Idea Management at Volvo IT - Improving the Front End of Innovation Master of Science Thesis in the Master Degree Programme Management and Economics of Innovation MARIA-LINA HEDLUND CAJSA JOHANSSON Department of Technology Management and Economics Division of Innovation Engineering and Management CHALMERS UNIVERSITY OF TECHNOLOGY Göteborg, Sweden, 2010 Report No. E 2010:049 Idea Management at Volvo IT Improving the Front End of Innovation MARIA-LINA HEDLUND CAJSA JOHANSSON © MARIA-LINA HEDLUND, 2010 CAJSA JOHANSSON, 2010 Report No. E 2010:049 Department of Technology Management and Economics Chalmers University of Technology SE-412 96 Göteborg Sweden Telephone + 46 (0) 31-772 1000 Cover: Volvo IT logo Chalmers reproservice Göteborg, Sweden 2010 REPORT NO. E 2010:049 Idea Management at Volvo IT Improving the Front End of Innovation MARIA-LINA HEDLUND CAJSA JOHANSSON Department of Technology Management and Economics CHALMERS UNIVERSITY OF TECHNOLOGY Göteborg, Sweden, 2010 I Idea Management at Volvo IT Improving the Front End of Innovation MARIA-LINA HEDLUND CAJSA JOHANSSON Department of Technology Management and Economics Chalmers University of Technology ABSTRACT One of the key paths for companies to create value is through innovations, which is ideas that have been developed and implemented successfully. The aim of this master thesis is to determine how Volvo IT can improve their idea management practices to extract more business value from innovations. More specifically, the purpose of this case study is to identify improvement opportunities in the front end of the service development process, from idea creation and capture to assessment for the launch of a full-scale development project. The information on the current idea management of Volvo IT comes from a large number of qualitative interviews with members from different parts of the organisation. This data is analysed based on an analytical framework built on previous research within the area of idea management and innovation in global matrix organisations. The findings reveal that Volvo IT is an organisation with a quite creative climate in terms of corporate culture but with few formal practices and tools that support idea generation and collection. Identified opportunities for improvement include idea creation and capture events, and an idea management system easily accessible for the whole organisation. The company is also recommended to more clearly communicate internally what kinds of innovations that are desirable, start rewarding ideas in a way that increase creativity, and making sure all geographical sites are included in the innovation processes. Regarding idea assessment and selection, the current practices is somewhat unclear and improvement suggestions in this area consist of defining and describing the process, and ensuring the use of appropriate decision criteria in them. The report is written in English Key words: front end of innovation, idea management, idea generation, idea collection, idea selection II CONTENTS Abstract ................................................................................................................................................................. I Contents .............................................................................................................................................................. II List of figures ................................................................................................................................................... VII Acknowledgements...................................................................................................................................... VIII 1 Introduction .............................................................................................................................................. 1 1.1 Background ..................................................................................................................................... 1 1.1.1 Volvo Information Technology .............................................................................................................................. 1 1.2 Purpose ............................................................................................................................................. 3 1.3 Research questions ...................................................................................................................... 4 1.4 Delimitations .................................................................................................................................. 4 1.5 Disposition ...................................................................................................................................... 5 2 Previous research .................................................................................................................................... 6 2.1 Sources of new ideas/innovations .......................................................................................... 7 2.1.1 Functional sources of innovation ......................................................................................................................... 7 2.1.2 Circumstantial sources of innovation ................................................................................................................. 8 2.1.3 Summary and applicability ..................................................................................................................................... 9 2.2 Idea generation .............................................................................................................................. 9 2.2.1 Creativity and corporate culture ....................................................................................................................... 10 2.2.2 Resources and top management support ...................................................................................................... 11 2.2.3 Clear innovation process ....................................................................................................................................... 11 2.2.4 Rewards and motivation ....................................................................................................................................... 12 2.2.5 Cross-functional interaction ................................................................................................................................ 13 2.2.6 Summary and applicability .................................................................................................................................. 14 2.3 Idea collection ............................................................................................................................. 14 2.3.1 Events for idea generation ................................................................................................................................... 15 2.3.2 Brainstorming ............................................................................................................................................................ 16 2.3.3 Trend-spotting and scenario workshops ....................................................................................................... 16 2.3.4 Involve or observe customers ............................................................................................................................ 17 2.3.5 Online communities ................................................................................................................................................ 17 III 2.3.6 Idea databases ........................................................................................................................................................... 18 2.3.7 Idea management systems ................................................................................................................................... 20 2.3.8 Idea coordinators ..................................................................................................................................................... 21 2.3.9 Summary and applicability .................................................................................................................................. 21 2.4 Idea selection............................................................................................................................... 22 2.4.1 Processes in the Front End of Innovation ..................................................................................................... 23 2.4.2 Idea screening ............................................................................................................................................................ 25 2.4.3 Portfolio management ............................................................................................................................................ 28 2.4.4 Knowledge management ....................................................................................................................................... 28 2.4.5 Key people ................................................................................................................................................................... 28 2.4.6 Politics and skunkworks ....................................................................................................................................... 30 2.4.7 Summary and applicability .................................................................................................................................. 31 2.5 Innovation in an organisational context ........................................................................... 32 2.5.1 Innovation in global organisations ................................................................................................................... 32 2.5.2 Innovation in matrix organisations .................................................................................................................. 34 2.5.3 Summary and applicability .................................................................................................................................. 35 3 Analytical framework ......................................................................................................................... 37 3.1 Sources of ideas .......................................................................................................................... 37 3.2 Idea generation ........................................................................................................................... 38 3.2.1 Creativity and corporate culture ....................................................................................................................... 38 3.2.2 Resources and top management support ...................................................................................................... 39 3.2.3 Clear innovation process ....................................................................................................................................... 39 3.2.4 Rewards and motivation ....................................................................................................................................... 39 3.2.5 Cross-functional interaction ................................................................................................................................ 40 3.3 Idea collection ............................................................................................................................. 40 3.3.1 Idea databases and idea management systems .......................................................................................... 41 3.3.2 Events for idea generation ................................................................................................................................... 41 3.3.3 Idea coordinators ..................................................................................................................................................... 42 3.4 Idea selection............................................................................................................................... 42 3.4.1 Idea screening ............................................................................................................................................................ 43 3.4.2 Politics and skunkworks ....................................................................................................................................... 46 IV 3.5 Innovation in global matrix organisations ....................................................................... 46 3.6 Synthesis of analytical framework ...................................................................................... 47 4 Methodology........................................................................................................................................... 48 4.1 Research design .......................................................................................................................... 48 4.2 Literature review ....................................................................................................................... 49 4.3 Interviews ..................................................................................................................................... 49 4.4 Sampling ........................................................................................................................................ 51 4.5 Data analysis ................................................................................................................................ 51 4.6 Reliability and validity ............................................................................................................. 52 5 Empirical results .................................................................................................................................. 53 5.1 Sources of ideas at Volvo IT .................................................................................................... 53 5.1.1 Functional sources of ideas .................................................................................................................................. 53 5.1.2 Circumstantial sources of ideas ......................................................................................................................... 55 5.1.3 Summary ...................................................................................................................................................................... 56 5.2 Idea generation at Volvo IT .................................................................................................... 56 5.2.1 Creative climate......................................................................................................................................................... 57 5.2.2 Top management support and communication.......................................................................................... 60 5.2.3 Cross-functional and external interaction..................................................................................................... 61 5.2.4 Summary ...................................................................................................................................................................... 63 5.3 Idea collection at Volvo IT ...................................................................................................... 63 5.3.1 The suggestion box .................................................................................................................................................. 64 5.3.2 Keep the dialogue going ........................................................................................................................................ 65 5.3.3 Local/departmental idea collection initiatives ........................................................................................... 65 5.3.4 Opinions on possible idea collection initiatives ......................................................................................... 66 5.3.5 Summary ...................................................................................................................................................................... 67 5.4 Idea selection at Volvo IT ........................................................................................................ 68 5.4.1 Volvo Group Issue Board funding ..................................................................................................................... 68 5.4.2 BA/BU - customer funded development ........................................................................................................ 69 5.4.3 The Volvo IT R&D budget ..................................................................................................................................... 69 5.4.4 Summary ...................................................................................................................................................................... 73 V 5.5 Innovation and idea management at Volvo Technology .............................................. 74 5.5.1 Innovation coaches .................................................................................................................................................. 75 5.5.2 Innovation jams / VTEC LIVE ............................................................................................................................. 75 5.5.3 Summary ...................................................................................................................................................................... 76 6 Analysis.................................................................................................................................................... 77 6.1 Sources of ideas at Volvo IT .................................................................................................... 77 6.1.1 Volvo Group and external customers .............................................................................................................. 77 6.1.2 Suppliers and competitors ................................................................................................................................... 78 6.1.3 Internal departments and geographical sites .............................................................................................. 78 6.2 Idea generation at Volvo IT .................................................................................................... 78 6.2.1 Corporate culture and the creative climate .................................................................................................. 78 6.2.2 Cross-functional and external interaction..................................................................................................... 80 6.2.3 Top management support and communication.......................................................................................... 80 6.3 Idea collection at Volvo IT ...................................................................................................... 81 6.3.1 Innovation ambassadors ....................................................................................................................................... 82 6.3.2 Observe or involve customers ............................................................................................................................ 82 6.3.3 Idea management system ..................................................................................................................................... 82 6.3.4 Innovation jam events ............................................................................................................................................ 83 6.3.5 Events for innovators ............................................................................................................................................. 85 6.4 Idea selection at Volvo IT ........................................................................................................ 85 6.4.1 The front end of innovation at Volvo IT ......................................................................................................... 85 6.4.2 The Volvo IT R&D budget screening process ............................................................................................... 86 6.5 Summary and analysis of the overall situation ............................................................... 87 7 Conclusions / Recommendations .................................................................................................... 90 7.1 Current situation in Volvo IT ................................................................................................. 90 7.2 Improvement suggestions ...................................................................................................... 91 7.2.1 Innovation ambassadors and TWBI expansion .......................................................................................... 91 7.2.2 Innovation jams ......................................................................................................................................................... 92 7.2.3 Idea management system ..................................................................................................................................... 93 7.2.4 Idea selection criteria ............................................................................................................................................. 94 7.3 Recommendations ..................................................................................................................... 94 VI 8 Discussion ............................................................................................................................................... 96 9 List of references................................................................................................................................... 97 9.1 Academic references ................................................................................................................. 97 9.2 Company specific references ............................................................................................... 100 9.2.1 Publicly available references ............................................................................................................................ 100 9.2.2 Publicly unavailable references ...................................................................................................................... 100 10 Appendices ...........................................................................................................................................10-1 10.1 Appendix I – Interview guides ........................................................................................... 10-1 10.1.1 Master interview guide ................................................................................................................................ 10-1 10.1.2 Random sample interview guide ............................................................................................................. 10-5 10.2 Appendix II – List of interviewees .................................................................................... 10-7 10.3 Appendix III – List of acronyms....................................................................................... 10-10 VII LIST OF FIGURES Figure 1: The Volvo Group organisation .................................................................................................................. 2 Figure 2: Volvo IT’s organisation ................................................................................................................................. 3 Figure 3: Disposition of the report.............................................................................................................................. 5 Figure 4: Number of ideas per successful innovation (Stevens & Burley, 2003) .................................... 6 Figure 5: The FEI pictured by Koen et al (2001) ................................................................................................ 23 Figure 6: The FEI according to Sandmeier et al (2004) .................................................................................. 24 Figure 7: The highways, alleys and by-lanes identified by Hellström & Hellström (2002) ............. 25 Figure 8: Strategies for worldwide innovation by Afuah (2003) ................................................................ 33 Figure 9: Illustration of a matrix organisational structure (Cleland, 2004) ........................................... 34 Figure 10: Overview of the analytical framework ............................................................................................. 37 Figure 11: The highways, alleys and by-lanes identified by Hellström & Hellström (2002)........... 43 Figure 12: The detailed analytical framework .................................................................................................... 47 Figure 13: Research design ......................................................................................................................................... 49 Figur 14: Service development business case template ................................................................................. 71 VIII ACKNOWLEDGEMENTS We began our search for a master thesis in the fall of 2009. Eager to put our education to the test we were hoping to find a challenging project that would be of strategic importance to the firm in question. When we came into contact with Volvo IT and learnt that innovation was a recent addition to their strategic focus, we realised that a project there would be exactly what we were looking for. We would like to thank Volvo IT for giving us the opportunity to work with such an interesting and challenging topic. We have received valuable advice and support, first of all from our supervisors Peter Fransson, Kerstin Hanson and Tommy Hansson but also from the many Volvo IT employees we have met during our everyday work in meetings, interviews and workshops. Special thanks go to all of our interviewees who have taken the time off from their busy schedule to help us with our study. We want to express our gratitude to our Chalmers supervisor Jonas Larsson who has been a much appreciated source of encouragement, advice and timely feedback. Jonas showed confidence in our ability to lead this project and he was always available for guidance whenever we needed it. We would also like to thank Jennie Björk for her guidance in our search for relevant theory and previous research and Thomas Hordern for his feedback and interest in our project. Our opponents Karin Hammar and Lina Larsson gave us useful comments that helped us improve our final report. Last, but not least, our dear friends and families who have supported us not only during this thesis but throughout all of our years at Chalmers. Thank you. Göteborg, June 2010 Maria-Lina Hedlund Cajsa Johansson IX “JUST AS ENERGY IS THE BASIS OF LIFE ITSELF, AND IDEAS THE SOURCE OF INNOVATION, SO IS INNOVATION THE VITAL SPARK OF ALL HUMAN CHANGE, IMPROVEMENT AND PROGRESS” TED LEVITT, FORMER EDITOR HARVARD BUSINESS REVIEW 1 1 INTRODUCTION The first part of the introduction accounts for the background of the study including general information about Volvo Information Technology. Thereafter the purpose of the study and the guiding research questions are presented as well as the study’s main delimitations. Finally, the disposition of the report is presented. 1.1 BACKGROUND Core competencies are different for every organization; they are, so to speak, part of an organization’s personality. But every organization — not just businesses — needs one core competence: innovation. (Drucker, 2006, p.108) Although most companies are aware that innovation is one of the key paths to growth, many do it by accident and just hope that someone will come up with an idea and exploit it. This approach is not enough to keep up with the business climate of today when companies need to generate and implement more ideas than ever before to stay competitive. What is needed is a sustainable approach for generating, capturing, and evaluating ideas before they can be developed. (Hering & Phillips, 2006) Numerous studies have shown that the most significant factor for developing successful products is the quality of execution of the early steps in the innovation process (Stevens and Burley, 2003). Innovations are ideas that have been developed and implemented, which implies that innovative firms need to have a durable flow of ideas to choose from for implementation. All these ideas originate from individuals and to be able to benefit from ideas they have to be made explicit and shared with the organisation. (Björk & Magnusson, 2009) In the next step, deciding which projects to pursue in an organisation is a difficult task with potentially large consequences. Information technology companies waste over 50 billion USD a year on development projects that create services not used by the intended customers. (Pinto, 2007) In the role as IT service provider Volvo IT have to provide its customers with IT solutions that do not just provide business value but are also cost-efficient. To be able to effectively do that Volvo IT has realised the importance of innovation and made it one of the strategic focus areas for the company. To improve innovativeness Volvo IT has identified several areas in the service development processes that should be addressed, including the early phases and the overall lead time. Decreasing the lead time to decrease time-to-market for new services would not be unfamiliar to what they were already working on in operational excellence initiatives, especially since service development at Volvo IT already follows a well-structured stage-gate model. The front end of the service development process was much less well-described and managed. Therefore, this study was launched to map and improve those practices. The goal of this master thesis is to find out how Volvo IT can improve within the area of idea management to become more innovative and make better use of innovations as potential sources of business value. 1.1.1 VOLVO INFORMATION TECHNOLOGY Volvo Information Technology AB (in this report referred to as Volvo IT) is a large, global company that offers industrial IT solutions, telematics services, and consulting services (Volvo Group Intranet Violin, 2010A). The company is a wholly-owned subsidiary of AB Volvo which is one of the world’s leading suppliers of commercial transport solutions (Volvo Group Intranet 2 Violin, 2010B). In 2009, Volvo IT achieved sales of SEK 7,4 billion globally with 5,000 employees (Volvo IT webpage, 2010A) with headquarters in Gothenburg and sites spread all across the world with a majority of the employees located in Sweden (Volvo Group Intranet Violin, 2010C). AB Volvo, the corporation which Volvo IT belongs to, is one of the world's largest producers of trucks, buses, and construction equipment and holds a leading position in the fields of marine and industrial power systems and aircraft engine components. Moreover, the Volvo Group also offers its customers financial services. (Volvo Group Intranet Violin, 2010B) The Volvo Group has a little over 90,000 employees, production facilities in 19 countries, and sales activities in some 180 countries (Volvo Group Intranet Violin, 2010B) with a yearly total sales of about SEK 300 billion in 2008 and SEK 220 billion in 2009 (Volvo Group webpage, 2010A). The Volvo Group has a matrix organisation made up of product-related business areas and supporting business units. The business units are global and created to combine expertise in key areas. They have the overall responsibility for product planning and purchasing, and for developing and delivering components, subsystems, services, and service and support to the Volvo Group's business areas. This structure also aims at creating economies of scale in areas such as product development, production, parts supply and logistics, administration and support functions. (Volvo Group Intranet Violin, 2010D) Already in 1967 the Volvo Group gathered its IT operations together in a separate company for the first time. In 1998, the current global Volvo IT was created as one of these business units (Volvo Group Intranet Violin, 2010E). As can be seen in Figure 1 the company serves all business areas in the Volvo Group. What is not displayed in that illustration is that Volvo IT also serves the other business units in the Volvo Group in addition to some external customers (Volvo Group Intranet Violin, 2010F). FIGURE 1: THE VOLVO GROUP ORGANISATION Volvo IT provides a full range of services for the entire industrial process from product development and manufacturing to sales, aftermarket, and administration including IT operations and infrastructure (Volvo IT webpage, 2010B). This means development, operations and maintenance of complex industrial IT systems. The company also delivers off-the-shelf enterprise solutions and standardised global services aimed at enabling increased individual productivity and collaboration between co-workers. (Volvo IT webpage, 2010C) The purpose of Volvo IT is to provide the Volvo Group with competitive IT solutions and services but for reasons such as economies of scale and increased learning, the company also has 3 external customers (Volvo IT webpage, 2010D). Volvo IT customers outside the Volvo Group include among others Volvo Car Corporation, SCA, Assa Abloy, and the City of Stockholm (Volvo IT webpage, 2010E). A major re-organisation of Volvo IT took place in 2009 and the new organisation is divided into several global functions, see Figure 2 (Volvo Group Intranet Violin, 2010G). The corporate functions handle finances, human resources, marketing and communications, and strategy and operational excellence. The purpose of the Customer Relations & Sales (CR&S) part of the organisation is to maximise business value for customers and manage the development of the Volvo IT business. Then there are five Solution Units (SUs) that capture business requirements and translate them into IT solutions. The five Solution Units are Product Development (PD), Sales to Order (StO), Order to Delivery (OtD), Delivery to Repurchase (DtR), and General Solutions (GS). Application Delivery (AD) is responsible for the development, maintenance, and support of business application solutions. Infrastructure & Operations (I&O) then secure customer delivery and service quality as well as product quality and productivity. Volvo IT has gathered Asia/Pacific integration activities in a separate function called APAC Integration with the aim to prepare all included locations for the handover of Volvo IT global functions while also supporting the Volvo Groups business areas and business units operations in the APAC area. Finally, Fortos Management Consulting is a part of the organisation that provides management consulting services for the whole Volvo Group. (Volvo Group Intranet Violin, 2010H) FIGURE 2: VOLVO IT’S ORGANISATION 1.2 PURPOSE In the role as IT service provider Volvo IT strives to deliver cost-efficient IT solutions that will provide long-term business value for their customers. One of the challenges is to capture ideas or business requirements and translate them into value adding customer offers at an increasingly rapid pace. This master thesis aims to determine how Volvo IT can improve within the area of idea management to make better use of innovations as potential sources of business value. The purpose is to identify improvement opportunities in the front end of the service development process, from idea creation and capture up until the launch of a development project. 4 1.3 RESEARCH QUESTIONS In order to be able to fulfil the purpose of this thesis, the following research questions need to be answered. • How can Volvo IT improve idea management in the front end of the service development process? o What are the current sources of ideas for new customer offers? � Are there other potential sources of ideas? � How can Volvo IT expand the base from which ideas are gathered? o How does the current mode of operations stimulate the generation of ideas for new customer offers? � How can work processes be improved to better stimulate idea generation? � What new tools or methods can be implemented to stimulate idea generation? o How are ideas for new customer offers currently collected? � How can the tools or methods for idea collection be improved? o How are ideas assessed and selected for further consideration for a full scale development project? � What are the implications of this assessment in terms of launched projects? � How can this selection process be improved to facilitate the launch of development projects for promising new services? 1.4 DELIMITATIONS This study is limited to Volvo IT and it is mainly the internal environment of the company that is examined. To gain a better understanding of the situation and the topic, a wider study could have been conducted involving for instance Volvo IT’s customers and the corporate group the company belongs to. How customers perceive Volvo IT and how they see their role in idea generation and selection at Volvo IT is not covered in this study. How the AB Volvo, the owner of Volvo IT, see innovation and idea management in Volvo IT could also have given a more complete picture but is not included due to time constraints. Furthermore, examining how competitors manage ideas could have been valuable for a comparison purposes but has not been included in the scope of this study. Another limitation is the focus on the front end of innovation. This implies that later stages of service development are not assessed, even though they also are pertinent parts of the innovation process. Finally, even though the influence of some roles in idea management processes are acknowledged, specific individuals in Volvo IT and their affect on idea generation, collection, or selection have not been studied. Instead the focus lies on internal practices and processes, however both formal and informal ones. 5 1.5 DISPOSITION The report is quite extensive, and efforts have been made to create a clear and consistent disposition to facilitate for the reader. In order to increase the readability even further, summaries and synthesises are available regularly throughout the report. The first chapter is the Introduction, providing the reader with background information on the topic of the thesis as well as on Volvo IT. Chapter 1 also presents the purpose, research questions, and delimitations of the study. The second chapter accounts for findings from Previous research relevant to fulfill the purpose of this thesis. The chapter is divided into five parts, starting with four aspects of idea management; sources of ideas, idea generation, idea collection, and idea selection. The fifth and final section presents previous research on the impact organisational characteristics have on innovation. The previous research creates a foundation upon which to build an Analytical framework which is presented in the ensuing chapter of the report, chapter 3. The analytical framework follows the same structure as the chapter on previous research, starting with sources of ideas followed by idea generation, idea collection, idea selection, and finally the organisational perspective with innovation in a global matrix organisation. The fourth chapter, Methodology, accounts for and motivates the design of the study; how data was collected and analysed. The study should be designed to be able to answer its research questions and fulfil its overall purpose, all of which were presented in the introduction of the report. Thus, both the methodology chapter and the previous research chapter both draw on the first chapter of the report, see Figure 3. The data collected is made available to the reader in the fifth chapter containing the Empirical results of the study. The first four sections of this chapter match the first four sections on idea management in the analytical framework. The data corresponding to the fifth part in the analytical framework, the organisational characteristics of Volvo IT, is partly merged in the previous four parts but mainly presented in the introduction of the report. The Data analysis chapter, where the empirical analytical framework is applied to the empirical results is also divided into the same four parts; sources, generation, collection and selection of ideas. The analysis reveals areas of improvement for which improvement suggestions are presented in chapter 7, Conclusions / Recommendations. The subsequent Discussion chapter addresses, among other things, the implications of the findings, and the extent to which the findings could be of interest to firms other than Volvo IT. The very last two chapters consist of a List of References and Appendices with interview guides, list of interviewees and a list of acronyms used throughout the report. FIGURE 3: DISPOSITION OF THE REPORT 6 2 PREVIOUS RESEARCH This chapter contains a review of research in the field of idea management including sources of ideas, idea generation, idea collection, and idea selection, as well as and innovation in an organisational context. Innovation can be described as ideas that have been developed and implemented. This perspective implies that to be innovative, firms needs to have a durable flow of ideas to choose from for implementation. The starting point for these ideas is an individual’s new insight and to turn this insight or idea into an innovation it has to be made explicit so it can be shared within the organisation. Björk & Magnusson (2009) also stress that innovative firms cannot rely on a few individuals or a specific function to be the sole source of ideas; instead ideation requires the involvement of everyone in the business as well as affiliated external individuals. Stevens & Burley (2003) have by studying three distinct information sources found a common pattern or success rate for ideas, see Figure 4. The three sources are project literature, venture capitalists’ experience, and the tracking of the commercialisation of patents. The success rates found in the three cases were remarkably similar and predict the commercial success for completely new product s to be one in 300 at the idea submission stage and one in 125 at the pre-study stage (or after a patent are granted). FIGURE 4: NUMBER OF IDEAS PER SUCCESSFUL INNOVATION (STEVENS & BURLEY, 2003) Hence, to really be innovative firms need a sustainable flow of ideas. To get that it is not enough to only consider an assigned department as the source of new ideas. Furthermore, in order for the whole organisation to generate ideas an appropriate company culture, structure, and processes are needed. Then, to be able to turn good ideas into innovations, ideas have to be made explicit, shared with the organisation, and finally selected for development. 7 2.1 SOURCES OF NEW IDEAS/INNOVATIONS New ideas are often revealed and exchanged through regular, informal, in-person communication between individuals from different functions. This can be achieved by joint problem-solving meeting but also, for instance, by locating people from different departments close to each other. (Afuah, 2003) Afuah (2003) identifies two types of sources of innovation; functional and circumstantial. Functional sources include the internal value chain, competitor spillovers, customers, and universities while circumstantial sources can be planned firm activities, unexpected occurrences, or societal changes. 2.1.1 FUNCTIONAL SOURCES OF INNOVATION If innovation starts with individual insights or ideas, the functional sources of innovation are the persons that contribute with inspiration and ideas. Afuah (2003) identifies five main functional sources of innovation: the firm’s own internal value chain; the external value-added chain of suppliers, customers, and complementary innovators; university, government, and private laboratories; competitors and related industries; and other nations or regions. Any of the functions in a firm’s value chain can be a source of innovation including R&D, manufacturing, marketing, and service. (Afuah, 2003) It may sound self-evident that there is a huge creative potential in most organisations but a lot of senior managers only view specialised departments such as R&D or incubators as the source of innovation. (Skarzynski & Gibson, 2008) A firm can also benefit from another company’s findings through spillovers in the form of anything ranging from basic scientific knowledge to advertising ideas. (Afuah, 2003) Suppliers or intermediaries can be a great source of ideas but also provide solutions and help identify problems early. In industries such as textiles, materials or equipment they provide much of the innovation. (Kim & Wilemon, 2002B) Suppliers of components or materials could also themselves develop technological innovations that a manufacturer can then take over and put in production and sell (Rogers, 2003). Depending on the industry it is more or less common for customers or other external actors to provide innovative ideas. For instance, within the electronics industry customers provide much of the innovation on new products. (Kim & Wilemon, 2002B) Lead users are per definition ahead of the general market in terms of their product needs. They can develop the product themselves by finding an own solution to their needs and build a prototype. (Rogers, 2003) A complementary innovator is a firm that would benefit from increased demand for, or performance of, the company at hand’s products and has the necessary knowledge to be able to supply innovative ideas (Afuah, 2003). Firms with complementary products can be found around many companies and products, and in industries where firms produce a range of products it can be difficult to distinguish between competitors and complementors (Schilling, 2008). To be able to absorb and find ideas in the basic and applied research performed in e.g. universities, a firm needs to perform related research and build an absorptive capacity (Afuah, 2003). Therefore, such external sources of information is usually a complement, rather than substitute, for in-house R&D (Schilling, 2008). 8 Innovative activity tends to be geographically clustered, especially for more knowledge intensive industries. (Fagerberg, Mowery & Nelson, 2005) Some countries or regions are leading within certain innovation areas e.g. Japan and Korea in electronic components and Italy in shoes and specialty leather, therefore these regions can be good sources of ideas within those fields (Afuah, 2003). 2.1.1.1 BOUNDARY SPANNERS New insights are the basis of ideas and can originate from the cross-section between different departments or firms. Reid & Bretani (2004) define boundary spanners as persons inside the company that operate at the boundary of the organisation by performing tasks that relates the organisation to its environment. Afuah (2003) calls these individuals, that act as transducers between the organisation and its outside environment, for gatekeepers. Gatekeepers interact with for instance suppliers, customers, competitors, or research laboratories and thereby gain insights about their operations and how that relates to their own organisation. Another definition of boundary spanners is offered by Afuah (2003) who define them as persons that act as transducers between their function and other functions. By that definition, boundary spanners understand the peculiarities of their own as well as other functions and can therefore successfully discuss issues with other functions and bring back and translate answers to the own function. 2.1.2 CIRCUMSTANTIAL SOURCES OF INNOVATION Circumstantial sources of innovation refer to under which circumstances innovations can be expected to arise. Perhaps the most commonly thought of circumstance for this is planned firm activities which include R&D investments, building on public research breakthroughs, and users or complementary innovators modifying products to better fit their needs and complementary products. During these planned firm activities unexpected occurrences, such as failure, can actually be a good source of innovation. (Afuah, 2003) Serendipity is the accidental discovery of an idea and will typically occur during a R&D project where another, very different solution is sought. These discoveries do not have to be made by researchers though and can for instance come from the public as well, as in the case of SMS. (Rogers, 2003) Other sources of ideas for innovations include change in different forms and global trends when identified. Recognising changing customer expectations or technological discontinuities increase the opportunities to come up with new ideas. Regulation and deregulation, globalisation, and macroeconomic, social or demographic changes are other circumstances that can be the sources of new ideas. (Afuah, 2003) Observations of these kinds of change can be used as basis for formulating relevant problems that then are used for finding viable business opportunities (Brem & Voigt, 2009). Brem & Voigt (2009) emphasise the linkages between technology push and market pull in identifying new business opportunities. Regarding technology sources for ideas, research will only be successful in this respect if existing corporate expertise, the personal interests of the researcher, and an overview of technological developments can be combined. This should then be complemented with marketers’ permanent search for new opportunities, both amongst currently dissatisfied customers and future potential needs that could be satisfied. 9 2.1.3 SUMMARY AND APPLICABILITY The more sources that the firm is able to tap into, the better positioned it is to succeed in generating valuable ideas. There are five main functional sources of innovation: the firm’s own internal value chain; the external value-added chain of suppliers, customers, and complementary innovators; university, government, and private laboratories; competitors and related industries; and other nations or regions. Boundary spanners are individuals that work across internal or external boundaries and bring knowledge and new insights between these different environments which can seed ideas. These new insights can be circumstantial sources of ideas which are the activities and trends that can be used as basis for formulating relevant problems and finding viable business opportunities. To be able to identify improvement possibilities for a firm that aims to become more innovative it is relevant to consider which sources of ideas that are currently used, and which sources of ideas that could be expanded or added. Thus, the applicable types of idea sources that exist are of interest for this study. 2.2 IDEA GENERATION Ideas are ubiquitous, both in the professional and personal context of everyday life. Thus, one could claim that idea generation is ever ongoing and that, from the perspective of the firm, it is merely a matter of seizing the opportunities and collect ideas when they appear. This is true to some extent, but gaining ideas is just as much about the process during which ideas are generated as it is about collecting them in an appropriate manner (Brem & Voight, 2009). Furthermore, organisations have the opportunity to influence their idea generation by encouraging practices and attitudes that induce individual and corporate creativity (Brem & Voight, 2009). There are structural differences in the generation of ideas for incremental vis-à-vis radical or discontinuous innovations (Reid & Bretani, 2004; Magnusson & Martini, 2008), which implies that the strategy of the firm will have an impact on how to best work with idea generation. Ideas for incremental innovations are usually generated top-down in the organisation, whereas the discontinuous ones are more likely to have a bottom-up background since they are often closely related to customer interaction or technology development (Reid & Bretani, 2004). Moreover, ideas for radical innovations tend to stem from external influences that are brought into the organisation by individuals acting as boundary spanners (Reid & Bretani, 2004). Thus, it can be quite challenging to stimulate both radical and incremental ideas, side by side, in one and the same organisation (Reid & Bretani, 2004; Magnusson & Martini, 2008). One key element to succeed with this endeavour is to keep activities related to discontinuous innovation separated from the more incremental, and efficiency focused ones. This separation can, for instance, be carried out on a temporal or organisational basis and will enable the organisation to enjoy the paradox of both incremental and radical innovation. (Magnusson & Martini, 2008). The ensuing paragraphs will elaborate on some of the most influential factors when it comes to enabling idea generation for both radical and incremental innovations. First out, and perhaps also foremost, is the atmosphere within the organisation i.e. the characteristics of the corporate culture and the quality of the existing creative climate. This is followed by an overview of the desired behaviour of top management, for instance in terms of resource allocation. The characteristics of internal processes and communication are also of interest since they can facilitate or hinder the sharing of information and knowledge upon which ideas are based. 10 Thereafter, the impact of rewards and other types of incentives on the motivation and creativity will be addressed. The last, but not least important, paragraph looks at the impact of cross- functional interpersonal connections and interactions. 2.2.1 CREATIVITY AND CORPORATE CULTURE Creativity is a prerequisite for innovation since it enables the generation of new and appropriate ideas which, if implemented successfully, can become innovations. Most humans have the ability to be creative in one or several areas of their life, either in the personal or professional domain or both. The level and frequency of individual creativity varies over time and is affected by both the social and the work environment (Amabile, 1997). Individual, or small team, creativity can be seen as consisting of three components; expertise, creative-thinking skill and intrinsic task motivation. Expertise in terms of relevant knowledge and skill is a self-evident prerequisite. Applying creative-thinking skills to a task entails using different cognitive strategies, either inherent to the individual or acquired through training. Whereas the two first factors give the individual the tools and ability to be creative, it is the intrinsic task motivation that determines what activities will actually be carried out. The fact that it is intrinsic, rather than extrinsic, motivation that is crucial to creative work implies that the highest level of creativity is achieved when individuals work in an area in which they not only possess considerable knowledge but also have a strong interest in and enjoy working with. (Amabile, 1997) The significant impact of intrinsic motivation raises the question on how one can go about ensuring this motivation and nurture the individual’s interest in developing innovative ideas (Van de Ven, 1986). This challenge becomes even greater considering that human beings have inherent cognitive limitations when it comes to managing uncertainty and unfamiliarity (Van de Ven, 1986), which are common elements encountered in innovative work. Common for not only the intrinsic motivation, but also expertise and creative-thinking skill, is that they are all to some extent related to personality but with influence from external factors (Amabile, 1997). Thus, management has to find ways to stir the minds of their subordinates and push them to recognise and enjoy new influences and ideas (Van de Ven, 1986). One way to expose the organisation to a flow of new influences it to create a diverse workplace that is open for interaction with external actors. A diverse workplace has a mixture of age, gender and ethnicity amongst the employees. The external actors referred to are various stakeholders, such as customers and competitors. Diversity is in itself is a prerequisite for innovation (Wycoff, 2003), thus including such a value in the corporate culture can have a positive effect. The intrinsic motivation to act on these influences can be stimulated through the careful design and implementation of rewards and recognition (e.g. Gorschek et al, 2010; Cotterman et al, 2009; Carrier, 1998), which will be elaborated on later in this chapter. Formal rewards or not, the overriding goal should be to shift the focus of the organisation from only maintaining and protecting the current business, to also encourage and trigger people to appreciate new paths and initiatives (Van de Ven, 1986). The ability of the organisation to be creative and innovate is not simply the sum of the creative abilities of its individuals (Schilling, 2008). The characteristics of the individuals matter, but the overall creative climate is highly affected by contextual factors in terms of properties of the organization and its sub-groups, such as routines, structures and incentives and culture (Schilling, 2008; Wycoff , 2003; Woodman et al, 1993). 11 When building a company culture that fosters innovation and creativity, what it should not be characterised by is just as important as what it should consist of. An organisation experiencing political problems, conflicts and turf wars will not be able to create an atmosphere that encourages the mutual exchange and sharing of knowledge crucial to find new and creative combinations of knowledge and information. (Amabile, 1997) Similarly, strong competition and destructive criticism will defer from risk-taking since mistakes are not evaluated in a just manner, nor are they seen as opportunities for learning (Van de Ven, Angle & Poole, 2000 [1989]). Instead, colleagues should be encouraged to challenge, and build on, each others ideas in a constructive manner, especially cross-functionally with colleagues with different competencies (Amabile, 1997). Knowing what type of company culture to strive for is merely the first step, implementing it is the real challenge. The desired company culture is generally communicated through public statements and policy documents. However, in order for the culture to truly permeate every day business, top management needs to also act and, for instance, allocate resources in accordance with it. 2.2.2 RESOURCES AND TOP MANAGEMENT SUPPORT Top management plays an important role in the process of enabling innovation and stimulating creativity (Boeddrich, 2004) since their actions determine what types of behaviour and achievements that are recognised and promoted (Kim & Wilemon, 2002B). Management support ensures that creative work, new ideas and innovation are valued by the organisation (Kim & Wilemon, 2002B). Furthermore, successful idea management requires company-specific idea areas to focus on (Boeddrich, 2004), areas one would expect senior management to determine. Management that fosters creativity is characterised by supervision based on feedback and enthusiastic support, rather than monitoring and control (Amabile, 1997; Hellström & Hellström, 2002). Furthermore, mistakes should not be feared since that will not encourage taking on the risks and uncertainties inherent to innovative work (Wycoff, 2003). Top management allocate resources and funding which send signals on what the employees should focus their time and energy on in the future (Kim & Wilemon, 2002B). Innovation does not just happen, it requires time, effort, necessary expertise with relevant training, systems and processes supporting collaboration and perhaps also significant material resources (Amabile, 1997; Wycoff, 2003). It can be useful to allocate resources giving individuals the freedom and time to reflect on and explore ideas on a more informal basis (Wycoff, 2003). To some extent, the overriding purpose of management is to direct the attention and efforts of the organisation to areas of strategic importance. The intervention of management in combination with organisational systems and processes can shift the focus of the organisation from routine tasks to creative and innovative work. (Van de Ven, 1986) 2.2.3 CLEAR INNOVATION PROCESS Although the generation of ideas might seem serendipitous at times, succeeding with the generation phase of idea management does require a systemic approach and a clear process to release creativity and channel it to relevant areas. Working with idea generation as a one or two day kickoff with brainstorming could produce some relevant ideas, but this approach is not sufficient in the long run. (Wycoff, 2003) 12 An innovation process should be documented and communicated throughout the organisation to make sure the process, and its relation to corporate strategy, is understood by everyone. The individual should not only understand the process and its purpose, but also be able to grasp what his or her role is in it. (Wycoff, 2003). The idea generation phase of this process should contain steps that teaches the members of the organisation how to go about searching for hints and inspiration in the surrounding environment and with different stakeholders (Boeddrich, 2004; Wycoff, 2003). Albeit that it is important to have a clear idea generation process, (Wycoff, 2003) an exorbitance of processes and procedures will impede an open, empowering and trusting climate that stimulates creativity and innovation (Amabile, 1997). Furthermore, as the idea management process progresses, complexity increases with the growing number of people and resources involved, making it difficult for the individual to monitor and grasp what is happening with his or her idea (Van de Ven, 1986). The fact that management feedback and good team communication can stimulate creativity (Amabile, 1997) implies that providing insight to the ensuing steps of the idea management process can have a positive effect on the creativity in the idea generation phase. Knowing that you as an ideator will be able to follow the progress of an idea could thus be intrinsically motivating. 2.2.4 REWARDS AND MOTIVATION Innovative firms have systems and processes in place to reward and recognise innovative ideas since that signals the importance and value associated with innovation (Cotterman et al, 2009). The most important prerequisite for being creative is intrinsic motivation (Amabile, 1997), thus, any and all systems for rewards and recognition should be designed to trigger this type of motivation. High intrinsic motivation can mitigate for somewhat inadequate expertise or creative thinking skills. When intrinsically motivated, a person is more likely make an effort to acquire the necessary knowledge and skills to solve the task at hand. (Amabile, 1997) Rewards should be carefully designed because many incentives associated with extrinsic motivation do not stimulate intrinsic motivation, they can on the contrary be detrimental to creativity. However, research shows that there are some extrinsic motivators that can help foster creativity in business organisations, especially if the initial intrinsic motivation is already quite high. (Amabile, 1997) Creativity can be induced through so-called synergistic extrinsic motivators which can generate two types of extrinsic motivation; enabling or informational extrinsic motivation. The enabling extrinsic motivation comes from rewards that make it possible for the individual, or team, to dedicate additional time and resources to a particular idea, e.g. research funding and material resources. The informational extrinsic motivation on the other hand, has to do with providing rewards in the shape of information or competence that will have a positive impact on performance. (Amabile, 1997) Giving rewards in the shape of training sessions or seminars will not only enable future creativity through increase in expertise, but also avoid the risk associated with monetary rewards to be perceived as bribes of some sort (Griffith-Hemans & Grover, 2006). However, there is a risk that the synergistic extrinsic motivators do not have the desired effect on the very earliest stages of a creative process. They are perhaps more suited for the stages following the initial discovery and concretisation of a problem or idea where the search for additional information could be vital to put the idea into a context and understand its potential. (Amabile, 1997) 13 Although traditional rewards are not considered to have a positive effect on creative performance, they could in fact have just that, if designed to reward and recognise creative ideas rather than successful or implemented ones (Amabile, 1997; Hellström & Hellström, 2002). Rewarding creative efforts rather than mere success can be accomplished by rewarding and recognising every idea and suggestion made, with no prior evaluation of its potential (Van Dijk & Van Ende, 2002), preferably in a public way since the attention alone can be motivating (Hellström & Hellström, 2002). However, rewards must not be perceived as a means to try and control behaviour, since that would result in a lower feeling of self-determination which in turn will reduce overall motivation and creativity (Amabile, 1997). Regardless of what is being rewarded, one should refrain from monetary rewards, partly because of the risk of dwindling intrinsic motivation, but also because it is just not necessary. Research shows that it is symbolic recognition and acknowledgement that matters the most to employees, not necessary large amount of money (Carrier, 1998; Hellström & Hellström, 2002). In general, it is best to distribute small rewards often, thereby enabling continuous support and making the appreciation of innovation a part of company culture. Furthermore, small frequent awards reduce the risk of creating a competitive environment harmful to collaboration and creativity. (Cotterman et al, 2009) 2.2.5 CROSS-FUNCTIONAL INTERACTION Since collaboration and diversity has a positive influence on creativity (Wycoff, 2003; Amabile, 1997; Kim & Wilemon, 2002B) it is not surprising to find that people who interact with different departments as an integrated part of their work, submit and generate more ideas (Carrier, 1998). Moreover, there appears to be a connection between rich personal networks, so called network connectivity, and the quality of the ideas generated by the individual (Björk & Magnusson, 2009). One could thus leap to the conclusion that ideas coming from large groups of well-connected individuals are generally better that those of small teams or individuals, but it is not so. In fact, there are indications of diminishing returns to additional participants when it comes to innovating in teams. As numbers grow large, the creative process internal to the groups becomes more important and conclusive to the outcome than the external connections. Moreover, the need to reach consensus among a large number of different opinions might not be the optimum way forward from an innovation point of view. (Björk & Magnusson, 2009) Still, it remains evident that encouraging cross-functional interaction and enabling individuals to build large personal networks has a positive effect on the quality and perhaps also quantity of ideas generated (Carrier, 1998; Björk & Magnusson, 2009). Vandenbosch et al (2006) presents a wide sample of research studies addressing the significant impact of diverse relationships, dialogues and social networks when it comes to generating ideas. Some even go as far as to suggest that the potential of an idea is directly dependent on the network position of the ideator (Vandenbosch et al, 2006). Organisations can stimulate cross-functional interaction and personal connectivity by increasing the formal interaction, promoting forums and points of interaction where individuals can meet and share information and experiences. Events such as brainstorming sessions and workshops with individuals from different parts of the organisation could be one initiative. A more continuous and organisation-wide approach is to improve the systems in place to share and store knowledge and information, e.g. knowledge management systems and idea databases. (Björk & Magnusson, 2009) 14 Supporting cross-functional interaction is particularly important in the early stages of a development process since it often involves members from different functions, experts with specialised roles. Early internal cooperation and cross-functional interaction will enable transfer of ideas and technologies as well as increase the acceptance of new ideas throughout the organisation. (Kim & Wilemon, 2002B). 2.2.6 SUMMARY AND APPLICABILITY Ideas for incremental innovations are usually generated top-down in the organisation while discontinuous ones are mainly created bottom-up, which makes it complicated for firms seeking both types of ideas. How this paradox is, and could be, handled in the studied company will determine which kinds of ideas that are generated. Creativity enables the generation of new ideas and there are three factors determining the level of creativity; expertise, creative-thinking skill and intrinsic task motivation. For a creative climate, an organisation needs to have a sharing culture where colleagues should be encouraged to challenge, and build on, each others ideas in a constructive manner. People, who interact with different departments as an integrated part of their work, generate and submit more, and more qualitative, ideas. A diverse workplace that is open for interaction with external actors will expose the organisation to a flow of new influences that can inspire new ideas. To ensure that a desired culture permeates every day business, top management needs to act and allocate resources in accordance with it. Succeeding with idea generation requires a long- term, systemic approach and a clear process to release creativity and channel it to relevant areas. Individuals should not only understand the process and purpose of the innovation processes but also their role in it. Top management’s actions indicate what types of behaviour that is recognised and valued and thereby what the employees should focus their time and energy on. To help shift the focus of the organisation from routine tasks to creative and innovative work top management can also make sure individuals have time to reflect on and explore ideas on a more informal basis. Innovative ideas should be rewarded and recognised since that signals the importance and value associated with innovation. Traditional, monetary rewards can have positive effects on creative performance if they reward and recognise creative efforts rather than just successful or implemented ideas. However, monetary rewards are not necessary and can in inappropriate forms decrease intrinsic motivation. To avoid this, rewards for enabling or informational extrinsic motivation can be used instead. To be able to generate more and better ideas a firm needs to have a creative climate. Therefore, research on creativity and how to create a company culture that supports innovation is applicable in a study that aims to improve idea management practices. 2.3 IDEA COLLECTION While idea generation and creativity is related to corporate culture and how it manifests itself through leadership practices, organisational structures and processes etc, idea collection focuses on the tools and techniques available to channel and tap into that creativity. There are different techniques that can help the individual or team reach further and expand their creativity, enabling ideas that would not have seen the light of day otherwise. Combining different approaches, more or less structured ones, when collecting ideas will help counteract the influence of preconceived notions and preconceptions. (Fernandes et al, 2009) 15 Structured idea collection could be done actively through face-to-face, personal interaction and meetings or via tools such as databases. Collecting ideas in person and thereby opening up for, above all, quick feedback and discussion can be perceived as more valuable than a thorough assessment. (Gorschek et al, 2010) One of the main purposes of structured idea collection is to channel the creativity by setting up some boundaries of just how far outside of the box ideas are expected to be. Without any type of rules or boundaries related to corporate strategy, the idea management process will not be effective. There would perhaps be a wider variety of ideas, but it is unlikely that more of them will be valuable compared to if they had been collected with a specific area or strategy in mind. Focusing the idea collection activities could be perceived as limiting the creativity, but preparing and presenting a focus area can be more of a source of inspiration and catalyst in the creative process. (Wycoff, 2003; Coyne, Clifford & Dye, 2007; Day, Gold & Kuczmarski, 1994) The idea collection topics should be related to the overall corporate strategy (Tidd, Bessant & Pavitt, 2005; Day, Gold & Kuczmarski, 1994) but could also play a part in influencing future strategy and identifying opportunities, for instance, by discussing potential markets (Tidd, Bessant & Pavitt, 2005). A well-formulated announcement of the strategy on new products or services, for instance, including goals and tolerable risks, is a good place to start from. Such a statement not only hints where to start looking for promising ideas, it above all give the information on where to not search for opportunities, giving the individual an estimation of what ideas that are likely to succeed. (Day, Gold & Kuczmarski, 1994) This chapter will exemplify and elaborate on some tools and techniques for idea collection. First out are event-based approaches to idea collection in general followed by trend-spotting, scenario analysis and brainstorming. Thereafter, different approaches to gathering ideas from customers will be presented. The last three parts includes different IT based tools for idea collection; online communities, idea databases and finally idea management systems. 2.3.1 EVENTS FOR IDEA GENERATION Event-based idea collection can be carried out both face-to-face person or online. Either way, individuals meet up for a day or two, a couple of times a year, to present and discuss ideas (Gorschek et al, 2010; Gamlin, Yourd & Patrick, 2007). Events are focused on a particular problem or topic, increasing the chance of generating relevant and useful ideas (Gamlin, Yourd & Patrick, 2007). The main drawback of this approach is the difficulty to enable participation from all members of the organisation. The participating individuals can convey messages and ideas from their colleagues, but if absent, it is not possible to take an active part in the discussions. (Gorschek et al, 2010) However, one should be aware of the fact that not everyone will want to participate, and recognise those that do contribute (Gamlin, Yourd & Patrick, 2007). Another potential problem with events lasting for a day or two is that the participants might find themselves torn between their everyday tasks and the idea event, distancing themselves from the discussions to answer emails or telephone calls. (Gorschek et al, 2010) As always, the culture of the company will have an impact on the level of success of tools for this type of idea collection events. Unless the culture promotes free exchange of ideas and employee participation, these types of event will not be fruitful. As with creativity in general, it is important to include processes for giving feedback throughout the event and to update the ideator on the progress of the idea as means to motivate him or her to submit more ideas. (Gamlin, Yourd & Patrick, 2007) 16 According to Gamlin, Yourd & Patrick (2007) there are five key success factors to arranging idea collection events. First of all, the purpose should not only be clear but also exciting and connected to a real business environment which will ensure the participant that the ideas submitted will be evaluated for further consideration. Timing is also of importance, if there is a perceived sense of urgency that could ensure a more enthusiastic participation. The third success factor is diversity among the participants, the more the better; try to include as many different functions as possible. Furthermore, encouraging the participants to approach the challenge from new and different perspectives could be useful, for instance by bringing in physical products to experiment and illustrate with. Finally, it is necessary to facilitate collaboration, e.g. by access to a collaborative virtual environment in which ideas can be shared and elaborated on, especially when the event is done globally through telephone conferences. 2.3.2 BRAINSTORMING Brainstorming is an event-based and rather well-known tool for collecting ideas in various settings, for instance, when speculating on the impact of coming trends. Traditionally brainstorming sessions are conducted by a limited group of people, given a certain topic or problem to focus their creativity on. There is a set of more or less defined ground rules or conditions in place starting with the attitude that all ideas are of interest, regardless of how unrealistic they might seem when expressed. Participants are encouraged to elaborate and build on each other’s ideas although there is no actual evaluation of the ideas until the end of the session. (Shani et al, 2009) One example of an event-based idea collection tool is the IBM’s InnovationJam. In 2006, this online brainstorming tool collected 46,000 ideas from 150,000 people worldwide during 72hours. (Gordon et al, 2008) There is a variety of IT tools available to help the participants of, for instance, brainstorming session to think more freely and in new ways. However, such tools are rarely considered successful, much due to the fact that the participants do not use them enough to become comfortable and experienced users. One does not get the opportunity to see and learn under what circumstances a particular tool could be of use. (Gordon et al, 2008) With or without IT support, brainstorming sessions can be more or less formal, and arranged for and with basically any kind of stakeholder or other persons that could have information of interest and value to a firm. It is not uncommon to host brainstorming activities where one or several customer representatives are involved. Customer brainstorming can start with the identifying of one or several problems, followed by a storming session with the purpose of collection suggestions on how to rectify it. (Cooper & Edgett, 2008) 2.3.3 TREND-SPOTTING AND SCENARIO WORKSHOPS It is stated time and time again that ideas should be generated and collected based on corporate strategy. If the strategy states, for instance, that the firm should be at the forefront of technology development it becomes relevant to understand the market dynamics and search for ideas on what upcoming technologies might be. The notion of trend-spotting includes various ways to search for, and collect, ideas related to trends in e.g. technology development and customer behaviour with the purpose of positioning the firm in relation to coming developments (Tidd, Bessant & Pavitt, 2005). There is a wide variety of sources useful when searching for hints on upcoming trends, for instance, conferences, seminars, exhibitions and connection to research labs (Tidd, Bessant & 17 Pavitt, 2005). There are also vast opportunities to utilise IT to monitor and search for trends, for instance through patent analysis, subscribing to data services and general search engines. It is common for firms to involve in some sort of structured process for spotting trends and gathering information on the activities of competitors. (Gordon et al, 2008) Noteworthy is that trends do not only have to mean the direction of future technology development but could also be a problem or need expected to arise as a result of, for instance, demographic or environmental changes (Rogers, 2003). Such correlations can sometimes be difficult to distinguish, hidden in large amounts of data. However, tools for statistical analysis and data mining are readily available. Simulation and optimisation tools can also be useful since they allow for very early exploration and evaluation of ideas. (Gordon et al, 2008) Having spotted a future trend raises the question on what this particular trend will lead to, what are the potential scenarios and their implications for the company. Discovering the trend is perhaps not the most difficult part, instead, taking action and responding to the expected changes poses the biggest challenge. (Cooper and Edgett, 2008) Scenario workshops and visualisation tools can help to predict and analyse the consequences to try and distinguish how the firm can best position itself to benefit from the expected changes. According to Gordon et al (2008) IT visualisation tools can aid simulation and be of great use to rapidly understand the implications of new concepts and changes in design etc. 2.3.4 INVOLVE OR OBSERVE CUSTOMERS In the section on sources of ideas, customers were presented as a source of ideas but there are different ways to go about collecting these ideas. Customer brainstorming is far from the only way. Regardless of the tool or method used, the customers involved could be both the direct customers of the innovating firm in question but also customers further down the value chain as well as end users (Cotterman et al, 2009). More innovative firms tend to apply qualitative rather than quantitative methods of obtaining customer insight in a structured way. Observing customers through visits enables a deeper understanding of their world and their underlying needs. Merely asking the customers about their wants and needs does not always give the complete picture. (Cotterman et al, 2009) Ethnographic research is one qualitative method which amounts to spending extensive periods of time at the customer’s location to observe the long-time use of the product or service in question. This method has theoretical advantages in terms of deep insight and understanding of unarticulated needs of the customer. However, it is a time-consuming and potentially rather costly approach which has led to a limited practical use. (Cooper & Edgett, 2008) Customer insight can also be gathered by frequent and close communication with customers, e.g. in project teams (Kim & Wilemon, 2002B). One could also implement an advisory board comprising of representatives from different customers. This type of board meetings tends to have a positive impact on customer relations in general, but they are not the best forum for idea collection since discussions are usually not focused on new ideas (Cooper & Edgett, 2008). 2.3.5 ONLINE COMMUNITIES There is an abundance of online communities devoted to a wide variety of topics of interest, some of which can be utilised as tools for idea collection. Tapping into discussions where, for instance, enthusiastic end-users discuss their problems and experiences could give valuable insights on how to improve one’s customer offers (Cooper & Edgett, 2008). 18 One could choose to set up communities, suggest topics or merely search for interesting discussions among existing communities. Either way, collecting ideas from online communities is not only cheap, but also relatively effective and can bring many high potential ideas into light. However, even though communities can be set up and maintained at a fairly low cost, it will require some resources to sort through all the discussions held. (Cooper & Edgett, 2008) Particular types of online communities are those devoted to the notion of open innovation. These are online arenas where people knowledgeable in a specific technology area can meet up and take on challenges posted by organisations. Open innovation communities, for instance Innocentive and NineSigma, make it possible for firms to leverage competencies outside of the firm to find the best possible ideas for how to tackle a future challenge. Downsides to the open innovation tools are potential issues with intellectual property rights (Alexy, Criscuolo, & Salter, 2009), possible reluctance to adopt ideas invented outside the firm (Trott, 2008), and the fact that overall effectiveness is perceived as rather low by users (Cooper & Edgett, 2008). One could also consider open innovation in the shape of an idea box, open to anyone outside the firm. However, few firms have this type of tool in place, and those that have tried it report of meagre results. The poor outcome could be explained by the large resources needed to scan and evaluate the ideas as well as providing ideators with feedback. (Cooper and Edgett, 2008) Still, the concept of idea databases limited to the firm, is a wide spread tool for collecting ideas. 2.3.6 IDEA DATABASES The perhaps most traditional and common way to collect ideas in a rather passive, yet structured way, is to set up one or several idea databases, or idea banks, controlled by the firm. Idea databases are generally based on a sort of virtual box, in which employees can put any type of idea that comes to mind. Relevant management representatives then screen the incoming ideas trying to determine which ones are worth to take into consideration and investigate further. (Gorschek et al, 2010) Idea databases, or idea boxes, can at a first glance seem like a promising and reasonable way to collect ideas. However, there are a number of challenges associated with these tools, many of which can be at least in part solved by adjusting the structure of the database as well as ensuring sufficient supporting functions around the database. (Gorschek et al, 2010; Carrier, 1998; Day, Gold & Kuczmarski, 1994) Still, some people prefer the personal interaction and direct feedback available through face-to-face idea collection, and might be reluctant to using an online idea database (Gorschek et al, 2010). Also, as with creative work in general, these systems are more successful when the users are presented with topics around which ideas will be gathered (Cooper and Edgett, 2008). Firms that are experienced in the management of idea databases bear witness to the importance of assessing the submitted ideas frequently. This is important out of respect to the employees that have taken the time and efforts to send in their suggestion, especially since none or late feedback will defer the individual from submitting ideas in the future. (Schuring & Luijten, 2001; Gorschek et al, 2010; Carrier, 1998; Fairbank & Williams, 2001; Cotterman et al, 2009) Moreover, the ability for the firm to absorb and implement ideas rapidly makes it possible to appropriate more business value from the idea in question. (Carrier, 1998) Idea databases should be designed to make it possible for the idea submitter to monitor the progress of the idea, whether it is pursued, rejected or perhaps put on hold. Having clear structures and procedures of the idea database is also preferable since it will make sure that the system is predictable and rewards the right type of ideas (Schuring & Luijten, 2001). A clear 19 structure will also make it less difficult to discern any potential synergies or commonalities in combinations of ideas. (Day, Gold & Kuczmarski, 1994) Unfortunately, ideas that originate from idea databases might come second to competing ideas that surface through other channels, e.g. customer requirements. Submitted ideas are only as good as their description, whilst a more direct request from a customer is also supported by a more certain business case of expected sales and revenue. Even if the two ideas were equal from a fact-based perspective, the idea from the database is usually only backed by one or a couple of individuals whilst the other idea will probably have a stronger organisational support from the start. (Gorschek et al, 2010) When searching for theory regarding idea databases one often comes across a certain type of databases designed as a means to collect suggestions for internal continuous improvement, rather than ideas for innovations. Albeit that the contents of the systems are different, they still share the challenge of triggering individuals to actually submitting suggestions or ideas. Shuring & Luijten (2001) state that such behaviours are stimulated by positive consequences and antecedents; signals that encourages and guides actions. The positive consequences necessary can be rewards and recognition of various types. The characteristics of successful rewards related to idea databases more or less coincides with the general theories on rewards that stimulate creativity, as presented earlier in this report. Rewards associated with idea databases should be positive, frequent, small, personalised, varied and not just monetary. (Shuring & Luijten, 2001) Although, there is research done suggesting that rewards should be proportional contrary to small and fixed (Fairbank & Williams, 2001). It is highly important to refrain from any type of negative feedback, rejection of ideas must not be perceived as any kind of punishment. Nor is it advisable to combine the submission of ideas with some sort of competition, unless it is a minor, short-term contest with purely positive and amusing rewards. (Shuring & Luijten, 2001) In order to encourage overall participation, all contributions could be given a small reward or some sort of token of appreciation. Acknowledging participation can make the employees more confident and increase their inclination to submit more ideas in the future. (Fairbank & Williams, 2001) The antecedents needed, in addition to the positive consequences, could be basic reminders of the existence and importance of the system (Shuring & Luijten, 2001; Fairbank & Williams, 2001). Furthermore, a simple form to fill in when submitting ideas, time to submit ideas and perhaps also help with completing the form will also reduce the threshold to submitting. (Shuring & Luijten, 2001) The importance of having a clear and understandable user interface and form for submitting ideas is also pointed out by Fairbank & Williams (2001). Employees are more likely to take an interest in an activity if they feel that they are competent enough for it. Feeling that your superiors believe you to be able to come up with, and submit, good ideas will make you more inclined to do so. (Fairbank & Williams, 2001) If implementing an idea database, the organisation needs to decide whether or not one should be able to submit ideas anonymously. Some might take pride in seeing their name on an idea whereas other would like to remain out of the spotlight. In order to not miss out on any suggestions it is advisable to leave it to the individual to choose his or her preferred level of anonymity. Communicating past successful ideas submitted to the box will bring motivating recognition to those ideators who made their name public. If anonymous, presenting the idea to 20 the public will still give some weight to the activity and signals that the idea database is worth submitting ideas to. (Fairbank & Williams, 2001) Ideas tend to improve as they are exposed to cross-functional feedback from people with different experiences and knowledge, a process which stops as the idea is submitted to the database. Refining an idea to give it a high potential for becoming a successful innovation often requires a combination of market, technology and strategy skills which are rarely found in one and the same person. Unlike ideas that are sent to the idea box, ideas that are advocated for face- to-face by an employee can continue to evolve over time. (Gorschek et al, 2010) One successful initiative where an idea box was combined with inviting the ideator to promote his or her idea in person in person is the GameChanger initiative by Shell. It consists of a traditional idea box combined with an internal venture capitalist board before which ideators were asked to clarify their submitted ideas. (Van Dijk & Van den Ende, 2002) There are researchers promoting an extension of the traditional idea box, implementing a more reactive and interactive interface with room for collaboration (Fairbank & Williams, 2001). Such a system would solve the main problem with passive idea databases and turn them into idea management systems. 2.3.7 IDEA MANAGEMENT SYSTEMS This section of the theoretical framework will take a closer look at systems were ideas are publicly posted and commented on by other members of the organisation, rather than just submitted to a closed box. Having an effective system in which posted ideas can be evaluated and elaborated on is valuable for firms working with innovation (Wycoff, 2003). The key rational for enabling collaboration and interaction in the systems is that the more time an idea is subjected to thought, the more valuable it becomes. Making it possible for others, not just the ideator, to take an idea into consideration will increase the potential of the idea. (Boeddrich, 2004) Opinions on that the system could be more efficient might arise, but it is still better to have a system in place, since it will ensure a constant flow of ideas and keep innovation on the agenda (Cotterman et al, 2009). Using IT to facilitate collaboration and thereby innovation is not a process unique for the idea management systems. There is a multiplicity of software in use to find sources of relevant sources of skill and information and tap into these, e.g. expert directories, wikis, blogs, portals and of course emails as well as instant messaging. The more often a tool is being used, the better the employee becomes in realising the full potential of the tool and when it can be helpful, thus frequent use is important. (Gordon et al, 2008) Success factors similar to those presented in the previous chapter on idea databases apply to idea management systems as well including rewards, topics related to strategy, clear and transparent process but also the possibility to cluster ideas with synergies (Boeddrich, 2004). Key challenges include getting people involved and interested in posting and commenting on the posts of others. The motivating factors tend to be the same, thus rewarding the number of original posts as well as comments ought to be sensible. Open for collaboration or not, factors that determines whether these systems fail or not are related to how they are constructed and supported (Cooper & Edgett, 2008). Firms that have worked successfully with idea management systems can be found spread across most industries, even those that are not traditionally associated with high-tech solutions. One example is Illinois Tool Works (ITW), a firm with relatively low tech products that utilised an 21 idea management system in the shape of an electronic bulletin board. It was used to overcome the challenge of solving technical problems rapidly although the competencies necessary are geographically dispersed. (Gordon et al, 2008) Van Dijk & Van den Ende (2002) presents Xerox Venray as a best practice firm within idea management since their system performed above nation average on employee participation, the degree of implemented ideas and the amounts saved. With its 2000 employees, Xerox Venray is described as the largest outlet for Xerox in Holland and the logistic centre of Europe. The firm went from a physical idea box to an online idea management system where ideas could not only be submitted but also monitored, by the ideator, in terms of evaluation and implementation. The system was managed by a designated assessment team and marketed via internal publications, brochures and posters conveying the message to register all ideas, no matter how small. That communication was accompanied by a co-ordinator arranging thematic events. Rewards were handed out personally by management and could consist of minor monetary rewards for all suggestions or credits that could be turned into gift vouchers. (Van Dijk & Van den Ende, 2002) 2.3.8 IDEA COORDINATORS IT has enabled efficient collection of ideas, especially in large and geographically dispersed organisations. However, as pointed out by Gorschek et al (2010), some people are less comfortable handing over their ideas to a system. Instead, they prefer the interaction and immediate feedback possible in face-to-face submission of ideas (Gorschek et al, 2010). Although desirable, it can be practically difficult to enable face-to-face collection in large, global organisations. The Dutch telecommunications firm KPN enjoyed great success with a combined approach consisting of innovation coordinators to whom one can send ideas and suggestions. Despite that fact that ideas are not always submitted face to face, there is still a clear recipient which is not always the case with idea management systems. The coordinators at KPN were responsible for the evaluation of the ideas and presented them to subject matter experts etc.