Innovation in the Private and Public Sector: A Review of Radical Innovation and Potential Applications to the Public Sector Richard Leifer and Phil Harnden CCHPO 4 th Change Conference March 3, 2004

Session Goals 1. What is radical innovation? 2. What are some critical parts for making sure it works? 3. What are implications for public sector organizations?

Activities of the Firm R.I THE “SQUEEZE ” Total Amount of Firm Effort = 100% ONGOING OPERATIONS INCREMENTAL INNOVATION © 2000 Rensselaer Polytechnic Institute 4

Incremental Innovation There has been an overwhelming emphasis in the past decade on continuous improvement and incremental innovation From TQM to cycle time to six sigma to “process centered” management Incremental innovation improves current systems and processes Typically managed with “Stage Gate” models

Why is Radical Innovation Important? Incremental innovation is limited It will only take us so far New demands on our systems require new ways of operating For many organizations, sustainable advantage requires discontinuous leaps

Radical Innovation Defined  new to the world performance features,  5-10X (or greater) performance improvement, or  % (or greater) reduction in cost.

Why is Radical Innovation Difficult? Tyranny of current market/customers Tyranny of current business models Tyranny of current strategy Tyranny of current organizational structure Tyranny of current evaluation mechanisms Tyranny of roles

Technical Uncertainty Low High High Market Uncertainty Low INCREMENTAL INNOVATION RADICAL INNOVATION The Nature of the Phenomenon

The Radical Innovation Project Lifecycle: Dupont Biomax ®

Organization Uncertainty Resource Uncertainty Technical Uncertainty Market Uncertainty LOW HI Incremental Innovation Radical Innovation

The Nature of the Radical Innovation Lifecycle  Highly uncertain, unpredictable  Sporadic -- stops and starts, deaths and revivals  Non-linear -- idea generation throughout  Long term  Stochastic -- key players come and go, priorities change, exogenous events are critical  Context dependent -- history, experience, corporate culture, personalities, and informal relations all matter The tried and true management practices that work for incremental innovation are often inadequate for radical innovation.

LEADERSHIP FUNCTIONS VISION / VALUES TO STRATEGY/STRUCTURE/SYSTEMS VISION / VALUES TO STRATEGY/STRUCTURE/SYSTEMS (moving from vision to performance and values to work culture) DO WE HAVE THE RIGHT __________ ? Customers Customers Key Products & Key Products & Services Services Business Strategy Business Strategy Org. Structure Org. Structure Work Processes Work Processes Support Processes Support Processes Equipment, Facilities, Equipment, Facilities, Technology, Technology, Information, etc. Information, etc. PEOPLEPEOPLE – Right competencies – Development process – Feedback/Coaching (360 o ) (360 o ) – Resolution Process (Performance (Performance Appraisal) Appraisal) WORK CULTURE VISION VALUES Leadership Philosophy Individual Behavioral Values Operating Systems Values PERFORMANCE Feedback / Coaching (360 o ) Resolution Process (Discipline System) Strategic Thinking: Mission/Niche Mission/Niche Theory of the Business Theory of the Business(strategy/structure/systems) Prepare Business Case + ~~~ - ~~~ Behaviors PM (Outcomes) PM (Input/Thro- ughput/Output) Strategic Planning: Set Direction Set Direction Capacity Building Capacity Building Prepare Business Plan PM = Performance Measures PM (Strategic Goals and Objectives) PM PM PM End Values/Higher Moral Purpose/Desired Future State { Means Values Tactical/Operational Plan Action Plan Action Plan Resources Plan Resources Plan Monitoring & Corrective Action Building High-Performance Organizations

DOING RADICAL INNOVATION IDEAS TO PERFORMANCE DO WE HAVE THE RIGHT __________ ? Customers Customers Key Products & Key Products & Services Services Business Strategy Business Strategy Org. Structure Org. Structure Work Processes Work Processes Support Processes Support Processes Equipment, Facilities, Equipment, Facilities, Technology, Technology, Information, etc. Information, etc. PEOPLEPEOPLE – Right competencies – Development process – Feedback/Coaching (360 o ) (360 o ) – Resolution Process (Performance (Performance Appraisal) Appraisal) WORK CULTURE IDEAs VALUES Leadership Philosophy Individual Behavioral Values Operating Systems Values PERFORMANCE Feedback / Coaching (360 o ) Resolution Process (Discipline System) + ~~~ - ~~~ Behaviors (Outcomes) PM = Performance Measures PM PM PM { Means Values Tactical/Operational Plan Action Plan Action Plan Resources Plan Resources Plan Monitoring & Corrective Action Building High-Performance Organizations Which Ideas WHAT TO TEST

The Radical Innovation Learning Curve: Radical Innovation Maturity Introduction  Phase I Radical innovation maturity is defined as the degree to which the organization has embedded a system for initiating, supporting and sustaining RI activities

Technical Uncertainty Resource Uncertainty Market Uncertainty Organization Uncertainty A Comprehensive Framework for Managing Radical Innovation Challenge 1: Capturing Radical Ideas Challenge 2: R&D is Changing Challenge 3: Market Learning Challenge 4: Business Model Challenge 5: Resource Acquisition Challenge 6: Transition Mgt. Challenge 7: Individual Initiative

Challenge #1: The Maturity of Competencies at the Front End of Innovation Early RI Capabilities: Largely individually based Ad hoc and sporadic Mature RI Capabilities Largely systems based Regular and continuous

Idea Generation: The Role of Senior Management Early RI Capability: Executives act as provocateurs, patrons, and champions to compensate for lack of supportive culture Mature RI Capability The firm’s leadership sets expectations, develops an RI culture, establishes facilitating organizational mechanisms (hubs), develops goals and reward systems

Idea Generation: The Role of Individuals Early RI Capability Mavericks try to catch the attention of patrons. There is a lack of infrastructure or systematic approach and there is a reliance on individual initiative to make someone listen. Mature RI Capability: First Steps Hunters and gatherers as formally identified roles or as formal positions seek out ideas from any individual in the organization.

Idea Generation Mature RI Capability: Later Steps Internet based knowledge management system available to all employees Idea submission forms – more or less cumbersome A front-end set of individuals tasked with maintaining the website, responding to ideas, developing workshops, bringing in speakers, marketing themselves to the organization. Hunters and gatherers have a formal organizational base of operations: An “organizational hub”

“ gatherer ” Business Unit A Building the Organizational Capacity for Capturing Radical Innovations The RI HUB Central R&DBusiness Unit B “ gatherer ” “hunter” “ gatherer ”

A hub is a natural “home base” for all those who play pivotal roles in making radical innovation happen -- radical innovators; idea hunters and gatherers; internal venture capitalists; members of evaluation and oversight boards; and corporate entrepreneurs. Most importantly, hubs help manage the interfaces between radical innovation projects and the mainstream organization, enhancing the flow of positive resources and diminishing the flow of negative elements Radical Innovation Hubs: A Parallel Organization

 Provide a natural “home base” for radical innovation personnel  Help manage the interfaces with internal and external partners  Engage in benchmarking  Act as the knowledge management center and repository for cumulative knowledge about radical innovation  Help select and train the radical innovation project and transition teams  Serve as experts and mentors for project teams and oversight boards  Establish and promote career path and reward systems to support radical innovation Roles for Radical Innovation Hubs

7. The Critical Importance of Senior Management Champions Patrons Provocateurs Shapers of Culture Managing the Process

Senior Managers as Champions Initiating and Driving RI The role of the senior management in initiating and driving radical innovation Essential part of vision, mission statements

Senior Managers as Patrons Supporting and Protecting RI CEO’s personally protect and provide funding for RI project

Patronage Making Patronage Work The CEO (or senior manager) needs: accessibility a personal belief and passion in the project a way to sustain the project when there is succession (how to effect the hand-off)

Senior Managers as Provocateurs An active role in driving RI, challenging the organization Otis - driven by the “Holy Grail” of the mile high building Setting standards and raising expectations broadly

Senior Managers as Shapers of Culture Builders of strong, innovative cultures 3M and Dick Drew H-P and Bill Hewlett and Dave Packard Walk the Talk institutionalize organizational mechanisms for supporting RI rewards, hubs, new organizational units, identifying hunters and gatherers personal implications for exhibiting the correct behaviors

Senior Managers as Managing the Process: Ambidextrous Leadership Managing Operations and Incremental Innovation Command and control Business plan, metrics, stage gate Managing Radical Innovation Control based on vision, mission, culture Learning plan based metrics

Who Does All of This Early RI Capability People emerge out of the woodwork Leadership personally involved Mature RI Capability Ensuring the Right People for RI An HR strategy for identifying, selecting, rewarding and retaining RI champions, experts, and team members is in place Leadership sets context and culture but no special pleading

Implications for the Public Sector 1. A direct fit to Public Sector engaged in R & D or product delivery (vertical on I-5) 2. Services or process-flow would have to stretch, but bring in concepts of hub (horizontal line on quality chart see I-5) 3. RI Hub to Parallel Organization overlaps (I-9 through I-11) 4. Expands definition of the Leadership Function of Learning/ Thinking/ Changing/ Renewing 5. Builds on leadership competencies (leadership at all levels) ala the Network Talent Model 6. Findings relative to Team Skills (Innovation related to groups vice individuals)

Discussion

Thank You