|Yes, by implementing innovation as an end-to-end idea-to-cash process and systematizing support for problem solving.
By Vinod Baya, Bo Parker, and Christopher Wasden
"While innovation can be groundbreaking, it is more often the incremental improvements of existing technologies and methods—the sum of many small but constant changes that over time can transform the way a company or an industry does business." —Jon Bidwell, Chubb
There are lessons here that all leadership teams need to take to heart.
“While innovation can be groundbreaking, it is more often the incremental improvements of existing technologies and methods—the sum of many small but constant changes that over time can transform the way a company or an industry does business,” says Jon Bidwell, chief innovation officer of Chubb, for whom the end-to-end innovation process goes from idea to marketable products.
Innovation is high on the agendas of CEOs in virtually any industry. In the past, they might have focused on growing market share to drive growth. Now, they increasingly are focusing on innovation in new products and services. (See Figure 1.)
And they’re confident their innovations will succeed: 78 percent expect their development efforts to generate “significant” new revenue opportunities over the next three years. It won’t be easy. But they are making changes at all levels of their organizations to make sure they can take advantage of incremental innovations, as well as breakthroughs.
As Bidwell understands, it is time to discard the stereotypes of innovation, radical or otherwise, and treat it for what it is: an enterprise business process that can and should be better understood, redesigned, improved, and measured to improve performance. The rest of this article examines how.
The combination of these two themes reveals how enterprises can recast invention4 challenges into problem-solving tasks. Thinking about the invention challenge as problem solving—and using patterns and principles that already exist—greatly simplifies the invention task and transforms it into a process of knowledge search and pattern recognition. In the transformed invention task, process orientation and information technology will play a bigger role.
This problem-solving approach typically involves four steps, listed here and illustrated in Figure 2.
Without a system or discipline, such problem solving is experienced as serendipitous or ad hoc. If an organization can discipline serendipity to make it happen more often, with more people, to yield more productive outcomes, then the organization would have higher innovation performance.
Enterprises often hire a consulting organization to tap disciplined processes and problem-solving methodologies. Some consulting organizations, such as IDEO and Jump Associates, accept the challenge of delivering the innovation for enterprises largely on an outsourcing basis. They combine techniques such as brainstorming, design thinking, and prototyping to bring discipline in their processes. Other consulting organizations, such as PwC, Doblin (a member of Monitor Group), and others, deliver services designed to change internal processes so that future innovations can be generated by the enterprise itself.
TRIZ5 is another example of a methodology that uses the principle shown in Figure 2 to systematize innovation. “What the intuitive innovator does subconsciously, TRIZ brings to the conscious level,” says Peter Hanik, president of Pretium Innovation.
Hanik offers an example of how powerful this principle’s search and application process can be. Ice storms have been capsizing fishing boats for centuries, despite many efforts to design boats less susceptible to flipping over after heavy ice collects on the decks. Not until a principle of energy transfer was applied to the problem did it occur to anyone that the temperature of the sea was high enough to melt the ice. It is now standard practice to pump seawater onto the decks of fishing boats to avoid capsizing in icy conditions. For a brief look at TRIZ, see the conversation with Peter Hanik in the sidebar on page 11.
PwC: Peter, what is TRIZ and how did you get interested in it?
PH: I first became involved with TRIZ in 2004. TRIZ is a systematic way of inventive problem solving based on methods that Genrich Altshuller developed in the Soviet Union in the late 1940s. The basis for TRIZ is the hypothesis that there are universal principles of invention that are the basis for creative innovations. Invention is a result of applying TRIZ principles to selected problems to spark potential solutions.
My colleagues and I looked at how natural or intuitive innovators do things, and the first thing they’ll do is define the problem. If you don’t define the problem correctly, you obviously won’t get the right answer.
Next the intuitive innovator will study the system that contains the problem to understand cause-and-effect and select areas of opportunity within the system. Then the intuitive innovator will subconsciously abstract a principle from a previous problem that they’ve solved or read about, and apply it to the opportunity in the system they’re working on. If that triggers an idea, then it is tested as a hypothesis. And if that works, it becomes a solution, or really, an invention.
The part where TRIZ comes in is the abstraction of a principle from a previous problem. What the intuitive innovator does subconsciously, TRIZ brings to the conscious level.
PwC: What are the practical steps that TRIZ brings to consciousness?
PH: In TRIZ, you are essentially doing one of three things and all are in a sense problem solving. Either you make a useful activity better, counteract a harmful activity, or resolve a contradiction. Resolving contradictions is at the heart of TRIZ. Most problem solving is about making a compromise or tradeoff between contradicting activities. For example, if you make a mechanical part thicker you increase its strength but you also increase the weight. If we can find a way to get more strength without the extra weight penalty, we have resolved the contradiction between strength (useful) and weight (harmful).
TRIZ researchers looked across an enormous number of past inventions—in particular those described in patents—and established a core set of principles that capture the essence of most all problems facing inventors or innovators, together with a set of principles that capture the essence of solutions to those problems.
Because TRIZ abstracts problem solutions to a set of common principles, the solutions can surface from any domain. Serendipity and creativity come in through a systematic process of mapping abstract principles from TRIZ to the resources available in the system at hand.
PwC: Can software support the deployment and use of TRIZ? What can a CIO do?
PH: The real power of TRIZ is in its inventive principles. Originally there were 40 principles, and many people have worked to refine and structure these TRIZ principles. Today, TRIZ inventive principles can be applied to any area of innovation—product, services, process, or business model.
From a CIO standpoint, the TRIZ inventive principles embedded in creative problem solutions are valuable information resources that can be captured and made available throughout the organization. For example, if I’ve solved a manufacturing problem or developed a new product, and I have identified the principles through TRIZ that are embedded in that innovation, I can capture those principles as keywords and make them searchable in a knowledge management system. This will make it possible to reuse or combine this solution in a different problem that needs to use the same principles. The organization is thus cataloging solutions and ideas for future use in a searchable and usable way.
In addition, the most valuable innovations are often business model innovations. Business models are driven by information systems, so the CIO has a key role to play in applying TRIZ in this particular kind of innovation.
PwC: Does TRIZ apply to techniques outside of engineering and manufacturing?
PH: A lot of people are working to use TRIZ beyond just the traditional manufacturing technology applications. To give you an example, years ago our chemical company sales force consisted of regionally distributed salesmen who sold all our polymer products in their region. We had a wide variety of products, and salesmen were not being effective across our entire product portfolio.
We applied the TRIZ principle “specialization” to our sales organization. We then reorganized the sales force so that sales reps sold only certain logically related segments of our products; that is, each sales representative’s work was now “specialized.” Some salesmen sold only to customers who were making films, say for garbage bags or related products. That was different from salesmen selling our products to customers that made molded parts. By specializing the sales force, and therefore the salesmen, it was easier for them to develop market and technical expertise, and sales performance improved.
The TRIZ principles can be effectively used to address these kinds of problems. I’ve done a good bit of work applying TRIZ principles to business processes, so I think the answer is, yes, TRIZ can be used in domains other than manufacturing, and more and more people are doing it.
PwC: Can TRIZ be compared to some other management trend from the past?
PH: Six Sigma is a comparable trend that can yield insight into how TRIZ can be applied in an organization. I’ve used elements of what companies have done with Six Sigma as a template. In Six Sigma, we teach people at the Green Belt, Black Belt, and Master Black Belt levels. We want everyone in the organization to have this Green Belt level of understanding, few to have Black Belt, and very few to have Master Black Belt.
A similar concept can apply to structured problem solving using TRIZ. If companies want to be more innovative as an enterprise, they need to make a similar scale of investment as they did in Six Sigma for quality.
Hessler, who has used TRIZ, says, “It frames all innovation as a search for existing solutions in different industries or contexts. In other words, your problem has already been solved and you just don’t know it.”
If this approach to problem solving, invention, and innovation is so powerful, so well specified, and so developed, where has it been all this time? One challenge is that most enterprises view innovative problem solving as a siloed activity, limited to the R&D and product development departments. A recent survey by Harvard Business Review Analytic Services found less than a quarter of senior management has high satisfaction with R&D outcomes and processes. (See Figure 3.) Clearly, if enterprises start to look at innovation as an end-to-end process, they could improve their innovation performance. This means marketing, product management, sales, customer support, strategy, IT, and even human resources need to incorporate creative problem solving in their daily jobs—supported by a disciplined and technologically advanced infrastructure.
Innovation is value-creating novelty. It must be new, but it must also create value for the business. “The key is to leverage our capability at all levels within the organization and to increase the speed and scope of idea generation and transformation into marketable products that result in new business value,” Bidwell says. Unless an innovative idea for a product, service, or business model is carried through to the customer, it will fail to generate cash or other value for the enterprise. It is therefore a process, rather than an activity.
The rise of open collaboration at companies such as Procter & Gamble, Cisco, and General Electric Company6 has begun to create awareness of innovation as a process that starts with ideas. Many companies are making good use of their customers, suppliers, and Web-based “suggestion boxes” to broaden the source of ideas for enhancements to existing products or entirely new products.
About 40 percent of global CEOs expect the majority of innovation in the future to be co-developed with partners outside the organization, according to PwC’s 14th Annual Global CEO Survey. (See Figure 4.)
In the journey of innovation, ideas—whether incremental or radical—are just the beginning and they need to move from discovery to impact on the business. Figure 5 shows this idea-to-cash life cycle as PwC constructs it. Managing a set of ideas beyond discovery through logical stage gates of incubation, acceleration, and scaling are the execution steps upon which most companies stumble.
The following summarizes the key activities in each phase:
Challenges and risks facing an innovation don’t stop if their nature changes during different phases of the life cycle. All great ideas sourced in the discovery phase will encounter numerous execution challenges in all phases, or problems that need solutions, for which structured problem solving can deliver dramatically better results.
It is also important to note that only a fraction of ideas move through the full life cycle—not all ideas can overcome all challenges and risks encountered during their development. As few as one in a hundred seemingly great ideas may eventually succeed and become a commercial offering. Built into disciplined problem solving are mechanisms to drop ideas when core problems have been exhaustively examined for solutions, which should be done as early as possible in the life cycle. This approach is often referred to as a fail fast strategy, so that only the most promising ideas move forward. Organizations also learn from failure. Fast, frequent, frugal failure decreases the learning cycle time and allows organizations to come up with better ideas faster in the future.
“If you want to come up with 10 or 20 ideas or directions for your company, you need a structured approach that thoroughly scans the range of possible solutions from many different domains,” Hessler observes.
An end-to-end innovation process “is important, because ultimately innovation’s success is not idea generation; it’s a lot of pick-and-spade work,” says Patrick Sullivan, chief architect of Chubb. “I liken it to building a road. It is one thing to draw a line and say that’s where we want the road to be. It’s another thing to get all the equipment and people, blast the passes through the mountains, level all the stuff out, grade it, surface it, and everything else. Organizations fall down in this, because the execution is really hard.”
Enterprises should treat innovation as an end-to-end process from idea to cash, and each problem faced in this process as an opportunity to invent a solution that moves the process forward. In many cases, the problem/invention challenge identifies and clarifies the real opportunities for sustainable competitive advantage.
If innovation has been so important, why hasn’t it been addressed as an end-to-end process to be optimized before now?
The history of process improvements, particularly those associated with the use of IT to implement best practices and to establish managed, end-to-end processes, starts with activities focused on managing behavior to common standards. Behavior-dominated business processes are primarily activities that require limited thinking, problem solving, or creativity. Some examples include accounting for a purchase, keeping track of how employees spend their time, and noting the details of an item being put into inventory. These are detailed, data-capture-oriented activities.
Over time, the focus of enterprise performance improvements grew to include activities that require more thinking, more knowledge, and direct support to enable staff to reach more informed conclusions. One example is the establishment of enterprise-wide standards and processes for measuring employee performance, providing coaching, and deciding compensation and promotions. Many IT vendors now offer applications that introduce end-to-end management of the performance appraisal process while those who know and work with the staff retain the role of evaluation and assessment.
The trend is clear. As Figure 6 shows, the target of enterprise performance improvements to end-to-end processes is steadily moving in the direction of more thinking. Innovation has been a challenge for the enterprise, in part, because it requires far more thinking, analyzing, knowledge leverage, and creativity, with much less scripted behavior. Now, enterprise applications are beginning to deliver more subtle support for semantically rich business activities such as idea management, problem solving, and invention—all keys to successful innovation. “Innovation is a social activity, and until software became social, it was impossible to really try and automate the innovation process,” says Matthew Greeley, CEO of Brightidea.
In part because of its high requirement for analysis, creativity, and social interaction, innovation has not been seen as a broadly connected collection of enterprise activities subject to process discipline or re-invention. Just as beliefs about performance management evolved and are now included in human capital management (HCM) applications, innovation increasingly is understood as being more than creative insight occurring at unpredictable times from inspired individuals.
The changes companies need to make to their siloed approaches to innovation may be jarring to some. But enterprise-wide transformation always ruffles feathers and faces initial resistance. That’s why the best organizations plot a collaborative, strategic program of change to maximize their chances of success.
Because enterprise transformations have occurred in the past, pattern matching suggests ways to succeed in the innovation domain. For example, when organizations transform siloed, disconnected, suboptimal processes into seamless, responsive, and efficient end-to-end enterprise processes, they focus on four deliverables: common nomenclatures, digitization of interfaces, a technology-enabled new process, and continuous monitoring and improvement. The article, “The strategic CIO’s new role in innovation,” on page 44 explores these in more depth.
What keeps good ideas from moving to cash and bad ideas from dying a quick death? It depends on how the enterprise executes on the idea.
Developing a good understanding of the end-to-end process shown in Figure 5 is a key first step. To jump from discovery to scaling without going through incubation and acceleration results in suboptimal outcomes. It is like trying to go from infancy to adulthood while bypassing childhood and adolescence. You’re not ready for it. Managing ideas to cash is also fraught with other challenges. The biggest factors in poor innovation execution within the life cycle include the following:
"Innovation is a social activity, and until software became social, it was impossible to really try and automate the innovation process." —Matthew Greeley of Brightidea
Any serious effort to transform enterprise innovation must address all of these challenges. The effort must introduce meaningful metrics and adopt a continuous improvement ethic. The good news is that idea management systems are now mature enterprise applications capable of addressing the key life-cycle challenges of idea selection, idea management and handoff, and innovation metrics. (See the article, “Powering the innovation life cycle,” on page 26.)
Applications are becoming available that help manage the complexity and learning issues associated with structured problem solving. They do this by addressing the two biggest mental challenges facing anyone trying to adopt structured problem solving:
Applications that support structured problem solving can also be understood as digital interfaces in a business process that today is mostly analog or human based. As problems are encountered and solved, by your enterprise or others, the flow of knowledge is added to the palette of potential solutions available to the enterprise digitally. No people need to assess, classify, or otherwise intervene.
Today, structured innovation methods and the software that supports them typically remain isolated in R&D. Yet enterprises have awakened to the need to seek ideas not just from staff in product design and engineering but also those in customer-facing, manufacturing process, business strategy, and partner management functions. The challenge has been that staff outside R&D aren’t engaged with problem solving and innovation frequently enough to become adept at the methods or software. And they typically don’t have the time to work on these problems, which require close attention.
Innovation is not just an R&D issue. Innovation should be in everyone’s DNA in the enterprise. “What you do is simply create the knowledge base. You have the tools in place so that this [innovation] simply becomes the set of ethics, practices, and beliefs that are fundamental to as many people in the organization as possible, and they simply think and act that way,” suggests Bidwell.
The current generation of enterprise applications designed to enhance innovation through the support of structured problem solving is just beginning to capture the attention of business units outside R&D. (See Figure 7.) PwC believes these products are already being enhanced with thoughtful redesigns that bring most of their value to a broader range of enterprise problem solvers and idea generators in a more compelling, accessible interface.
Extending these methods and capabilities throughout the organization is imperative. Even after a brilliant idea is identified, it often faces many conceptual, engineering, market development, distribution, and customer acceptance challenges that demand creative problem solving. In short, the structured innovation approach can contribute beyond the discovery phase. Indeed, it is crucial that innovation also be applied to the incubation, acceleration, and scaling phases of new product development.
In other enterprise contexts, such as human capital management, thoughtful activities can be enhanced by the right software design and underlying technologies. As this happens, the highest performing, most innovative enterprises will be those that have brought their innovation and problem-solving worlds together as part of a full life-cycle, end-to-end, managed process.