Today successfully managing innovation is getting increasingly challenging and placing considerable strain on the present design and structures of organizations.

A dedicated unit or group that draws from a range of disciplines and combines these into a new organisational unit has significant value to be at the forefront of designing the organizational change needed for innovation to be more embedded and integrated.

Let me explain why?
IBM has been investigating and promoting the concept of SSME- Services, Sciences, Management & Engineering for some time. I recalled a presentation by Jim Spohner of the Almaden Service Research from 2006 that has significant relevance even more today. As most are very aware, IBM has shifted dramatically into a service organization and innovation is absolutely essential.

To quote from Henry Chesbrough with his opening remarks in his latest book “Open Service Innovation”: “A few years ago, I sat in Paul Horn’s office at IBM.  Paul was the Senior Vice President of Research, in charge of IBM’s 3,000 researchers, scientists and engineers.

We had a wonderful conversation about innovation, and the many successes IBM had obtained from its research activities.  At the end of our time, I asked him a final question:  what is your biggest problem today? His biggest problem was that his research activities were geared to support a company that made computer products:  systems, servers, mainframes, and software.

But most of IBM’s revenues were coming from services, not from its products.  “I can’t sustain a significant research activity at IBM if our research is not relevant to more than half of the company’s revenues going forward”, he stated.  His answer intrigued and stimulated me to start working on an academic area that has become known as “Service Science”

The ability to combine sciences, engineering and innovation management offers much.

I believe both IBM’s & Henry Chesbrough’s focus is absolutely right, to focus upon service, but I would argue much of that thinking also applies across all of an organization’s innovation activity.

I believe we are at a point of time where we need to create dedicated Innovation Scientists & Engineers that focus on the discipline of innovation and build this into a centre of excellence within the organization.

Drawing from this work of IBM and applying it to the broader application of innovation let me outline the profile, skills and what these specialist units can accomplish.

First we need to agree that there is this need for a ‘call to action’
Every organization is working through their view of innovation, it seemingly is complex, the issue is that innovation will all of the best efforts still remains ‘ad hoc’ and not recognised as an emerging discipline.

It needs to become an established academic discipline, it needs to combine different methods and turn these into the ‘science of innovation’. We need to become more systematic about innovation. It needs a new type of speciality, a different mindset to tackle the broad issues surrounding innovation.

Establishing and combining these science and engineer innovators
Innovation is a huge field of research. It needs an understanding of its design, its systems and how these can be scale-emergent. We need more predictability in a whole raft of areas relating to innovation activity: in quality, compliance, productivity, sustainability and improving success rates for innovation activity.

We need to turn more ‘promise’ into economic value in our innovation activity. It needs to be dedicated, specialists that ‘grasp’ the different aspects of innovation and successfully translate them.

This dedicated team or person delivers real value
Through their own specialized understanding, they create knowledge others can use and quickly translate

• Through their science application, they create this knowledge
• Through their engineering, they can show the way to apply this to create new value
• Through their management understanding, they demonstrate the improvement of the process of creating and capturing value for the organizational good.

So having a dedicated innovation scientific emphasis can create knowledge, the engineering aspects can show ways to employ the knowledge, with the understanding of business models and how the different aspects can capture the potential value and finally how specific innovation management can improve the process, climate and environment to deliver innovation.

It is the ability to combine these as a dedicated unit or group of people that can rapidly accelerate and embed innovation within organizations

What are the disciplines required to be mastered?
There is a real need to blend the exciting areas emerging from social sciences, drawing from the many disciplines of engineering schools and schools of science (operations, computer sciences, industrial design & system engineering) and finally the school of management (marketing, accounting, management of technology, operations and customers found from MBA programmes) and a fair level of working experience and exposure across organizational problems and present disciplines.

The skill-set required will be incredibly valued by being ‘pooled’ together.
A huge blend needs to be within the mix: the combination of technology, business and social- organisation.

The team needs to be able to use tools that are more empirical (simulation work, investigative, experience applicable), analytical tools and techniques, engineering (workbench application, prototyping, assembly understanding, infrastructure deployment), theoretical (academic savvy, knowing standards and principles), scienced based and design applicable.

The principal role of this dedicated innovation group
They ‘own’ the body of knowledge, they seek consistent improvements, they perceive and evaluate emerging opportunities and they often identify unique avenues.

Where do they get involved?

This specialised unit or group works across the whole organization and its stakeholders for innovation; they don’t necessarily manage it, other more highly focused disciplines do (research, operations, supply chain, marketing, customer services) but they ‘orchestrate’ it, for the economies of co-ordination this can bring improvements in creating and capturing innovation value that translates into new economic and commercial success.

1. Firstly they are judged by their ability to relate & transform. Today, we have a growing co-production relationship that need of working both with internal and external parties (e.g open innovation).

This growing need has to be translated increasingly into the goals, rewards, risks and work, both explicitly and tacitly, to be captured between the parties so as to manage the ongoing state and efforts needed.

This task is increasingly falling to newly forming dedicated ‘relationship’ groups but  I would argue that there is a need going well beyond this current structure seen today, as concepts do need to have both the strategic and tactical implications well understood beyond many of these current open exchanges today are generating.

It calls not just for a senior manager to have the oversight but a broader strategic team capable of broader innovation assessments and understanding of the strategic and tactical implications. It is this teams ability to be the central point for co-production as overseer’s of the core process of innovation and fostering it.

2.      Supporting the Frontstage activities: Variance at the front stage is largely due to often consistent changes to requests and misunderstandings, resulting in actions that can step well outside a specific brief. More importantly, they can miss or simply ignore different opportunities as they were not in the initial brief.

Spotting these different opportunities can be discovered and then linked into the organization’s broader strategic intent by a dedicated unit, and through this, can provide even more higher-value services or concepts.

Eliminating front stage variance can lead to improving standards and higher quality, better and faster time to market but it can also ignore or destroy a lot of high end value creation opportunities by lacking this broader insight and deeper organisation understanding. This needs greater balance and dedication that this specialised unit could bring. It becomes a strategic innovation unit (SIU).

3.      Contributing to Backstage activities: These presently involve less the external stakeholders but more on how the internal process of innovation works within organisations. The speed, time to market and engagement of all involved in any innovation process determine ideas moving through to successful implementation.

Making innovation more visible comes in many forms. This could be working with different levels of management to provide improvements in tools, and techniques and raise its meaning.

It could mean exploring the impact points within the innovation value chain and often the knock-on effects, it could mean managing portfolio aspects, investigating execution value (what works, what doesn’t), evaluating redundancy and legacy issues within the innovation process, providing innovation assessments, anchoring innovation thinking into institutional change, and moving custom processes into standard ones that become more sustainable.

4.      Delivering the complementary aspects of Service, Product & the Business Model: as products and services have the potential to be combined in unique ways to increase the value for organizations; these are often having increasing tension on the present business model.

These ‘tensions’ need to be evaluated and organizations increasingly re-designed to seize the different opportunities that come from new combinations. This requires a fairly detailed understanding of the effects on the system and what needs changing, spinning out or altering.

5. Orchestration: they have the express intent to manage the total innovation platform in co-producing the value and extracting the different contributions from suppliers and customers alike and achieving the economies of this dedicated co-ordination.

The intensity of innovation will continue to increase, it needs dedicated managing to provide a more holistic assessment of its impact, effect and dynamics upon both the organization and the market it operates within to clarify the economic value in different terms. They orchestrate the innovation business platform.

6. Improve dynamic evolution: Understand the dynamics of innovation, their interrelationships and the gap points that need resolving to deliver successful innovation. I’ve written on this previously under dynamic capabilities and innovation landscapes (see http://bit.ly/bxTeYO).

7. Improve the capabilities of people and organizations: so the ability to add higher value creation and capture changes to reconfigure and improve productive capacity to contribute to innovation activity. I’ve written about a number of areas on this already ( http://bit.ly/c3G0Ta) or ( http://bit.ly/bLxGdt) & ( http://bit.ly/ibeT6D) to not go into this further here.

Innovation is certainly becoming more intense
Innovation is becoming more intense; in activities, knowledge, organizations, networks of partners, relationships with multiple external partners and customers. It is becoming more demand-sided that requires different approaches than those traditionally from the past.

We do need a greater dedicated focus to manage this. It needs to be more systematic, and more organized so it can draw upon an increasing set of disciplines (old and new) with the aim of integrating them into a new speciality of innovation science and engineering.

There is this powerful need to combine innovation in science, engineering and management.

We are increasingly dependent on the successful outcome of our innovation activity: to evolve, interact, coordinate, specialize and value co-produce.

We need to recognize we do not have the dedicated, combined structure yet in place to meet the innovation challenges not only of today but rapidly coming towards us in the future. Perhaps its time has come?

The post Dedicated Innovation Scientists and Engineers Group – the Growing Imperative first appeared on Building Your Innovation & Ecosystem Intelligence.

The book can go the way of a lightning rod to bringing service innovation up in many people’s thinking both in academic research and corporate agendas.

Professor Chesbrough is absolutely right, services are critical to developed countries’ economies and within our organizations. It is time to move service innovation up in our thinking by combining the internal capabilities within organizations and by enlisting the efforts of many others in support of their business.

The challenge is to combine the customer and the supplier on the same platform for Open Services Innovation to work. It is thinking through platforms more that catches my interest and what this means in generating new, innovative business models.

Taking services into a more open approach is not so easy.
Service innovation is distinctly different. Just take the opportunity to read “Service Innovation” by Lance A Bettencourt, published by McGraw Hill to get a really detailed understanding of this or read my book review I provided to InnovationManagement.se (http://bit.ly/9mCXmO).

Chesbrough’s book has four foundation steps. You can see these in my last blog “Taking the Open Services Innovation Road (http://bit.ly/h5mbAV). The two aspects that I felt were worth focusing upon here are 1) transforming and redesigning your business model and 2) the suggestion of an open innovation business model platform to work from.

Transforming your Business model
The chapter that deals with these two aspects (chapter 5) open with “while openness can be quite helpful to improve service innovation, it becomes far more powerful when joined to the task of designing or redesigning a business model.” This is a pivotal chapter for me.

For me, business model generation is very much something we all have to build into our thinking. I’ve blogged on different occasions about this in many of my September & October 2010 posts on this site- I encourage you to take a look back to refresh on these if needed.

Opening up organizations thinking to focus more on service innovation will certainly challenge existing business model design. Distribution channels, and interactions with customers will dramatically alter; extracting more out of the value chain, and deepening after-sale service will all need to be reviewed. Professor Chesbrough does suggest many current business models are full of inertia by their very logic as one choice can constrain other alternatives and cites Dell as a good example of this.

Also, I would recommend Alexander Osterwalder’s excellent book on Business Model Generation, my review (http://bit.ly/i6W3HV) or Mark Johnson’s “Seizing the White space”, review here (http://bit.ly/bwKNkS) for gaining a really good understanding of Business model needs as Professor Chesbrough’s book touches on the Business model as you do need to supplement this chapter significantly.

Open Innovation Business Model Platform
“The ultimate goal for a service business is to become a platform for other businesses to build upon”

According to Professor Chesbrough “the crowning achievement of a platform business model is that it attracts external companies to invest in business activities that enhance the value of your platform. Stated differently, a platform business model leverages other people’s money and resources at it grow”

Now, this gets to the interesting part of the book for me. Professor Chesbrough suggests a two-sided market platform between suppliers and customers both contributing to the ‘hosted’ platform’s numerous choices for customers to choose from and lots of customers looking for items to choose from to form a virtuous cycle.

It is the architecture, the platform developer that connects the internal and external elements to achieve this.

In this open platform business model where key suppliers and customers enter into a ‘relationship’ and become business partners to share technical and business risks with customer needs and experience understanding.

Getting to this sense of spiritual ‘Nevada’ is the really big ‘bite’ from this book.
“This requires opening up your organization’s business model to harness the energy and investment of third parties in the business”

The book does broaden the business model still further and suggests third parties be encouraged to participate in the company’s future business plans with even independent evaluators to rate and review services on this sharing platform. By sharing tools, standards, intellectual property and know-how needed is part of the open equation, the platform not only coordinates business directions it now shapes future direction alongside the customer.

Extending what is presently going on and applying it across industries is the challenge.

This platform approach is nothing new for many business-to-business activities that have technology as central, and or, have long lead times and require industry standardisation where they need to build out on agreed platforms or through a roadmap approach.

Also for selected industries that have achieved this greater connection with suppliers and customers such as Apple (well covered in the book) for its iPod, iTunes, iPhone & iPad where applications are open and customers participate but can this go more broadly across other industries might be more fraught and questionable?

Can the combination of fresh thinking of your business as more a service business, allowing co-creation with customers getting more involved through opening up innovation to a broader ecosystem-based on platform business models be our next big ‘wave’ in innovation?

It will be interesting to participate in the debate and see if it gains a broader acceptance. I feel we might have a long road to travel through, to tackle this conceptual framework suggested by Professor Chesbrough and resolve the many issues and challenges it tends to brush over.

The post The Promise of Open Services innovation first appeared on Building Your Innovation & Ecosystem Intelligence.

I have been looking forward to this book; it addresses one of the most important areas of innovation that we have, the service sector and discusses open services.

In this last week, I have been reading Professor Henry Chesbrough’s new book “Open Services Innovation: Rethinking your business to grow and compete in a new era”, published by Jossey-Bass, released last week on 18^th January.

Services are critical to understand and focus upon, for our continued economic growth, for the ability to offer an often distinct and unique competitive advantage, as well as provide much of our future employment opportunities, especially crucial in the Western economies. Services today comprise roughly 80% of economic activity in the United States, and 60% of economic activity in the top forty economies of the world (source OECD).

Mixed Emotions
After reading this book a couple of times I must admit I had a set of very mixed emotions.
His argument and business case for services is certainly compelling. He outlines a four key conceptual framework which can serve as a broad roadmap in thinking about how to tackle services in a more open way but, and it is big but he leaves an awful lot of ‘open’ questions to fill in and this is where the book disappoints.

His four foundational concepts that drive his framework
The four foundational concepts are bold and certainly radical in their strategic implications, although on first glance they may not seem that way.

1. Think of your business as an open services business in order to create and sustain differentiation in a commodity trap world
2. Invite customers to co-create innovation to generate (new) experiences they will value and reward
3. Use open innovation to help you turn your business into a platform for others to build on.
4. Transform your business model with Open Services Innovation to profit from building a platform business model so you can gain from others’ innovation activities as well.

The escape from the commodity trap is one of his biggest arguments for change

He talks a lot about escaping the commodity trap. I’m not sure I buy this argument yet. I feel too many organizations don’t differentiate enough and do not recognize their often unique position. They spend far too much in time, effort and money on benchmarking others, copying and mimicking best practices. This is often the easy route and eventually it can take you to commoditization but the case for opening up your thinking to new ways of service needs exploring more before many are really at today’s point of being ‘trapped’. It is more the present fixed mental mindset than being already at the commodity trap.

He ‘hits’ the right area of focus in Service Innovation
I can accept all the arguments put forward in the book about service innovation and one could certainly add even a few more to support the business case.  I agree to throw open your innovation thinking to engage with the customer as central is absolutely right but does this conceptual framework go deep enough in exploring this and explaining the consequences?

The Shift to catch more ‘open innovation’ winds.
Are Services the next natural step of open innovation or does this book simply float a balloon to gauge the existing and future winds and the ‘open movement’ is just catching the winds that already are in force? We are at risk that the lack of necessary detail within this book to support this fundamental framework will allow for more ‘hot air’ and expand the gases that surround open innovation already?

In my view, we should be tackling existing problems before we move on and introduce another layer of open complexity. It certainly will throw open the debate about how open can an organization become with its stakeholders and especially its customers.

Open questions abound
There are many, I mean many, open questions that Professor Chesbrough introduces that are within themselves significant concepts. These are for me, dealt with in a ‘light’ way and do not have the detailed examination I would expect.

Let me provide a couple of examples where there was a need of greater depth and structure to tackle these

1)       The Customers Experience
Just engaging with customers to provide them with more complete experiences has a huge body of existing work behind that in its impact, strategic needs and what is required to do this correctly yet these are not really discussed in the difficulties, risks or rewards. A ‘complete experience’ is seemingly dangled there.  Much is left to be investigated. Equally co-creating with customers as part of your development process is seismic in managing this sort of change at all levels of any organization.

This move to engage the customer and provide her with a complete experience is such a strategic decision, perhaps no different from opening up the R&D to outsiders, but I would have expected more on the problems this might entail for any debate the board and organizational will need to conduct to understand the implication for such changes as this. The level of structural, process and relationship change this would bring is huge.

2)       Understanding Tacit Knowledge
Another example where you really wanted more was the level of explanations around tacit knowledge. Tacit knowledge is very difficult to capture. I felt it was dealt with in a very light manner.

Professor Chesbrough is right, knowing more about your customers than anyone else does offer a potential strategic advantage, you can potentially get closer to tacit knowledge but is this for the few who can invest in this sort of information database (ie Amazon) or for the many that simply can’t make this type of database or research-related investment?

Tacit knowledge of clients’ experiences is still a major challenge to capture and interpret but I certainly didn’t get as much help here in this book on how to go about it yet it is stressed that it is most important going forward for this framework.

One insight on tacit knowledge really worth sharing for our thinking.
There is one wonderful insight on this though, that I found excellent and must share- “the ability to manage tacit information effectively can create competitive advantage….as the globe moves ever faster…it is precisely the knowledge that doesn’t move fast –the tacit knowledge- that becomes increasingly valuable”. I loved that observation.

The risk of non-adoption in an organization is higher when you lack the necessary detail.

The success of this book will be in its adoption; the taking up of this conceptual thinking and how it prompts ‘reactions’ and is seen by different organizations that are facing service challenges, for it to resonate with them. Will “Open Service Innovation” be recognised as essential to adopt for the required growth and improvement needed to stay competitive will determine whether this book has the same impact as his first one, “Open Innovation”?

It will be a tough sell to this opening up of services to C-Level executives for many, and I’m sure, it will be difficult on just this book‘s conceptual approach and limited guidance.

The post Taking the Open Services Innovation Road. first appeared on Building Your Innovation & Ecosystem Intelligence.

I’m hopeful that the forthcoming book of Henry Chesbrough: “Open Services Innovation: Rethinking your Business to Grow and Compete in a New Era”, published by Jossey-Bass and being launched officially next week, 18^th January 2011, will go some of the ways to be a lightning rod to bringing this up in many people’s agenda if it is not already!

I felt with his past books on Open Innovation and Open Business Innovation they were the catalysts for deeper thinking. He provided the stimulus to find better answers with his many reflections and case studies through his solid research work and his ‘open’ and questioning thinking to prompt community ‘reactions’. This galvanized significant innovation movements and this time hopefully, it will be to open up and manage service innovation more effectively.

I will be completing a book review on this latest open innovation thinking by Dr.Chesbrough for www.innovationmanagement.se as an early February publication and I’m certainly looking forward to reading the final edition of this book when it arrives.
I’ve glanced through different early teasers, and complimentary pages and seen some advances to raise my expectations on this but understanding service innovation has been poorly understood and documented to date. It is complex and needs some different perspectives and thinking.

Dealing with the service side of innovation seems to have always been tricky. As the more ‘advanced’ economies or the ‘developed’ world extracts knowledge, its future understanding and extraction seem tied to really understanding and delivering service. Increasingly goods being produced is flowing east, and service experience and delivery will not be far behind unless this becomes the critical focus of Western countries to master and own for the next few years.

I’ve read a significant amount about the subject of service innovation, often it is been very fragmented and poorly connected in many different lacking ways; in its empirical evidence, analytical and theoretical frameworks and laying out a cohesive design. Let us hope Dr. Chesbrough’s book gives us a more solid basis to build upon and extend out.

For me we have different focal points within service that need to be thought through some more, these are

1. Centred on People– how we set about consumer services for example, how we enable engagement and develop these connections to build a sustainable business around individual’s needs is critical to understand
2. Centred on Business– again what connects the parties into a service relationship and what ‘transforms’ from this dialogue and set of exchanges into something that gives value to all the participators and builds on the existing to transform it into something of new worth.
3. Centred on Products– where design becomes more critical to gain appeal and attention but then how to build from this ‘sale’ to operate, maintain and grow further services around these products sold
4.  Centred on Information– the creation of knowledge and the being able to adapt it, leverage its utilization and diffuse it in new and valuable ways.

All of the above four require different understanding, a different science of service. All have a very high social-organizational need; all are lending themselves to being opened up.

An urgent ‘call to action’
We do need an urgent’ call to action’, we need a science of services to understand how this needs to evolve, what the different types of service focus requires look, how the service systems should evolve and scale.

The call to action does need to be a concerted effort-
a)      it needs to take increasing Governments attention to remove barriers and promote service,
b)      it needs businesses to give the necessary ‘weight of emphasis’ service deserves as service relevance to the organization is increasing faster than producing products and this call to refocus internal resources needs to be recognised;
c)       academics need to make service an increased priority for studies, for educational productivity and providing the platforms for research understanding and
d)       Societal impact needs a better service understanding.

Also knowing how to measure service is another big challenge.
Then we need to improve our level of measures for service. The growing need for measuring networks, interactions and relationships is extremely relevant to this area of innovation. Also the ability to measure operations and delivery excellence and thirdly the service value chain, the partnerships needed and the service excellence points understood from the client/ final consumer’s point of view.

There are seemingly many challenges and unknowns for service innovation today. We do need to get systematic about service innovation and make it more of dynamic evolution.

Optimism and openness to fresh insight is indeed needed

I hope Dr Henry Chesbrough’s book is the catalyst for this. Like his 2003 book, Open Innovation, it kicked off a whole new way to manage outside those internal organisational borders, let’s hope he ignites the open touch paper again in this book for service innovation.

A further work of his around the importance of the Business model is very much in the present minds of many and some excellent frameworks presently help us in thinking these through like Alex Osterwalder’s Business model generation and its nine exploring blocks, or Mark Johnson’s and his four-box business model framework. Both of these you will find comments within this blog or the book reviews I have previously made for www.innovationmanagement.se.

We really need a better acceleration of service innovation and its greater understanding for regaining growth in the Western economies and if it is throwing services open then let’s go! I think service innovation is going to be very topical, highly critical in the coming months and years to grasp, translate and perform as we need service excellence to thrive and in the West, survive from service’s increased contribution in wealth formation to the economies and its role in necessary job creation.

The post Service innovation- can it become more open? first appeared on Building Your Innovation & Ecosystem Intelligence.