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The innovation game

Companies across the globe are pushing for it, the public sector is falling over itself to show that its attempting it and Northern Rock probably wishes it had been doing more of it. Innovation may be the catch-all phrase of the noughties but, asks Patricia Curmi, is quality management a help or hindrance?

Chances are, by the time you've finished reading this article, it will already be out of date. The technology and concepts it mentions will likely be re-vamped, re-invented and re-branded before you reach the final sentence. Ideas are transformed into business reality quicker than ever, and advances in technology mean the implications for the rest of us are wider-reaching than at any other time in history.

Just look at the meteoric rise of social networking sites such as Facebook or MySpace. They appeared seemingly out of nowhere and in the space of a few months managed to turn the way today's youth communicate with friends and organise their lives completely upside down. Now they have become a major part of how musicians and music companies promote new bands. And yet there are already rumours that their might is fading, and fast. Soon, they could be trumped by the next big idea that we'll struggle to imagine how we ever lived without.

While there are few who aren't clamouring to label themselves innovative - the government has even dedicated an entire department to it - several challenges confront those who want to see it in practice on a day-to-day basis. How, for example, can you ensure that any new products and services are instilled with the same level of quality as those which had a longer time to develop and perfect? How can quality tools foster innovative thinking among staff; and how are traditional research and development (R&D) approaches to innovation changing?

Strange bedfellows?

When the CQI ran a poll in its monthly e-newsletter, Forward, asking whether quality management deterred innovation, a resounding 80 per cent of readers disagreed. Yet the misguided perception remains among many that while innovation thrives on constant change and risk-taking, quality processes are based on slavishly following standards and a stifling cautiousness.

Richard Luecke and Ralph Katz, two authors who have written various books on the topic believe quality tools and innovation can be mutually beneficial. They point out that: 'Innovation is generally understood as the successful introduction of a new thing or method. It is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes, or services.' The similarities to the objectives of quality managers in any company are instantly evident.

'Tushman and Benner found that increased ISO certifications were associated with a 'significant decline' in the number of patents that were based entirely on knowledge new to the firm'

Yet Harvard Business school professor Michael Tushman and Mary Benner, a management professor from the Wharton school at the University of Pennsylvania, carried out research indicating that process management sometimes endangers innovation within companies. Benner argues: 'Brand new technologies to produce products that don't exist are difficult to measure. This kind of innovation may be crowded out when you focus too much on processes you can measure.'

Tushman and Benner studied the number of ISO 9001 certifications obtained by paint and photography companies in the US.Their findings are striking: increased ISO certifications were associated with a 'significant decline' in the number of patents that were based entirely on knowledge new to the firm. Even exploitation of existing knowledge was slowed, with patents that relied up to 40 per cent on previously acquired knowledge being 'squeezed out' in favour of patents based 80 per cent or over on existing knowledge.

Ultimately, the conflict lies between achieving short-term measurable goals and long-term change. 'Creative people will push back in an environment where people are required to follow standard processes and the people who are comfortable are not exactly the most innovative,' says Benner, 'so it's important not to extend six sigma like programmes into all areas of an organisation.'

'Standardisation should help innovation. As we have learned that all innovations always have their predecessors. In order to develop new solutions we must become experts in existing knowledge.'

Praveen Gupta, founder of Accelper Consulting, who writes for www.realinnovation.com, which specialises in looking at creativity with quality tools like TRIZ and six sigma, disagrees. He points out that innovation is an evolutionary process, saying: 'Actually standardisation should help innovation. All innovations always have their predecessors. In order to develop new solutions we must become experts in existing knowledge. So, the product life cycle consists of concept, development, production, standardisation and new concepts.'

Innovation on demand?

In their book, Managing Creativity and Innovation, Lueke and Katz note the case of 3M employee Dick Drew in the 1920s. Visiting a garage one day to test the sandpaper his company made, Drew noticed a mechanic annoyed that ripping sellotape off the paintwork of a car removed the paint as well. After two years of experimenting with adhesives and materials, secretly and without management support, he created a new product: masking tape. It spawned hundreds of specialised tapes for medical, technological and industrial applications and those ideas helped make 3M the multi-billion dollar company it now is.

Reading about Drew's innovation, it would be easy to confuse innovation with creativity. Not so says Gupta. He points out that everyone can be creative and come up with ideas, but innovation is about making 'come to life' in a practical way. However, he adds: 'When innovation is produced on demand, creativity and innovation become very similar, because innovation is an applied creativity delivered in a short space of time. This is especially true when innovation is technology-driven.'

But is it possible to produce innovation, on demand? Isn't the creative process something that depends on the individual? 'There is the accepted view that innovation is an art,' Gupta suggests, 'whereas I think people should realise that they can learn to be creative and innovative. There's no fundamental difference between the research scientist and any other individual; we just need to "schedule" innovation to deliver consistently and on demand. No framework currently exists to drive innovation in a simple, holistic way that produces tangible outcomes.'

Out of the lab

Spending on R&D may not have the tangible rises in innovative products one might expect, either.Despite recent government figures showing a nine per cent increase in R&D, a survey from Birmingham City University's Technology Innovation Centre (TIC) found short-term, often customer-driven, urgency dominated the long-term importance of innovation. Top managers believed their companies performed well in innovation, but line managers and technical staff reported their frustration at the company approach.

TIC associate director and product development expert, Peter Rayson, thinks the UK has been slow to catch up with US and Japanese innovation techniques which successfully meld quality processes.

He says: 'I worked in the US for some years where methods are used to harness the innovation process more effectively - without losing creative spontaneity. Over there they see it as vital, but in the UK and Europe many bright ideas, studies and reports that show how six sigma and other quality techniques transformed quality lie in files undeveloped.'

It is true that, until recently, R&D was synonymous with technology and innovation. In the UK, most support measures for innovation on the national and the EU level are for R&D activities. The Lisbon strategy, which aims by 2010 to position Europe as the most competitive and dynamic knowledge-based economy in the world, incorporates a policy goal that the R&D expenditure in the European economies should reach three per cent of GDP by 2010.

However, although R&D is vital for many innovation activities of firms and the competitiveness of an industry and a country, the 2007 EU-wide Community Innovation Survey shows that almost half of the European innovators do not conduct intramural or in-house R&D.

Such non-R&D innovation includes the purchase of advanced machinery and computer hardware specifically purchased to implement new or significantly improved products or processes, the purchase of rights to use patents and non-patented inventions, licenses, knowhow, trademarks and software, internal or external training activities for a company's personnel aimed at the development or introduction of innovations, and internal and external marketing innovations aimed at the market introduction of new or significantly improved products.

'We need to focus beyond traditional R&D,' agrees Gupta. 'It used to be that it took three to five years to develop an idea into a product, then even more time to get it out onto the market. That isn't the case any more - companies are more likely to pump out three or four really innovative products onto the market each year.'

'How to cope with an ever-changing market full of resource-rich consumers who are less likely to be brand loyal than any previous generation? The obvious tactic is to stay ahead of the game: innovate.'

He notes that in such a 'real-time' environment, R&D labs are becoming outdated. It's all about innovation networks, such as the Proctor & Gamble initiatives and Nokia's revolutionary approach to development (see company profiles).

So how to cope with an ever-changing market full of resource-rich consumers who are less likely to be brand loyal than any previous generation? The obvious tactic is to stay ahead of the game: innovate. Turning over innovative products and services at a staggering rate, once considered the sole domain of IT and pharmaceutical companies, has become more than a path to increased profit; it's the only way to stay afloat amid intense competition.

But for every successful innovation there are hundreds that failed to make the grade or, worse, pose a threat to consumers. A race to the bottom between companies in terms of costs and time taken to get products onto the market only intensifies the need for quality assurances

Company profiles

Nokia

Once a maker of wood products and tires, the Finnish firm has thrived in the wireless world. Today, Nokia has almost a 40 per cent share of the global mobile phone market, more than twice that of its closest competitor, Motorola. The company prides itself on identifying the 'remarkable similarities in what global consumers want and need in their mobile devices then innovating to include local insights,' says senior design manager Rhys Newman. Bright colours are key to success in India, China, and the Middle East, 'where a phone can show status'. Markets with low literacy rates get phones without written menus.The company's next challenge is to gain a customer base in the US, where it has less than 10 per cent of the market.

 

Proctor & Gamble

Facing a crisis in 2000, with their stock falling by more than half, the company faced a dilemma: despite pouring money into R&D, it couldn't create new products fast enough to keep growing. P&G's novel solution was to innovate innovation. It launched the Connect+Develop programme (pictured bottom right), which allows outside developers to get their concepts and designs into P&G's product pipeline.

Gupta says that the company's move from traditional lab-based innovation means 42 per cent of P&G products' components are externally sourced. As a result, profits last year climbed 14 per cent to $11bn.

 

Anomaly

Instead of claiming to reinvent advertising, London-based Anomaly shirks the ad categorisation altogether. In 2004, Jason DeLand set out with four former colleagues to build a new kind of company: part branding firm, part design shop, part innovation think tank. Anomaly has created a model that attacks the fundamental flaws of the agency machine. Most ad agencies still earn their revenue from time sheets and media spend, which means they're motivated to be inefficient and produce ideas that are wedded to expensive media.

Anomaly takes a different approach, negotiating upfront either a predetermined fee or, better yet, royalties or an equity stake in a product. So when a client comes in with an advertising problem, Anomaly addresses it more broadly as a business issue, analysing everything from design to product development.

 

Whole Foods

Showing innovation in its supplier-side relationships, organic food retailer Whole Foods has created a loan programme for its food suppliers. The company, which is expected to make $7bn in sales this year, created a pool of $10m per year to provide low-interest loans to small food producers to encourage the local-agriculture movement.