[music] I talked a little bit about budgeting and how we have to budget in
advance and how our organizations may require us to be very, to propose our
innovations in ways that are already legitimate.
That the ways that they know that you're using the money in a way that's already
valued, in a way that's not going to waste it, in a way that we should trust and we
understand. And so, how do we do that?
Well, one thing to say is to say, let's look at how other functions and
organizations develop le, legitimacy for their resource allocation.
So, there are other parts of the organization, say in marketing or say in,
in finance, where they get resource allocations.
What kind of language do they use and how might we use that language?
Well, there's a interesting paper by Klaus Brockhoff, I thought it was interesting.
Anyway, that was where he sort of took these values in other parts of, of other
disciplines and sort of applied them to innovation.
So, let's say in finance we may value capital utilization.
So we, we have a measure of, how efficient are we with the capital that we get?
So, if I go to a capital market that sells stock, I get people's money, how do I use
that? Do I use that efficiently?
Well, I call that the ROI, right? The Return On the Investment.
When we put money into a project, how much money do we get out?
We may also look at sort of our external resource dependents, our debt-equity
ratio. These kinds of ratios and, and ways of
looking at things that finance people have.
Well, what if we were to adopt some of those?
What if in innovation value we might say, well, in innovation, the ROI, return on
innovation, we might say it's the profit over the R&D investment.
Of course, it's a limited measure, but it's no more limited than ROI, which is
also a limited measure. We might talk about knowledge, knowledge
equity ratio. How much knowledge we buy versus how much
internal knowledge we create. And look at those two budgets and sort of
compare those two. Are we efficient at the ways that we use
the, the, the external information or knowledge that we buy?
The other things might be manufacturing values.
How do manufacturing people look at the problem of reosurce allocations?
How do they justify more resources? Well, labor productivity.
You know, how many sales per employee? Or what 's a proper production per
employee? And you can look through annual reports
and see numbers like this. They're very legitimate numbers.
And in fact, it makes sense, right? If I'm going to put people on a project,
what kind of return am I getting for that? Throughput time.
Like how quick does it make us to make to, to make a product, like what's the amount
of time it takes. Are we increasing that?
Are we, is that spreading out? So, manufacturing's interested in this.
How can we use those values and innovations?
Well, you might consider innovation efficiency.
You know how many patents per R&D hours that you spend.
And again, these measures are very flawed. They are, you know, they will have
problems, but so do the other measures as well.
And so, but, just think about it. You know, patents per R&D hour, so think
about how it is you might change these in ways that make sense to you.
The time to completion, average time from start to finish of an R&D project.
And say, oh, wait, every project is different.
Yeah, every project is different. Every product is different.
So, even manufacturing people have different products that they have to push
through processes and they take different times, and yet this number still makes
sense are still valuable insight. Then, we have you may think of marketing
values. Like, what are the marketing values?
There's market share, how much of this market do we have compared to our
competitors? Pricing elasticity.
If I change the price, how many, how much change does that do in sales?
Right? And I look at those type of things.
And what were the equivalent in terms of innovation terms?
Our technology share. You know, how many patents do we have
versus our competitor's patents. And that's almost kind of like a market
share, but around patents. We think of development elasticity.
If we say let's how much change an R&D expenditure will cause this amount of
change in sales? If we have a good understanding of that,
then we can predict how much money should we be putting in?
And for the money we put in, what kind of return should we be seeing for that?
And so again, these kinds of measures, these real simple measures of innovation
values, right? And again, they're all flawed, might be
ways of helping us legitimize what we're doing inside.
And part of this is to say, if I can my ideas listened to, fairly, then they have
a chance. And legitimization is one of the tools
inside an organization that will really give you more chances in that way.
So, I want to wrap up the organizational constraints.
We've talked about strategy that is the intention that a organization has, what
it's trying to do which requires us to understand what's going on in the
landscape. What are the capabilities that we have,
and those kinds of things and how is that we apply those to innovation?
Do we have the strategy that is appropriate for us, or is innovation a
part of that strategy? You know, we're asking people to help us
in that same direction. Do they know the strategy, in other words.
We talked about structure, about these problems of exploring versus exploiting.
When we say efficiency is about exploiting, about doing things in a
routine manner. And if that's the only way we're allowed
to talk about things, if that's the way the structure of the organization forces
to behave, we're not going to explore, we're not going to get to other places.
We looked at coordination mechanisms, how people are coordinated inside of
organizations in authority. We also talked a little bit about
motivation, you know, trusting people. Do people know that making mistakes is
okay, or does it effect value? And finally, we talked about resource
constraints, and sort of resources being the capability to act in terms of people,
in terms of money, in terms of time, in terms of the value chaining, even the
processes that we have. These are the important things to make
sure that when we have these in order, when we understand them very well, that in
fact we can use them to overcome, we use our understanding of these things to
overcome the innovation constraints that are inherent in them.
Because remember, innovation is pretty much the opposite of organization.
And so, if we're going to do that thing called innovation, we need to overcome
these kinds of constraints on the way there.
