I have this great idea!
Brian Grafsgaard, PMP, PgMP, Professional Services Director, Quality Business Solutions (QBS)
Innovation is often associated with great ideas. As a result, many organizations focus their efforts on the “Great Idea Hunt” only to find that coming up with ideas is not really the challenge. The challenge is to realize the intended benefits of the idea. Benefits realization requires an integrated innovation management ecosystem—grounded in the disciplines of portfolio, program, and project management—to ensure that the right ideas are selected and acted upon. This paper will describe the purpose and various dimensions of innovation; the innovation process—from problem definition (empathy) to ideation (creativity) to development of the solution (execution) and realization of benefits (adoption)—and how an integrated ecosystem of multiple disciplines—including idea, portfolio, program, project, change, and risk management—provides the foundation for a sustainable innovation capability.
In an ever-changing world, it is widely accepted that organizations must innovate in order to survive. The phrase “innovate or die” has become a common refrain. This imperative is succinctly described by Drucker (1993, p. 532):
“An established company which, in an age demanding innovation, is not able to innovate, is doomed to decline and extinction.”
But the mission of any organization is not to merely survive; it is to grow. Phillips, in Relentless Innovation: What Works, What Doesn't—And What that Means for Your Business (2012), argues that organizations must balance efficiencies with sustainable innovation in order to achieve growth and long-term viability. In short, long-term viability requires both efficiency and top line growth, which requires sustained innovation. But what exactly is innovation? Can innovation be managed? And, more importantly, can innovation become a consistent, sustainable capability? Smith and Fingar (2006, p. 178) respond to these questions and provide the backdrop for this paper:
“Innovation isn't difficult because employees don't have good ideas. The world is awash with creativity and technological breakthroughs. Rather, myriad obstacles in the idea-to-cash process limit a company's ability to innovate…. Seen as the creator of new value, innovation isn't hit-or-miss, trial-and-error lateral thinking, but a repeatable process.”
This paper will endeavor to define the innovation process and describe an integrated management ecosystem— grounded in portfolio management, program management, project management, risk management, and change management—it provides the foundation for a sustainable innovation management capability that successfully unite the dreamers with the doers. We will examine how portfolio management integrates with idea management and helps organizations “do the right work” by managing strategic alignment and investment of resources. We will also examine how program management and project management—supplemented with risk management and change management—helps organizations “do the work right” by managing execution and adoption.
Although commonly viewed as a modern term, “innovation” has been in use since the sixteenth century or earlier; Machiavelli described the perils of being an innovator in The Prince (1513). The modern definition of innovation is “the introduction of something new” (Merriam-Webster, online). By that definition, innovation can be as subtle as a process improvement, a new product feature, or as radical as providing a new product, service, or capability, or even a new market. Rogers (2003, p xvii), whose first edition has served as a guide since 1962, elaborates on the definition of innovation as “an idea, practice, or object that is perceived as new by an individual or other unit of adoption.” Kaafarni and Stevenson (2011, p. 9) further clarify this concept:
“To be a true innovation, a product, service, or company has to have three essential elements: It has to be unique, it has to be valuable, and it has to be worthy of exchange.”
Implied in this definition is the distinction between invention and innovation: an invention primarily addresses the first element—often resulting in a patented concept or technology—but may not result is something of value or worthy of exchange. Too often, the view of innovation is incomplete and focuses only on the “glamorous” side of innovation, the generation of ideas. Berkun elaborates on this misperception in The Myths of Innovation (2010) and provides the real story behind some of the world's most famous inventions. The untold story for many of them is not only the continuous trial and error required to develop a viable idea but the extraordinary effort required for the resulting invention to gain acceptance. Scocco (2006, ¶3) provides further clarity on the distinction between invention and innovation:
“[Invention] refers to new concepts or products that derive from individual's ideas or from scientific research. [Innovation] represents the commercialization of the invention itself.”
The concept of commercialization, or adoption, is critical to innovation success. Rogers (2003, p. 11) first introduced the roadmap to adoption in 1962, when he described diffusion (adoption) as “the process by which an innovation is communicated through certain channels over time among the members of a social system.” This sounds very similar to the recipe for effective change management, which Prosci, in The Change Management Tutorial Series (2011, ¶15), describes as:
“…the process, tools and techniques to manage the people side of change to achieve the required business outcome. Change management incorporates the organizational tools that can be utilized to help individuals make successful personal transitions resulting in the adoption and realization of change.”
From the definitions above a few common themes have emerged: innovation provides a new capability that, once adopted, provides value to the recipient. In short, the purpose of innovation is to provide something new that people want (even if they do not yet realize they want it). We are also beginning to sense that innovation is a process. Patniak (2010, ¶3) provides a succinct reminder of the purpose of innovation and provides the necessary elements:
“Innovation is about growth, and growth takes empathy, creativity, and execution. Empathy, on an organizational scale, is a shared intuition for what people outside the company really need and value. Creativity is the ability to come up with new ideas for products, services, and businesses that are different and distinct. And execution is the art of getting things done.”
Berkun touches on this life cycle and the role of empathy in the innovation process, stating that “the majority of innovations come from dedicated people in a field working hard to solve a well-defined problem…. the innovators spent time framing the problem, enumerating possible solutions, and then began experimenting” (2010, pp 40–41). The concept of experimentation and developing a learning environment is also critical to innovation success.
As we'll see, managing an innovation initiative as a program can improve the overall probability of success by enabling the learning process that project management alone typically does not provide. We will explore further how program management, coupled with portfolio management and project management, integrate to add value to the innovation process and help eliminate barriers to innovation.
Types of Innovation
Before we discuss these capabilities, it is important to acknowledge that there are several broad categories of innovation, each with its own particular challenges. Moore (2008) identified thirteen distinct types of innovation, based on the product or service life cycle involved. Bessant and Tidd (2009, pp 21–26) identified four dimensions of innovation, including:
- Product/service innovation—changes in the things the organization offers.
- Process innovation—changes in the ways these products/services are created and delivered.
- Position innovation—changes in the context by which the products/services are introduced.
- Paradigm innovation—changes in the underlying mental models that frame what the organization does.
Within each of these dimensions lies a continuum ranging from incremental (or sustaining) innovation to radical (or breakthrough) innovation. An innovation initiative may simultaneously impact one or more of these dimensions, increasing the complexity, uncertainty, and risk that has to be managed. Bessant and Tidd (2009, p. 22) provide the example of a new jet-powered sea ferry, which could be both a product innovation and a process innovation. I would add position innovation as well, if the provider were to market the unsurpassed speed of passage as an alternative to flying. The provider may also decide to change its entire paradigm and, rather than remaining a low-cost, volume-based service provider, become an up-market provider of fast, efficient service to the more affluent.
The dimensions that are impacted, and the degree to which they are impacted, ultimately impacts how the initiative is managed and the degree of change that is introduced. Breakthrough innovation typically introduces a higher degree of change, along with higher levels of ambiguity and uncertainty. Sustaining innovation typically introduces less change, along with less ambiguity and uncertainty. Sustaining innovation is, in many ways, the opposite of breakthrough innovation; organizations typically have more mature processes in place to introduce sustaining innovations as they are less impactful to the organization and the intended beneficiary. Breakthrough innovation often requires significantly more experimentation and effort to deliver and is typically more impactful to the organization and beneficiary. In addition, breakthrough innovation often requires that the beneficiary be educated about the benefits of the innovation before it is sufficiently adopted; effective change management is critical in this situation.
To add another element of complexity, innovation can be driven from within the organization (closed innovation) or as a collaborative effort with stakeholders outside the organization (open innovation). This too increases the complexity of the initiative and how it is managed. Open innovation, in particular, requires a great deal of stakeholder and communication management to be effective.
It is beyond the scope of this paper to identify and describe every category, type, and dimension of innovation. For the purposes of this paper we will address innovation more generically, recognizing that any innovation effort results in change—which must be proactively managed across the entire life cycle—along with ambiguity, uncertainty, and risk. The difference is the degree of change, ambiguity, uncertainty, risk that is being introduced.
Innovation and Risk Management
Risk management—coupled with program and project management—is a critical element of the innovation life cycle and helps address ambiguity and uncertainty. Ambiguity refers to the likelihood that the objectives of an initiative will change over time. Uncertainty refers to the inability to predict outcomes, based on the objectives of the initiative. Thiry, in Program Management (2010, p. 16), describes ambiguity and uncertainty on a continuum from:
- Ambiguity—pre-existing (low, typical operational change) to developing (medium, typical of business solutions) to emergent (high, typical of organizational or societal change)
- Uncertainty—known (low, typical of operations) to knowable (medium, typical of projects) and unknown (high, typical of breakthrough research or [author's note] breakthrough innovation)
Project management can address uncertainty, to some degree, through effective risk management but is less effective at addressing ambiguity; the objectives of a project typically must be well-understood before it is undertaken. Program management is especially useful in addressing both ambiguity and uncertainty, a hallmark of innovation initiatives. As Thiry (2010, p. 17) states:
“Program management has emerged as a methodology that enables organizations to deal with increased ambiguity and complexity and is well suited to reduce ambiguity, an essential preliminary course of action for project management to be effective.”
Thiry explains that in high ambiguity, high uncertainty situations, decisions must be based more on experience and intuition than data, which “requires a process where results of decisions are continually measured and objectives are adjusted accordingly” (2010, p 60). The experience and intuition required are gained through a learning process, applying the knowledge, skills, and competencies of the program team, as well as the lessons learned during the innovation process.
During the innovation process, a number of decisions have to be made, some based on intuition and some based on hard evidence. Risk management principles can be applied at both the program and component project levels to reduce the uncertainty. Hillson (2004, p 6) provides an important distinction between uncertainty and risk to illustrate this concept:
“Risk is measureable uncertainty; uncertainty is unmeasurable risk.”
From this statement we can see the importance of consistently identifying and analyzing risk events (both threats and opportunities) in an attempt to reduce uncertainty. Structuring the innovation initiative as a program provides the benefit of risk management on several fronts: at the component project and activity levels and at the program level, which includes both program-level risks and the component project-level risks that, in aggregate, may impact the overall program; project-level risks (both threats and opportunities) in aggregate can become program-level risks. Despite our best efforts we will never completely eliminate uncertainty, which further emphasizes the need for a learning process.
We have acknowledged that there are several dimensions and categories of innovation (on which there is no universal agreement). It must also be acknowledged that innovation can occur at any time during the execution of a program or project; innovation does not explicitly require an “innovation” initiative. This type of innovation is more closely associated with the positive side of risk management, the continuous identification and exploitation of opportunities. The proactive identification of opportunities, managed with the same rigor and attention as potential threats, often results in process efficiencies, shortened project life cycles, an improved solution, and/or enhanced benefits.
Hillson, in Effective Opportunity Management for Projects: Exploiting Positive Risk (2004), recommends that threat-based project risk management be extended to include opportunities and provides a framework to do so. The opportunity side of risk management, which is so commonly ignored, is critical to innovation initiatives and the “discovery” process that is so often required. Effective risk management can also help answer the most critical question: What if we don't pursue this innovation initiative?
Innovation and Change Management
Every innovation initiative, by its nature, results in some degree of change. Breakthrough innovations may change people's perceptions or even create a completely new market. Nearly every one of the conveniences that we enjoy today was at some point a breakthrough innovation (e.g., your refrigerator, automobile, air conditioning, etc.). This concept is exemplified by Henry Ford's most famous adage:
“If I had asked people what they wanted they would have said faster horses.”
Although this quote is likely a myth (Vlaskovits, 2011), it illustrates the importance of carefully defining the problem to solved as well as overcoming the aversion to change that many people (and organizations) experience.
Change management is also a critical element of the innovation life cycle, from the ideation stage to delivery and the ultimate adoption and sustainment of the product, service, or capability. Change management is an art and science unto itself and one that can be very challenging if done casually. Prosci, in The Change Management Tutorial Series (2011, ¶4), describes the change management process:
“From a process perspective, it is the set of steps followed by a team member on a particular project or initiative. For the given transformational effort, it is the strategy and set of plans focused on moving people through the change…. Effective change management follows a structured process and uses a holistic set of tools to drive successful change.”
Change management is integral to program and project management and facilitates adoption by both internal and external stakeholders. Designing and developing the first prototype or near production-quality product, service, or capability through experimentation is typically only part of the story. Many times, the much larger effort is to develop the infrastructure and capability to consistently produce the product, service, or capability and sustain the resulting benefits, often by internal stakeholders. This requires effective stakeholder and communication management.
Stakeholder and communication management are integral to change management. To effectively manage and facilitate change you have to know who will be impacted by the change and how they will feel about it. You also have to continuously communicate with stakeholders to prepare them for and ultimately persuade them to accept and adopt the change. Adoption may require a significant amount of education and “marketing.” Structuring the innovation initiative as a program provides the benefit of stakeholder and communication management on several fronts (like risk management): at the component project and activity levels and the program level.
But communication alone does not ensure that change will be accepted and that the benefits provided by the program will be sustained. Benefits management—as a supplement to change management—helps ensures that a comprehensive benefits realization plan, including plans to transition the program outcome and benefits to the intended recipients (and ensure that they can be sustained), is defined and executed. Benefits management will be covered in more detail later.
The Innovation Management Ecosystem
We have identified several categories and dimensions of innovation and the associated continuum of change, ambiguity, uncertainty, and risk. We have also identified the primary phases of the innovation process, from problem definition (empathy), ideation (creativity), benefits delivery (execution), to benefits realization (adoption). Trott (2008, p 14), reminds us that innovation is a very broad concept and provides a comprehensive definition, a concept originally offered by Myers and Marquis in 1969:
“Innovation is not a single action but a total process of interrelated sub processes. It is not just the conception of a new idea, nor the invention of a new device, nor the development of a new market. The process is all these things acting in an integrated fashion.”
This definition reinforces the complexity involved in managing an innovation initiative. But given the dynamic nature of innovation, the question remains: Can innovation be managed? Some practitioners believe the answer is an emphatic “yes.” Management is required to help ensure that: (a) the right problem is defined (one that supports the strategic objectives of the organization); (b) viable ideas are generated to address the problem; (c) the right ideas are acted upon; (d) the result is successfully adopted and that these elements can be performed in a consistent, repeatable manner.
For others, “managed” is the equivalent of “controlled” or “constrained.” How can you manage having a great idea? But innovation is not synonymous with creativity. Creativity is a necessary ingredient, but innovation ultimately requires execution; nearly every organization has far more ideas than it can conceivably act upon. Govindarajan (2010a, ¶1) confirms this misperception about innovation:
“Usually, managers equate innovation with creativity. But innovation is not creativity. Creativity is about coming up with the big idea. Innovation is about executing the idea — converting the idea into a successful business.”
Govindarajan (2010a, ¶2) goes on to acknowledge the importance of creativity in the innovation process:
“We like to think of an organization's capacity for innovation as creativity multiplied by execution. We use “multiplication” rather than “sum” because, if either creativity or execution has a score of zero, then the capacity for innovation is zero.”
In other words, without a well-defined problem and creative ideas to solve it, there is no innovation and without execution, there is no innovation. Some practitioners focus on creative problem solving and idea management concepts (the “fuzzy front end” of innovation) and view the entire innovation process through this lens. Other practitioners warn of putting too much emphasis on the early stages of the innovation process. Govindarajan and Trimble (2010b, p 4) confirm that, in their research, far more emphasis is put on the energizing and glamorous ideation stage than the seemingly humdrum, behind-the-scenes dirty work of implementation and emphasize that:
“…most companies, in their efforts to improve innovation, focus entirely on the Big Idea Hunt. Focusing on ideas may unleash more immediate energy, but focusing on execution is far more powerful.”
Because the fuzzy front end is often seen as more glamorous, a significant amount of energy can be spent developing and soliciting ideas. The result is typically a surplus of ideas with varying degrees of merit, each of which must be assessed and responded to. Many innovation experts recommend that an idea management capability be developed and that ideas be managed like a portfolio. The result is that idea management—problem identification (empathy), idea generation (creativity), and idea screening (high-level business case)—becomes part of the overall innovation management ecosystem, integrated with portfolio management to ensure that the most viable ideas are acted upon. This approach also prevents the organization's portfolio of strategic initiatives from becoming a “suggestion box.”
Idea management ultimately integrates with portfolio management—as well as program and project management—to add value to the innovation process, from organizational strategy to the discrete work packages and deliverables that are ultimately required, as illustrated in Exhibit 1.
Next we will explore how the portfolio management supports the innovation process.
Innovation and Portfolio Management
Portfolio management integrates with program management to bridge the gap between organizational strategy and execution and ensure that the right ideas are being pursued. Portfolio management also ensures that the proper resources (with the required capabilities) are being allocated. Portfolio management is a continuous process that links organizational strategy to execution by matching investment and the allocation of resources to strategic objectives; according to Williams (2011, p. 19):
“Portfolio management enables organizations to identify, select and manage the investments that will maximize business value. In essence, the goal of any portfolio-based approach is to maximize the value of the overall portfolio and to balance the strategic fit, timing and sequencing, investment risk, operational capability and resource capacity.”
A quality business case, which starts at the ideation stage, is critical to assessing an initiative's fit within corporate objectives, measuring its projected benefits against investment requirements, uncovering potential risks, and identifying alternatives.
The parameters used to assess initiatives and balance the organization's portfolio begin with the organization's mission. The organization's mission directs how the strategy is to be executed, which in turn defines how the organization's vision is to be achieved. Through a periodic strategic planning process, the organization's strategic objectives and performance targets are defined. Initiatives that sustain value are identified and assessed through operations planning and management. Initiatives that create value are identified and assessed during the portfolio planning and management functions, as illustrated in Exhibit 2 (adapted from The Standard for Portfolio Management – Third Edition (PMI, 2013b, p. 8).
The standard (PMI, 2013b, p. 8) goes on to explain that “the ultimate goal of linking portfolio management with organizational strategy is to establish a balanced, executable plan that will help the organization achieve its goals.” Organizational strategy is achieved by:
- Maintaining portfolio alignment–Each initiative must be aligned with one or more strategic goals and reflected in the business case.
- Allocating financial resources–The priority of each initiative guides financial allocation decisions.
- Allocating human resources–The priority of each initiative also guides resource planning, hiring, training, and procurement efforts; the organization must have the capability to meet its objectives.
- Measuring component contributions–The contribution of each initiative toward the strategic goals must be continuously measured.
“Operations” reflects the day-to-day organizational activities, which may include production, manufacturing, finance, marketing, legal, information services, human resources, and other administrative services that are essential to the organization (PMI, 2013b). These operational areas represent the organization's “performance engine.” It is important that the innovation program/project teams continuously manage the relationship with these operational areas for two reasons:
- The outcome and benefits of the innovation program must ultimately be transitioned to operational teams to sustain those benefits, and
- Resources for the innovation initiative typically come from these operational areas, unless the capability must be procured externally.
Relationship management requires proactive resource capability analysis and resource planning, as well as proactive, positive, and continuous stakeholder and communication management. Govindarajan and Trimble (2010b, p. 12) warn that “…the greatest strength of a Performance Engine—its drive for repeatability and predictability—also establishes its greatest limitations.” The reason is that:
“By definition, innovation is neither repeatable nor predictable. It is exactly the opposite—non-routine and uncertain. These are the fundamental incompatibilities between innovation and on-going operations…Business organizations are not built for innovation, they are built for efficiency.”
Govindarajan and Trimble also recommend engaging the performance engine to provide many of the functions that the innovation initiative may not have the resources, capability, or infrastructure to do (as efficiently). Govindarajan (2010b, ¶2) recommends that organizations adopt a “distinct-but-linked organizational model” by creating a dedicated team for the innovation initiative with the processes and incentive necessary to partner with, rather than fight, the performance engine and allow the performance engine to do what it does best.
This is important to bear in mind during program and project execution. Innovation becomes business-as-usual when the capabilities and activities that enable innovation—fully aligned with strategic objectives—are executed routinely throughout the organization. Allen summarizes (2012, ¶6) “If you make your company's routine behavior mirror strategy, you can transform your business.” That, of course, includes effective portfolio alignment, resource allocation, and performance monitoring.
Maintaining Portfolio Alignment
Organizational strategy is intended to position the organization for sustainable competitive advantage; help ensure the long-term viability of the organization; determine which industries, projects, and services to deliver; and allocate resources to achieve a unique competitive position. If the organization does not recognize innovation as an enabler of strategy, innovation initiatives will quickly be dismissed at the strategic portfolio level. Portfolio management plays an important role in enabling innovation strategy, as described by Al-Ali (2003, pp 119–120), by:
- Defining the areas in which new products (or services) will be introduced (i.e., the markets and segments in which they will compete).
- Shaping the mix of the innovation portfolio and enabling management of the associated risks by diversifying the portfolio mix to include projects of varying levels of “innovativeness.”
- Cultivating the ability to get to market fast by presenting a snapshot of all the innovation projects across the organization, enabling allocation and shifting of human and financial resources to meet strategic priorities.
Once the organization decides that innovation is necessary to support its strategy, it is imperative that senior leadership provides the proper directives and authority to middle management and those on the front lines who actually execute the strategy. The innovation strategy must be communicated throughout the organization to facilitate support for innovation initiatives, especially at the layers of management that ultimately provide the resources. If the necessary resources are not provided, innovation initiatives are in effect dismissed at the operational level. Innovation initiatives are ultimately authorized by providing resources to them.
Every organization has a finite amount of resources in terms of money, equipment, material, and labor. Portfolio management endeavors to match the demand for resources to the supply of resources; the organization's capabilities must be considered as well. Ultimately, decision makers must balance the benefit of using those resources on the innovation initiative against the “lost” opportunity of applying the resources elsewhere. However, it is imperative that the cost and risk of not developing an innovative solution also be considered. What is the financial impact if the organization does not proceed? More importantly, can the organization survive without pursuing the diverse mix of innovation initiatives that are required for growth?
Christensen (2010, p. 226) provides a warning on the resource allocation process:
“Managing innovation mirrors the resource allocation process: Innovation proposals that get the funding and manpower they require may succeed; those given lower priority, whether formally or de facto, will starve for lack of resources and have little chance of success. One major reason for the difficulty of managing innovation is the complexity of managing the resource allocation process.”
Although resources are allocated at the portfolio level, resources must be procured at the program and project levels. Wright (2012) emphasizes the need to quantify the resources (including skills and capabilities) required across the entire program life cycle and reminds us that they must cover not only the initial investment but the necessary training and ongoing operations as well. Program management supports this approach through development of a program roadmap and the top-down and bottom-up estimating that is typically required.
Measuring Component Contributions
Portfolio balance is achieved through the portfolio management governance function. Governance is accountable for investment decisions throughout the portfolio life cycle by continuously:
- Selecting and funding the investment portfolio;
- Monitoring and controlling portfolio investments;
- Communicating decisions about the investment portfolio and constituent components within the portfolio; and
- Ensuring that the investment portfolio continues to align with strategic objectives. (PMI, 2013b)
This ongoing cycle is supplemented by the phase gate review governance process that is performed at the portfolio, program, and project levels. These phase gate reviews are similar to the new product development stage gate reviews and are integrated within the innovation life cycle. Both are decision points (go/cancel/hold) based on the information available at the time, including:
▪ Performance metrics—are key performance indicators still within the proper threshold?
▪ Viability of the solution—has the investment to date or expected return on investment been negatively impacted?
▪ Current risk profile—how likely is it that the solution can still be delivered?
▪ Availability of resources—does the organization still have the right resources available at the right time?
▪ Capability assessment—does the organization have the right knowledge, skills, and competencies?
The portfolio mix must be continuously assessed and rebalanced across strategic fit, timing, and sequencing; investment risk; operational capability and resource capacity; and understanding that transformational innovation projects may require special attention, including a range of risk versus reward scenarios. Innovation initiatives must be continuously balanced against “business as usual” initiatives and against each other in a range from sustaining to breakthrough innovation.
Innovation and Program Management
Program management helps support the ongoing portfolio assessment by providing performance metrics from the component projects and from the program itself. Program management also reinforces the continuous alignment of program objectives with the organization's strategy and facilitates the stakeholder, communication, and change management necessary to help ensure that the intended benefits will be realized and sustained.
The Standard for Program Management – Third Edition (PMI, 2013c, p 6) describes program management as “the application of knowledge, skills, and control not available by managing projects individually. It involves aligning multiple components to achieve the program goals and allows for optimized or integrated cost, schedule and, effort.” The standard (PMI, 2013c, p 4) describes a program as “a group of related projects, sub-programs, and program activities that are managed in a coordinated way to obtain benefits not available from managing them individually. Programs are comprised of various components—the majority of these being the individual projects within the program.”
Managing multiple projects by means of a program allows for integrated or dependent deliverables across the program; delivery of incremental benefits; and optimization of staffing in the context of the overall program's needs. Optimization and integration are critical to managing innovation initiatives, given their ambiguous and uncertain nature. The pacing of the component projects is especially important for innovation initiatives. The deliberate pacing provided by the program planning process allows program activities to be sequenced in a manner that enables continuous learning and ensures an integrated result. Milosevic, Martinelli, and Waddell (2007, p 9) touch on this program/project relationship:
“The program management function links execution to strategy by integrating the deliverables and work flows of multiple interdependent projects to develop and deliver an integrated product, service, or infrastructure capability. This integrated solution becomes the means by which the strategic objectives are achieved.”
Program management unites disparate stakeholders with a common objective, provides a roadmap to efficiently execute the multiple threads of activity, and manages the dependencies between them. These concepts form the basis of Govindarajan and Trimble's prescription for successful innovation. Their first publication, How Stella Saved the Farm (2010a), serves as a cautionary tale on the risks of assigning a single person to lead an innovation initiative and to “go make it happen.” This approach often leads to conflict with the rest of the organization and, ultimately, to failure.
In their follow-on publication, The Other Side of Innovation: Solving the Execution Challenge (2010b), Govindarajan and Trimble provide a more prescriptive guide to managing innovation initiatives. The authors stress the importance of building partnerships to leverage the organization's capabilities—many functions can be provided more efficiently by the organization's performance engine—and emphasize the importance of a rigorous learning process. Innovation programs must strive for disciplined experimentation to convert assumptions and uncertainty into knowledge. The program roadmap must be developed to ensure that alternatives are available if an experiment being conducted by a component project does not produce the expected results. A new hypothesis can be formed, based on the results of the failed experiment, and another project can be quickly launched.
With that backdrop we will explore how the various program management domains apply to innovation.
Program Management Domains
Many of the benefits of managing an innovation initiative as a program have been explained over the course of this paper but a brief review of the domains and how they relate to innovation management is in order. The Program Management Professional (PgMP)® Examination Content Outline (PMI, 2011), describes five domains of practice; The Standard for Program Management – Third Edition (PMI, 2013c) aligns with these domains. The five domains are:
- Strategic Program Management—Identifying opportunities and benefits that achieve the organization's strategic objectives and maintaining alignment through program implementation.
- Benefits Management—Defining, creating, maximizing, and sustaining the benefits provided by programs.
- Stakeholder Management—Capturing stakeholder needs and expectations, gaining and maintaining stakeholder support, and mitigating/channeling opposition.
- Governance—Establishing processes and procedures for maintaining proactive program management oversight and decision-making support throughout the entire program life cycle.
- Program Life Cycle—Activities related to the life cycle phases from definition of the program through execution and close.
The relationships between the domains are illustrated in Exhibit 3. Program initiation and planning is performed in the Define process. Program execution and control are performed iteratively in the Deliver process. Finally, program closure is performed in the Close process.
Following is a brief overview of each domain and how it applies to innovation initiatives.
Strategic Program Management
Although the importance of strategic alignment has been covered in the portfolio management section, it must be recognized that portfolio management requires significant leadership attention to be effective. As a result, organizational “fatigue” can set in and participants can start going through the motions rather than objectively evaluating alternatives. Program management reinforces strategic alignment by ensuring that the component projects—as well as the program itself—maintain continuous alignment with the organization's strategic objectives. The Strategic Program Management domain comprises the:
▪ Definition and alignment of the program vision, mission, and objectives with the organizational strategy;
▪ Necessary environmental assessments and development of the program business case and strategy;
▪ Transformation of the program strategy to a program roadmap that guides the realization of program; and benefits.
These elements, in turn, flow down to the component projects.
The Standard for Program Management – Third Edition (PMI, 2013c, p 34) states that “a benefit is an outcome of actions and behaviors that provide utility, value, or a positive change to the intended recipient…. Programs and projects deliver benefits by enhancing current capabilities or developing new capabilities that support the sponsoring organization's strategic goals and objectives.” The standard (PMI, 2013c, p 33) also notes that “the purpose of program benefits management is to focus program stakeholders…on the outcomes and benefits to be provided” by the program.
One of the primary differentiators between program and project management is the concept of benefits management and realization. Benefits management ensures that the focus of the program is on the benefit to be delivered to the recipient rather than the specifications for a particular product, service, or capability; project management ensures that the resulting product, service, or capability has been created to the required specifications. Levitt, quoting McGinneva (1986, p 128), illustrates this point by describing a common sales and marketing adage:
“They [the customer] don't want quarter-inch bits; they want quarter-inch holes.”
This concept provides an excellent example of the difference between requirements and benefits. The requirement reflects the need for a quarter-inch drill bit; the quarter-inch hole reflects the benefit to be realized. Program management ensures that the focus is not exclusively on the product, service, or capability being created; the focus remains on the “job to be done” and how the recipient will benefit from the result. Ultimately, an innovation program is largely one of experimentation and learning, trying to find the best solution to support “the job to be done.”
Job to be done is an important concept, as illustrated by Christensen and Raynor (2003). The premise is that customers “hire” a product or service to do a job that has a social, functional, and emotional dimension. Program management ensures that the focus is not exclusively on the product, service, or capability being created; the focus remains on the “job to be done” and how the recipient will benefit from the result. To do so, the program must continually:
- Identify and assess the value and impact of program benefits;
- Monitor the interdependencies between the benefits being delivered by the component projects;
- Analyze the impact of planned program changes on benefits and outcomes; and
- Assign responsibility and accountability for the realization of benefits provided by the program.
The benefits management life cycle is performed in parallel with the program life cycle and comprises the following phases (PMI, 2013c):
▪ Benefits identification—identify the program benefits and the “job to be done”
▪ Benefits analysis and planning—define the benefits realization plan and program roadmap to determine how and when the benefits will be created and transitioned to operational areas (and ultimately sustained)
▪ Benefits delivery—monitor the program and component project results during program/project execution to ensure that the benefits will be realized as planned
▪ Benefits transition—transfer resulting component project outcomes and program benefits to operations for ongoing support and sustainment.
Benefits sustainment is the final, on-going phase. Benefits sustainment ensures that, before the program is closed, the responsibility for sustaining the benefits provided by the program is passed to the organization's “performance engine,” where the capability will continue to evolve through operational improvements, maintenance activities, and sustaining innovations.
Stakeholder management—referred to here as stakeholder engagement as many stakeholders, especially those in senior leadership positions, object to the notion of being “managed”—has been covered throughout this paper as well. The important point to make here is that, although program-level stakeholder engagement is similar to project-level stakeholder engagement, the audience is typically much broader. Program-level stakeholder engagement often requires a different approach and a much more acute need to influence without authority as program-level stakeholders (especially those internal to the organization) often hold higher positions within the organization than the program manager.
Ultimately, the innovation process benefits from engaging stakeholders at the program, project, and project activity levels by capturing their needs and expectations, gaining and maintaining their support (especially the performance engine!), and addressing any resistance. Innovation programs typically require a cross-functional effort; subject matter experts from across the organization and, many times, external to the organization must be engaged in the effort. Effective stakeholder engagement and communication management is critical to engage the organization in the effort and ready the organization for the results. Maintaining productive, positive relationships with stakeholders, especially the performance engine is critical to:
- Overcoming resistance, especially in relation to procurement of resources.
- Transitioning the outcome and benefits of the innovation program to operational teams to sustain those benefits.
Relationship management requires proactive, positive, and continuous stakeholder and communication management as well as proactive resource capability analysis and planning.
The importance of governance has been covered in the portfolio management section. Both program and project management reinforce the governance function by establishing the proper oversight in the form of governance boards (e.g., steering committees), advisory boards (to facilitate adoption and ensure that benefits are sustained), phase gate reviews to determine whether the program should proceed, and other methods.
The relationship between the portfolio and program is cyclical. Strategic objectives, expectations, and constraints flow from the portfolio level to the program in early phases of the program. Program level performance information flows from the program level to the portfolio in later phases. Since programs are comprised of projects, project performance information is aggregated at the program level. This bottom-up approach ensures the continuous evaluation of the investment at multiple levels.
Program governance helps ensure that the program and component project outcomes remain aligned with the organizational strategy and that the business case for each component project—which may impact the business case for the overall program—and the overall program is still valid.
Program Life Cycle Management
The program life cycle is managed in parallel with the benefits management life cycle. The program life cycle involves:
▪ Defining the program and component projects
▪ Defining the program's scope and planning the program activities and component projects, including the program roadmap and pacing
▪ Executing the program activities and component projects to achieve the program's objectives and deliver the program's benefits
▪ Monitoring and controlling program and component project progress and proactively managing risk events
▪ Finalizing all program activities, including all component projects, executing the transition plan, and preparing the operational areas to maintain the program results.
Whereas the benefits management life cycle focuses on the delivery of benefits, the program life cycle focuses on the execution of the activities required to successfully complete the component projects and maintain program performance. During a program's life cycle projects are initiated and the program manager oversees and provides direction and guidance to the project managers; program managers coordinate efforts between projects but do not manage them. An essential program management responsibility is the identification, rationalization, monitoring, and control of the interdependencies between projects; dealing with the escalated issues among the projects that comprise the program; and tracking the contribution of each project and non-project work to the consolidated program benefits (PMI, 2013c).
The component projects are performed in the delivery of the program benefits phase after the program has been initiated and planned; component projects, which may deliver incremental benefits, are also closed during this phase. After all of the component projects have been completed and closed, the program benefits are transitioned to the necessary operational areas (and to the intended beneficiary) where the benefits are sustained for the long term.
Innovation and Project Management
A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Fifth Edition (PMI, 2013a, p 5) describes project management as “the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements” within the constraints of time, cost, scope, and quality, while proactively managing risk. Projects focus on delivering specific outputs through a temporary endeavor. Programs themselves do not produce the intended products, services, or capabilities; component projects produce the outputs that, when combined, provide the intended program benefits.
In the innovation context, “experimental” projects may not produce anything of value other than the lessons learned from a failed experiment or prototype. But the resulting lessons learned are a valuable outcome to the overall program. It is important that a project to test a hypothesis or conduct an experiment be allowed to fail, but fail quickly. Frequent decisions must be made whether to proceed with or abandon the experiment and try something else. It is not in our nature as project managers to allow failure. Defining rejection criteria, in addition to acceptance criteria, can facilitate a fact-based assessment and allow a rational decision to be made.
If a project to develop a proof of concept or test a hypothesis meets the rejection criteria, the entire program does not have to fail; a project to develop an alternative proof of concept or test an alternative hypothesis can be launched in support of the program objectives. Being prepared to quickly launch an alternative proof of concept or experiment can mitigate the risk to the program. To do so it is imperative that the lessons learned be captured and leveraged for the new attempt.
Component projects may also provide incremental benefits by producing an initial version of a product, service, or capability that can be utilized by the intended recipient and developed over time. Providing incremental benefits is similar to the concept of “fail fast” taken to market. This approach has been popularized by Reis (2011). Although Reis’ approach is directed at start-up companies, the concepts apply equally as well to innovation initiatives. The core concepts are to eliminate waste—if it does not add value, do not do it—and leverage iterative development methodologies to produce a minimally viable product, service, or capability. Stakeholder feedback and experimentation is then used to build out additional features over time.
Similar to the relationship between the portfolio and program, the program and project relationship is cyclical. Strategic objectives, expectations, and constraints flow from the program level to the component project in the early phases. Project level performance information flows from the project level to the program in later phases. Projects are comprised of activities so project performance information is aggregated from these activities. This bottom-up approach ensures the continuous evaluation of the investment in both the component project and the program.
Specifically, programs provide project goals and objectives, requirements, timelines, resource allocations, and constraints to the component projects. These parameters are translated into project scope, schedule, and budget, based on initial estimates of (human and financial) resource requirements. Component projects then provide performance updates to the program level, including: project status, cost performance, budget and schedule updates, change requests and approved changes (project level change control is performed in addition to program-level), escalated issues and risks, and corrective actions.
Continuous monitoring is required to determine whether the project is still a worthwhile investment. Negative scope, cost, or schedule performance at the project level may invalidate the business case and why the innovation program was approved in the first place. If a critical project schedule slips it may delay the entire program and the outcome may not meet the speed to market objectives outlined in the business case. If the estimated cost is exceeded, the business case may no longer support the initiative, or at least that particular component of the program. If the required scope is not provided, the outcome may no longer support the business case or be viable in the marketplace. Again, in the innovation context it is imperative that a project fail quickly in order to limit the exposure to the organization and allow the program to proceed with an alternative approach.
Throughout this paper we have covered the interplay between portfolio, program, and project management. It is assumed that the fundamentals of project management are familiar to the reader. Traditional project management requires integrated initiating, planning, controlling, executing, and closing processes across the (now) ten familiar Knowledge Areas, as described in PMBOK® Guide (PMI, 2013a):
1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management
10. Project Stakeholder Management (new in the Fifth Edition)
Although each of these Knowledge Areas is critical to the success of the component project (and overall program); depending on the nature of the project, activities within some Knowledge Areas may not be required. Project scope, time, and cost deserve special attention as they form the baseline parameters for the project, the well-known “triple constraint,” to which quality has been added as a fourth parameter. Although the trade-offs demonstrated by the triple constraint are a basic concept, the stakes can he higher in the context of innovation, especially if the organization's survival depends on it. The project manager must proactively manage uncertainty and risk, as well as many other factors, to avoid changes in these parameters; the viability of the project outcome and its acceptance may be impacted as a result.
In essence, project managers must control change within the component project, whereas program managers must embrace change. Conditions may change and alter the course of the program. In response, projects may have to be canceled, modified, or quickly defined and launched in order to deliver the intended benefits. Project managers cannot be expected to make decisions that jeopardize their project or cause it to fail. Program managers must be ready, willing, and able to do so.
Although, again, there are practitioners who insist that innovation cannot be managed, they are generally describing the ideation phase, something like “you can't manage coming up with a great idea.” But, as with most endeavors, explicit and/or implicit constraints exist even with innovation initiatives. Hale (2009, NASA Blogs) illustrates why the discipline imposed by project management is critical for such endeavors:
“Having a better idea, adding just one more function, tweaking the design through just one more iteration—all of these things are wonderful, marvelous, the very life-breath of a successful project—right up until the point where they kill the project by driving it way over budget, way behind schedule, or into an endless technology development cycle.”
In the rapidly changing world, bringing an idea to fruition may have to occur within weeks, rather than months or years, and must provide compelling value. Project management, coupled with program management, can help ensure the success of the innovation initiative.
Sustainable innovation requires that the organization develop an innovation management ecosystem to manage the entire innovation process, from defining the problem (empathy), ideating solutions to the problem (creativity), developing and implementing the solution (execution), to realizing the resulting benefits (adoption). The ecosystem may have its underpinnings in a new product development phase gate methodology or another methodology. The ideal solution must cover the entire life cycle, providing an integrated approach from the “fuzzy front end” through delivery, adoption, and continuous improvement.
Many innovation experts recommend that an idea management capability be developed to manage the idea life cycle like a portfolio. The result is that the idea management capability—problem identification (empathy), idea generation (creativity), and idea screening (high level business case)—becomes part of the overall innovation management ecosystem, integrated with portfolio management, as well as program and project management, to create a sustainable innovation value chain.
The organization may have to develop its portfolio, program, and project management capabilities in order to sustain innovation. Program management is required to effectively address the change, ambiguity, uncertainty, and risk inherent in the innovation process. Project management is required to address the change, uncertainty, and risk at a different level. Project management integrates with program management to produce the outcomes that contribute to the program's intended benefits. Risk management and change management are integral to program and project management and help ensure that the innovation program's outcomes and benefits can be adopted and sustained. Finally, portfolio management integrates with program management to bridge the gap between organizational strategy and execution, ensuring that the right ideas are pursued and that the necessary resources are allocated to them.
This paper has strived to provide insight into the questions posed in the introduction: What exactly is innovation? Can innovation be managed? And, more importantly, can innovation become a consistent, sustainable capability? In response, we have identified the purpose of innovation, defined the various categories and dimensions of innovation, and clarified why innovation is not synonymous with creativity and invention. We have identified the continuum of change, ambiguity, uncertainty, and risk associated with the various categories and dimensions of innovation. In addition, we have identified the primary elements of the innovation process, from problem definition (empathy) to ideation (creativity) to development of the solution (execution) and realization of benefits (adoption).
We have learned how an integrated ecosystem of multiple disciplines—including idea, portfolio, program, project, change, and risk management—provides the foundation for a sustainable innovation capability. We explored how program management, coupled with portfolio management and project management (which supplement risk and change management), enables the innovation process and how these capabilities integrate to create value and help eliminate the barriers to innovation.
And, finally, we reviewed how this innovation management ecosystem provides a consistent, sustainable innovation capability. Although this paper has referenced “markets” and commercial entities, the information is extendable to other industries and initiatives as well.
It is my hope that you can leverage the information in this paper to improve your innovation capabilities. All the best to you in your journey!
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© 2013, Brian Grafsgaard, PMP, PgMP
Published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana