 Tom Kelley's book: the ten faces of innovation specific cultural trait. 6.4 Change Management As we have stated several times, innovation is difficult and risky and entails change. It requires extra effort from people and often it is not welcomed. It is necessary to take this into account and be able to manage this rejection to prevent innovation from stagnating. The most common reasons why people oppose innovation are: Fear. It is the biggest reason. No one wants to fail. To avoid it, managers should support innovators and should welcome failure as an opportunity to learn and progress. Lack of time. The day-to-day work occupies all the available space. if "windows" of time are not established to innovate, it will be difficult for it to happen. Organizations can’t expect innovators to be heroes. Lack of resources. It is a classic situation of a snake biting its tail. As managers are not sure of success, the project is under-resourced so consequently, it doesn’t deliver the expected results. Lack of collaboration. Each department in the company has its budget, objectives, and people and they don’t always facilitate collaboration between them. Managers should make sure that the company performance management promotes collaboration, as it seeks the common best avoiding watertight compartments. Bad organization. As we have seen before, it is necessary for innovation to have a focus, and to be well-led, and it should exist a well-known innovation process. 46  Figure 44 Change factors 6.5 Some tips on neuroscience and change Change can bring anxiety and fear We have collected here some tips to understand how it happens in our brain: As research from the University of Minnesota explains it, “Once the fear pathways are ramped up, the brain short-circuits more rational processing paths and reacts immediately to signals from the amygdala. When in this overactive state, the brain perceives events as negative and remembers them that way.”9 Neuropsychologist Rick Hanson says the brain is like Velcro for negative experiences and Teflon for positive ones. That means we have a lot of negative associations to choose from when trying to assess a new situation, or “change”. Plus, we all suffer from what is called negativity bias, when the brain reacts more intensely to bad news, compared to good news But also, David Rock and Jeffrey Schwartz tell us: “When people solve a problem themselves, the brain releases a rush of neurotransmitters like adrenaline.” This rush will inspire you to embrace and champion the change you are requesting of your teams10. 9 https://www.anneloehr.com/2018/02/15/leaders-learn-neuroscience-behind-change- master/ 10 https://www.linkedin.com/pulse/leaders-learn-neuroscience-behind-change-resistance- anne/ 47 7 CONCLUSIONS Innovating is not a fad; it is necessary for any organization that wants to continue in the market. Doing it well requires working and combining many factors, as we have seen in a very summarized way in this document. Figure 45 Innovation Pillars To get many ideas and projects that feed the funnel of innovation the wheel that includes context, organization, and people must be well-greased. Figure 46 Innovation wheel by lean ventures international 7.1 Innovation killers Here you can find some innovation killers: Asking for hard numbers too soon. For a truly innovative product, it is not possible to reliably produce any accurate numbers at the beginning. “We have always done it this way” so we never find better ways to do it. 48  Believe that you know your competition because you know well the ones that are like you in your industry/sector. The most threatening competition often comes from another industry, from startups, or from substitute products. Stagnating doing what we know how to do very well and has been a great success in the past, and not seeing changes in the environment. Believing what customers say. Try to observe what customers do, better than asking them what they would do. Try your “noncustomers” Asking your customer’s opinions for truly innovative ideas. Consumer research often is useful but not for truly innovative ideas and markets that do not exist yet This document presents in a very summarized way several of the factors, agents, and interactions that intervene in companies’ innovation. It should be completed with the HBP Manage mentors and with the slides and documents loaded in ADI. If you want to go deeper, you can explore the bibliography at the end of these notes and we can give you some people to follow on social networks. Just ask! 49 8 Other approaches to the attributes of an innovative enterprise 8.1 The 8 essentials for innovation McKinsey The consulting firm McKinsey conducted a study to find out what innovative big companies had in common that could be useful to other companies. It was a multiyear study comprising in- depth interviews, workshops, and surveys of more than 2,500 executives in over 300 companies, including both performance leaders and laggards, in a broad set of industries and countries. As a result, they came out with a set of eight essential attributes that are present, either in part or in full, at every big company that’s a high performer in the product, process, or business-model innovation: aspire, choose, discover, evolve, accelerate, scale, extend and mobilize. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our- insights/the-eight-essentials-of-innovation Table 11 The eight essentials of innovation, McKinsey 50 8.2 Boston Consulting Group’s most innovative companies In 2003, BCG launched its first annual innovation report. Its objective was to identify the world's most innovative companies and to analyze how these innovation champions did it. Since then BCG has published this ranking every year. As discovered by BCG studies, successful serial innovators get three things right They walk the talk. “Innovation success starts with commitment—making innovation a priority and investing decisively behind that ambition” They embrace the benefits of scale They calibrate their innovation systems for success Figure 47 Innovation System 51 In the image, from 2021, you can see the sample and the variables that are considered. Table 12 Most innovative companies 2023. BCG 52 9 Bibliography on innovation There are many books that are considered essential reading on the topic of innovation. Here are a few that are highly regarded and often recommended: "The Innovator's Dilemma" by Clayton Christensen: This book explores the concept of "disruptive innovation" and how it can lead to the downfall of established companies. It is a classic in the field of innovation and is a must-read for anyone interested in understanding how and why some companies succeed while others fail. "The Lean Startup" by Eric Ries: This book offers a framework for developing and launching new products and businesses. It emphasizes the importance of iterative learning and rapid experimentation in the innovation process. "Innovation and Entrepreneurship" by Peter Drucker: This book is considered a classic in the field of innovation and entrepreneurship. It provides a practical guide for those looking to create new products and businesses and covers a wide range of topics, including strategy, marketing, and finance. "Open Innovation" by Henry Chesbrough: discusses the principles of open innovation and how companies can leverage external ideas and resources to drive innovation and growth. "The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators": by Jeffrey Dyer, Hal Gregersen and Clayton Christensen This book discusses the qualities and characteristics of innovative individuals and offers strategies for cultivating a culture of innovation within organizations. "The Ten Faces of Innovation" by Tom Kelley: This book discusses the different roles and personalities that can contribute to innovation within an organization and offers strategies for fostering a culture of innovation. "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers" by Alex Osterwalder et al.: This book presents a framework for designing and testing new business models and offers practical tools and techniques for innovating and iterating on business ideas. "Value Proposition Design: How to Create Products and Services Customers Want" by Alex Osterwalder et al.: This book discusses how to create value for customers by aligning products and services with customer needs and preferences. "The Invincible Company: How to Constantly Renew and Reinvent Your Organization" by Alex Osterwalder et al. by Alex Osterwalder et al.: This book explores the principles of organizational renewal and how to foster a culture of continuous innovation and improvement within companies. Articles from HBR’s must reads on innovation and on business model innovation. 53  It's important to note that innovation is a dynamic and constantly evolving field, so it can be helpful to read a variety of sources and stay up to date with the latest thinking and best practices. Here you can find a few more books: "The Innovator's Method: Bringing the Lean Start-Up into Your Organization" by Nathan Furr and Jeff Dyer: This book presents a framework for rapidly testing and iterating on new business ideas, with a focus on maximizing efficiency and minimizing waste. "The Innovator's Playbook: How to Look for Problems Worth Solving": This book explores how to identify and solve problems in a way that creates value for customers and drives innovation within an organization. "The Innovator's Way: Essential Practices for Successful Innovation" by Jeff Dyer: This book discusses the principles and practices of successful innovation, and offers practical tools and techniques for fostering innovation within organizations. "The Lean Enterprise: How Corporations Can Innovate Like Startups" by Alex Osterwalder et al.: This book discusses how large organizations can adopt the principles and practices of lean startups to foster innovation and agility. "Creative Confidence" by Tom Kelley and David Kelley: This book focuses on how to cultivate and harness creativity in order to drive innovation. It offers practical tools and techniques for boosting creativity and fostering a culture of innovation within organizations. "The Art of Innovation" by Tom Kelley: This book shares the insights and experiences of IDEO, a leading design and innovation firm, on how to foster a culture of innovation within organizations. "The Innovative Leader" by Paul Sloane: This book offers practical guidance on how to build a culture of innovation within an organization, including strategies for encouraging creativity and fostering a growth mindset. "The Innovative Organization" by Amy Edmondson: This book discusses how to create a culture of psychological safety within organizations, which is critical for fostering innovation and creativity. "The Innovator's Hypothesis: How Cheap Experiments Are Worth More Than Good Ideas" by Jeff Dyer: This book discusses the importance of experimentation in the innovation process, and offers strategies for rapidly testing and iterating on new ideas. TIP: the linkedin newslwtter of Fidel Rodríguez-Batalla. He reads everything that is coming out on innovation and makes a very short video summary of each book. You can already find 24 of them https://www.linkedin.com/newsletters/innovaci%25C3%25B3n-libro-recomendado- 7022611723702444032/ 54