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Process 4: Structural Changes for IM

Effect the structural changes to enable management of innovation projects across an internal net­work of competence centers and external network of alliances. This involves the arrangement of skills and expertise into competence centers across the organization, so that they can be flexibly allocated to various projects, depending on the needs of the innovation project. The organization should also be able to tap into external resources by managing external alliances and networks in a portfolio, as detailed in the following steps.

Step 1: Developing Competence Centers. As outlined in Chapter 7, in some organizations, competence centers develop naturally as specific business units, labs, departments, and groups develop a specialization in a certain area, so that they become known to management for their expertise. But this is not enough; this development should be systemized in a methodical way under the business model. The design of the business model should also define the criteria on which a new competence center will be developed and when to take advantage of innovation clus­ters. The following steps provide a guide:

1. The manager of each competence center (lab, department, unit, or group) should know the skills, expertise, and competencies of his or her personnel.* The manager should also keep a record of the projects assigned to each one in the center, time availability and ability to travel.

2.       Create a competence center, or recognize it as such, whenever the unit concerned devel­ops a specialty in a certain area where concentration of skill is beneficial to improving resource and team allocation.

3.       Organize competence centers around areas of knowledge, applications, or skills and not product, process, or location.

4.        Create a flexible structure in which personnel from the various competence centers can be assigned to projects across the organization.

5.       Keep a log showing what each center has in terms of equipment, access to local talent, and strategic alliances.

6.       Consider the desirable geographic location of any new competence center. In particular, consider the following:

 

•   Advantages of proximity to an innovation cluster with the most advanced technology in the area of practice

•   Availability and cost of highly skilled labor

•   Access to local talent •   Advantages of proximity of the center to other related centers in the internal network of competence centers

•   Advantages of proximity to external networks focused on the same area of knowledge or practice

Step 2: Create and Manage an Alliance Portfolio. Alliances as a general rule should be sought to combine complementary strengths, increase learning and knowledge transfer, and get to mar­ket faster. In all cases, the following steps should be taken into account before making an alliance decision:

1.       Align the purpose of the alliance with business objectives and priorities.

2.       Set clear goals for the alliance, including defining metrics for monitoring progress in reference to the set goals.

3.       Assess the partner's culture and reputation, market reach, and customers. The depth to which this step needs to be performed depends on the type of the alliance relationship and its duration.

4.       Create a portfolio of alliances to be managed by a central department. Exhibit 12.6 pro­vides a guide on the information that needs to be included in such a portfolio.

5.       The central department should be the final point of approval on alliances, and a first resort to assess the benefits of the alliance. This is important to avoid situations in which different business units compete for the same alliance.

6.       Analyze synergies and overlaps in the portfolio to maximize efficiency and control costs.

Step 3: Tap Internal and External Resources to Form Project Teams. In forming the project teams the central unit should follow these steps:

1.       Identify the critical issues that are presented by the innovation project.

2.       Determine the critical skills that are required to manage and work on the project, and identify the people within the organization who have the required skills.

3.       Consider the skills outside the organization available in the portfolio of alliances devel­oped under step 3 above, as well as explore other potential partners if needed.

4.       Assign a team leader with the responsibility of setting the timeline, milestones, work­flow, and measures.

ALLIANCE	DETAILS
Type	R&D collaboration, joint venture, partnership, license
Party	Supplier, distributor, customer, university lab, R&D organization
Duration	Project-based, commercialization of technology, set or unlimited
Purpose	Combine strengths, reduce time to market, gain knowledge, economies of scale, access to blocking patent
Competitive advantage (competitive assessment of partner)	Customer base, market reach, proficiency and expertise, performance results
Skills accessed	[List]

EXHIBIT 12.6    Alliance Portfolio Chart

Many methods are available to operationalize the generic innovation strategies outlined under Process 2. The most important consideration in choosing a certain innovation method is aligning it with strategy and culture. Otherwise, the method will not be effective and may create confusion if the method's underlying philosophy conflicts with the cultural values or the strategy of the organi­zation. Hence, as a preparatory step to Processes 5 through 8, the organization needs to choose the methods that enable its innovation strategy, according to Exhibit 12.7. It should be noted, however, that even if an organization has a certain innovation strategy, individual business units may still use a method mentioned under another innovation strategy that is aligned with the business unit's spe­cific strategy, goals, and objectives. For example, a service business unit (e.g., financial services) may adopt a customer-driven innovation strategy, while another consumer products business unit may adopt a technology-driven innovation strategy. Alternatively, the organization may choose to implement some of these methods for a new business or when moving to a new market where another strategy is more appropriate. Processes 5 through 8 provide a guide as to the creation of idea banks, implementation of the lead user, and technology management methods.

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