IN THE FRONT END OF INNOVATION
7.3 Organizational Resources and Climate
The organizational resources for the front end and the climate of the orga- nization defi ne the foundation for all front-end activities. Figure 7.3 shows study results. The thickness of the arrows denotes the relative importance of the variables in relation to having a successful front end. In this case, all of the variables were equally important. 1 The key variables are as follows:
• Senior Management involvement in the front end is the degree to which senior managers are personally involved in front-end activities, play
1In order to measure front-end performance, we developed a multi-item measuring tool. Such measuring tools have become well accepted in the new product develop- ment literature (e.g., Cooper and Kleinschmidt, 1993; Song and Parry, 1996) for mea- suring overall new product development success since actual quantitative product development performance, which one would consider the gold standard, is too diffi - cult to reliably obtain since the numbers are not often kept and are considered highly confi dential when they are.
FIGURE 7.3 RELATIONSHIP BETWEEN ORGANIZATIONAL RESOURCES AND CLIMATE AND SUCCESS OF THE FRONT END. THE
THICKNESS OF THE LINE DENOTES THE STRENGTH OF THE VARI- ABLE ’S INFLUENCE ON FRONT-END PERFORMANCE. IN THIS CASE,
ALL FIVE AREAS CAN BE CONSIDERED EQUALLY IMPORTANT.
Senior Management Involvement in the Front
End
Front End of Innovation Performance Strategy
Climate Resources
Vision
a central role in project reviews, participate in making key decisions, help champion new front-end projects, and play an integral role in them. P&G, under A.G. Lafl ey ’s leadership, has been consistently rated as one of the top 10 innovation companies in the world. In his book Game Changer (2008), coauthored with R. Charin, the former CEO of P&G describes how he established innovation as a central foundation of his company. Front-end activities, especially for transformational and disruptive products and services, are always more risky than incremen- tal and manufacturing improvements. Middle managers fi nd that they have no appetite to support riskier projects if senior management is unwilling to support them.
• Vision establishes the areas for front-end projects and gives clear direc- tions to them. It describes a future aspirational state. Vision is distinct from strategy. For example, Apple Computer ’s vision 2 is to bring the
“best user experience to its customers through its innovative hardware, software, peripherals and service.” They want to accomplish this goal through the company ’s “unique ability to design and develop its own operating system, hardware, application software and services” in order to bring to the customer new products and solutions “with superior ease-of-use, seamless integration and innovative design.”
The ideas for the next breakthrough typically come from employees who are closest to the consumer or user of the company ’s products or services. Often these breakthrough ideas are not in the company ’s pipeline. The vision provides the constraints or lens through which the people closest to the consumer can envision a new product or service.
For example, Apple ’s vision embodies products and services in which the hardware and software offerings are integrated and combined, making products like the iPhone and iPad congruent. In contrast, a television with no integrated software would not fi t within Apple ’s vision, and their employees would instinctively know this.
• Strategy provides an investment roadmap to the innovation initiatives and should be congruent with the company ’s vision. In Apple ’s case, their strategy defi nes particular products (e.g., iPod, iPhone, Mac com- puter) and product enhancements and services (e.g., iTunes and Apple stores) that would be supported within their investment horizon.
• Resources represent the degree to which sufficient funds are allo- cated to front-end activities: opportunity identifi cation and analysis, idea generation and enrichment, and concept defi nition. Directing resources to the front end is obviously necessary for success. However,
2 From Apple ’s September 2011 10K Report.
the authors have found this to be one of the most diffi cult and perplex- ing challenges for senior management: allocating suffi cient resources to transformational and disruptive products. Directing resources to higher-risk projects means separating them from incremental proj- ects—which, in turn, will have an effect on near-term quarterly earn- ings. This creates a quandary, as many senior managers are judged on the basis of quarterly earnings during the current fi scal year.
• Climate is the recurring patterns of behavior, attitudes, and feelings within an organization. Climate embodies the deeper and enduring val- ues of the organization and is diffi cult to change. Human beings tend to be extremely sensitive to any form of criticism. A climate that supports the individual and allows ideas to be expressed without any retribution or criticism is a critical part of ensuring a creative environment, which, in turn, leads to new innovative products. In addition, it is important to align the incentives with the type of efforts that need to be made. Dan Pink, in his popular book Drive (2011), summarized abundant research showing that monetary rewards and recognition worked well for rudi- mentary tasks typically required for sustaining or incremental projects.
However, his analysis also showed that for transformational and disrup- tive efforts, where creative thinking was required, monetary awards did not work and were even counterproductive to success. He found that the climate required for innovative thinking required the organization to support autonomy (people want to have control over their work), mas- tery (people want to get better at what they do), and purpose (people want to be part of something that is bigger than they are).
Our research suggests that the organizational resources and climate are the most important parts of the front end. Khurana and Rosenthal (1998) in their study of 10 incremental and two radical projects, and Poskela and Martinsuo (2009) in a more recent study of 137 Finish companies, found similar results. This is an important conclusion, as literature sometimes places more emphasis on the importance of idea generation. Often com- panies start new front-end initiatives with an ideation brainstorming session or a companywide request for new
ideas. The research indicates that the company fi rst needs to get their orga- nizational resources (i.e., senior man- agement commitment, vision, strategy, and resources) and climate aligned in order to be successful.
Organizational resources and climate are the most impor- tant foundational parts of the front end.
A recently published book entitled Collective Genius (2012), by Linda Hill and her colleagues, is a study of innovation leaders across 10 research sites including California, Dubai, India, and Korea and spanned both ser- vice and product industries. The authors found that the great innovation leaders created an environment where the employees felt empowered to be creative. The great leaders led from behind. This concept is best cap- tured in a quote from Nelson Mandela: “A leader . . . is like a shepherd.
He stays behind the fl ock, letting the most nimble go on ahead, where- upon the others follow, not realizing that all along they are being directed from behind.”
Our research also concludes that all of the organizational resources and climate are equally important. In fact, all parts of the engine are critical to a successful front end. This result aligns well with Lafl ey and Charin ’s book Game Changers (2008, p. 10), where they state that successful innovation can happen only if it is “integrated into how you run your busi- ness; its overall purpose, goals and strategies, structure and systems, lead- ership and culture.” The authors further state that successful innovation can only occur when the key elements of leadership, vision (i.e., purpose and value), strategies including stretch goals, culture, and their enabling structures and processes are all organized together.