Radical Innovation: How Mature Companies Can Outsmart Upstarts
How many big businesses have pioneered the technologies and business models that now dominate e-commerce, personal computing, biotechnology, and wireless telecommunication? Answer: hardly any. The problem is not that executives fail to recognize the need to infuse their organizations with the kind of model-busting innovative capabilities of agile startups. It's a lack of understanding of what to do and how to do it.
But now, this groundbreaking book reveals the patterns through which game-changing innovation occurs in large, established companies, and identifies the new managerial competencies firms need to make radical innovation happen. The authors define a radical innovation project as one that delivers a product, process, or service with either unprecedented performance features, or with familiar features that will enable market transformation through significant performance improvements or cost reductions. These projects are nurtured within the established organization, not skunkworks. They are not concerned with exploiting current lines of business, but with exploring entirely new ones.
Based on evidence from a five-year, real time study of twelve radical innovation projects within ten major corporations-including General Electric, IBM, Nortel Networks, DuPont, and Texas Instruments-this book addresses seven managerial challenges large companies face in creating and sustaining radical innovation: (1) dealing with radical ideas in the "fuzzy front end"; (2) developing new models for project management; (3) learning about unfamiliar markets; (4) working through uncertainty in the business model; (5) bridging resource and competency gaps; (6) managing the transition from radical project to operating status; and (7) engaging individual initiative.
The authors, experts in a variety of areas such as entrepreneurship, R&D management, product design, marketing, organizational behavior, and operations and project management, distill a comprehensive, interdisciplinary approach to mastering each of these challenges, from the conceptualization of viable ideas to the commercialization of radical innovations. Designed to push the envelope of thinking about the most significant challenge facing large companies today, this important book offers a revolutionary new paradigm for long-term corporate success.
Richard Leifer, Christopher M. McDermott, Gina Colarelli O'Connor, Lois S. Peters, Mark Rice and Robert W. Veryzer are all faculty members in the Lally School of Management and Technology, Rensselaer Polytechnic Institute.
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This book is about how to manage Radical Innovation within existing companies. The authors have studied projects within a few companies and provided guidelines of how to manage the entire radica innovation process.
Radical innovation is defined as either of the following - Having totally new performance features, or doing Improvements > 5 times, or Significant reduction in cost > 30%. The skills, management techniques etc involved are are multi-dimensional and quite different from that of continuous innovation.
The procedure involves
a) Having a Innovation Hub within the company which fosters innovation - This consists of people labeled Hunters who actively seek innovative ideas and Gatherers who passively gather ideas.
b) Project Management techniques - These involve identifying and tracking uncertainties, developing a learning plan, getting the right people within the team with a resource acquisition mindset and finally managing interfaces between the team and senior management
c) Learning about markets - In this need to probe and learn as traditional marketing research will not be applicable, need to select customers (or at least a lead customer) and be prepared for surprises.
d) Building a Business Model - This involves envisioning the entire value chain and finding the place of the company within that. In the worst case, need to be ready for cannibalization of existing products.
e) Funding process - Need to have people who can talk and present ideas to the senior management to secure funding. Buyin of senior management is must for this lest the radical innovation will fail. Companies can have internal venture funding mechanism or external means to secure funds. Once funding is secured, then the various stages of funding like pre-project funding, ramp funding and transition funding needs to managed
f) Transitioning to Operations - This is the final step to materializing the innovation. It is better to decide if the innovation can fit within an existing business unit or need to fork out a new one (including a new company). A transition team needs to be established which needs to look into the personnel involved, the migration path with a detailed transition plan. It should look into the funding during the transition, finalizing the business model, finalizing applications for the product etc
For all the above, the need of individuals is very much essential who champion the radical innovation, have eye for catching ideas, shape them with an entrepreneurial mindset. These can be technical champions, project or business unit champions. The role of senior management is equally important in nurturing these individuals, providing adequate rewards to them and having a career ladder for them.
The book has analyzed the following few companies
a) Analog Devices - the role of accelerometers within the automotive industries for safety
b) GE -
c) TI - the DLP project was employed in various products like projectors, interactive whiteboards. Overall, 4 product platforms were formed
d) IBM - Flat panel display used in ThinkPad notebooks and IBM monitors. This technology can be extended to Electronic books as well.
Another innovation was SiGe which can be used in cellular phones and other wireless products.
e) Nortel Networks - NetActive project which resulted in spinning off a new company. This was used for providing PC games, software and music videos in a secure way to the customer.
f) Otis Elevator - the Otis Odyssey was used for super tall buildings and the technology can also be used for transporting prisoners securely from one prison to another.
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Living with Chaos Managing Radical Innovation Projects
Learning about Markets for Radical Innovation
Building the Business Model
Acquiring Resources and Capabilities
Making the Transition to Operations
Driving Radical Innovation The Importance of Individuals