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1 The Building Blocks and the Challenges of In-House Innovation Management

The last chapter has looked at the ecosystems that form the framework in which joint innovation can take place. It also considered the many challenges that one encounters when utilizing the rich know-how stored in an organization’s many minds and getting these minds to work together to produce new innovations. These challenges include a unique challenge for global IT service organizations: to establish modern and effective innovation management that is not just a bridge between the organization’s people, its external (technology) partners and providers, and research bodies as suggested by the idea of “open innovation”, but which gets all of the integrative groundwork in place to instill a successful culture of innovation in-house.

This next chapter will go beyond the concepts introduced before and look at a real-life example of how effective in-house innovation management should be established and managed to live up to the business reality faced by IT service organizations.

Simple ideas management is no longer enough if we intend to seize all of the potential for innovation. An IT service organization’s innovation management efforts should, in an ideal world, not only cover the innovation strategy and targets, but also the processes and structures that are needed for them. This means implementing and maintaining in-house systems in the sense of a reliable infrastructure and efficient processes. By making sure of the right information and software systems, appropriate processes for planning, managing, and overseeing innovation efforts, and resources for processing data in terms of collating, checking, and pursuing innovative ideas, these ideas are given the guidance and support they need on their way to becoming real-life practice.

How can IT service organizations use innovation to get a head-start in the dynamic ICT business? The first thing they need is a corporate culture that promotes innovation. Both established roles and any necessary new roles should be adjusted to aid the innovation efforts. In its ‘umbrella’ role, innovation management needs to get all of the core processes of the organization to accept innovation as an inherent part of their purpose, and not as the job of any one area alone. Creating such an innovation-positive culture is, in this sense, one of the most complex and one of the most sensitive tasks that innovation management faces in IT service organizations.

Another internal challenge lies in the need to keep costs down while expectations concerning IT performance are growing. The operational business needs to be given technical solutions that help them develop innovations to market readiness. Keeping a global enterprise nimble and responsive also needs clear instructions, comprehensible rules, transparent targets, and people explicitly appointed to make innovation a tangible reality for the organization’s people.

We can distinguish between four clusters of corporate functions that are essential for successful in-house innovation management:

  • Structure and governance: How can interdisciplinary contacts be achieved, supported, and managed?

  • Communication: Which internal communication measures are required to give the innovation process the support it needs?

  • People: How should the workforce be organized? Which roles should be defined for the innovation process, and what is the job of HR managers in this respect? How can we involve people as soon as possible and as effectively as possible in the innovation process?

  • Processes: Which steps do we need to turn a pool of unrefined ideas into a tangible outcome?

Successful innovation needs many factors to be in place in these clusters. Apart from new technologies, or their development, production, and the establishment of the right service offerings for them, innovation also needs to be brought to market with the right marketing strategy. This needs interdisciplinary cooperation to work effectively in the organization. The people involved need to know how to communicate and work with each other, e.g. research and development with the innovation team or production with marketing and sales.

Technological innovation can be as up-to-date as it wants: picking the wrong features or not preparing for the market launch will cost invaluable time and resources, which no IT service organizations with global ambitions can accept. This should be kept in mind when involving R&D, IT production, or distribution specialists in the innovation process from its very beginning.

Again, the close integration of all of the core functions into the innovation process is the right way to go. This doesn't just mean process design or workflows: All of the innovation activities need to have a clear, shared target in mind, wherever they might be located. If this shared target is, for instance, reaching market leadership with an innovative portfolio element, special attention should be paid by everybody involved to all of the criteria that are necessary to make it a success in the market, e.g. by considering its appeal for all of the potential customer groups. At an external level, this means effective coordination and cooperation between product management and sales/marketing.

The organization’s strategy, culture, and general working atmosphere are internal levers with just as much relevance as legal considerations (patents, licenses, country-specific regulations). There is also the potential for conflict between the many interfaces of larger organizations: this needs to be seen as a major challenge for innovation managers. They need to find the right processes and alignment of the interfaces, not just between an innovation’s original development and its product or application-specific evolution, but also between production and marketing. In this area, it helps to make use of coordination measures that cut across processes and departments, such as relying on multipliers, steering groups, or special, often interdisciplinary transfer task forces.

Interdepartmental communication should accompany innovations along the entire process chain to support their evolution and give them a public expression, both inwards into the organization and outwards into the wider public. Such professional communication support for innovations is becoming more and more important and should be regarded as a dedicated part of corporate communications. Innovation communication means including communication at every step in the innovation management process, beginning with the choice of the right media and platforms to reach out to all people involved. This choice can range from online or print media (intranet, flyers, bulletins, in-house magazines, blogs, or communities) to full-scale events or competitions. Later in the innovation cycle, this is expanded to include the public presentation and selling of the innovation.

No innovation is successful before the people it is meant for have understood and accepted it—being seen by customers as innovative or forward-looking is not enough. The job of communication is to get the company’s people involved in the internal innovation culture from the very start and to make innovation a real and interesting experience for them.

Technical or functional competence is no guarantee for a successful marketing strategy or market presence for new products or services. Given the constant pressure to innovate in the ICT industry, it is more than essential to record and safeguard the new knowledge, since access to knowledge and information capital can make or break a company’s competitive success. This means that HR management is no longer a purely administrative pursuit. For IT service organizations in particular, the danger is that they concentrate too much on the technical objectives in their innovation strategies or targets. Coming up with innovative ideas or designing and selling new products and services are processes done by human beings. Structures and tools are there to help these people. They are not able to replace them. At IT service organizations, HR management needs to work hand in hand with innovation management to have the right answers to the following questions: Has the workforce structure been considered when defining the innovation strategy or targets? Does workforce planning set aside dedicated resources for developing and pursuing innovations? Are there long-term prospects and opportunities for people’s development hidden in the innovation process? Are the training opportunities on offer sufficient?

Here, a previously defined, fully integrated—both internally and externally—innovation management has the effect of determining success in the competition: All of the internal challenges need to be internalized and covered in the innovation mindset. IT service organizations who maintain working partnerships with clients or who work with the best (technology) partners and, possibly, research institutes in innovation partnerships, stand a good chance of getting quick and meaningful results.

2 The Innovation Process from First Ideas to Finished Output

At IT service providers, innovation means the sum of new inventions and their successful marketization. This requires a clear distinction between innovations that are immediately market-ready and innovations that need more than 2 years before they become tangible reality. Pushing ‘quick-acting’ innovations can make particular sense when trying to improve internal efficiency or external competitiveness, but not only there: In dynamic environments, yesterday’s innovations might very soon be old hat. The same goes for slow-acting innovations. Here, too, the upfront investment has to be able to pay off before the innovation becomes obsolete.

The ideal innovation process has a lean governance superstructure and three distinct phases: Collect, Verify, and Execute.

All of a company’s people are encouraged to take part in the process—everybody should become a contributor of ideas or other input. Collecting ideas can take the form of a structured system with dedicated platforms and tools. Uniform criteria, such as standard templates for filing innovative ideas, are essential for a quick follow-up, although there should be only a minimum of formalities reining in the ideas.

Verifying the proposed innovations is the second step in the process, which ends with a decision as to whether the idea is dropped, put on hold, or executed. Ideally, the verification should use a multi-level balanced scorecard, built around the corporate targets. Using such an approach has the advantage that it standardizes the process with a set of readily adaptable criteria. The following decisions can be taken at this stage:

  • Revise: Concerning cases in which the available information is not sufficient for a final judgment about the idea.

  • Reject: Cases that do not live up to the defined criteria.

  • Split or combine: Cases in which the idea matches or complements another current idea (combining) or seems too complex for a single project (split).

  • On hold: Cases in which the idea does match the criteria, but has to be postponed, in consideration of other priorities.

  • Evaluate and transfer: Cases that match all of the criteria.

The last step in the process is the actual Execution of the idea by the right people, depending on the outcome of the verification process.

This process applies internally and externally, that is, also for cases in which the organization works with clients or cooperation partners on new ideas or solutions, on testing new prototypes, or on launching new products and services. IT service organizations that have the ambition to become true enablers of the innovation-powered growth of their business need a fast innovation cycle in place, integrated into a holistic ecosystem of innovation.

3 Factors Determining the Success of Innovating Ecosystems

In most cases, access to experts or to the right resources is not the greatest obstacle that needs to be overcome. The challenge is rather to manage the many interactions and collaborations within and between the numerous actors in the ecosystem. The effective integration and management of all of the available resources is necessary if one wants to seize the synergies that exist between individuals’ creativity and their shared ecosystem. With a living and working ecosystem in place, innovators from many different disciplines and backgrounds can produce new ideas and turn them into commercial benefits, with all of the diverse functions and processes in the organization contributing to the various links of the chain from the raw idea to the commercial product (participation, team management, business development, IP protection, finance management, controlling, marketing, and so on).

All of these processes and functions resemble an administrative machine, but the effective management of this ecosystem means more than forming a network between its actors. An innovation strategy only ever makes sense if it proves its ability to function under “open innovation” circumstances. For an innovation to produce real commercial benefits, it needs to initiate a momentum that is carried forward by all of the links along the process chain until it becomes a (commercial) success.

As managers of innovating ecosystems, IT service organizations need to focus on the interfaces and inter-dependencies between the actors in the system. They need to know which actor has the greatest leverage on the new technology. Managing the ecosystem means navigating through this multifaceted system and getting more value out of the sum of its parts. This makes “ecosystem relationship management” the counterpart to usual organizational functions, such as customer relationship management. It becomes the means to tie all of the strings together and operate the system from a central vantage point.

It has been stated many times that the time it takes to implement an innovation will determine the competitive success of any IT service organization. The same goes for the integration of new partners into the ecosystem. The ability to do so at high speed is the result of knowing the system and its actors, while delays are usually caused by external forces, such as being dependent on other actors or working with cautious investors controlling the purse strings.

The war for talent mentioned in the previous chapter describes a situation in which the organization is not able to create or sustain this system or when creative minds and their ideas begin to abandon the organization—whether mentally or physically. In such cases, the levers are to be found in close cooperation with HR management: An innovative culture needs to get many HR-related aspects right, including flexi-time models or the availability of training and travel opportunities. Executives also need the HR department to offer them specific development opportunities: They should be put into a place where they can recognize innovation when they see it, promote it, and take it further to become part of the innovating ecosystem. Innovation needs versatile integration skills, not specialist expertise in narrowly limited areas. This means that companies need to continue to invest in the development of their executives to make sure that these skills are present.

One aspect should be remembered when engaging in the war for new-generation talent: Talent does not have to come from the inside. The key is that the right talent acts as part of the ecosystem, and not that the company offers a constant stream of incentives to retain the talent for the company. Talented minds with creative ideas can hail from other companies or other external organizations, such as research institutes: What matters is that they contribute their innovative potential as part of the ecosystem. IT service organizations should therefore consider the entire ecosystem as its talent pool. This means that it needs to integrate and look after all of the actors in it, be they within or without the organization. A rethink is in order, away from the old belief that innovation should belong only within one’s own organization and that all of its resources should be kept within it. Opening up to the world in this sense allows real “open innovation”. Add this to a sustainably managed ecosystem, and innovation begins to produce real competitive advantages.

4 Innovation as an Opportunity for Employees

Innovation is far more than mere new products or services. Seen in terms of the inner workings of the innovating organization, it becomes an important lever for more efficiency, and an opportunity for the organization’s people. In IT service organizations, innovation is an integral part of everyday work and a means for keeping the company and its people ready for the future. At the same time, innovative ideas often act faster than people’s sense for the changes that are under way. Companies can help their people develop the right awareness for changes by enabling them to get involved with new developments.

Innovation happens, anywhere and anytime. Every member of staff has the ideas and creativity to make him or her a potential source for innovation. How should an innovative culture be shaped to help tap into this potential? For IT service organizations, an awareness of the problems and original thinking seem to be the prime aspects. If they want to be aware of and understand their client’s needs, expectations, and benefits, reaching out to the customer is still the way to go. This cannot be replaced by simple market research, because it lives off the creativity, experience, and mutual interaction that happens when employees engage with clients or cooperation partners.

Another important lever is an inspiring and engaging working atmosphere that encourages people to innovate. This includes opportunities for participating and for expressing constructive criticism. IT service organizations should try to be active, not passive in the growth of innovation. This means listening to the customer, but it also means listening to the many ideas about how to use innovative solutions that are already there in the workforce. In current ICT organizations in particular, many, if not most working ideas are the product of the innovative input coming from within.

How can one integrate such innovative input into the innovation process? User-friendly, straightforward tools like databases need the right software to be in active use. Another way of generating ideas and also a great medium for larger companies in particular is the “idea storm”. An idea storm is a form of collective brainstorming, made possible with a medium that everybody can access. The principle is that a platform is created to promote communication and cooperation at the company. Such a platform can become the perfect medium for seizing the combined creativity and mental potential of all of the organization’s people. Many well-known names in the ICT sector have already come to recognize the advantages of the system and conduct their own idea storms regularly—often in many different forms and modes, but always with a huge response from their people.

The platform for an idea storm can be a website on which employees can post, comment on, discuss, and rate ideas and innovative concepts. It can also become a forum with which specific areas or the executive management of the company can address their specific concerns and listen to people’s input and innovative contributions. The key is to review the many contributions that are posted and bring the most promising ones to fruition. Special events, such as live debates with top management representatives, are another very popular approach.

People’s creative potential is the fuel that powers constant modernization in businesses operating in competitive markets. A positive culture of innovation can encourage people to see their ideas as the opportunities they are. Continuous innovation in this sense teaches employees to see change not as a threat, but as an opportunity. Engaging with new technologies means creating new vistas for development, as well as constant professional and personal growth. With managers and employees communicating and sharing their know-how, innovation processes are stimulated that help people identify with the organization around them—the seedbed for more participation and engagement in large and potentially anonymous organizations.