The ideas factory

"Innovation is about organisations doing new things or existing things differently. Being able to do things differently and better than your rivals is one of the key competitive advantages for an organisation," says George Stonehouse, professor of international strategic management and an associate dean at Newcastle Business School, Northumbria University. Stonehouse says that innovation takes many forms: "It's dangerous to just think about it as creating the next new high-tech product. This is important, but these days a new product will not be able to compete unless the services and marketing that support it are innovative, too. "Innovation should also be customer-oriented, take Nike as an example," he adds. "They know their customers well and they develop products around customers' needs. As a result, they have a reputation for producing innovative and market-leading products." Creative block Innovation sounds great and it is no wonder everyone wants a slice of it. But can a manufacturing firm really systemise the process of innovation to gain competitive advantage? "To a certain extent, systems which are highly regulated can actually get in the way of innovation," says Stonehouse. "They don't require us to think outside the box and therefore they block true creativity. However, there are steps that organisations can take to enable a more innovation-friendly environment." (See box item, p37.) One organisation that has managed to foster such an environment is e2v Technologies, a company which was formed after an MBO from Marconi and which is a significant employer of engineers and scientists with a reputation for adopting and generating new technologies. Indeed, over 300 of the 1100 employees on the Chelmsford site are scientists and engineers. Technology director Dr Trevor Cross is particularly keen to have a structured process to encourage and recognise good ideas - this starts with a quarterly meeting where anyone with ideas is invited to the 'new ideas process forum'. Ideas are presented; everyone hears them and progress is shared. Cross calls this stage "weeding and feeding." After presentation at the forum, the ideas are depicted at one of four stages: concept, evaluation, feasibility and commercialise. This resembles a funnel: the volume of ideas reaching the later stages becomes smaller, while the call on resources they need increases. Even at the feasibility stage, the ideas can still be just prototypes and there are no guarantees that a commercial application will result. But, as Cross points out, "the prize could be very, very large." Later in the process, more resources are applied to each idea. And, upon engagement with a customer, the level of both financial and people resources really steps up a gear. A dedicated programme manager is put in place with a support team, a budget and reporting structure. But a certain amount of management control is still required, so the number of these programmes is limited to no more than half a dozen at any time. Recognition is a recurring theme throughout the process. If someone is very enthusiastic about an idea, but no commercial application can be found, it's still important to recognise that person - whether the recognition takes the form of public praise at an event, an announcement, a certificate or similar. Explaining the funnel process to everyone, with the four stages, means they understand why their idea may have been 'parked' for the time being - though Cross is keen to point out "I never say never". If the idea progresses, however, then the in-house patent attorney steps into action. Initiators of ideas that reach this patent stage are recognised and rewarded, though the recognition is more prominent than the reward. Once the patent is filed, a token payment, together with plenty of in-house publicity and a certificate are presented. Once the patent makes it through the long system, a further payment is made to the person who generated the idea. This is a great example of how innovation can follow a structured approach and have tangible benefits. Another is Money Controls, which from its Oldham, Lancashire, headquarters makes a range of payment machines - coin, bill and cashless systems for a range of sectors including retail, parking, amusement arcades, transport and more. The company is a leader in its field but was struggling with new ideas for its products, and turned to its local Manufacturing Advisory Service (MAS) for help. MAS organised a three-day value analysis workshop, which was based around the re-evaluation of an existing product. The design in question was an uprated 'hopper', which had been intended to replace the existing version that was losing market share. But, it had not gone into production because its manufacturing cost was prohibitively high. Learning points During the first stage of the workshop - feature analysis - the team identified 22 key features to which the customer attached varied importance. Even at this early stage, there were some major learning points for the company - in particular, the vital importance of having more than just design input. The participating team was drawn from varied functions - sales, design, manufacturing, purchasing and quality - many of which did not usually get involved in product development. "The contribution from the varied participants was a real surprise for some of the designers, especially in terms of the importance being placed on some features by the team analysis as compared to the designers' own views. In essence, the previous design had placed too much emphasis on some features that were actually determined to be relatively unimportant from the customer's viewpoint," states Peter Gerrard, a new product development practitioner with NW MAS. The next stage of the workshop was to generate a total cost profile and determine cost drivers - this is when the light bulb came on for many of the participants, says Gerrard, in terms of recognising the extent of unnecessary costs and the possible cost reduction opportunities. Value analysis techniques were used to identify cost reduction opportunities and the team brainstormed improvement ideas. From more than 100 opportunities identified, six were taken forward for detailed cost-benefit analysis. "This process can be difficult for designers, who can be sensitive to the fact that their designs are being analysed," says Gerrard. "However, they were very professional and throughout the workshop, one of my key roles as facilitator was to ensure that designs were critiqued not criticised, and that this distinction was understood." The result was that the workshop was extremely constructive. The detailed cost-benefit analysis undertaken on the six ideas determined that the product's manufacturing cost could be reduced by around 10%, for a minimal £14,000 investment. The workshop not only helped to generate a good understanding, enthusiasm and buy-in to this new way of addressing cost, but also brought about a change in attitude among designers towards better balance of marketing and manufacturing needs. As a result, the company has set up a dedicated team whose core activity is undertaking value analysis of all product designs, and this is starting to deliver long-term improvements. crosshead But leaping straight from the manufacturing process mindset to an innovative-friendly culture is a dangerous step, according to those in the know. Mark Fillingham made just such a point at the Best Factory Conference earlier this year, at which he gave a presentation for Robinson Paperboard Packaging, which was a winner of the 2005 Best Factory Award for Innovation. In fact, even Fillingham's presentation was innovative - he used voting cards for audience participation and it was certainly one of the most popular slots at the event. Such is Fillingham's knowledge and desire for innovation, that he is now leaving Robinson and doing a PhD on innovation. Fillingham says that innovation has four key parts: creativity, trust, networks and champions. "Creativity is more than just ideas generation," he says. "What are the ideas about? The danger is that many are just renovation not innovation - they are improvement ideas." Fillingham says that a business needs to think about the source of its ideas: "You can't just get some guys together in a room." The ideas need a point, a basis, and they need to move away from the 'industrial foundation', by which he means move from process improvement to a more creative environment. So what of the other parts? Trust is crucial as it enables the interchange of ideas between all of the companies in the supply chain, and even third parties involved in innovation. And this is where the business networks come in. Business must rely on ideas and input from outside of the organisation, too. Allowing ideas to flow and interact is important. "Often, you find something because you were looking for something else," says Fillingham. But he advises caution: "Even gated processes may force you down a particular path." Finally, the fourth element in the innovation system is champions - the people who co-ordinate others and who help keep everyone on track. These people help to break down the barriers of resistance and help to encourage and support the new innovation-friendly culture. Innovation can certainly have a fabric or a structure, but to flourish, the structure must not be as rigid and sequenced as that found in a more formal manufacturing environment. As Fillingham says: "You can't just transfer in those manufacturing skills and expect to get results."