Customer Reviews

Making Innovation Work: How to Manage It, Measure It, and Profit from It

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A book's subtitle is often very informative and that is certainly true of this book. I also appreciate the fact that its co-authors explain why their book was written, what its key points are, and how its material has been organized. According to Davila, Epstein, and Shelton: "The truth is that there is not much that is truly new about innovation. The basics have not changed for centuries. However, we have become smarter about managing innovation." There is a compelling need in 2005 to view it from different perspectives. The co-authors suggest three:

"Innovation, like many [other] business functions, is a management process that requires specific tools, rules and discipline -- it is not mysterious."

"Innovation requires [accurate] measurement and [generous] rewards to deliver sustained, high yield."

"Companies can use innovation to redefine an industry by employing combinations of business model innovation and technology innovation."

It is impossible to exaggerate the importance of these three separate but interdependent perspectives when attempting (struggling?) to determine how to manage, measure, and profit from innovation. The co-authors have obviously done some innovative thinking about innovation, especially in terms of its practical applications. The most valuable business books tend to be those whose narrative is driven by a question. In Jim Collins' Good to Great, "How can a good company become a great company?" In Jason Jennings' Think Big, Act Small, "What traits do America's best performing companies share?" In this book, the co-authors seem to be primarily interested in answering two questions: "Why is innovation a necessary ingredient for sustained success?" and "Why is innovation an integral part of [any] business?" When responding to these two questions from the three aforementioned perspectives, they reveal the most effective strategies and tactics for managing, measuring, and profiting from innovation.

There is overwhelming evidence that almost all process simplification initiatives have failed. Why? Several reasons but the most common one seems to be that the process by which change agents attempted to simplify process was itself too complicated. "Old wine in new bottles" is still old wine. As with process simplification, the ultimate result -- quality of wine -- also requires a sequence of initiatives and is determined by many factors which include ingredients (i.e. grapes), soil, climate, timing, etc. The same is true of innovation initiatives. I wholly agree with the co-authors that "how you innovate determines what you innovate." So to repeat: In 2005, there is a compelling need to view innovation from different perspectives. In other words, to think innovatively about innovation. Obviously, easier said than done. Much easier. Those initiatives are most effective when they involve communication, cooperation, and collaboration between and among everyone involved. Hence the importance of what Davila, Epstein, and Shelton offer in this book.

As I read their informative and thought-provoking book, I was again reminded of the fact that the same principles which they cite and then explain have -- for decades -- guided and informed the pragmatic innovation of countless teams and even communities. For example, those which Warren Bennis and Patricia Ward Biederman examine in their book, Creating Genius: the Disney studios which produced so many animation classics; Xerox's Palo Alto Research Center (PARC) which developed the first personal computer; Apple Computer which then took it to market; those in the so-called "War Room" who helped to elect Bill Clinton President in 1992; the so-called "Skunk Works" where so many of Lockheed's greatest designs were formulated; Black Mountain College which "wasn't simply a place where creative collaboration took place" for the artists in residence from 1933 to 1956, "it was about creative collaboration"; and Los Alamos (NM) and the University of Chicago where the Manhattan Project eventually produced a new weapon called "the Gadget."

Those who share my high regard for this book are urged to check out the aforementioned Organizing Genius as well as Evan I. Schwartz's Juice: The Creative Fuel That Drives World-Class Inventors; three volumes in the Harvard Business Review Paperback Series on Breakthrough Thinking, Innovation, and The Innovative Enterprise; Tom Kelley's The Art of Innovation: Lessons in Creativity from IDEO, America's Leading Design Firm; Seeing What's Next: Using Theories of Innovation to Predict Industry Change co-authored by Clayton M. Christensen, Scott D. Anthony, and Erik A. Roth; and The Design of Things to Come: How Ordinary People Create Extraordinary Products co-authored by Jonathan Cagan, Craig M. Vogel, and Peter Boatwright.

Many CEOs speak of the need for innovation in their companies, but few know how to sustain such a nebulous culture especially during economic downturns. There is a commonly held perception that allowing such creativity necessitates a laissez-faire atmosphere, but co-authors Mark Epstein, Robert Shelton and Tony Davila offer the counterintuitive belief that a culture of innovation requires focused leadership, creative but viable metrics, an emphasis on business models rather than individual products and an incentive program that rewards the high-stakes innovation that is lacking within a company. It's a relatively daring concept but a vital one well researched and succinctly presented by this trio - Epstein and Davila are academics teaching at Stanford and Harvard and Shelton is a managing director of Navigant Consulting's Innovation practice.

What becomes clear from this treatise is that innovation is a process that only starts with creativity, which includes idea generation, prototyping, experimentation and idea selection. But it needs to end with value capture, which encompasses project management, market planning, manufacturing, and commercial rollout. Often a company is good at either end of this spectrum - creativity or value capture - but not both. Epstein, Shelton and Davila assert that it is not an either-or proposition that companies need to pay attention to both to succeed in the long term.

The co-authors credibly attribute one of the failures to sustaining innovation to what they call "rampant incrementalism". How they define this concept is the idea that people get so focused on incremental innovation that they cut off the bigger, more revolutionary ideas that could reap bigger rewards. The key is to have the right balance in the product portfolio - enough small projects to bring in steady revenue in order to support riskier projects that have the potential to produce the huge profits if they succeed. The fulcrum will be how much risk a company is willing to take and for someone to push the envelope to realize that optimal balance.

The co-authors go as far as anointing a chief innovation officer, whose role is to stimulate the desired behavior companywide and eliminate constraints by integrating the technology and the business-model thinking. The new "CIO" can help the company focus on three particular aspects of the innovation rules:
-- Networks that link the internal and external partners in the collaborative activities required to bring about innovation
-- Balance in the processes that deliver creativity and capture value, from idea generation to commercialization
-- Metrics that provide feedback and guidance to management

The third element is the most intriguing component as it is essential in ensuring innovation thrives given that true innovators must be rewarded. Deciding what to measure is the most critical step. For example, many companies only measure whether projects are on time and on budget. But proper measurement has to occur at the company-wide level. The co-authors stress that heretofore nebulous factors need to be quantified, for example, measures around questions such as "Am I having the right type of ideas, selecting the right portfolio of products, and delivering on the innovations and the ideas that the organization is coming up with?"

Many companies measure results in the traditional sense by using finance-based metrics. But Epstein et al state convincingly that non-financial measures are preferable because they give better real-time, granular evaluations of progress and likelihood of success. Creating the right innovation model and measuring its performance are crucial.

The best advice in the book is reserved for the CEO, who has to take a good, hard look at the company and assess the innovation inputs, processes, outputs, and outcomes needed to meet business objectives. The CEO then needs to populate those four categories with measures that make sense for the company's innovation portfolio, at which point the creativity and value capture, culture, and overall business strategy will follow suit. Epstein, Shelton and Davila have convinced me that innovation has to start at that fundamental level to succeed.

There is a dire need for a fresh look at innovation.

Contrary to popular belief, the authors assert, much of what is held as common wisdom regarding how innovation is managed is wrong. Tony Davila, a faculty member of Stanford's Graduate School of Business, Marc Epstein, a research professor at Rice University's School of Management, and Robert Shelton, managing director of Navigant Consulting's Innovation practice write that contrary to popular belief, innovation:

* Does not require a revolution.
* Is not alchemy
* Does not require a "creative" culture.
* Is not solely about processes and stage-gate tools.
* Does not focus exclusively on new technology.
* Is not needed in copious quantities.

The authors write that innovation, like many business functions, is a management process that requires tools, rules and discipline. It needs to be measured and promoted if sustained, high yields are going to be delivered. It is a necessary ingredient to safeguard an organization's tangible and intangible assets. In short, it is a vital and must be managed.

To do so, the book identifies seven rules:

1. Strong leadership encourages value creation.
2. Innovation is a vital part of an organization's mentality.
3. Innovation matches the organization's business strategy.
4. Creativity and value creation are balanced.
5. Seek to neutralize forces that discourage good ideas.
6. Networks, not individuals, are the building blocks of innovation.
7. Metrics and rewards make innovation manageable.

Execution of innovation is not difficult, the authors conclude. It is similar to other management activities, such as manufacturing or financial control. There are no secret formulas. This book replaces the myths and half-truths with clear and concise thinking on how to manage and execute innovation.

Innovation is a great thing to have in a company but how do you manage and plan for it? That is the question at the core of this book as the authors lead the reader through a process that measures, manages, and profits from innovation. They make the case that management of innovation depends on the right corporate culture as well as the right employees. When it becomes a part of the corporate culture then innovation can be a regular part of the planning process instead of an erratic thing that occurs occasionally and can't be planned for. Using a tried and true method they detail how to bring about this culture and the factors that defeat it as well as encourage it. Once innovation learns to thrive within your organization it can be used to differentiate your product or service and its perceived value. Insightful with lots of illustrations, sidebars, and other information that helps the reader understand the process, Making Innovation Work is recommended.

Many executives decide they want more innovation from their organizations . . . but aren't quite sure how to encourage that result. Relax. You can read and apply Making Innovation Work, and you'll do a lot better.

The authors clearly understand today's best practices in innovation both for breakthroughs and for on-going incremental improvements. They take what seems amorphous to many and make it as concrete as is desirable to do.

The basic approach entails helping readers to understand that the processes you use to innovate determine what kind and how much innovation you will accomplish. From there, the book focuses on how to use a process that permits all of the kinds of innovation to prosper that the company's strategy pursues.

While many such books exhort everyone to go for breakthroughs, Making Innovation Works also explains when it's appropriate to have a more defensive innovation strategy . . . but to stay in the game . . . rather than to fall behind by being too defensive.

For me, though, the book really hit its stride in chapter six where the appropriate measurements are described to identify how your innovation process is doing. The book became even more impressive in chapter seven where incentives for innovation are explained. Chapter eight on how to learn innovation is perhaps the most pivotal section in the book. Chapter nine on creating a supportive culture for innovation was also solid.

I was pleased to see that Making Innovation Work looks beyond just innovating products and processes. The book also addresses business model innovation, perhaps the most important subject for innovation.

The only weakness I found in the book came in describing business model innovation and how to pursue it. The authors have too narrow a view of what's involved in business model innovation. They need to become more familiar with the less frequently cited best practices in business model innovation. Although their bibliography on innovation is a marvelous one, I was surprised to see how thin it is on the subject of business model innovation.

Until a better overview of how to manage innovation comes along, Making Innovation Work will be the standard reference.

This book opens with some cheery news: "Much that is held as common wisdom regarding how successful innovation is managed is wrong." According to the authors, innovation does not require a company-wide revolution or mystifying transformations, nor a focus on technology or a devotion to building a "creative culture." In fact, not every company really needs a large quantity of innovation. Instead, there are a few requirements to implement a successful innovation program: specific tools, rules, and discipline; the right measurements and incentives; and the ability to integrate both business model innovation and technology innovation.

Using real-world examples from such innovative organizations as Apple, Coca-Cola, and Vodafone, this book identifies seven rules of innovation: exert strong leadership on the innovation strategy and portfolio decisions; integrate innovation into the company's basic business mentality; align the amount and type of innovation to the company's business; manage the natural tension between creativity and value capture; neutralize organizational "antibodies"; recognize that the basic unit of innovation is a network that includes people and knowledge both inside and outside the organization; and create the right metrics and rewards for innovation.

Innovation comes in many flavors. For example, Apple is praised for its chancy decisions to invest in the iPod and iTunes, two "semi-radical" innovations that fundamentally changed the industry. Years earlier, rival Dell also broke with the traditional PC business by honing a direct sales strategy, but Dell's change led it to focus even more on PCs, not less.

This book largely escapes a problem with many books on innovation: their relentless reuse of case studies of companies that were once rich in innovation but lost their way, apparently with little notice from the authors. So it's refreshing to note that Making Innovation Work takes a shot at Hewlett-Packard-an innovation golden boy in dozens of titles despite years of declining performance-by opining that former CEO Carly Fiorina sowed the seeds of its downward turn by changing the company's culture away from the "HP Way."

We like the authoritative tone of this work, born perhaps from the experience of its trio of authors. Davila is a professor at Stanford's Graduate School of Business. Epstein was a visiting scholar at Harvard Business School and is a distinguished research professor at Rice University's Jones Graduate School of Management. Shelton is managing director of Navigant Consulting's innovation practice.

Of the many recent books on innovation, this goes near the top of the list.

- Sean Silverthorne

I'm a fresh MIT graduate, and found this book a fun and insightful read. Much like other reviewers, I think this book has a nicely balanced and realistic view of innovation, stemming probably from the authors' extensive experiences. After the ridiculous amount of innovation hype at MIT, this was like a breath of fresh air that put all of that into a proper context. The book considers *both* radical and incremental innovation, whereas all my other sources (school, magazines, etc.) have pounded me with only radical innovation. Both have their place in business, and this book has down-to-earth advice about how managers can deal with them. It also helps me as an engineer to know how my work fits into the bigger picture.

So the general message and organization is good, but I give this book 3 stars because of the writing. The book is *full* of un-insightful one-liner anecdotes/examples, which dilute the message and make this a long and confusing book to read. It's difficult to get through it!

Anecdotes about how companies succeeded are usually taken entirely out of context and given no further support. Conveniently... they always support the authors' views. In the end I don't actually understand anything that went on in the minds of Dell, Apple, Nokia, etc. etc. etc. after reading a whole book's worth of random one-liners. Nothing in those anecdotes proves - heck, indicates - how exactly *that* strategy brought the company out of a problem or *caused* success. Tired (from reading those examples every two sentences) readers might believe the message, but critical ones will recognize it as over-simplified fluff.

This book just needs a new version. The authors need to radically cut down on the number of examples, and add in some substance to the ones they keep. After I marked all the important parts in the book (about 1/4), the book is making a lot more sense on a second quick read. Now it's finally clear enough that I can critically think about what it's trying to say

If you have been in the workforce long enough you have seen fresh ideas age, become stale, and then the pain involved in trying to revive things with new ideas, processes, and products. The struggle often devolves into one group urging the status quo; that the organization simply needs to get back to its roots and the get behind the products that had been successful in the past. Surely, they argue, these ideas and products can be successful once again. Another group, more pessimistic, urges that the company be turned into a cash cow, stripped of all extra costs (including R&D) and every penny of profit extracted, hoping for a permanent and profitable floor in sales. They continue cutting costs and chasing elusive profitability as the company continues its slide towards oblivion. A third group argues for renewal. They argue that the original company and product was absolutely new and full of risks. To grow and thrive, this group pleads, the company must take risks, invest in new products, change processes, and move into a dominant position in the new marketplace.

Doing anything new is risky because no one knows exactly how things will turn out. However, the apparent safety of doing the same old thing is an illusion. Tomorrow is never the same as today and today isn't yesterday. We are always having to adapt to a new environment or go extinct. The issue is are we chasing survival or working to gain a position of dominance and the ability to thrive.

This book does a fine job of explaining the company conditions required to manage innovation, the kinds of innovation to pursue (radical or incremental - aggressive or defensive), how to measures, reward, and what internal conditions are required to foster the right kind of innovation for your organization.

I like that this book discusses failure and how to contain it. Not every idea or initiative will succeed. The danger is in letting the fear of failure force you to either over fund an idea and harm the company, or cut all creativity out of the company for fear of spending a nickel on something that goes nowhere. The authors also discuss sharing risk through partnering, outsourcing, and gathering ideas from outside the company that invigorate and spark new work inside the walls of your company.

This is a practical book. The focus is on making new ideas that add profitability rather than doing something new simply because it is new. The authors always speak in terms of bounds. The vignettes (not quite case studies) demonstrate some failures along with all the successes and I really appreciate that honesty. As the authors note, sometimes learning what not to do contributes as much as anything else in learning what it is you should do.

This is not a book with its eyes in the clouds about trying to capture genius in a bottle. It simply teaches managers that they have the responsibility to renew their company. That innovation cannot succeed without direct and appropriate support from the CEO and that there must be a series of other organizational supports to allow innovation to happen in a way that contributes to company growth. If you carefully read this book and think through what it has to offer, I am sure you will be able to find a way to apply much of what the authors offer us.

I found this book to be loaded with insight and practical beyond my expectations. I highly recommend it. It is written in a very intelligent and easily understandable fashion. It also takes a different look at innovation, and very convincingly out-thinks the other books on this topic. Bravo, for the authors who take the typical innovation authors to task on this topic.

Excellent Book!

Once in awhile a book comes along that I consider "my bible." This one certainly measures up to that for me. Making Innovation Work is one of the best books on innovation written. If you haven't read the earlier "Innovator's Dilemma", don't bother, just read this book instead.

I particularly like the academic bent to the book. While by no means a textbook, the number of the conceptual and yet practical frameworks on innovation is mindblowing! Page after page leads you to experience a true "Ah - Ha !" moment. I have read Making Innovation Work twice and will definitely be reading it again.