Improvement and innovation: two sides of the same coin

Market and Knowledge Newsletter May 2008 The onesixsigma.com Market & Knowledge Newsletter for the Business Improvement and Innovation Professional

In February this year we focused on innovation, and the response was such that we are going to be taking a closer look at the concept, methods and tools this month.

To a lot of people who are not directly involved in it, innovation is still a somewhat vague concept. It is often mistakenly thought of as simply being about product design; Apple are frequently held up as the model for innovation, with the emphasis being placed on their products. Whilst this is certainly true, it is not the whole story. Fewer people make the link to Toyota and their innovative processes, supply chain, strategy and culture. Whirlpool, instead of throwing a huge chunk of money at product design, introduced 400 small projects worth $25,000 throughout the organisation with the aim of innovating in every aspect of its business. These projects now bring in $1 billion of benefits.

In the 1930s, Joseph Schumpeter, defined five types of innovation. These have been both expounded and expanded upon, and are still referred to today when a company is deciding where to target its innovation efforts. The different types are:

The introduction of a new product or qualitative change in an existing product. Process innovation new to the industry. The opening of a new market. The development of new sources of supply for raw materials. Changes in industrial organisation.

Schumpeter's definitions also go a long way to dispel the myth that Six Sigma, Lean and quality improvement generally stifles innovation; the second, fourth and fifth definitions are objectives shared by the improvement methodologies.

Arguably, what is missing from Schumpeter's definitions is a direct correlation between innovation and company strategy. Earlier this year, we interviewed Dr Phil Samuel, Chief Innovation Officer of BMG, and he spoke of how truly innovative companies align innovation with their strategy, not just their product line. "Strategic innovation is about bringing new ideas to life... creating new value to the customer... and providing value for the business."

Linking innovation to strategy is impossible without effective management, and one common factor in all successful innovators is a rigorous process for managing innovation. A McKinsey survey from 2007 found that although 70% of the executives interviewed claimed that innovation was one of their top three priorities, as many as a third say that it is governed in an ad hoc way. Essentially, this means that their efforts are not measured. Of course, many people argue that innovation cannot -- indeed, should not -- be measured; it is inestimable, indefinable, and any attempt to measure it stifles it. This attitude misses the vital point that if it can be measured, it can be better understood, identified and replicated.

Indeed, this is why the US Secretary of Commerce recently assembled a panel of top academics and business leaders to make proposals for measuring innovation. Although taking a wider, economic view, the report still advocates measurement as being vital to the encouragement and nurturing of innovation.

Whilst it is therefore vital, for individual organisations wishing to gain competitive advantage through innovative practices in difficult economic times, the problem still remains: how do you measure innovation? It is a key question that all business leaders should be asking, along with: how can a company leverage the benefits available to their full potential? Who should be responsible for innovation? What are the tools, the methods, and how can they be deployed? And in order to answer these questions, the organisation returns to the fundamental "what is innovation for us?"

These questions and topics will be explored collaboratively this month on onesixsigma.com. If the above discussion holds an interest for you or your company, if you have some answers, some suggestions, examples of tools or solutions, or even if you have more questions, then get in touch. We will be running articles and white papers, and as ever invite contributions, no matter how small, how detailed, or how controversial. We will also be inviting innovation experts to our forums over the coming weeks, so post a question there and keep an eye out for the answers.

In addition, a User Group Meeting exploring these themes will take place at the beginning of July, hosted by our partner, i&i Events. This will be a collaborative learning environment, designed specifically for practitioners to share best practice and create knowledge networks.

Sources and Further Information:

"The Truth About Innovation" by Max McKeown, Prentice Hall, 2008. "Everybody is responsible for innovation" An interview with Dr Phil Samuel, onesixsigma.com, March 2008. http://www.onesixsigma.com/node/8331 "The Theory of Economic Development" by Joseph A. Schumpeter, Transaction Publishers, 1980. http://www.amazon.co.uk/Theory-Economic-Development-Science-Classics/dp/0878556982/ "The State of innovation" Business Week, Dec 2007. http://www.businessweek.com/innovate/content/dec2007/id20071219_302022.htm?chan=search "Innovation Measurement: Tracking the State of innovation in the American Economy." A Report to the Secretary of Commerce by The Advisory Committee on
Measuring innovation in the 21st Century Economy, January 2008 . http://www.innovationmetrics.gov Contact Us: http://www.onesixsigma.com/onesixsigma/contact_us Information on the i&i User Group Meeting: http://www.onesixsigma.com/iandi/ii-User-Group-Meeting-innovation-01072008

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Improvement and innovation: two sides of the same coin