• Learning Objectives for Project Managers and Innovation Personnel
• To understand the different types of innovation and their characteristics
• To understand that, in some forms of innovation, many team members can be external to the company
• To understand the importance of measuring “value-in-use”

INTRODUCTION

“Innovation is an evolutionary process, so it's not necessary to be radical all the time.”

— Marc Jacobs

“Of the top 10 sources of innovation, employees are the only resource that you can control and access that your competitors cannot. Employees are the one asset you have that can actually be a sustainable competitive advantage.”

— Kaihan Krippendorff

According to Webster's Dictionary, innovation can be defined simply as a “new idea, device or method.” However, innovation is also viewed as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs (Maryville 1992) and (Frankelius 2009). This is accomplished through more effective products, processes, services, technologies, or business models that are readily available to satisfy market needs.

From an organizational perspective, innovation may be linked to positive changes in efficiency, productivity, quality, competitiveness, and market share. Research findings highlight the importance of the firm's organizational culture in enabling organizations to translate innovative activities into tangible performance improvements (Salge and Vera 2012). Organizations can also improve profits and performance by providing workers with adequate resources and tools to innovate, in addition to supporting the employees' core job tasks.

INCREMENTAL VERSUS RADICAL INNOVATION

Companies have been struggling with ways to classify the different forms of innovation. In one of the early studies on innovation, Marquis (1969) differentiated between two types of innovation, incremental and radical. Many authors today consider these as the two primary forms of innovation.

Incremental innovation consists of small, and often continuous, improvements to existing products and services to maintain support for customers in existing market segments and hopefully attract some new customers. The intent may be to extend the life of a product or service. The improvements may or may not be technical improvements. Investments in incremental technology improvements can occur with the intent of lowering production costs. Nontechnical incremental improvements may be the addition of a new feature or functionality, improvements in quality, or even changes in color and design to make a product more aesthetically appealing. The amount of flexibility provided to the innovation team may be limited because the organization has a reasonably good idea as to where they are heading.

Radical innovation is the use of new technologies to create new products and services for new markets. The resulting product might be new to the company, new to the national market, or new to the international market. Radical innovation is characterized by search, discovery, experimentation, and risk taking. The innovation project team may have some degree of flexibility but within the confinement of more formal ideation methods. The innovation may be driven by dreams or a vision of what might be possible.

There are risks with successful radical innovation. The result might be the loss of some customers that are not ready for the new technology. The new products and services may lead to creative destruction, whereby some of your existing products and services are now obsolete and the new products cannot be produced within the existing manufacturing facilities. There can also be radical changes in the relationships with your suppliers, distributors, and other partnerships. Similar arguments can be made regarding making too many incremental innovations while consumers and partners are looking for technical breakthroughs.

Scholars like to compare incremental and radical innovation. Incremental innovation is a slight change to an existing product, whereas radical innovation is a change based on a completely new idea. Incremental innovation focuses on existing markets and enhancements of existing products and services as well as refinements to production and delivery services (Danneels 2002, Jansen et al. 2006). Radical innovation focuses on the development of new technologies, usually targeted for new markets, which adds a great deal of uncertainty and risk (O'Connor and Rice 2013; Garcia and Calantone 2002).

UNDERSTANDING INNOVATION DIFFERENCES

From a project manager's perspective, these two types of innovation projects have different and often-competing strategic objectives, which must be managed differently. Radical innovation creates long-term profits for a firm. However, the cash flow needed for radical innovation may depend on the firm's success with incremental innovation. The “hidden” strategic objective, as seen by the project manager, is therefore to get the change made as quickly as possible to generate cash flow for radical innovation. Trying to develop the perfect incremental change to a product is not as important as time-to-market. Making incremental changes every year may be a better decision than trying to make a perfect change every three years and run the risk that competitive products will enter the market, causing you to lose cash flow opportunities. Incremental changes can be made quickly if the changes are made within the core competencies of the team.

Another difference between the competing objectives of incremental versus radical innovation is the opportunity for creative destruction. With incremental innovation, the project manager knows that the product will be commercialized using existing technology and existing manufacturing processes. With radical innovation, the project manager must consider that the new product will displace older products and the production technologies used in manufacturing will also need to be updated. Therefore, there can be disruptive changes to the commercialization process because of new products.

Just from these two types of innovation activities, it should be obvious that project managers must have a good understanding of the type of innovation being undertaken. Each type of innovation has strategic business objectives that compete with other forms of innovation. Also, project managers must know the core competences of the assigned team members rather than just if the functional managers assigned the right people. With traditional project management, we may not worry as much about core competencies. With innovation, core competencies have a significant impact on strategic business objectives, time-to-market, and other commercialization activities.

PRODUCT DEVELOPMENT INNOVATION CATEGORIES

Figure 2-1 shows some typical categories for product development innovation. There are four general types of product innovation. Each type comes with advantages and disadvantages:

1. Add-ons, enhancements, product/quality improvements, and cost-reduction efforts. This type of innovation may be able to be accomplished quickly and with the existing resources in the company. The intent is to solve a problem and add incremental value to the result. The disadvantage is that this may have to be done frequently.
2. New family members or next generation. This is the creation of totally new products or possibly to complete a product line and may require a technological breakthrough. The risk is in market acceptance.
3. Radical breakthrough in technology. This type of innovation has risks. You may not be able to determine when the breakthrough will be made and what the accompanying cost will be. Even if the breakthrough can be made, there is no guarantee that the client will receive added value from this solution. If the breakthrough cannot be made, the client may still be happy with the partial solution. This type of innovation may require the skills of only one or two people.
4. Totally complex system or platform. This is the solution with the greatest risk. If the complex system cannot be developed, then the project will probably be considered a total loss. Many highly talented resources are needed for this form of innovation.

Incremental innovation includes add-ons and next-generation products that may simply be the result of the add-ons. Radical innovation is based on new technology that could lead to a totally new complex system.

As we go from add-ons to complex systems, ambiguity and complexity will usually increase. Project managers may find it difficult to define requirements, understand changes in the marketplace, estimate time and cost, perform risk management, and deal with extensive meddling by stakeholders. Project managers may not be qualified to manage each type of product innovation project, and this does not include other company innovation projects such as service-related projects, new processes, and transformational projects.

Some projects can begin as incremental innovation and then expand into radical innovation. This can lead to a change in project leadership because not all project managers possess the skills to manage each type of innovation project. Project teams responsible for incremental innovation respond to changes in market conditions, whereas radical innovation teams perform in a more proactive manner. Radical innovation teams are multidisciplinary and self-managed. They must have open communication channels to share ideas and solve problems rapidly. This may require that project managers possess a different skill set.

For innovation to occur on a repetitive basis and for a firm to retain its competitive advantage, the organization must create and nurture an environment conducive for innovation. Executives and managers need to break away from traditional ways of thinking and use change to their advantage. Executives must adopt an innovation mindset. There is a great deal of risk, but with it comes greater opportunities. Innovations may force companies to downsize and re-engineer their operations to remain competitive. This may affect employment as businesses may be forced to reduce the number of people employed while accomplishing the same amount of work if not more (Anthony et al. 2008). The impact that innovation can have on the way that a firm runs its business is often referred to as disruptive innovation. We must remember that many process innovations result in disruptive changes rather than sales.

CLOSED AND OPEN INNOVATION

“True innovation and disruption happens outside of the accepted playing field, outside of the court, outside of the battleground. Disruption breaches the field and changes the game.”

— Tony Curl

“To measure market needs, I would watch carefully what customers do, not simply listen to what they say. Watching how customers actually use a product provides much more reliable information that can be gleaned from a verbal interview or a focus group.”

— Clayton M. Christensen, The Innovator's Dilemma

Wheelwright and Clark (1992) were among the first to identify how diverse types of innovation projects can impact the way a firm is managed, and that organizational change may occur frequently to maintain an innovation environment. The authors argue that companies are challenged with linking innovation projects to the company's strategy and that, although each project may have its own business strategy, there must still exist a linkage to the firm's overall business strategy. In an earlier work (Abernathy and Clark 1985), projects were classified according to the firm's technical and marketing capabilities, which became the basis for identifying competence-enhancing vs. competence-destroying innovations.

The innovation environment in a firm can be defined as closed or open concerning idea generation and sources of information.

Closed innovation is based on the premise that successful innovation requires control. Particularly, a company should control the generation of their own ideas, as well as production, marketing, distribution, servicing, financing, and supporting. This way, it is left up to the corporations to take the new product development cycle into their own hands. In this approach, the company assumes that there is not enough time to wait for other companies to start producing some of the components that are required in their final product. These companies become relatively self-sufficient, with little communication directed outward to other companies or universities.

With closed innovation, companies must rely on their own people and events to gather ideas. Typical sources for ideas might include:

• Unexpected occurrences, whether a success or failure
• Incongruities
• Process needs
• Observed industry and market changes
• Observed changes in demographics
• Changes in perception
• New knowledge

Open innovation argues that companies cannot rely entirely on their own research but should solicit ideas from outside the firm, including consumers, rival companies, academic institutions, licensing, and joint ventures. The boundaries between the firm and its environment are now permeable.

Throughout the years several factors have emerged that paved the way for open innovation paradigms:

• The increasing availability and mobility of skilled workers
• The growth of the venture capital market
• External options for ideas sitting on the shelf
• The increasing capability of external suppliers

Open innovation offers several benefits to companies operating on a program of global collaboration:

• Reducing the cost for idea generation
• Reduced the cost of conducting research and development on their own
• Incorporating customers early in the development process to get buy-in and possibly partial ownership
• A more accurate understanding of the targets market segments and customers
• Potential for productivity and efficiency improvements

Implementing a model of open innovation is naturally associated with risks and challenges, including:

• Possibility of revealing information not intended for sharing
• Potential for the hosting organization to lose its competitive advantage by revealing intellectual property
• Increased complexity of controlling innovation and regulating how contributors affect a project
• Devising a means to properly identify and incorporate external innovation

Typical sources for ideas with open innovation include:

• Customers, competitors, and suppliers
• Purchasing or licensing of technology
• Private inventors
• Academic institutions and academic research reports
• Government agencies and government-funded research
• Journals and other publications such as working papers
• Technical fairs and trade fairs
• Open innovation fairs

Both buying or licensing inventions and patents from others and forming joint ventures bring with them additional risks. First, you may be revealing too many technical details not found in publications. Second, there is always the risk of willful patent infringement. Third, you are informing people that someone believes there are opportunities here by the justification of costs and negotiations and accompanying financial obligations.

Converting ideas to reality requires technology. There are four levels of technology for innovation:

• Level I: The technology exists within the company.
• Level II: The technology can be obtained from other sources within the country
• Level III: The technology can be obtained from other sources outside of the country.
• Level IV: Technology must be researched outside of the country and brought back to the parent company.

Regardless of whether we use open or closed innovation, techniques must be established for the capturing and storage of information. Typical idea handling techniques include:

• Idea inventories
• Idea clearinghouses
• Idea banks
• Screening or review teams

The greater the number of creative ideas generated, the greater the chance of selecting the types of innovation projects that will maximize the business value. If the organization is risk averse, then high-risk projects with the potential of delivering high levels of value may never surface.

CROWDSOURCING

“This is not the wisdom of the crowd, but the wisdom of someone in the crowd. It's not that the network itself is smart; it's that the individuals get smarter because they're connected to the network.”

— Steven Johnson, Where Good Ideas Come From: The Natural History of Innovation

“Customers often know more about your products than you do. Use them as a source of inspiration and ideas for product development.”

— David J. Greer, Wind in Your Sails

Crowdsourcing is often associated with open innovation and is the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people. There is usually a greater number of creative and innovative people outside of a company than within it. Open innovation focuses on idea generation, whereas the intent of crowdsourcing is to solve a potential problem and then share the information freely with all contributors. The challenge is determining the size of the crowd, its ability to be productive, and whether its members understand their role.

Collecting information from crowdsourcing can be accomplished through formal channels of communication and/or informal social media networks. However, there are risks in both cases as to the value of the information received.

Abrahamson et al. (2013, 15) identifies five possible outcomes from crowdsourcing:

1. Getting ideas. Obtaining many ideas that would otherwise be beyond the scope of what is possible with an internal team or traditional partners.
2. Evaluating ideas. Efficiently receiving feedback and interpretations from a wide range of stakeholders to determine where to make future investments.
3. Finding talent. Through the proposals, identify new individuals, teams, and organizations to work with.
4. Causing conversation. Generating content and often provocative ideas that in turn lead to conversations and media coverage.
5. Transforming relationships. Enabling stakeholders to participate in generating and selecting ideas can positively change the relationship between the organization and stakeholders.

There are several limitations and controversies about crowdsourcing:

• Crowdsourcing might negatively affect product quality due to the considerable number of participants that may be involved, many of whom may be unqualified.
• A great deal of time and money can be spent evaluating low-quality contributions because little information is available currently about the desired product.
• Crowdworkers may not communicate with one another, and the results could be suboptimal.
• Increased number of funded ideas may make the evaluation process complex, resulting in good ideas not being considered.
• Trustworthiness of the information and the decision-making process can be open for debate.
• Determining who controls copyright information, patents, etc. can create legal headaches.

CO-CREATION INNOVATION

“It takes people from the outside to change things on the inside. Innovation happens from outsiders.”

— Richie Norton

“To go from Bitter, to BETTER, means you need to turn your I onto an E, by embracing WE.”

— Tony Dovale

Most companies have limited resources and cannot undertake all the innovation activities they desire. Other reasons for resource restrictions might include:

• In-house technical resources have insufficient knowledge/skills.
• In-house resources are committed to higher-priority projects.
• In-house talent exists but work can be done externally for less money and in less time.

Companies may then wish to take on strategic business partners and focus on co-creation. Co-creation is a management initiative or strategy that brings different parties together, such as a company and a group of customers, to jointly produce a product or service that has value-in-use to all parties. Co-creation brings a blend of ideas from direct customers or viewers (who may not be the direct users of the product), which in turn brings innovative ideas to the organization. However, the project manager must decide in which phases, early or late, in the life cycle to involve the co-creation team.

Co-creation is a much better tool than market research for determining consumer behavior because it provides some degree of power and decision making to the participants for brand identification and future direction. Co-creation is an excellent way to identify opportunities because “none of us are as smart as all of us.” Co-creation teams that involve leading-edge users generally provide more ideas than a company could generate internally. The size of a co-creation team can vary from a few participants to hundreds.

For novelty products, co-creation teams may have an easier time thinking out of the box than using just internal personnel. The co-creation team may also provide ideas for value chain efficiency, especially if they are part of the value chain.

Co-created value arises in the form of personalized, unique experiences for the customer (value-in-use) and ongoing revenue, learning, and enhanced market performance drivers for the firm (loyalty, relationships, customer word of mouth). Value is co-created with customers when a customer can personalize his or her experience using a firm's product-service proposition to create greater value. The result can be faster time-to-market, less exposure to risks and uncertainty, greater customer satisfaction, lower cost, better product quality, higher revenues/profitability, superior brand value/loyalty, and better technical solutions. A major value for the firm sponsoring co-creation is better fulfillment of customer needs that increases the likelihood of new product/service success.

Co-creation is a form of “open” innovation, as seen in Figure 2-2. The six arrows in the top portion of Figure 2-2 are the characteristics of a closed innovation process where the firm does everything by themselves. When co-creation takes place, the boxes in the bottom portion of Figure 2-2 are added in to form an open innovation environment.

The purpose of innovation is to create value. As seen in Figure 2-3, companies are investing heavily in customer value management programs. According to a study by the American Productivity and Quality Center (APQC 1998, 8):

Although customer satisfaction is still measured and used in decision-making, the majority of partner organizations (used in this study) have shifted their focus from customer satisfaction to customer value.

Customer value management programs are replacing customer relations management (CRM) programs. Traditionally, CRM activities focused on handling customer complaints and product returns. This provided information related to existing products only with little or no information related to future products and services, and a rather informal approach to listening to the voice of the customer.

Co-creation is a critical component of customer value management programs because it allows you to get closer to the customers and understand their perception of value and their needs. Companies need to know how their customers interpret value and create their own value. Customers and the ultimate consumers provide the sources of competitive advantage. Companies therefore need customer-driven innovation to unlock the sources of competitive advantage. This will require new forms of relationships with customers for activities other than innovation as well.

The importance of value creates an innovation focus that is not just on cost and quality. It also includes beauty, safety, comfort, pride, and aesthetic value, and so on. Financing is not a critical issue for innovation in most firms, especially when value is the ultimate goal.

The project manager and his/her IPM team must have a clear understanding of value and its importance to the innovation process. This is different than what most PMs are used to when they work with internal personnel only. This includes:

• Customers will co-create with you if they perceive the value-in-use of buying your goods and services.
• Value is usually a personal judgment, and the focus must be on value-in-use.
• Customers must perceive the value before integrating their own resources into a co-creation effort.
• Determining value-in-use requires marketing and the IPM team to get closer to the customer.
• It is the customer that determines what is valuable.
• There is a difference between perceived and actual value in the innovation life cycle.
• Value-in-use focuses on lifetime value.
• Value can appear as financial value, organizational value, and strategic value.

Customer co-creation can be looked at from a business-to-consumer (B2C) perspective or from a business-to-business (B2B) perspective. Customer co-creation for innovation in B2B contexts is relatively mature, whereas B2C settings are only now being studied. In both cases, customer co-creation is described as a network or “ecosystem” involving several types of actors. There are different actors for each case as well as different boundary conditions and requirements. There can also be different forms of co-creation logic used, such as:

• Goods-dominant logic (G-D)
• Service-dominant logic (S-D)

A critical component in customer co-creation is the identification of “appropriate” customer co-creators for specific outcomes. Some publications make a distinction between ordinary/mainstream customers and advanced customers/lead user innovators that possess superior knowledge and/or have advanced market needs. Both types of customers must be able to think outside the box and provide original ideas.

Co-creation offers firms and their network of “actors” significant opportunities for innovation, as each actor offers access to untapped resources through a process of resource integration. Actors can come from a variety of sources including suppliers, customers, strategic and nonstrategic partners, competitors (with similar offerings) and influencers (indirect collaborators such as media, government, and regulatory agencies). Customers are often considered as the most important actors because they can provide new sources of competitive advantage in value creation that can lead to enhanced consumer loyalty, consumer satisfaction, and higher purchases.

The output of a co-creation effort can be a product or a platform. A platform is a core design from which customers can customized the result with features or amenities specifically designed for their markets. This approach involves developing and introducing a partially completed product, for the purpose of providing a platform, framework, or tool kit for contributors to access, customize, and exploit. The goal is for the contributors to extend the platform product's functionality while increasing the overall value of the product for everyone involved.

As an example of platform co-creation, Boeing allowed eight airlines to have a role in the development of the Boeing 777 aircraft. The eight airlines were All Nippon Airways, American Airlines, British Airways, Cathay Pacific, Delta Air Lines, Japan Airlines, Qantas, and United Airlines. This was a departure from industry practice, where manufacturers typically designed aircraft with minimal customer input.

The eight airlines that contributed to the design process became known within Boeing as the “Working Together” group. At the first group meeting, a 23-page questionnaire was distributed to the airline representatives, asking what each wanted in the design. Two months later, Boeing and the airlines had decided on a basic design configuration that included flexible interiors to satisfy the needs of each airline. Part of the co-creation effort was also to look at ways of designing an aircraft such that maintenance costs could be lowered. At one point, Boeing had 240 design teams, with up to 40 members each, addressing almost 1,500 design issues with individual aircraft components. The fuselage diameter was increased to suit Cathay Pacific, the baseline model grew longer for All Nippon Airways, and British Airways' input led to added built-in testing and interior flexibility, along with higher operating weight options.

Most customers usually welcome participation in co-creation efforts because they view it as beneficial to their organization and possibly themselves personally. Some potential benefits include:

• Partial ownership in the result
• Excitement
• Creating and collecting intellectual property
• Possibility of obtaining a competitive advantage and competitive leadership for their own firm
• Possibility of enriching their portfolio and introducing new products and services

The customers and the parent company must be two equal problem solvers rather than just the company listening to the voice of the customer. Dialogue is needed in order to identify:

• Each party's vision and sense of urgency
• What each party sees as a competitive advantage
• New customers

Selecting co-creation partners is difficult even if it is for a specific outcome. Critical questions that must be considered include:

• Who are the actors—end users, extreme end users, suppliers, distributors?
• Should we look at a mass crowd of users? (i.e., crowd-sorting)
• Do we select actors that are ordinary users or those who have some proficiency in product development?
• Do we select ordinary/mainstream customers or advanced customers (lead users) that have superior knowledge and advanced needs?
• Should we select lead users in the idea generation stage and ordinary users in the testing stage?
• Does it make a difference in actor selection if we have incremental or radical innovation?
• Does the expected innovation outcome make a difference in actor selection?
• Can ordinary customers think out of the box?
• What are the pros and cons of each group of actors?
• Can customer involvement vary based upon the life-cycle phase?
• How much freedom should we give the lead firm to design the architecture of participation and determine who makes decisions?
• How should we plan for situations where some partners are unwilling to share information if they are already participating in co-creation?

Selecting partners can create challenges for the parent company, especially behavioral issues that could impact relationships in the future. Some questions that the enterprise must consider before seeking partners include:

• What are the reasons for the partnerships?
• How do we recruit and find actors/customers?
• Will the actors function in a support role or will it be joint innovation?
• Do we understand the cost and risks of co-creation activities?
• Who will own the intellectual property rights?
• Will there be a sharing of revenue and/or proprietary knowledge?
• Will any of the customers be unhappy and not agree to participate in the future?
• How should we handle irrational behavior by some of the partners?
• How will partners react to each other's behavior?
• What are the potential conflicts among the partners and how should they be resolved?

IPMs must participate in discussions involving answers to these questions. Unlike traditional project management practices where issues like these are handled by the project sponsor, these issues may require direct involvement by the innovation project manager and possibly team members.

There are numerous benefits to using co-creation. They include:

• Supplanted innovation
• Better alignment to the customer's needs and the customer's business model
• Maintaining technical leadership and skills
• More new business opportunities
• Maintaining a defensive posture to meet competition
• Balancing work loads and maintaining better asset allocation
• Maintaining customer goodwill
• Improvements to existing products
• Reduction in commercialization time
• Faster time-to-market
• Lower risk of failure
• Early identification of market reaction
• Better focus on value creation
• Reduction in innovation costs
• Make company more competitive in the future and lower market entry barriers
• Repeatable elsewhere

Some companies prefer to identify the benefits of co-creation by the following:

• Co-design
• Co-production
• Co-promotion
• Co-pricing
• Co-distribution
• Co-maintenance
• Co-consumption
• Co-disposal
• Co-outsourcing

Companies that are highly successful at co-creation build co-creation activities into their business model. The result can be better customer relations management practices, quicker compliance to regulatory and social needs, identification of better ways to restructure the organization, better strategic planning options by identifying future needs, and more predictable financial considerations.

Sometimes we start out with the best intentions and then discover that things went wrong. Some of the factors that can destroy co-creation initiatives include:

• Participants working toward different goal and objectives
• Partner problems
• A landlord-tenant relationship between parties
• Unrealistic expectations
• Lack of senior management support and commitment
• Being close-minded about ideas
• Mismatched cultures
• Personality clashes
• Failing to keep creative people engaged and challenged
• Bringing the wrong people on board
• Too large a group
• Not listening to everyone
• Allowing time pressure to force you to make rapid decisions based on partial information
• Criticizing ideas perhaps without justification
• Failing to focus on lifetime value

Perhaps the greatest risk with co-creation occurs when the outcome is creative destruction. Creative destruction occurs when the team develops a product that is new and revolutionizes the marketplace to a point where their other products are now obsolete. This could result in a loss of revenue from past customers, having to lay off people, and the need for a completely new business model.

OPEN INNOVATION IN ACTION: AIRBUS AND CO-CREATION PARTNERSHIPS

Airbus was formed in 1970 as a consortium of aerospace manufacturers from four countries in Europe. Airbus designs, manufactures, and sells civil and military aerospace products worldwide. The company has three divisions: commercial aircraft, defense and space, and helicopters. In the commercial aircraft division, which is the older division, 'manufacturing is shared as follows: the wings are made in the United Kingdom, the fuselage and the vertical part of the tail in Germany, the horizontal part of the tail in Spain, and the plane is assembled in Toulouse, France. Considering the heterogeneity of the involved companies, Airbus is inherently a laboratory of “open innovation.” According to Chesbrough (2003), who coined the term, open innovation is the cooperation between several companies that share resources, knowledge, and skills in a creative goal. This is exactly what has been done at Airbus, namely four aerospace companies in Europe put together the efforts, knowledge, and experiences in order to be competitive with the US aviation companies. However, it has to be noticed that, especially in the case of product innovation and in the high-tech field, the effort of a “single” company (even of a consortium like Airbus) could be not enough to promote the development of new technologies or, to cite Schumpeter (1942), to induce the creative destruction process.¹ As observed by Chesbrough, in order to better create the conditions to make easier the development of new technologies, it is extremely advantageous to cooperate with other firms in the same sector, with suppliers, with universities, with research centers, and so on. Figuratively, the continuous line that ideally defines the boundaries of a firm must become a dash line, allowing the knowledge to be shared freely among the partners. As pointed out by Park, Srivastava, and Gnyawali (2014) the sharing of resources promotes innovation and generates collective competitive advantages to distance competitors who are not involved in the partnership. In addition, the cooperating networks of actors create synergies, multiply the ability to innovate, and all involved partners benefit from each others' expertise (Chesbrough 2003).

At Airbus, open innovation is not only a concept used to create and compete but also a way to provide very advanced products that include new technologies. In accordance with Chesbrough's theory, the idea generation and the creation of new products is reached by the constant collaboration between Airbus and supplier's, and with universities and research centers. An example is the advanced center for composite materials research, Technocampus EMC². Located near Nantes (France) Technocampus EMC², which includes in its name Einstein's most famous equation, is a technological research center dedicated to composite manufacturing. It encompasses industrial and academic players who work on developing innovative manufacturing technologies for high-performance composite materials. Opened in September 2009, it offers pooled equipment and resources, encourages an interdisciplinary approach, collaborative R&D, and technology transfer. With the Technocampus EMC² Airbus has established efficient means of research and development in technologies of impregnated composites and thermoplastic resin infusion. These technologies have been widely used in the design of the latest long-haul aircraft in its class: the A350 XWB.² Airbus develops materials with Technocampus EMC² for airplanes of tomorrow in collaboration with academic partners: the Ecole Centrale Nantes, the Ecole des Mines, ICAM, and Polytech; industrial partners such as CETIM, Aerolia, CIMPA, Composite Tool, Daher-Socata, and Euro Engineering. The involvement of all these actors represents the contribution of skills and technological knowledge needed when the priority is to develop a revolutionary innovative product or a killer technology (Oihab 2015).

VALUE (OR VALUE-DRIVEN) INNOVATION

“Focus on innovating at value, not positioning against competitors.”

— W. Chan Kim, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

“When organizations fail to register the difference between value innovation and innovation per se, they all too often end with an innovation that breaks new ground but does not unlock the mass of target buyers.”

— W. Chan Kim, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

When companies embark on a quest for innovation, they often use conventional logic. In this approach, products and services are introduced into the marketplace with the hope that customers and end users see some value in the use of the product or service. Companies can invest billions of dollars on just a hunch that the end user will accept the product rather than taking the more realistic approach of talking first to end users. Decisions may be made to expand a product line, add more features to a product, or possibly disrupt the markets with radical innovation. But regardless of what decisions are made, real success is measured by value.

When customers recognize value-in-use of the products, the results translate into value for your company that can then be measured in economic or financial terms. The focus therefore should be on the customer's perception of value rather than just creating another product. This thinking has led to a new form of innovation—namely, value or value-driven innovation. Some people use the term customer-driven innovation as a form of value-driven innovation.

With this approach, there is a heavy emphasis on capturing the true voice of the customer. Customer-perceived value may appear in incremental rather than radical changes, improvements in quality, speed to market, and customer support. Value may also be insensitive to price.

Value innovation possesses many of the following characteristics that are not part of conventional logic:

• You must go beyond just listening to customers; ask them what their needs are now and in the future.
• You must observe the customers using your products and services; put yourself in your customers' shoes.
• Carefully watch how your customers use your products or services to discover opportunities for further improvements or innovations.
• Involve customers in testing your prototypes and products.
• Make value-driven innovation activities part of your firm's culture.

There are several benefits to value-driven innovation:

• Having products targeted towards customer value rather than sales or marketing goals
• An easier time targeting market segments
• Development of an innovation product portfolio that focuses on the delivery of value to the customers rather than just deliverables
• Better focus on developing a meaningful business strategy and aligning thinking with strategic business objectives.³

Innovation researchers and academia have recognized the importance of value-driven innovation for some time, but private industry was slow in responding because of the lack of knowledge in establishing value-based metrics as part of managing innovation projects. Value-based metrics, as will be discussed in Chapter 7, have opened the door for use of value-driven innovation.

AGILE INNOVATION

Shifting customer needs are common in today's marketplace. Businesses must be adaptive and responsive to change while delivering an exceptional customer experience to be competitive. Traditional development and delivery frameworks such as waterfall are often ineffective. In contrast, Scrum is a value-driven agile approach which incorporates adjustments based on regular and repeated customer and stakeholder feedback. And Scrum's built-in rapid response to change leads to substantial benefits such as fast time-to-market, higher satisfaction, and continuous improvement— which supports innovation and drives competitive advantage.”

– Scott M. Graffius, Agile Scrum: Your Quick Start Guide with Step-by-Step Instructions

Products in the marketplace are becoming obsolete at a faster rate than ever before. Combining this with an increase in new competitors entering the marketplace, companies are being pressured to shorten the product development life cycle for a speedy, time-to-market product launch. This has led to the introduction of a new form of innovation, namely, agile innovation, that allows teams to launch new products quickly and at a lower risk than with other more traditional innovation practices.

Agile innovation is an approach that companies take to achieve optimal efficiency and effectiveness in their innovation activities. The objective is to obtain the best solution to a problem through a collaborative effort. The solution must solve the conflicting requirements of time, cost, scope, quality, and innovation. The underlying principle is that rapid access to the required knowledge makes it easier to organize and manage the agile innovation team. Speed is a critical attribute of agile innovation.

Agile techniques have been used for some time in IT organizations for software development projects. Today, the principles of agile have spread to other corporate functions such as innovation. Rigby et al. (2018) state:

Agile teams are best suited to innovation—that is, the profitable application of creativity to improve products and services, processes, or business models. They are small and multidisciplinary. Confronted with a large, complex problem, they break it into modules, develop solutions to each component through rapid prototyping and tight feedback loops, and integrate the solutions into a coherent whole. They place more value on adapting to change than on sticking to a plan, and they hold themselves accountable for outcomes (such as growth, profitability, and customer loyalty), not outputs (such as lines of code or number of new products).

The authors then continue by stating how agile teams may impact governance:

Agile teams work differently from chain-of-command bureaucracies. They are largely self-governing: Senior leaders tell team members where to innovate but not how. And the teams work closely with customers, both external and internal. Ideally, this puts responsibility for innovation in the hands of those who are closest to customers. It reduces layers of control and approval, thereby speeding up work and increasing the teams' motivation. It also frees up senior leaders to do what only they can do: create and communicate long-term visions, set and sequence strategic priorities, and build the organizational capabilities to achieve those goals.

While there are significant benefits in using agile teams, not all types of projects are well suited for this approach.

AGILE INNOVATION IN ACTION: DELOITTE

Plan

The project was envisioned and delivered in four subsequent phases: discover, define, develop, and deploy, following the “‘double diamond,”‘ a creative process created by the Design Council, a nonprofit organization promoting the concept of inclusive design, depicted in Figure 2-4.

In the “discover” and “define” phases, there was no agile coach or project manager role present. These phases were not conducted according to the traditional project delivery methodology, but rather in the so-called “magic time,” meaning somewhere in between all other tasks. In these first two phases, there was just a single “management” role—the product owner, who was responsible for gathering insights as well as understanding the problems and needs of candidates and recruiters. The understanding of the underlying problems to be solved provided the foundation to develop the interactive prototype and subsequently define the initial product backlog of the future recruiting solution.

The third phase of “develop” required significant capital investment, and as such, the sponsors asked for the project manager (PM) or Agile coach (AC) role. The first task for the appointed PM/AC and PO working in tandem was to prepare the statement of work and the pitch presentation to the management board, which included project approach, timeline, scope, budget, and team structure. This required proper traditional planning. An iterative approach for the delivery of the new recruitment platform was selected as the preferred project management approach. This decision was made by one of the sponsors (let's call him the visionary) based on his intuition rather than experience. PM/AC/PO together with the visionary explained to other stakeholders, that using the iterative approach would minimize risk and waste.

Regarding the timeline, from the beginning of the project it was clear that there was no hard deadline for launching the new recruitment platform. “Hard deadline” was understood to mean a date resulting from business, technical, or compliance reasons. Nevertheless, a deadline was set, the date when the team will run out of money (budget). Other points on the timeline were more indicative and were presented in order to depict the team's ideas for subsequent stages of the project delivery, from demos, to UATs, RITE tests, friends and family testing, and security testing, to potential release dates. These points of time were not treated as milestones, as they did not define the critical path (this expression was never used during the project), and moreover, the changing of initially defined dates did not require acceptance from the sponsors. These activities were not regarded as “project deliverables.” The only agreed deliverable was the business value to be delivered, meaning an improved candidate experience, enhanced recruiter experience, and reduced time needed to process candidates through the recruiting cycle.

The scope was defined in a few iterative steps starting with an interactive prototype created during the “define” phase of the project. The prototype was discussed with almost all business users (around 20 individuals) during a full-day workshop. The prototype covered key user interactions and flows across the entire recruitment journey. That was a very helpful tool for the product owner and UX designer—the facilitators of the workshop tasked to engage future users in the co-creation process. For the candidates, recruiters, and the business, it was also much easier to point out key recruiting activities that should be enabled and simplified based on the prototype. In the second step, based on the workshop outcomes, the product owner, with support from PM/AC, wrote the product backlog with MoSCoW (must have, should have, could have, and won't have) priorities, along with the DEEP technique. Next, during a two-day workshop the development team estimated in man-days the required work effort, which was taken as the baseline for the project budget to be agreed with the sponsors. So far, the role of the PM/AC was focused more on facilitation of meetings and elimination of impediments, so he acted more like the agile coach. Regarding the team structure, sponsors expected to see who would be responsible for specific project areas such as business requirements, architecture, and quality assurance, and so the DSDM (dynamic systems development method) team structure was used to define such roles as business visionaries, business ambassadors, technical coordinators, solution developers, and so on. In subsequent stagea of the project, the team worked much closer to a traditional Scrum framework with three key roles: product owner, development team, and agile coach.

AGILE INNOVATION IN ACTION: STAR ALLIANCE

GOVERNMENT INNOVATION

“…it is the public sector I find more interesting, because governments and other non-market institutions have long suffered from the innovation malaise of top-heavy bureaucracies. Today, these institutions have an opportunity to fundamentally alter the way they cultivate and promote good ideas. The more the government thinks of itself as an open platform instead of a centralized bureaucracy, the better it will be for all of us, citizens and activists, and entrepreneurs alike.”

— Steven Johnson, Where Good Ideas Come From: The Natural History of Innovation

The need for innovation in the public sector has grown in many cases faster than in the private sector. The public sector does not have a profit motive but still needs innovation to take place. Public service innovations are evolutionary and dynamic, not radical. If significant population diversity exists, it is more difficult to satisfy the needs of an entire population with the innovation.

Examples of public sector innovations include:

• Social responsibility innovations
  • Reducing poverty
  • Providing low-cost housing
  • Providing startup capital
  • Reducing unemployment
  • Reducing resource depletion
• Marketing innovations
  • Contracting and outsourcing
• Organizational innovations
  • Decentralization and delayering
• Service innovations
  • New services to existing users
  • New services to new users
  • Existing services to new users

As more and more government agencies adopt the project management approach, we discover that public-sector projects, including innovation, can be more complex than private-sector projects and more difficult to manage. According to David Wirick (2009, 8–10):

Private-sector project managers like to assume that their work is more demanding than projects in the public sector. They assume that their projects are more complex, subject to tougher management oversight and mandated to move at faster speeds. Although private-sector projects can be tough, in many cases, it is easier to accomplish results in the private sector than in the public sector.

Public-sector projects can be more difficult than many private-sector projects because they:

• Operate in an environment of often-conflicting goals and outcomes
• Involve many layers of stakeholders with varied interests
• Must placate political interests and operate under media scrutiny
• Are allowed little tolerance for failure
• Operate in organizations that often have a difficult time identifying outcome measures and missions
• Are required to be performed under constraints imposed by administrative rules and often-cumbersome policies and processes that can delay projects and consume project resources
• Require the cooperation and performance of agencies outside of the project team for purchasing, hiring, and other functions
• Must make do with existing staff resources more often than private-sector projects because of civil-service protections and hiring systems
• Are performed in organizations that may not be comfortable or used to directed action and project success
• Are performed in an environment that may include political adversaries

If these challenges were not tough enough, because of their ability to push the burden of paying for projects to future generations, public-sector projects have a reach deep into the future. That introduces the challenges of serving the needs of stakeholders who are not yet “at the table” and whose interests might be difficult to identify.

Some also cite the relative lack of project management maturity in public organizations as a challenge for public-sector projects. In addition to these complications, public projects are often more complex than those in the private sector. For some projects, the outcome can be defined at the beginning of the project. Construction projects are one example. For other projects, the desired outcome can only be defined as the project progresses. Examples of those are organizational change projects and complex information technology projects. Although the first type of project can be difficult and require detailed planning and implementation, the second type, those whose outcomes are determined over the course of the project, are regarded as more challenging. They require more interaction with stakeholders and more openness to factors outside of the control of the project team. Because of the multiple stakeholders involved in public-sector projects, the types of projects the public sector engages in, and the difficulty of identifying measurable outcomes in the public sector, more public-sector projects are likely to be of the latter variety and more difficult.

The public sector generally does a better job identifying causes of failure than the private sector. The following are causes of failure on public-sector projects, including innovation (Wirick 2009, 18–19):

• Cannot identify the stakeholders
• Optimistic schedules and no plan for late deliverables
• Insufficient or unqualified resources
• Restrictions on use of resources
• Turf issues arise when sharing resources
• Not enough time for project planning
• Inability to prioritize projects
• Poor risk management practices (fear of exposing risks)
• No revalidation of assumptions
• Lack of repeatable project management processes
• Inexperienced project managers
• Fail to benefit from, or capture, lessons learned and best practices
• Political changes due to elections
• Changing (political) priorities
• Resistance to changes
• Policy conflicts
• Legislative issues
• Unclear goals and objectives

HUMANITARIAN/SOCIAL INNOVATION

Humanitarian or social innovations are most frequently a subset of public sector innovations but can occur in the private sector as well based on a firm's commitment to its social responsibility program. There are also organizations that are committed to humanitarian concerns such as GAHI, the Global Alliance for Humanitarian Innovation.

The innovations created by these organizations are driven by humanitarian needs, usually involving health and safety concerns, and are designed to save lives and reduce human suffering of vulnerable people. Innovation projects can involve disaster sanitation, saving children and refugees, disease control and reduction, emergency relief possibly from weather concerns, sanitized water, medicines, electricity generation, and refrigeration.

Humanitarian innovations depend heavily on private donors and usually have spokespeople who are well-known actors, actresses, and/or professional athletes. The choice of spokesperson is based on the target audience for the humanitarian innovation, and possibly the geographical area where the spokesperson may be well known and has proven ability to promote donations.

As an example of a humanitarian need, many developing countries suffer from severe acute malnutrition, which is a life-threatening condition that requires urgent treatment. Until recently, severely malnourished children had to receive medical care and a therapeutic diet in a hospital setting. With the advent of ready-to-use therapeutic food (RUTF), large numbers of children who are severely malnourished can now be treated successfully in their communities, which has the potential to transform the lives of millions of malnourished children.

UNICEF Kid Power⁵ is a philanthropic initiative that began in 2014 as a division of the US Fund for UNICEF to help solve this humanitarian need using the RUTF innovation. During the launch, UNICEF Kid Power was sponsored by the George Harrison Fund for UNICEF and backed by mayors from New York, Boston, and Dallas, and supported by local sports teams and players, including the Boston Celtics, Boston Bruins, Brooklyn Nets, and Dallas Mavericks. Sports teams and players help encourage kids to stay active by cheering them on with classroom visits, recognizing the young philanthropists at home games and more. Some athletes that have acted as spokespersons include:

• Alex Morgan (soccer)
• Tyson Chandler (men's professional basketball)
• Maya Moore (women's professional basketball)
• Aly Raisman (gymnastics)
• Dartanyon Crockett (judo)
• Meryl Davis (ice dancing)
• David Ortiz (baseball)

SOCIAL INNOVATION IN ACTION: HITACHI

NONTECHNICAL INNOVATION IN ACTION

When discussing innovation, our first thoughts usually involve technical innovation such as with cell phones, computers, and other mobile devices. But there are other forms of innovation, some very simple and without technology, and the results can be outstanding.

As a young engineer I accepted a position working on a Finnish Aid project that encompassed the entire Kenyan Western Province. The project's objective was to provide the rural population in Western Kenya with clean water by dug or drilled wells. All of these wells were equipped with manually operated hand pumps. When I became involved in the project, there were over 1500 wells and pumps already installed throughout the province. My job designation was a hand pump engineer with a role to maintain and further develop these pumps, their durability, serviceability, and usage. As expected, the pumps were subject to breakage quite often, since the pumps were utilized day and night.

The first innovation was to change the mechanical lever-operated pumps to a so-called direct-action lever with two different-sized polyethylene pipes, one inside the other, and both reaching to bottom of well. The outer pipe had a one-way valve at the end. When pulling the bottom-end-closed inner pipe up, with handle on top, it sucked up water into the outer tube thru the bottom valve. Then, pushing the inner pipe down, water rushed up between the pipes and out of the spout. The design and operation were simple enough, and the only breaking/malfunctioning part was the bottom valve. These pumps were lasting far longer than any other hand pumps in the market. But even with the new design, it was inevitable that the pumps would break now and then.

The project had two pump mechanic teams traveling around Kenya's most populous and large province. My predecessors had started training bicycle repairmen in each village with pumps, giving them the responsibility to find and fix broken pumps. Everyone seemed to believe that when the Finns left and the project was handed over the local repairmen, they would use the equipment for personal projects. Sure enough, after a while we started getting reports that pumps were not being repaired. Where were the repairmen−bicycle mechanics? Moved to cities, where there were more customers!

I needed to find a solution to the dilemma. It was obvious who would suffer the most if the pump was not working—the women. The women, who were responsible for bringing home the water, had to travel vast distances to fetch water from alluvial creeks and rivers. The result was often disease and sickness, making their husband and rest of their family very unhappy.

From a westerner's point of view, my next innovation was maybe not that brilliant. But from the local point of view, it was next to impossible to even envision what was about to happen. I told my Kenyan team, most of whom were opposed to my idea and were doubtful that it would work, to announce to the population that we needed 10 women to come to the first pump repair training program. Only two women came. Why? Their husbands did not let them attend.

Back in the 1980s, gender equality was not what it is nowadays. This was especially true in rural areas such as the one where I was located back then, where women were considered as property of their husbands. Thus, it is now easy to understand the feelings of insecurity among the men; they feared what might change.

Some rather brutal rumors started spreading about us foreigners as well. Today one might call the rumors “fake news.”

Then came my small innovative idea. Let's call all the men of a geographical area to a meeting. We knew that the most important pastime of a typical African village man is to discuss pertinent matters and drink home-brewed beer with his colleagues. What usually happens when the water to the beer is not clean? An inconvenient diarrhea occurs, badly disturbing one's pastime! Since it was the task of the women to brew this beer, they often took the blame if the beer made their husbands sick. But think, we argued, if the water is clean then you won't get sick and you do not need to blame your woman. Look, your women can give you that! Ye-es, good, came the first hesitant response, but then it became unanimous.—Eleven women, instead of invited ten, turned up in the following morning—one extra was sent by a man inspired by the palaver.

After we conducted the first training we wanted to have some official recognition for the women we had trained. So we printed certificates of “Certified Pump Repair Woman” to be handed to them by a section supervisor, a government employee. After two hours of waiting under a mango tree for a government employee, finally there appeared a young uniformed man with his bicycle, the youngest in the administration and probably with no one to delegate further. He shoved the certificates to these women, not even glancing into their eyes, and then rushed away when he was done with the last one.

Fast forward to some six months later….

By this time, some 300 village women had been trained and received their already highly praised professional certifications. I then received a call. “This is the provincial governor” (from one of six provinces, each reporting directly and only to the country's president) announced the speaker. “I understand that you are training women to fix pumps.” “Yes sir,” I replied. “When and where is the next event of handing out the certificates?” I told him. “I want to be there to hand those certificates to those women; can I?” “Of course, sir, it will be a great honor,” I responded. At this certificate handing ceremony there were more than 3000 spectators, including all governmental and provincial dignitaries. The governor hosted a lunch with 200 guests. The governor seated me opposite him. I felt honored, not because of my seat, but by having created something sustainable that probably helped a large number of people—women, men, and children alike. The aid project had had some remarkable results.

What I learned was that thinking out of the traditional or local box might yield more than one can imagine. Maybe thinking globally, mixing people intentionally from different cultures could inspire novel ideas and solutions to projects and products. And as this story has shown, innovation can occur without technology, with as little as one piece of paper depending on how we use it.

OTHER CATEGORIES OF INNOVATION

There are several other generic categories for innovation projects. Many of these definitions are like other forms of innovation but are looked at slightly differently by scholars because of minor differences and applications.

Value-added innovation involves refining and revising an existing product or service. It is often compared with incremental innovation. Value-added innovation typically requires minimal risk taking compared to other forms of innovation such as exploratory innovation, which often involves taking an appreciable risk. Value-added innovations in the automotive sector would include making improvements on existing cars by making them faster, more comfortable, and with better gas mileage.

Occasionally, a value-added innovation may require a completely new way of thinking and possibly taking new risks. In this example, the usage of an existing product was reworked and introduced into a new market. While an existing product is being changed and/or improved upon, characterizing it as a value-added innovation, outside-the-box thinking, research, and risk taking may still be required since it is being introduced into a new market.

Financial innovation is the act of creating new financial instruments as well as new financial technologies, institutions, and markets. There are three categories of innovation—institutional, product, and process. Institutional innovations relate to the creation of new types of financial firms such as specialist credit card firms, discount brokerage firms, and Internet banks. Product innovation relates to new products for investments and financing. Process innovations relate to new ways of doing financial business such as consumer lending. This also includes the growth in financial technologies such online banking and telephone banking that focus on ease of payments.

Hidden innovation, invisible innovation, or stealth innovation refers to innovation that is done under the radar screen and not captured or reported by traditional indicators or metrics. The term generally refers to innovation that takes place outside the traditional R&D organization because of a lack of R&D funding. If a discovery is made, the project may then become a fully funded project so that the innovation research can continue.

Service innovation includes new or improved ways of designing and producing services. This may include innovation in the client interaction channel and service delivery systems. The innovation may be based on technology, expertise, or a combination of both.

Eco-innovation is the development of products and processes that contribute to sustainable development, applying the commercial application of knowledge to elicit direct or indirect ecological improvements. This includes a range of related ideas, from environmentally friendly technological advances to socially acceptable innovative paths toward sustainability.

Open sustainability innovation is the use of open innovation in the development of sustainable products, services, and initiatives. This approach to marketing may prove to be advantageous as it is not point-of-sale based, but rather, offers consumers information they have previously never been exposed to.

Social innovations are new strategies, concepts, ideas, and organizations that aim to meet social needs resulting from working conditions, education, community development, and health. These ideas, which are related to public-sector innovations discussed above, are created with the goal of extending and strengthening civil society. Social innovation includes the social processes of innovation, such as open source methods and techniques, and also the innovations that have a social purpose, such as activism, online volunteering, microcredit, or distance learning.

Offensive innovation projects are designed to capture new markets or expand market share within existing markets. Offensive projects mandate the continuous development of new products and services using innovations.

Defensive innovation projects are designed to extend the life of existing products or services. This includes add-ons or enhancements geared toward keeping present customers or finding new customers for one's existing products or services. Defensive projects are usually easier to manage than offensive projects and have a higher probability of success.

Discontinuous innovation projects must change direction in midstream because of changing conditions; rules of the game have changed quickly.

Disruptive innovation causes some products to be removed from the market immediately and replaced with new products.

Crisis-driven innovation must be done rapidly because of a marketplace crisis, such as designing a new package to prevent product tampering.

Followership innovation, unlike leadership innovation, requires a good understanding of the competition's skills and trying to produce it cheaper and at a higher quality without having to incur the competition's innovation costs.

Pulled (or inbound) innovation involves finding customer areas not met and finding solutions to their needs.

Pushed (or outbound) innovation involves finding profitable applications for newly invented technology.

Innovation classifications can be made in the way that innovation data is collected and interpreted (OECD 2005). In this regard, innovations are represented as related project activities that can be classified as:

• Product/service innovations
• Process innovations
• Organizational innovations
• Marketing innovations

Innovation can also be classified by application. Keeley (2013) defines 10 categories of innovation by application:

• Profit model (How do we make money?)
• Networks (Do we have collaboration or partnerships with others?)
• Structure (Does our organizational structure help us and attract talent?)
• Process (Do we have knowledge, skills, and patents to sustain our processes?)
• Product performance (Do we have superior offerings?)
• Product system (Do we have products that are connected or distinct?)
• Service (Are customers happy with our service?)
• Channel (Do we have the right channels of distribution?)
• Brand (Do we have distinct brand identification?)
• Customer engagement (Are our products part of our customers' lives?)

There are many other classification systems for innovation. Saren (1984) suggested classifying innovation projects according to five types; departmental-stage models, activity-stage models, decision-stage models, conversation process models, and response models. Pich et al. (2002) characterize projects based on information available up front to the project team:

• Instructionalist project. The information needed for innovation is available.
• Selectionist project. Not enough information is available and there is an elevated level of uncertainty.
• Learning project. The project is susceptible to unforeseen events.

Shenhar and Dvir (2004, 2007) identify innovation project categories as novelty, technology, complexity, and pace using their “diamond of innovation.” These were some of the first articles that bridged innovation and project management. Another way to classify innovations is according to a complexity factor. One such approach identified five different dimensions of complexity: structural, uncertainty, dynamics, pace, and sociopolitical (Geraldi et al. 2011).

If any form of standardization is to be established for innovation project managers, the starting point must be in the way that we classify innovation projects. The number of different types, and the way the types can overlap, makes it clear that innovation project management practices may be different based on the type of innovation project. Each type of innovation can have its own unique success criteria and unique metrics for tracking performance.

ROLE OF THE BOARD OF DIRECTORS

“Innovation is too important to leave solely in the hands of the management team without any Board oversight or guidance.”

— Pearl Zhu, Digitizing Boardroom: The Multifaceted Aspects of Digital Ready Boards

A critical question facing many companies involves the role of the board of directors when it comes to innovation considerations. In a recent Harvard Business Review article by Cheng and Groysberg (2018), the authors conducted a survey of 5,000 companies and found that innovation was not a top boardroom priority. While innovation was on the list, it was not considered as important as hiring the right talent, competitive and regulatory analysis, shareholder relations, and strategic and financial planning.

The role of innovation, as stated previously, is to create long-term shareholder value. Yet members of the board, and senior management, appear in many companies to be more occupied with short-term rather than long-term thinking and the accompanying results. Board members and executives seem more interested in ways to exploit the innovations created than in active innovation management practices.

While board members may remain distant from actual innovation practices, the same will not work for senior managers who are looking for sustainable, long-term innovations. Senior managers are the architects of the innovative corporate culture. They can be active participants, and function as innovation project sponsors, or provide their support by creating innovation centers⁶ that maintain some degree of control over innovation ideas, track innovation project performance, and make briefings to senior management and the board of directors.

FINDING AN INNOVATION PROJECT SPONSOR

Innovation projects rarely become fully funded projects without a project sponsor or champion. Without a sponsor, a promising idea could be scrapped. The greatest risk is with pure research and bootlegged innovation projects, where innovators cannot recognize the need for seeking out a sponsor even in the early stages of innovation.⁷

Innovators must play the unfamiliar role of a salesperson. This involves identifying the person to become the sponsor, selling them on the idea, and then following up periodically to keep the sponsor involved so that his/her influence in making this a fully funded project is not diminished.

The right sponsor is not merely the person that can write out a check or fund the project, but someone who can influence others to see the value of the project. If there is a choice of people to function as sponsor, preference usually goes to that person who can authorize more resources to be committed to the project. The sponsor should have some vested interest in the intellectual property that will be forthcoming and fully understand the scope of the project.

The natural tendency is to seek out a sponsor at the senior-most levels of management. While this seems like the best approach, it comes with risks. When you bypass middle levels of management, you risk turning them into enemies. Middle managers are the people you may need to work with daily for project staffing, and their support may be critical for success.

Selling the innovation concept requires focusing on the benefits and value that will be forthcoming, namely revenue, profits, or cost-reduction opportunities. The benefits and value must be linked to the long-term interests of both the company and the sponsoring organization.

IMPLICATIONS AND ISSUES FOR PROJECT MANAGERS AND INNOVATION PERSONNEL

Project managers who are asked to manage innovation projects must understand the different types of innovation and the fact that a different project management leadership style may have to be used for each type. Some of the critical issues and challenges that may be new for some project managers include an understanding of the following:

• Each type of innovation is different.
• Different forms of innovation can have competing strategic objectives.
• Individuals have their own internal strengths and weaknesses, and they may not be able to perform as expected in some types of innovation.
• They may need to use a different form of project management leadership when working with a co-creation team.
• External team members may provide better ideas and more out-of-the-box thinking than internal personnel.
• The goal for innovation is not just the creation of a deliverable, but a value-in-use product and/or service as defined by the customer.
• Success may be defined by the customer as value-in-use.

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