Innovation. Too Important to Leave to Chance.

Managed Innovation?

Innovation. It's a bright idea, a new feature, a patent, or doing something a new way. Everybody wants some but what is it?

It's rarely a eureka moment. And while it's not entirely predictable, it should not be left to chance. So we've built an ongoing process of investigation, revelation and execution into the way we work all the way through the product lifecycle.

We view innovation as an invention that adds sustaining value or creates breakthrough value for clients-the kind of value you can quantify-in the form of new revenue and more profit culminating in increased valuations.

You need systematic invention generation, a process to identify the most promising ideas and a battle tested execution capability to transform inventions into value.

Even the best companies bump up against limits to growth and in today's hyper competitive, globalizing economy there are plenty of reasons to get innovative. The proliferation of new technologies, disruptive delivery and distribution mechanisms, and harsh business model shifts are forcing companies to adapt in order to survive and thrive.

While not all innovation comes from R&D and product related functions, it is an important strategic outcome for R&D organizations along with other R&D Performance targets. If your mission is to identify and execute new products and services that materially contribute to revenue, margin, and market share you are living the innovation imperative.

Here are some of the keys to unlocking the full value of innovation within a global environment.

Manage Innovation Proactively

Innovation never 'just happens'. Inventions can happen by accident, but the resulting innovation does not. Add a 10,000 mile difference to the equation and you'll need some real structure to manage innovation through process, culture, metrics and the use of technology.

The message is innovation has to be managed and the wrong culture can kill it. It means building a corporate capability to recognize and remove whatever interferes with desired innovation outcomes-behaviors, norms, metrics and rewards.

So we've trained Innovation Mentors and installed dashboards, portals and reward systems, and made implementation processes tighter. And we've implemented a management system and metrics to track from invention to 'cash' so we can get better at transitioning ideas to realized value from innovations for our clients. Commercial grade innovation means delivering in a repeatable and sustainable way across multiple groups of people. To do this we mine ideas across the product development lifecycle, make innovation metrics part of client governance, and sustain organizational engagement.

All this structure is a means to manage the ROI for innovation—both our investment and the investment our clients make in us—but it’s also a way to open minds so that innovation can happen.

Collaborate In-Context

The best results come through deep, in-context collaboration inside and outside your company. It's about getting teams to a seamless level of operation so you can co-create whenever, where ever.

Collaboration barriers can be magnified by working across time zones but co-creation is so vital to increasing innovation yields in R&D that we are working with clients to break these barriers. A suite of context and collaboration tools and processes bring speed, accuracy and enhanced individual and organizational effectiveness to global operations. These tools and processes break down barriers by emulating the senses critical for human interaction. We are leveraging years of global operating know-how to find practical solutions for common issues:

Bundles of common technologies used in uncommon ways provide more effective transition and project management. Client portals provide real time client dashboards, Wiki, virtual meetings, document management, discussions, proprietary tools like Symphony Product Release Manager™, and streaming video. This supports one-time and all-the-time knowledge transfer that goes far beyond enhancing the client experience to enable the kind of collaboration that results in true partnership and innovation.

Expand Global Networks

The difference between an invention and innovation is often the strength of an organization's capability to execute.

How do you make sure you have a steady stream of innovation (aka inventions that add value) through systematic invention generation, a great filter for choosing the best and a battle tested execution capability to transform your inventions into value?

The question is how to shift resources and focus to increase the prominence of new breakthrough innovations in your revenue mix. As opposed to today's primary concentration on sustaining innovations, which only add incremental revenue. At best this short-term fix increases revenue from current products. But it offers no new value to customers and can camouflage the burning need to achieve breakthrough innovations perpetuating unhealthy business performance. So how do you get out of this doom loop?

Why not collaborate with external partners in the R&D process and extend your capability to turn more inventions into value? "A 2007 Economist Intelligence Unit study, "The Emergence of Global Innovation Networks," indicates that today, 64% of companies are outsourcing R&D and in three years this number will increase to 75%."

If your mantra is to move more rapidly from inventions driven by customer needs that go beyond features and functions to new platforms, delivery models and service innovations then you have to think differently. Shift from owning everything to a mindset of finding people to partner with that can take on parts of the innovation and commercialization process—no matter where they are in the world. Think about where you have the most acute needs the across the product development lifecycle, your product portfolio, and against revenue type (sustaining and breakthrough innovations).

This means embracing R&D globalization. You can build a technology and innovation network with organizations around the world best suited to help accelerate the achievement of your business goals—including specialized product development outsourcers that are aligned with your values.

Measure Outcomes

R&D outcomes - not spend - are the true measures of the value of innovation.

You can't simply throw more money at R&D and expect a proportional return on the investment. But the problem is there are no standardized metrics for innovation. And the three most commonly used means for measuring innovation impact: 1) percent of sales, 2) R&D headcount, and 3) number of patents acquired, are flawed. None of these measures are owned by R&D. The percent of sales and headcount are cost-driven, and the number of patents does not give you an indication of future value.

A better way to track innovation impact on the business is to track the revenue and return on investment directly related to innovation. To do this, Symphony combines a Vitality Index for Innovation with Innovation ROI measurements.

The Vitality Index, or VI, is the ratio of revenue generated from innovations over the last 12 months as compared with all other existing revenue. This is a revenue view of innovation verses a spend view. For example, assume a company has four product lines that have a combined return of $100 million in total revenue. Three of these four products have been earning revenue for more than a year. And the fourth was released just under a year ago and contributed $5 million to annual revenues. This company's VI would be 5/100 or 5%. Healthy organizations should strive for a VI of 10-20%, which compounded over time, will result in a 100% turnover in revenue from new products every five years.

The second and supporting metric called the Innovation ROI, or IROI, accounts for the money invested in developing an innovation. The IROI is the cumulative before tax profits over N years from innovation-driven products divided by the cumulative product expenditures for that same period. This can be further enhanced by discounting both revenue and cost as a function of prevailing and forecasted interest rates. The IROI allows you to compare overall product values independent of their size.

Combining both the Vitality Index and the IROI provides a much clearer picture of a company's innovation health. Using these direct measures of innovation, companies can foresee the revenue implications of unfocused R&D years earlier than with traditional measures. To foresee is to be forewarned, a metaphor realized through the Vitality Index.


An Innovation Checklist

Download Symphony Services latest white paper to learn about trends and best practices in establishing global innovation networks.



The Vitality Index

Measuring the impact that innovation programs have on organizational value is extremely important. Traditional measures are ineffective and a new measurement approach is needed, one that correlates activity to value.



Globalization and Innovation

Gordon BrooksGordon Brooks, President and CEO, Symphony Services

"Globalization is a challenge to innovation. But companies are not outsourcing innovation. They’re globalizing R&D and expect to get innovation along with increased productivity and speed to market. Innovation is top-of-mind now due to customer demands and the maturation of the software industry along with global innovation processes."

Innovation Teams

Robert Gersten, Chief Development Officer, Oracle / Hyperion

excerpt from session on R&D Globalization andIn novation at Software 2007

"Market driven development is about getting close to customers. The maturation of the software industry and of global innovation processes is making innovation critical now. A subset of our team at Symphony includes a small Innovation Team that has a pure focus on generating new ideas. They are helping to provide the dynamic technical environment necessary for sustaining our ability to innovate."

Global Networks

Robert GerstenEd Spire, Sr. Director, Technology and Architecture, Attachmate / NetIQ

excerpt from session on R&D Globalization and Innovation at Software 2007

"Our multi-national architectural group meets weekly and is focused on making a better product. The team we have in Bangalore with Symphony is not extra help. They are a vital part of our overall team. We've turned over almost everything about our most important products. We are leveraging engineering talent and treating them as equals in full cooperation and collaboration."