How do you define innovation?
Andrei Cernasov: To me, it's creativity with constraints. I've often heard that creativity that brings money is the only possible form of innovation a company should get involved with.
Inventions are new, non-obvious ideas that are useful to one person—essentially, the inventor. And from that point on, it becomes a matter of socializing that idea to see if we can convert it into innovation, something useful to many.
Venkatraman L: Innovation lies in not only creating something disruptive, but also in trying to add value to something that was not there before.
How can project managers and their organizations foster a culture of innovation?
Dr. Cernasov: The project manager has to be more of an innovation educator than a practitioner, and that's tricky. You do that by building a track record. If project managers who consistently foster innovation outperform conservative ones, then other people will want to join in. But project managers have to provide the tools that allow people to implement innovative practices. You can train innovation up to a certain level, but you also have to identify and bring in naturally innovative people.
Mr. L: If someone has an innovative idea, it can't go into a black hole. What's the process by which these ideas are nurtured? Is there an organizational sponsor? Are innovators motivated to do more?
Companies must build a culture where you're allowed to fail, but at the same time there's support and a clear vision. It's also about creating an environment where team members are able to see the trends in the external world. Project managers play a significant part in fostering that culture.
Dr. Cernasov: I may swim against the current here. Changing an organizational culture is very difficult. Culture is the result of many years of hiring practices, of encouraging certain behaviors, of making certain kinds of investments.
When I got here, we had a pool of 3,000 very conservative engineers doing what they wanted to do and doing it very well. We identified a small group of people who could create a subculture of innovation. Our management consistently encouraged this subculture to outperform the rest. We expect more people to join in and sort of spread by example.
Our innovation program has three major parts:
One is the protection of ideas. We developed a database so no idea is lost, belittled or ignored.
Two, we have the small group of innovation catalysts whose role is to protect the person with the idea, regardless of their rank, from whatever issues he or she may encounter.
The third rung is top-down. Because of the nature of what we do, sometimes we have to innovate around something our team members are experiencing in the field, and we have to solve that problem quickly. So our management will issue a request for innovation, which in turn triggers a set of workshops designed to address the problem.
Mr. L: I agree with Dr. Cernasov. At the earlier firm I worked with, at least twice a year we had an innovation fest, where people showcased their ideas with proof of concepts and data points in terms of how this can benefit the organization. There are people benchmarking and saying, “This is going to give us x number of page views more,” and things like that.
Once a particular innovation becomes a prototype, a lot more team members see it has value. They start saying, “Maybe I'll also try something.” It starts to spread.
How do you measure the ROI of innovation?
Dr. Cernasov: The ultimate question is: Does your client see your product as highly innovative, highly differentiated from the competition, or not?
Early on, what you're looking for is management's commitment to innovation. To me, this is the most important leading metric. Does upper management provide guidelines to human capital for the hiring and training of people in innovation? How much money does the company invest in innovation? How much risk does the company assume?
At the trailing end, we have industry impact: how many patents you have and how many new ideas you have actually deployed in your product line. Then there are open innovation practices. Are you open to other people's ideas? What percentage of the ideas you don't use do you make public? Do you try to monetize the excess innovation? Because if you don't allow such exchanges, you're suppressing some of the innovation out of your people, and that's not a good thing.
Mr. L: There are a couple of things to measure. There are the immediate concerns, the incremental value to the top line or bottom line—for example, reduced costs. That's a more tangible way to look at it. There's also customer satisfaction and time to market. Instead of delivering a project in six weeks, how about four?
Make sure you know how many ideas are coming in, how many are getting implemented, and how many have really made a difference to the company.
We also have incremental innovation. Start with a product in hand. Everybody gets into a room and says, “It's not going the way we want it to. Can we try something new?”
Where do most organizations go wrong when it comes to innovation?
Dr. Cernasov: Some companies appreciated as great innovators have a bad habit: They have this idea funnel, and they want to have hundreds and hundreds of ideas feeding it. Then they manage it using stage gate processes.
At each stage gate, each idea is evaluated against milestones. A lot of ideas are terminated. Some program managers, unfortunately, take great pride in a high kill rate because it reflects that not only do they have a lot of ideas at the input, but that they have a very strict set of criteria to decide which ones are funded.
There's a backside to that proposition: A very high number of disenchanted innovators make it to a certain point, and then say, “I'm not going to suggest another idea because it will get killed.”
Instead of killing ideas when milestones aren't met, we implemented an idea maintenance system, where ideas are visited regularly to see if, under changing conditions, those ideas can be improved or be used in an existing project. This keeps innovators engaged. They're not disenchanted, and they get trained so their ideas, in time, converge more and more with our enterprise's and our clients' needs. PM