Conference PaperPDF Available

Capabilities-Driven Innovation Management Framework: Crossing the Innovator's Chasm

Authors:
  • Innovation Management Research Institute (IMRI)

Abstract and Figures

Almost all CEOs and executive managers agree that innovation should be a top strategic priority within their organizations. But, a large percentage of corporations are still unsuccessful with the implementation of innovation management within their organizations for various reasons: many are still in the infancy stage of their implementation effort; underestimated the complexity and scope; or there exist a knowledge gap. Current industry research and literature build a strong case that disruptive or breakthrough innovation has become an absolute requirement for sustainable growth and survival. To support this theory, the management of innovation as an additional corporate business capability must increasingly become more important as a critical factor for corporate success.
Content may be subject to copyright.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 1 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
CAPABILITIES-DRIVEN INNOVATION MANAGEMENTTM CONCEPTUAL FRAMEWORK:
CROSSING THE INNOVATOR’S CHASM
LOUIS BOUWER
South African Nuclear Energy Corporation (NECSA), Technology Transfer, Pretoria, South Africa.
North-West University (NWU), Industrial Engineering, Potchefstroom, South Africa
louis.bouwer@necsa.co.za
ABSTRACT
Almost all CEOs and executive managers agree that innovation should be a top strategic priority within
their organizations. But, a large percentage of corporations are still unsuccessful with the
implementation of innovation management within their organizations for various reasons: many are
still in the infancy stage of their implementation effort; underestimated the complexity and scope; or
there exist a knowledge gap.
Current industry research and literature build a strong case that disruptive or breakthrough innovation
has become an absolute requirement for sustainable growth and survival. To support this theory, the
management of innovation as an additional corporate business capability must increasingly become
more important as a critical factor for corporate success.
This paper revisited competitive advantage, core competency, capabilities and innovation process
model theories from academic literature, and intersected the knowledge with empirical data collected
as the current state of innovation management within corporations at a global scale.
The research identified ten innovation management capabilities with strong interdependencies and
critical relationships to support innovation successfully within corporations.
The Capabilities-Driven Innovation ManagementTM conceptual framework was then developed with
the goal to introduce a flexible map, consisting of strongly interrelated capabilities to simplify the
understanding and implementation of innovation management capabilities and the management of a
corporate innovation system and ecosystem.
The expected end result of this framework is to increase successful innovations, competitive
advantage, growth and the generation of wealth for employees, shareholders and all other
stakeholders.
Key words: innovation, management, capabilities, framework, implementation, chasm
Copyright © 2015 by Louis Bouwer. Permission granted to IAMOT to publish and use.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 2 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
INTRODUCTION
Corporate stakeholders demand that executives must generate wealth through growth in market
share, revenue and profit margins to realize larger dividends, increased market capitalization and total
shareholder return (Christensen and Bever, 2014).
The past few decades, strategies to generate competitive advantage and growth shifted dramatically
from obsolete levers such as productivity management to enable cost and price reduction, quality
management to ensure product reliability or even global corporate mergers and acquisitions to gain
size and economies of scale to innovation and the continuous development of new capabilities to
ensure a steady stream of new innovative products (Almquist et al., 2013, Porter, 1979, Prahalad and
Hamel, 1990, Shelton and Percival, 2013) in very turbulent, dynamic and competitive global markets
(de Jong et al., 2013, Hubbard et al., 2014, Kinni, 2014, Verma et al., 2011, Xu et al., 2007).
Silverstein et al. (2007) summarized this concept extremely well (Figure 1), demonstrating how
innovation became a structured system as an organizational capability.
Figure 1: In the big picture of organizational capability, structured innovation is the next frontier for
development and systemization (Silverstein et al., 2007 : 16)
This means, the capability to manage a well-structured innovation system is considered to be the
solution to create competitive advantages with valuable solutions (for customers and consumers) in
such a predictable way, that the company will generate brand recognition (and profit margins) in the
market and wealth for employees, shareholders and stakeholders through consistent (market and
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 3 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
revenue) growth (Almquist et al., 2013, Miller et al., 2012, Shelton and Percival, 2013). To summarize,
Figure 2 demonstrates the conceptual chain of drivers for innovation.
Figure 2: Conceptual chain of motivational drivers for innovation.
In 2013 at least 70% to 90%, depending on the selected survey’s target population bias toward
innovation, of executive managers agreed that innovation is one of their top three strategic critical
factors for success (Almquist et al., 2013, Koetzier and Alon, 2013, Shelton and Percival, 2013, Taylor
and Wagner, 2014, Wagner et al., 2013).
From financial analytics for the past decade, it was demonstrated that companies with small research
and development budgets can also be very innovative (Jaruzelski et al., 2014). This concluded that
increased budgets for research and development do not necessarily increase innovativeness, a direct
correlation does not exist.
With the evolution of innovation process models (Eveleens, 2010) the 5th generation (Rothwell, 1994)
became a complex system (Hajikarimi et al., 2012, Hobday, 2005, Koetzier and Alon, 2013, Taylor et
al., 2012, Taylor and Wagner, 2014, Xu et al., 2007). The capability to manage a complex innovation
system is then another very important factor that will determinate a corporation’s financial future
(Drucker, 1985, Jaruzelski et al., 2014, Koetzier and Alon, 2013, Wagner et al., 2013).
It was then very surprising that only 20% to 30%, statistics collected from individual unrelated surveys,
of executive managers made the serious commitment to support a formal innovation system or engine
with the implementation of an institutionalized innovation management corporate capability
(Almquist et al., 2013, Snowden et al., 2014, Wagner et al., 2014). These percentages correlate well
with the Fit for GrowthSM Indexresearch study, developed by PwC Strategy&, that determined only
17% of corporations are actually ready and able to grow consistently to provide favourable Total
Shareholder Return (TSR) (Divakaran and Couto, 2013).
The identified problem then is that at least up to 70% of corporations are still very unsuccessful with
the implementation of innovation management within their organizations for various possible
reasons: many are still in the infancy stage of their implementation effort; they underestimated the
complexity and scope; or there exists a knowledge gap.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 4 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
Therefore, this research’s primary aim was to develop a theory that can guide corporations with the
management of innovation and increase the level of success with innovation output, competitive
advantage, growth and the generation of wealth for employees, shareholders and all other
stakeholders. In short, this research paper wants to guide corporations to “cross the innovator’s
chasm”.
The research methodology applied to acquire new knowledge started with “dumpster diving”
empirical data collection, followed by data mining and analysis to construct “empirical theoriesand
finally the construction of a full theoretical “academic construct”, as suggested by Professor Clayton
Christensen at Harvard university (Kirby, 2014) and Emeritus Professor Jean-Philippe Deschamps at
IMD and author of the newly released book “Innovation Governance” (Deschamps and Nelson, 2014).
This means, apply curiosity to observe, question and listen to what is happening in the industry first,
then make associations and connections to determine what problems exist and how to solve them
(Dyer et al., 2009, Furr and Dyer, 2014).
For empirical data collection a decision was made to study the latest empirical research reports on the
current state of innovation management within corporations from leading global consulting firms such
as PwC, Accenture, Boston Consulting Group, etc., as the most productive strategy. This enabled the
research to obtain a large volume of empirical data collected from thousands of interviews and surveys
over the past decade.
During the data mining and analysis phase, the concept of capabilities (Jaruzelski and Dehoff, 2010,
Wagner et al., 2013) always surfaced. Therefore, this research revisited the academic foundations of
core competency theory (Prahalad and Hamel, 1990), capabilities theory (Almquist et al., 2013,
Christensen and Overdorf, 2000, Hubbard et al., 2014, Stalk et al., 1992), dynamic capabilities theory
(Teece and Pisano, 1994, Teece et al., 1997), coherency theory (Leinwand and Mainardi, 2010) and
Total Innovation Management (TIM) theory (Xu et al., 2002). The results delivered various empirical
theories for innovation and innovation management.
With the development of empirical theories, ten innovation management capabilities, applied by top
innovative corporations, were identified. This resulted in the construction of the Capabilities-Driven
Innovation ManagementTM conceptual framework, the full theoretical academic construct, with the
goal to introduce a flexible map of strongly interrelated capabilities to simplify the management of
corporate innovation systems and ecosystems.
METHODOLOGY
Overview
The goal with the empirical data collection was to understand how innovation systems and ecosystems
are being managed within corporations at a global scale, which this paper considers to be the “current
state of innovation management” within corporations. Since this was such an ambitious research
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 5 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
project, it would have been impossible for the author to collect the required empirical data himself.
Therefore, the author searched for empirical data from existing industry research reports.
Selection Criteria for Empirical Data Reports
The following selection criteria were used as a basis to qualify empirical research reports for this
research paper:
i. The research report had to investigate the current state of innovation management within
corporations to determine what activities or principles are being applied to manage
innovation by the most successful corporations.
ii. It was critical that the selected research report collected empirical data at a global scale with
a substantial large data samples, ideally with 500 or more respondents. See Table 1 for report
details.
iii. The report had to be from a globally reputable consulting firm or academic institution, known
for their knowledge or expertise in business management and innovation management.
Table 1: Empirical research report data sample sizes and geographic coverage.
Report
Sample Size
Demographics
Geographic
PwC Strategy&: Global Innovation 1000 Study
(Jaruzelski et al., 2014)
±500
Senior
Managers
Global
BCG: Global Top 50 Most Innovative Companies
(Wagner et al., 2014)
+1,500
Senior
Executives
Global
PwC: 17th Annual Global CEO Survey
(Snowden et al., 2014)
1,344 CEOs Global
PwC: Global Innovation Survey
(Shelton and Percival, 2013)
1,757
C-suite
Executives
Global
Accenture: Why Low Risk Innovation is Costly
(Koetzier and Alon, 2013)
519
Executives with
+$100m Rev
US, UK & FR
Accenture: How To Get The Most From Your Best Ideas
(Alon and Chow, 2008)
601
Executives with
+$750m Rev
US & Europe
Capgimini Consulting & IESE Business School:
Innovation Leadership (Miller et al., 2012)
260
Innovation
Executives
Global
Imaginatik: State of Global Innovation Survey
(Anonymous, 2013)
204
Innovation
Managers
Global
GE: Global Innovation Barometer Survey
(Anonymous, 2014)
3,200
Executives
Interviews
Global
Planview: 4th Product Portfolio Management
Benchmark Study (Carlson, 2013)
514
Innovation
Managers
Global
Detail of Selected Reports
The following industry research reports were collected for empirical data collection, data mining and
empirical theory development:
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 6 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
i. PwC Strategy&: Global Innovation 1000 Study (Jaruzelski et al., 2014):
a. Sample: “PwC Strategy& (formally known as Booz & Company) identified the global
1,000 private corporations that spent the most on R&D since 2005.”
b. Methodology: “For each of the top 1,000 companies, we obtained from Bloomberg
and Capital IQ the key financial metrics for 2008 through 2013, including sales, gross
profit, operating profit, net profit, historical R&D expenditures, and market
capitalization. To enable meaningful comparisons across industries, the R&D
spending levels and financial performance metrics of each company were indexed
against the average values in its own industry. In addition, for the past four years we
have asked the Global Innovation 1000 survey respondents to name the companies
they thought were the world’s most innovative. Over the past few years, we have
carefully analysed the innovation factors that enable some companies to consistently
achieve superior financial results. A great deal of the work we have done in the annual
Global Innovation 1000 studies over the past several years has involved teasing out
the different ways companies approach innovation, and the implications of those
approaches.”
c. Previous annual reports included:
i. Proven Paths to Innovation Success (Jaruzelski et al., 2014)
ii. Navigating the Digital Future (Jaruzelski et al., 2013)
iii. Making Ideas Work (Jaruzelski et al., 2012)
iv. Why Culture is Key (Jaruzelski et al., 2011)
v. How the Top Innovators Keep Winning (Jaruzelski and Dehoff, 2010)
vi. Beyond Borders (Jaruzelski and Dehoff, 2008)
vii. The Customer Connection (Jaruzelski and dehoff, 2007)
ii. BCG: Global Top 50 Most Innovative Companies (Wagner et al., 2014)
a. Sample: “Data is collected from more than 1,500 senior executives each year since
2005.”
b. Methodology: “These executives then rank the global top 50 innovative companies,
which also gets weighted to incorporate relative three-year shareholder returns,
revenue growth, and margin growth.”
c. Previous annual reports included:
i. Breaking Through is Hard to Do (Wagner et al., 2014)
ii. Lessons from Leaders (Wagner et al., 2013)
iii. The State of the Art in Leading Industries (Taylor et al., 2012)
iv. Companies on the Move (Verma et al., 2011)
v. A Return to Prominence (Andrew et al., 2010)
iii. PwC: 17th Annual Global CEO Survey (Snowden et al., 2014)
a. Sample: We’ve conducted 1,344 quantitative interviews with CEOs in 68 countries
worldwide, selecting our sample based on the percentage of the total GDP of
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 7 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
countries included in the survey, to ensure CEOs’ views are fairly represented across
all major countries and regions of the world.
b. Methodology: “The lower threshold for inclusion in the top 10 countries (by GDP) was
500 employees or revenues of more than $50 million. The threshold for inclusion in
the next 20 countries was companies with more than 100 employees or revenues of
more than $10 million.
iv. PwC: Global Innovation Survey (Shelton and Percival, 2013)
a. Sample: “We drew on insights obtained from interviews with board-level executives
with responsibility for overseeing innovation from 1,757 C-suite and executive-level
respondents, across more than 25 countries and 30 sectors.”
b. Methodology: “For the purpose of our analysis, we segmented these companies
based on a balanced scorecard calculated from their responses to six areas, which are
explored in our study. From this scorecard, we then identified the top 20% innovators
(359 companies), and the bottom 20% innovators (395 companies), enabling us to
contrast their relative characteristics and experiences and zero in on the strategies
and tactics of the most-innovative group.”
v. Accenture: Why Low Risk Innovation is Costly (Koetzier and Alon, 2013)
a. Sample: “519 executives (vice presidents, directors, managers) at large organizations
(revenues in excess of $100 million or the equivalent) in the USA (254), UK (230), and
France (35) answered a 28-question, 15-minute survey administered on-line
(November 2012).
b. Methodology: “Trend results and comparisons were drawn from a comparable survey
conducted by Accenture in 2009 that sampled 639 respondents from the U.S. (330)
and U.K. (309).”
vi. Accenture: How To Get The Most From Your Best Ideas (Alon and Chow, 2008)
a. Sample: “The Economist Intelligence Unit, on behalf of Accenture, surveyed 601
senior executives in late 2007 at major companies in North America and Europe.
Respondents included board members, CEOs, CFOs and other C-level executives, as
well as senior managers. All of the respondents’ companies have more than US$750
million in annual revenues, and nearly two-thirds have annual revenues of at least
US$5 billion.”
b. Methodology: The survey asked qualitative questions to determine “How are the
world’s global companies faring in their quest for innovation?
vii. Capgimini Consulting & IESE Business School: Innovation Leadership (Miller et al., 2012)
a. Sample: “They conducted 25 in-depth interviews with innovation leaders to explore
their perspectives on the innovation function and mechanisms (formal and informal)
for managing innovation. Subsequently, an online survey in the field generated
responses from 260 innovation executives around the world presenting the full range
of industries, regions, functional specialties and seniority.”
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 8 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
b. Methodology: “We distinguish between four categories of innovation success based
on (self assed %) rate, namely: ‘Less than 25%’ (laggards), ‘25-50%’, ‘50-75%’ and
‘Over 75%’ (leaders) of innovation efforts having a positive material impact on the
company’s business results”. It aimed to understand how those leading and managing
innovation in their organizations think about the innovation function and offers an
insider perspective into both the formal and informal mechanisms for managing
innovation.”
viii. Imaginatik: State of Global Innovation Survey (Anonymous, 2013)
a. Sample: In total, 204 qualified mid- to senior-level managers with a stake in
innovation were selected and who answered the survey, the data are presented in
this report.”
b. Methodology: We asked respondents a variety of questions about their companies’
approach to innovation strategy, governance, leadership, process, and results. Survey
was conducted in the form of an online survey with many open-ended questions
which allowed for richer commentary and explanations than more traditional
questions to as wide and diverse an audience as possible. Because of sample bias
toward innovation management optimism (managers involved with innovation), the
level of adoption of innovation leadership and governance structures, and more
generally the actual level of innovation focus maturity, is likely to be somewhat lower
in the overall business world today than the findings presented in this study suggest.”
ix. GE: Global Innovation Barometer Survey (Anonymous, 2014)
a. Sample: Interviews with the 3,200 senior business executives were conducted by
telephone across 26 countries. All respondents are VP level or above and directly
involved in their company’s innovation processes. Twenty-five percent of those
surveyed are at the C-suite level. All respondents are directly involved in the
innovation strategy or process within their company.”
b. Methodology: The research was commissioned by GE and conducted by Edelman
Berland between April 14, 2014 and May 30, 2014. The Barometer explores how the
perception of innovation is changing in a complex, globalized environment.”
x. Planview: 4th Product Portfolio Management Benchmark Study: (Carlson, 2013)
a. Sample: “Appleseed Partners and OpenSky Research, commissioned by Planview,
conducted the fourth benchmark study on the state of product portfolio
management. “A total of 730 people participated in the survey. Out of those, a total
of 514 met the criteria for the research, completed the survey, and are represented
in the findings provided in this report. Participants had to be involved in their
organizations’ product development processes to qualify to participate in the study.
This year, 60% of participants were from North America, 25% from Europe, 7% from
Asia Pacific and Australia, with the remainder from Latin America, Middle East, and
Africa.”
b. Methodology: “The Product Portfolio Management benchmark research consists of
two phases: a qualitative telephone interview that provides in-depth information on
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 9 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
some of the main topics, and used to develop the questions for the second phase, the
quantitative online survey.”
FINDINGS
Empirical Theory Development
A textual data warehouse was constructed with data collected primarily from 10 empirical research
survey reports (see Table 1) that were published by reputable consulting firms regarding the current
state of innovation management at a global scale.
With the knowledge of core competency and capabilities theory, empirical research data was
collected, curated and analysed with the objective to identify capabilities required for the successful
implementation and management of an innovation ecosystem to support the innovation system and
its processes within a corporation. Table 2 is a summary of the identified capabilities required for
successful innovation management.
Table 2: Summary of innovation management capabilities required for success.
Report
Competitive
Intelligence
Intellectual
Strategy
Big Data Analytics
Governance
Metrics
Operations and
Processes
Leadership, HR
Networking and
Collaboration
PwC Strategy&: Global Innovation 1000 Study
(Jaruzelski et al., 2014) X X X
BCG: Global Top 50 Most Innovative Companies
(Wagner et al., 2014) X X X X
PwC: 17th Annual Global CEO Survey
(Snowden et al., 2014) X X X
PwC: Global Innovation Survey
(Shelton and Percival, 2013) X X
Accenture: Why Low Risk Innovation is Costly
(Koetzier and Alon, 2013) X X X
Accenture: How To Get The Most From Your
Best Ideas (Alon and Chow, 2008) X X X
Capgimini Consulting & IESE Business School:
Innovation Leadership (Miller et al., 2012) X X X X
Imaginatik: State of Global Innovation Survey
(Anonymous, 2013) X
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 10 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
GE: Global Innovation Barometer Survey
(Anonymous, 2014) X X
Planview: 4th Product Portfolio Management
Benchmark Study (Carlson, 2013) X X X
Total
3
1
4
3
During the empirical theory data mining phase, the following foundational early stage trends regarding
the future of innovation management were also observed:
i. The institutionalization of innovation management as a corporate business function.
ii. Increased awareness of capabilities and systems theory thinking applied to innovation
management.
The following list of questions evolved during the discovery and association process (which will be
discussed in the following paragraphs):
i. Why innovate, are there any motivational drivers?
ii. How must innovation be defined for industry today?
iii. Why managing innovation, are there any motivation drivers?
iv. What makes the management of innovation so difficult?
v. How must innovation management be defined for industry today?
The first task during data mining was to determine why corporations care to innovate, what
motivational drivers force corporations to look at innovation as a solution for growth and the
generation of wealth. A surprise finding was that drivers for innovation are not only fuelled by external
competitive forces, but also by shareholders (dividends and market capitalization), employees
(salaries and benefits) and all other stakeholders (environment and social responsibilities) with high
expectations for the generation of growth and wealth.
Five motivational drivers for innovation were formulated as follows (Figure 3):
i. Hypercompetitive industries.
a. Globalization.
b. Barriers of entry are getting smaller and lesser.
c. Increase in disruptive and breakthrough innovations.
d. Product innovation alone is insufficient.
e. Business model and systems oriented solutions is required.
ii. Turbulent and dynamic markets.
a. Increased influence by the Internet, social media and digital devices.
b. Fast-moving, uncertain markets with new entrants and solution offerings.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 11 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
iii. Fast paced changing world.
a. Increased pace to get idea-to-market.
b. Shorter product life cycles.
iv. Demanding shareholders and employees for growth and wealth.
a. Market capitalization and dividends requires increased revenues and profits.
v. Demanding customer and consumers.
a. Cheaper and better solutions to help get the job done.
b. More individualized products or service solutions.
Figure 3: Drivers for Corporate Innovation
With the identified motivational drivers for innovation, this research constructed a new definition for
innovation as follows:
Innovation is a system that delivers new ideas as unique solutions (for customers
and consumers) in such a way, that the company will generate brand recognition
in the market and increase wealth for employees and stakeholders.
Where:
New ideas may require sustainable, disruptive or breakthrough innovation efforts
(Christensen and Bever, 2014) to deliver new improved profit models, networks,
structures, processes, products, services, channels, brands or customer
engagement innovative solution types (Keeley et al., 2013).
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 12 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
With a good understanding why corporations have to be innovative and what an innovation system
needs to accomplish, the next research objective was to determine the existence of any corporate
forces that will motivate an organization to invest into the development of capabilities to manage the
innovation system.
The motivational drivers for innovation management were identified as the following:
i. Increased collaboration and larger networks across and outside the corporation.
ii. Increased complexity of solutions with high tech integrations and new business models.
iii. Increased disruptive and breakthrough innovation efforts.
iv. Increased pace with product research, development and commercialization.
v. Increased financial investments required.
vi. Increased risks for technological and commercial success.
Even if a corporation acknowledges the above mentioned motivational drivers for innovation
management, the following challenges were identified that can prevent the successful
implementation of innovation management as an institutionalized business function:
i. Corporate commitment and support.
ii. Integration of product data, technology forecasts, consumer analyses and market insights.
iii. Alignment of technical capabilities with turbulent and dynamic market insights.
iv. Transformation of tacit knowledge (intangible assets) into products (tangible assets) via a
complex innovation system with (Operations):
v. Complex organization structures, organizational behaviour and culture.
vi. Establishment and development of new innovation management capabilities.
vii. Internal and external stakeholder management.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 13 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
To respond to the motivational drivers and existing challenges for an institutionalized innovation
management function, this research constructed the definition of innovation management to be as
follows:
Innovation Management should be an institutionalized strategic and holistic
management function to automate, optimize and coherently align the
multidisciplinary and multi-functional innovation capabilities to ensure good ideas
can get through the innovation system fast, effective and efficiently through proper
coordination, collaboration and communication across the organization.
Holistically, the innovation management
function is responsible to make the
innovation system:
i. Repeatable.
ii. Predictable.
iii. Consistent.
iv. Sustainable (imbedded in procedures and values).
v. Scalable (according to market size).
vi. Tolerable (less risk).
vii. Profitable (revenue & growth).
Construction of the Capabilities-Driven Innovation ManagementTM Conceptual Framework
With the acquired knowledge about the current state of innovation in industry and the important
contribution innovation management can deliver, it was finally possible to construct a theoretical
solution to increase the success of innovations, competitive advantage, growth and the generation of
wealth for employees, shareholders and all other stakeholders.
The research determined that the success of a corporation’s innovation system depends heavily on
the level of commitment to support a management function that can oversee the operational health
and maturity development of the innovation system.
While innovation management can be interpreted at four different levels (Figure 4), this research’s
scope is at the corporate ecosystem management level. This management level must oversee the
innovation system’s environment and maintain a holistic oversight view of the innovation ecosystem.
Therefore, this research also focussed on the innovation management capabilities that are not
necessarily directly involved with new product innovation activities, but act as supporting enablers for
the innovation system. The other innovation management ecosystems were identified to be at
Research and New Product Development (R&NPD) and Product Lifecycle Management (PLM), Industry
and government levels.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 14 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
Figure 4: Conceptual Ecosystem Levels of Innovation Management
From the distilled empirical data, the following ten innovation management capabilities required for
successful innovation management, as a business function within a corporation, were identified:
i. Competitive Intelligence (CI).
ii. Intellectual Property (IP) management.
iii. Strategy, roadmap and portfolio management.
iv. Information Technology (IT) systems, big data and data analytics.
v. Innovation management governance.
vi. Innovation benchmarking.
vii. Innovation system process operations.
viii. Innovation commercialization.
ix. Leadership and culture development.
x. Collaboration and network development.
The Capabilities-Driven Innovation ManagementTM conceptual framework was constructed with the
goal to introduce a flexible map consisting of a set of strongly interrelated capabilities to simplify the
implementation of innovation management capabilities and the management of a corporate
innovation system. Figure 5 is a graphical representation of the Capabilities-Driven Innovation
ManagementTM conceptual framework.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 15 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
Figure 5: Capabilities-Driven Innovation ManagementTM framework
The Capabilities-Driven Innovation ManagementTM conceptual framework has the following
attributes:
i. The framework is only concerned with innovation management capabilities.
ii. There exist strong interdependencies and critical relationships.
iii. Influence are from top-to-bottom and from left-to-right.
iv. Coherency must exist between the top (strategy and planning) and bottom (execution)
capabilities.
v. Capabilities at the bottom seek to be stable, while capabilities at the top needs to be dynamic
and vigilant to steer the company to new opportunities.
vi. Capabilities at the bottom are more visible in the corporation as processes and values, while
capabilities at the top are imbedded in specific resources that are less visible.
CONCLUSIONS
This research identified the motivational drivers that forces corporations to at least acknowledge the
importance of innovation and in some cases innovation management as well. New definitions for
innovation and innovation management had to be constructed as new empirical theories to support
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 16 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
the context of this research. The challenges innovation management will face within a corporation
was also identified.
The research acknowledged a new paradigm where innovation is not a simple linear process of single
activities anymore, but a very complex fast paced multidisciplinary and multifunctional business
system with multiple activities being performed concurrently.
The research concluded that the difference in success with innovation is the level of commitment to
support a management function and the development of innovation management capabilities to
oversee the health and maturity of the innovation ecosystem and the innovation system itself.
This research delivered a theoretical Capabilities-Driven Innovation ManagementTM conceptual
framework as a flexible map consisting of a set of strongly interrelated capabilities to simplify the
management of an innovation system within a corporation as a solution to increase the success of
innovations, competitive advantage, growth and the generation of wealth for employees,
shareholders and all other stakeholders.
The contribution for industry and academics is a new approach that applies capabilities theory to
simplify the institutionalization of innovation management as a business function within corporations.
Future research will investigate:
i. The acceptance of the Capabilities-Driven Innovation ManagementTM conceptual framework
by academics and industry executives.
ii. Suggestions on how to improve the Capabilities-Driven Innovation ManagementTM conceptual
framework.
iii. Strategies to implement the Capabilities-Driven Innovation ManagementTM conceptual
framework within organizations.
Optional future research can:
i. Determine the value of each innovation management capability within different industries.
ii. Develop Capabilities-Driven Innovation ManagementTM maturity metrics.
ACKNOWLEDGEMENTS
The author would like to thank Prof Lucas Venter and Prof Nicholas Allen who inspired him to start
this research effort and especially Dr Marten van Dijken for his insights and his hint to investigate core
competency theory. Dr Hester Oosthuizen was instrumental with her assistance to transform the
author’s tacit knowledge into academic literature.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 17 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
REFERENCES
ALMQUIST, E., LEIMAN, M., RIGBY, D. & ROTH, A. 2013. Taking the measure of your innovation
performance. Bain & Company.
ALON, A. & CHOW, D. D. 2008. How to get the most from your best ideas. Accenture Outlook.
Accenture.
ANDREW, J. P., MANGET, J., MICHAEL, D. C., TAYLOR, A. & ZABLIT, H. 2010. A Return to Prominance -
And the Emergence of a New World Order. BCG Most Innovative Companies. BCG.
ANONYMOUS 2013. State of Global Innovation 2013. Imaginatik. Imaginatik.
ANONYMOUS 2014. GE Global Innovation Barometer 2014. GE Global Innovation Barometer. 4th
Edition ed.: GE.
CARLSON, M. 2013. Fourth Product Portfolio Management Benchmark Study: The state of product
development in 2013. Planview, Inc.
CHRISTENSEN, C. M. & BEVER, D. V. 2014. The Capitalist's Dilemma. Harvard Business Review, 92, 60-
68.
CHRISTENSEN, C. M. & OVERDORF, M. 2000. Meeting the Challenge of Disruptive Change. Harvard
Business Review, 78, 66-76.
DE JONG, M., MARSTON, N., ROTH, E. & VAN BILJON, P. 2013. The Eight Essentials of innovation
performance. McKinsey Strategy. McKinsey & Company.
DESCHAMPS, J. P. & NELSON, B. 2014. Innovation Governance: How Top Management Organizes and
Mobilizes for Innovation, Wiley.
DIVAKARAN, A. & COUTO, V. 2013. How Ready Are You for Growth? PwC Strategy&
strategy+business magazine. Booz & Company Inc.
DRUCKER, P. F. 1985. The discipline of innovation. Harvard Business Review, 63, 67-72.
DYER, J. H., GREGERSEN, H. B. & CHRISTENSEN, C. M. 2009. The innovator's DNA. Harvard business
review, 87, 60-67, 128.
EVELEENS, C. 2010. Innovation management; a literature review of innovation process models and
their implications. Science, 800, 900.
FURR, N. & DYER, J. H. 2014. Leading your team into the unknown: How great managers empower
their organizations to innovate. Harvard Business Review, 92, 9.
HAJIKARIMI, A., HAMIDIZADEH, M. R., JAZANI, N. & HASHEMI, S. M. G. 2012. Comprehensive
Systemic Model of Innovation Management : Total Innovation Management ( TIM ). Interdisciplinary
Journal of Contemporary Research in Business, 4, 1078 - 1088.
HOBDAY, M. 2005. Firm-Level Innovation Models: Perspectives on Research in Developed and
Developing Countries. Technology Analysis and Strategic Management, 17, 121-146.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 18 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
HUBBARD, T. N., LEINWAND, P. & MAINARDI, C. 2014. The New Supercompetitors. Stratety+Business
[Online].
JARUZELSKI, B. & DEHOFF, K. 2007. The Customer Connection. PwC Strategy& Global Innovation
1000. Strategy+Business: PwC Strategy&.
JARUZELSKI, B. & DEHOFF, K. 2008. Beyond Borders. PwC Strategy& Global Innovation 1000.
Strategy+Business: PwC Strategy&.
JARUZELSKI, B. & DEHOFF, K. 2010. How the Top Innovators Keep Winning. PwC Strategy& Global
Innovation 1000. Strategy+Business: PwC Strategy&.
JARUZELSKI, B., LOEHR, J. & HOLMAN, R. 2011. Why Culture Is Key. PwC Strategy& Global Innovation
1000. Strategy+Business: PwC Strategy&.
JARUZELSKI, B., LOEHR, J. & HOLMAN, R. 2012. Making Ideas Work. PwC Strategy& Global Innovaiton
1000. Pwc Strategy& Startegy+Business: PwC Startegy&.
JARUZELSKI, B., LOEHR, J. & HOLMAN, R. 2013. Navigating the Digital Future. PwC Strategy& Global
Innovation 1000. 73 ed. New York, NY 10178: PwC Strategy&.
JARUZELSKI, B., STAACK, V. & GOEHLE, B. 2014. Proven Paths to Innovation Success. In: 10 (ed.) PwC
Strategy& Global Innovation 1000. Winter 2014 ed. New York, NY 10178: PwC Strategy&.
KINNI, T. 2014. The Thought Leader Interview: Rita Gunther McGrath. McKinsey strategy+business.
KIRBY, J. 2014. Clay Christensen on Peter Drucker. Harvard Business Review [Online].
Available: https://hbr.org/2014/11/clay-christensen-on-peter-drucker.
KOETZIER, W. & ALON, A. 2013. Why “Low Risk” Innovation Is Costly: Overcoming the Perils of
Renovation and Invention. Accenture. Accenture.
LEINWAND, P. & MAINARDI, C. 2010. The coherence premium. Harvard Business Review, 88, 86-92.
MILLER, P., KLOKGIETERS, K., BRANKOVIC, A. & DUPPEN, F. 2012. Managing Innovation: An Insider
Perspective. Capgemini Innovation Leadership Study. Capgemini IESE.
PORTER, M. E. 1979. How competitive forces shape strategy. Harvard Business Review, 57, 137-145.
PRAHALAD, C. K. & HAMEL, G. 1990. The Core Competence of the Corporation. Harvard Business
Review, 68, 79-91.
ROTHWELL, R. 1994. Towards the Fifth-generation Innovation Process. International Marketing
Review, 11, 7-31.
SHELTON, R. D. & PERCIVAL, D. 2013. Breakthrough innovation and growth. PwC Global Innovation
Survey. PwC.
SILVERSTEIN, D., DECARLO, N. & SLOCUM, M. 2007. Insourcing Innovation: How to Achieve
Competitive Excellence Using TRIZ, Taylor & Francis.
SNOWDEN, S., CHEAH, P.-K., LANG, A. & WATTS, S. 2014. Fit for the future: Capitalizing on global
trends. PwC Annual Global CEO Survey. 17th Edition ed.: PwC.
STALK, G., EVANS, P. & SHULMAN, L. E. 1992. Competing on capabilities: the new rules of corporate
strategy. Harvard Business Review, 70, 57-69.
TAYLOR, A. & WAGNER, K. 2014. Rethinking your innovation system. BCG Winning with Growth. BCG
Perspectives: BCG.
International Association for Management of Technology
IAMOT 2015 Conference Proceedings
Page 19 of 19
All Rights Reserved. Copyright © Louis Bouwer 2015.
TAYLOR, A., WAGNER, K. & ZABLIT, H. 2012. The State of the Art in Leading Industries. BCG Most
Innovative Companies. 8th ed.: BCG.
TEECE, D. & PISANO, G. 1994. The dynamic capabilities of firms: An introduction. Industrial and
Corporate Change, 3, 537-556.
TEECE, D. J., PISANO, G. & SHUEN, A. 1997. Dynamic capabilities and strategic management.
Strategic Management Journal, 18, 509-533.
VERMA, S., SANGHI, K., MICHAELIS, H., DUPOUX, P., KHANNA, D. & PETERS, P. 2011. Companies on
the Move - Rising Stars from Rapidly Developing Economies are Reshaping Global Industries. BCG
Most Innovative Companies. BCG.
WAGNER, K., TAYLOR, A., ZABLIT, H. & FOO, E. 2013. Lessons from leaders. BCG Most Innovative
Companies. 9th Edition ed.: BCG.
WAGNER, K., TAYLOR, A., ZABLIT, H. & FOO, E. 2014. Breaking through is hard to do. BCG Most
Innovative Companies. 10th Edition ed.: BCG.
XU, Q., CHEN, J., XIE, Z., LIU, J., ZHENG, G. & WANG, Y. 2007. Total Innovation Management: a novel
paradigm of innovation management in the 21st century. The Journal of Technology Transfer, 32, 9-
25.
XU, Q., YU, Z., ZHENG, G. & ZHOU, Z. 2002. Towards Capability-based Total Innovation Management
(TIM): The Emerging New Trend of Innovation Management-A Case Study of Haier Group. In: XU, Q.,
WU, X. & CHEN, J., eds. International Conference on Management of Innovation and Technology
(ICMIT’02 & ISMOT'02), 2002 Hangzhou, China. Zhejiang: Zhejiang University Press, 233-239.
Conference Paper
Full-text available
Many innovation management experts, especially those from academic institutions and management consulting firms, believe that innovation is a discipline in its own right (or developing towards one). From this point of view, it can be assumed that the management of innovation activities in organizations will be performed by a separate function within the structure of the organization. There are many examples of companies that manage innovation as a corporate function, headed by a VP Innovation, Chief Technology and Innovation Officer or the like. To the contrary, other companies that also underpin the key role of innovation, do not believe in functional structuring of the management of innovation. Their approach relies heavily on the innovative culture and open, unstructured interaction and idea sharing through all levels of the organization. Google is a good example that supports this approach. This paper aims to share insight into this contradictory issue. A literature based research approach is followed to identify possible factors that can help firms to characterize themselves. The common view is that innovation management consist out of dimensions like innovative leadership, innovation culture, the innovation process, knowledge management and others. This point of view supports the need to drive innovation with an integrative approach mainly by active management of innovation through a formal structure within the organization. Nevertheless, various points of view for, or against a formal structure are argued in terms of the contexts related to these dimensions. Conclusions are drawn, and a taxonomy suggested for the development of a model for firms to guide themselves when determining their need for an innovation management function and what the management priorities should be.
Article
Sixty months after the 2008 recession ended, the economy was still sputtering, producing disappointing growth and job numbers. Corporations seemed stuck: Despite low interest rates, they were sitting on massive piles of cash and failing to invest in new initiatives. In this article, a leading innovation expert and his HBS colleague explore the reasons for this sluggishness. The crux of the problem, they say, is that investments in different types of innovation have different effects on growth but are all evaluated using the same (flawed) metrics. Performance-improving innovations, which replace old products with better models, and efficiency innovations, which lower costs, don't produce many jobs. (Indeed, efficiency innovations eliminate them.) Market-creating innovations, which transform products so radically they create a new class of consumer, do generate jobs for their originators and for the economy. But the assessment metrics that financial markets and companies use always show efficiency and performance-improving innovations to be better opportunities. This is the capitalist's dilemma: Doing the right thing for long-term prosperity is the wrong thing for investors, according to the tools that guide investments. Those tools, however, are based on an unexamined assumption: that capital is scarce, and that performance should be assessed by how efficiently companies use it. The truth is, capital is no longer scarce, and our tools need to catch up to that reality.
Article
Strategic and organizational factors are what separate successful big-company innovators from the rest of the field.
Technical Report
Executive summary This innovation leadership study carried out jointly by IESE Business School and Capgemini Consulting is Capgemini’s third report in the innovation leader versus laggard series. It aims to understand how those leading and managing innovation in their organizations think about the innovation function and offers an insider per- spective into both the formal and informal mechanisms for managing innovation. It covers five key areas that affect a company’s innovation success: the innovation function, innovation strategy and innovation governance (formal mechanisms), innovation leadership and innova- tion culture (informal mechanisms). The study offers a unique perspective by looking at the differences in behav- ior of innovation leaders versus laggards across these key areas - allowing to uncover good practices in managing innovation. Finally, the report offers an overview of the most important implications for innovation executives that seek to improve their innovation success rate. Our study revealed that the absence of a well-articulated innovation strategy is by far the most important constraint for companies to reach their innovation targets, followed by a lack of understanding of the external environment. There is a need for innovation strategy development in a more bottom-up manner, focused on people as the key source of competitive advantage. One needs to capture all those individual insights from managers and employees to better incorporate an understanding of the external environment in the strategy development process. The findings also suggest that there is a correlation between having a formalized innovation governance and the reported innovation success rate, implying that there is much to gain by improving the formal mechanisms for managing innovation. Furthermore, large organizations create so much distance between the executives and those that are tasked to inno- vate that a disconnect exists between them. Real innova- tion leadership requires executives to reduce the level of disconnect between themselves and employees when it comes to motivation for innovation. Also, our research on innovation culture shows that agility in behavior is considered a key cultural element of innovation. Behaviors that enable better responsiveness to the external environ- ment are required in our present-day society in order to be successful in innovation. Such a culture springs from both formal and informal sources. The CEO is the most important source of innovation culture but it has to take root informally as well. These and a wide range of other relevant findings for in- novation leaders and executives are elaborated on in this report. The most important findings per area can be sum- marized as follows. With innovation an emerging functional area within organizations the innovation function is becoming increasingly important as a source for innovation leadership. n Forty-three percent of respondents say they have a formally accountable innovation executive, versus 57 percent without such a formalized role. This is significantly higher than the 33 percent who said so in last year’s innovation leader versus laggard study. n Building and nurturing an innovation ecosystem (32 percent of respondents) and formulating and com- municating the innovation strategy (31 percent) are considered the top roles of the innovation function. n Companies consider the absence of a well-articulated and/or communicated innovation strategy as the most important constraint for their organization’s ability to achieve its innovation targets (24 percent of respondents). It is followed by a lack of understanding of the external environment as indicated by 13 percent of survey respondents. The majority of companies do not have an explicit innovation strategy - those who have one mostly develop it top-down. n Only 42 percent of respondents have an explicit innova- tion strategy, leaving 58 percent without such a strategy. n Innovation strategy development is mainly a top-down exercise. Most respondents (30 percent) indicate their innovation strategy is developed by a combination of top management, business unit heads, and internal innovation experts. Only 11 percent of respondents explicitly involve employees in the strategy development process. n The majority of companies communicate their innovation strategy widely in the organization. Seventy- eight percent of respondents say their innovation strategy is communicated widely inside the organization providing employees with a direction on how to act in the context of innovation. 2 Section Title AScercotsisotnheInbtoraord the governance levers for the formal management of innovation are largely overlooked or underdeveloped. n Only 30 percent of respondents agree they have an effective organizational structure for innovation. This is mainly due to not having a formal organizational BosdtryuTcteuxrte for innovation (45 percent), not having a well-defined governance structure (45 percent), or lack of clear roles and responsibilities for innovation (40 percent of respondents). n Thirty-nine percent of respondents say they do not have an effective decision-making process for innovation. This is largely due to not having a well defined process to prioritize and allocate time and funding to innovation projects (49 percent). n The KPI system is the least developed governance lever when it comes to innovation. A stunning 54 percent of survey participants indicate that they do not have a formal KPI system for promoting innovation. Only 21 percent of innovation leaders and managers agree they have an effective KPI system for innovation. n Less than a quarter (24 percent) of the respondents believes they have an effective organizational alignment of innovation efforts. Executives are mainly motivated by extrinsic transactional drives whereas employees are driven by high intrinsic transformational motivations for innovation. n Accountability for realizing growth is considered the main motivation for senior executives to be involved in innovation (46 percent of survey respondents), compared to only 15 percent who believe intrinsic creative motivation plays a role here. n Respondents believe that employees are primarily motivated for innovation because of intrinsic drives. Innovation is considered to be exciting work (91 percent), employees have a desire to improve things (89 percent), and like being part of a team or task force for something new (87 percent). Companies recognize the need to create a strong innovation culture that enables organizational agility. n Two-thirds of respondents (66 percent) say they have been tasked with creating a culture of innovation. n Respondents indicate openness to others’ ideas, to change, to exchange (84 percent), innovation considered a core value of the company (74 percent), and sharing information, ideas and results (69 percent) as the most important cultural elements for innovation. n The CEO is considered the most important source of an innovation culture (69 percent of respondents), followed by peers (59 percent) and managers in general (51 percent).
Article
Booz Allen Hamilton's annual study of the world's largest corporate R&D spenders finds two primary success factors: aligning the innovation model to corporate strategy and listening to customers every step of the way. How do companies innovate successfully? They can spend the most money, hire the best engineers, develop the best technology, and conduct the best market research. But unless their research and development efforts are driven by a thorough understanding of what their customers want, their performance may well fall short — at least compared to that of their more customer-driven competitors. John Schiech, president of the DeWalt division of Black & Decker (the division that makes power tools used by professional contractors), put it simply. When asked what made his company so successful, he responded, "It's engineers and marketing product managers spending hours and hours on job sites talking to the guys who are trying to make their living with these tools." This insight represents a further amplification of our ongoing research into the costs and value of corporate innovation. In 2006, as in the two previous years of our annual study of the Booz Allen Hamilton Global Innovation 1000 — the 1,000 publicly held companies around the world that spent the most on research and development — overall corporate revenues among these companies increased 10 percent. Once again, their overall spending on research and development also rose, to US$447 billion this year. And as in years past, we found no statistically significant connection between the amount of money a company spent on innovation and its financial performance. We also compiled a list of high-leverage innovators, as we did last year. These were the companies that, compared to other companies in 2006, got a significantly bigger performance bang for their R&D buck. The high-leverage innovators consistently achieve better sustained financial performance than their industry peers while spending less on R&D. We've spoken to executives at a number of these companies, including Black & Decker. When listing the reasons for their success, they all mention two key factors. The first is strategic alignment: They work hard to align their innovation strategies closely to overall corporate strategy. The second is customer focus: They all have processes in place to pay close attention to their customers in every phase of the innovation value chain, from idea generation to product development to marketing.