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INNOVATION MANAGEMENT:

HOW IDEAS GET TRANSFORMED INTO INNOVATION

SCIENTIFIC ENGINEERING PROJECT REPORT

Done by:

Jayabalaji Sathiyamoorthi
Mat Nr: 5019665

Submitted to:

Prof. Dr.-Ing. Agnes Pechmann


Technical Management
FH OOW, Emden
UNIVERSITY OF APPLIED SCIENCES
Constantiaplatz 4, D-26723 Emden
Germany
Contents
1. INTRODUCTION ............................................................................................................................... 3
2. INNOVATION ................................................................................................................................... 5
2.1. KINDS OF INNOVATION ........................................................................................................... 7
2.2. MISUNDERSTOOD TERMS ....................................................................................................... 9
3. GENESIS OF AN IDEA ..................................................................................................................... 10
3.1. IDEA GENERATION PROCESS ................................................................................................. 11
3.2. PHASES OF IDEA .................................................................................................................... 12
4. METRICS FOR GENERATED IDEAS ................................................................................................. 20
4.1. QUALITY BASED METRICS ..................................................................................................... 20
4.2. QUANTITY BASED METRICS................................................................................................... 22
4.3. INNOVATION METRICS FRAMEWORK ................................................................................... 26
4.4. GUIDELINES FOR NEW METRICS ........................................................................................... 30
5. LATEST TRENDS & FUTURE OF INNOVATION ................................................................................ 31
6. QUESTIONNAIRE RESULTS ............................................................................................................ 34
7. CONCLUSIONS ............................................................................................................................... 38
8. ACKNOWLEDGEMENT ................................................................................................................... 39
9. REFERENCES .................................................................................................................................. 40
APPENDIX – A ........................................................................................................................................ 44
APPENDIX – B ........................................................................................................................................ 47
APPENDIX – C ........................................................................................................................................ 63

Table of Figures

Figure 1: Ideas to Innovation phases in different stages of business ........................................ 13


Figure 2 : R&D Return, Productivity and Yield Framework ......................................................... 26
Figure 3 : Resource View .................................................................................................................. 27
Figure 4 : Capability View ................................................................................................................. 28
Figure 5 : Innovation Metrics Framework ....................................................................................... 29

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INNOVATION MANAGEMENT:
HOW IDEAS GET TRANSFORMED INTO INNOVATION

1. INTRODUCTION
No distance is too far and no dream is too large because the cycle of life
keeps changing. Certainly, changes bring improved lifestyle and technological
progress, consecutively to keep the momentum of improvements one has to really
appreciate innovation. But where does the innovation come from? An apple in
Newton‟s head sparked to deliver an Idea, which plays a vital role in everyone‟s life
till today. Innovation can be considered to be as creativity, i.e., to create new ideas
and knowledge creation. However it goes beyond idea generation to putting those
ideas into action. So it is important to evaluate the ideas in order to yield good
innovation. An idea that is developed and put into action creates innovation.
Moreover, “seamless flow of new Ideas is the vital source” for sustained innovation.

In order to gain advantage of sustainable innovation, we need to evaluate the


ideas and organizations‟ need to have some metric in place to access the progress.
Metrics can be customized by the managers to keep track on innovation success in
their companies. These metrics can help senior executives assess their company‟s
innovativeness and hence combat the insidious strategy decay that often afflicts a
company‟s business.

According to Hamel and Valikangas (2003) the organizations' strategies can


be decayed mainly by four reasons.
 Over time they get replicated and they lose their distinctiveness and,
therefore, their power to produce above-average returns or better strategies
supplant them
 Strategies also get exhausted as markets become saturated
 Customers get bored, or optimization programs reach the point of diminishing
returns
 Finally, strategies get eviscerated. Customers or suppliers become so
powerful that they can dictate much lower prices than before.

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So, how to tackle this situation? The only solution to combat strategy decay is
to keep innovating. There comes the importance of knowing what is a good idea,
how it is created and gets transformed into innovation. All these aspects form the
syllabus of this paper. First the theoretical aspects of the idea to innovation phases
were discussed, then the industry approach is explained with examples and it is
supported by a survey. Additionally, a modified framework for the idea assessment is
also proposed.

SCOPE AND METHODOLOGY


In this paper, I would like to analyse how ideas could be generation, what are
all the significant techniques for idea generation, different phased involved in
transformation of ideas into innovation. Most importantly, I tried to evaluate the
existing methodology to assess ideas; furthermore I propose different metrics for
idea evaluation.
Idea is more often one‟s brainchild, so how can we evaluate it? As George
Bernard Shaw quotes “if you have an idea and I have an idea and we exchange
these ideas, then each of us will have two ideas.” A forum to share ideas will help to
pick the good ideas. But to evaluate it we need to see the outcome of the idea with
supporting factors. Thus the phase by which the simple idea is getting transformed
into an innovative idea is discussed. The innovative idea will help the company to
bring out its new products.
To prepare this topic, I evaluated many technical literatures, technical books,
Government reports of EU and US, companies‟ survey reports for the theoretical
concepts and its practical implementations in the industry.
In the beginning chapters of this paper, I discuss about what innovation
means to industry and market, later I divulge the factors which calls for innovation,
followed by the idea generation process and in the later chapters I discuss about
factors supporting new metrics for Idea evaluation. In the final chapters, I review the
existing surveys and also a dedicated questionnaire.
A questionnaire is developed and it is circulate among the companies whom
appreciate Innovation and believe innovation leads to sustained growth. All of these
companies were representing their presence in European Union, Americas and Asia

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market regions. The feedback from the companies are thoroughly evaluated in the
later chapters and analysed how far ideas are measured till it becomes innovation.

2. INNOVATION
DEFINITION - “INNOVATION”
The US federal advisory committee on measuring innovation defines
innovation as follows. “The design, invention, development and /or implementation of
new or altered products, services, process, systems, organizational structure or
business models for the purpose of creating new value for customers and financial
returns of the firm”.
The definition of innovation can be divided into two perspectives, namely
Opportunities to exploit and Opportunities to explore (Amy Wong, 2001). Let‟s try to
understand both of them.
First perspective, opportunities or changes to exploit are those where most of
the parameters are well defined and understood. It is something like improving an
ongoing process, reducing cycle time, increasing throughput or reducing cost. So
these are basically incremental improvements.
On the other hand, opportunities/changes to explore are those areas, where
we have newly started and have little information about it. Here we have ideas and
solutions which are applied in new ways to solve new problems. It creates the
environment for transformational innovation.
For this paper, I adopt Peter Drucker‟s (1993) definition of Innovation, who
defines Innovation in business terms as the fundamental to the quest for profitable
and sustainable growth. Precisely one of the important business competencies
needed for the future, it implies that innovation is not all about marginal
improvements on some unimportant products.

OTHER CLASSICAL DEFINITIONS OF INNOVATION


ABS, the Australia's most comprehensive Innovation Survey (1996) defines,
“An innovation is any new or substantially improved goods or services which has
been commercialised or any new or substantially improved process used for the
commercial production of goods and services. New means new to your business”

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UK Govt, Department for innovation, universities & skills, has two perspective
definitions for innovation.
First at the level of an individual firm, Innovation is defined as the “application
of ideas that are new to the firm, whether the new ideas are embodied in products,
processes, services or in work organization, management or marketing systems.”
Second at the business perspective, “Innovation is something that is new or
significantly improved, done by an enterprise to create added value either directly for
the enterprise or indirectly for its customers.”

NEED FOR INNOVATION


Why that innovation is playing a vital role in companies now? What is the
need for innovation and how does it impact companies‟ growth? Horibe (2001)
emphasizes “What is likely to kill a company in this new economy is not somebody
doing something better, it‟s somebody doing something differently.” So is it all about
being different in the market, may be true for some industry sectors but not
applicable for general industries.
In today‟s fast moving economic situation, mostly category breaking business
environments meet their objectives. Only such companies meet their estimate
growth, gain profit, out run their competitors and show excellence in execution. They
achieve by the culture of “INNOVATION”.
In every industry, the leading companies are the innovators. However the
cadre of innovators keeps changing. For example, Thomas J. Peters and Robert
Waterman (1982) cited that companies like Amdahl, Texas Instruments, Eastman
Kodak, and Maytag as exemplars in their business classic, In Search of Excellence.
They achieved that stage by extensive innovation and market presence for years.
Meanwhile, today‟s innovators such as Wal-Mart (chain of retail shops), Southwest
Airlines (good service for low fare), eBay (online auctions), and the University of
Phoenix (degree programs for working adults) are themselves relative newcomers.
Such high turnover at the top suggests that the real problem is not with the lack of
innovation, but it is “Sustained Innovation”.
Companies may seize upon a good idea that gives them an advantage for a
while, but sooner or later, they cede this advantage to a competitor who has found
an even better idea. As Nicholas Stein (2000) correctly mentioned, “Innovation is at
the heart of sustaining a company‟s competitive advantage”. This holds very true as

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long as any company wants to stay on top of their competitors and win the
innovation game.
Innovation is very important criterion for success in the future, (Horibe,
Frances Dale Emy, 2001) an important study done on the rate of return of 17
successful innovations shows a mean return of 56% in comparison with an average
Return on Investment (ROI) of 16%. It is clear that organizations need to innovate to
survive and achieve good profit figures.

WHAT TO INNOVATE
Now we understood the importance of the role that innovation plays in an
organization. The next important question now arise is where and which things to
apply innovative ideas in a big organization. Suggestion and recommendation for
where to apply innovations are as follows,
1. Innovation can be applied to products, services, design, invention,
development, process, and systems.
2. To make a product/ service compete with the new economy. This is
essentially to educate organizations to move out of their traditional old habits1
to the new innovation culture.
3. To avoid high risks – Avoiding high risks involving money, staying ahead of
competition and high pay off opportunities are the essence of the innovation
4. To gain long term market focus, as a result the company can save money.

2.1. KINDS OF INNOVATION


Based on the way, it is implemented Innovation can be divided into two major
categories namely,
1. Incremental Innovation and
2. Radical Innovation
Let us discuss about how these innovation methods are applied in the industry and
which are the companies adopt them.

2.1.1. INCREMENTAL INNOVATION


Incremental innovation projects are built upon an existing knowledge and
resources within an organization. As a result the existing competencies of the
company are being enhanced. There is a modest technological change and the

1
Traditional myths & habits may change firms incompetent to the current market and it is no longer useful
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existing product remains competitive in the market. Literally, these organizations
don‟t work against their competitors, instead build innovation groups among their
own different kind of products and be an active competitor for their products.
For example, the Hewlett-Packard2 Company produces both laser and ink jet
printers. These products equally compete in the market. They came up with a plan,
to divide the markets of both the ink jet and laser divisions. As a result, HP has
become the leader in both laser and ink jet printers.

2.1.2. RADICAL INNOVATION


On the other hand, Radical Innovation projects are developed and
implemented in a completely new area of operation. So organizations require to
completely acquiring new knowledge and resources. In the execution, it involves
large technological advancements. As a result the existing competence of the
organization might get turmoil and become obsolete.
For example, Intel, one among the largest PC processor manufacturers,
appreciates radical innovation. It initially developed single core processors, however
as soon as it released its dual core processors, the former became obsolete and the
later gained its market. This process is endless, as Intel recently released its multi
core processor, which might cease the interest of dual core processors in future.
Literally, Intel cannibalizes its own business by constantly bringing out better
processors to replace the ones that are once market leaders.

PROBLEMS WITH CHANGE


As we discussed about the types of innovation, now it is important to find out
which method does an organization need to select. There arise the problems with
managing changes, which are the results of innovation activity.
Most organizations are resistant to rapid and discontinuous change, because
of many factors like its traditional values, business strategies etc.; moreover it is
difficult for them to find solutions in a new direction in which their business is not
focussed.
The fear of chance makes many companies to stick in their standard mode of
operation. They work hard to bring up existing model work better and don‟t spend
time looking for a better model, or a better method of operation.

2
Popularly called as HP
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Gary Hamel (2003) puts forward, “Most companies are built for continuous
improvement, rather than for discontinuous innovation. They know how to get better,
but they don‟t know how to get different.”
But successful companies deploy their managers to take responsibility for
initiating and directing change in addition to their objectives. Successful companies
believe that they need to do something that the world has not seen before. They
change and innovate so that they are first and unique in this wild and competitive
market.
Let us analyse this with the scenario from software industry. Yahoo first
released its popular instant messaging program Yahoo! Messenger (YM). This is a
GUI based beta release of the software, which became very popular in late90‟s 3.
Though YM is more popular, it had many bugs reported by the customers, so YM
has to develop and release bug fix and patches. The lesson learnt is being ahead in
the market and managing chance to sustain. Lately, YM introduced voice and live
video messaging options, all as a result of adapting to chance and applying
innovation.

2.2. MISUNDERSTOOD TERMS


There are few terms which are normally misunderstood in context. Perhaps this
section will address those terms and avoid confusions of the same.

2.2.1. CREATIVITY AND INNOVATION


Creativity and innovation might sound similar in contextual meaning.
Ofcourse, innovation typically involves creativity but it is not identical to it. Linda
Naiman (2005) defines, “Creativity is typically used to refer to the act of producing
new ideas, approaches or actions, while innovation is the process of both generating
and applying such creative ideas in some specific context.”
In simpler words, innovation involves successful implementation of creative
ideas. We can say that creativity is the act of producing new approaches and
imaginative ideas. But, Innovation is the production or implementation of an idea in
some specific context. So if we have ideas, but don't act on them, then it means that
we are simply imaginative but not creative.

3
Source: http://yhoo.client.shareholder.com/press/ReleaseDetail.cfm?ReleaseID=173501
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2.2.2. INNOVATION VS INVENTION
Following the above mentioned concept of creativity, the next similar
misunderstood concepts are Innovation and Invention.
Fagerberg (2004) distinguishes them as; “Invention is the first occurrence of
an idea for a new product or process, while innovation is the first attempt to carry it
out into practice".
Interesting thing is that, Innovation does occur when someone uses an
invention or an idea to change how the thing it works. So to make it more precise,
invention is a ladder to reach the spot called “innovation”.

3. GENESIS OF AN IDEA
The types of innovation helped us to understand the methodology in which the
innovation is applied in industry. This also helped us to understand the risks involved
if the organizations resist changing. This is a business view of innovation, now let us
look it from the conceptual view of innovation. The basic building blocks of innovation
are IDEAS.
Ideas are basically the outcomes of the thought process. The quantity and
quality of idea does have a direct impact in innovation, so it is important to classify
ideas. As supported by Paulo Matos (2002) that is if a company classifies a good
idea it means that there is little evaluated risk involved to achieve excellence in
execution. Therefore, to come up with good ideas and concepts for new products,
CEOs have to encourage break through thinking. So to be innovative, the idea has to
be creative and implemented.
The core discussion of this paper is to analyse the ideas process and to apply
suitable metrics to evaluate whether the germinated ideas is a good or not.

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3.1. IDEA GENERATION PROCESS
The idea generation process is nothing but the whole process from thinking to
action, i.e., from the generation of first ideas to the final innovative result.
Understanding these phases will helps us to review the ways of combining and
creating knowledge that can relate to reality.

People/ team’s role in Idea generation process


The idea generation process and thereby innovations are strongly connected
to people's attitudes. As Peter Drucker (1993) points out that in order to organise
work, it is necessary to start with a specific task/problem, to then make the
information input and finally develop the necessary human relations to get the work
done.
But who has to take the ownership of this task? Druker (1993) reinforces the
people's role, according to him it is necessary that someone takes matters into his
won hands and make them happen. A simple NO answer must always be confronted
to get to know the underlying reasons and ease the search for answers.
In other words it just means that "people and organisations have to exceed
what is pre-defined in their functions." So people have to think that a problem is in
place not to fail but as an opportunity to seize for growth. If such an attitude has to
be in people, then their motivation level needs to be higher. Thus innovation should
be attractive and beneficial for the owners/ managers involved, for this there must be
a clear definition of the innovation's importance and its dimension in the global
setting.
Human relations are based on communication. Thus effective communication
between the employees and top management will certainly impact the idea
generation process and to get appropriate solution in case of problems.

Organisation role on innovation


In this section, let us discuss about the strategies and tactics that
organizations need to follow in order to gain advantage from idea generation
process.
According to Paulo Matos (How to improve management of ideas, 2002), One
important skill that organizations‟ need for idea generation and Innovation are

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 The long term vision,
 The ability to identify or even anticipate market tendencies and
 The will and ability to gather and integrate the process.
 Additionally, the EU innovation manuals states the other necessary skills
that organization needs to posses are
 The ability to take risk (Calculated risk)
 Internal co-operation between the different functional department and
 The external cooperation, with public investigation, with consulting
services.
Therefore, when developing new ideas it is important to understand the
organizations‟ skill and it is a good idea to have a list that allows controlling the
critical factors for the idea implementation. One among the critical factor is
controlling the change.
So to handle this change, a good method could be to inherent organisation
change process into small entities such that it does not cause any ruptures with the
on going procedures, articulating, and sequencing them so that in the long term the
desired result is achieved. Once the tactics are set, organizations need to employ
appropriate tools and methodologies which are discussed in the later chapters.
Summarizing the organizations‟ role from the strategic point of view, an
organization necessarily has to define the evaluation system towards the initial set
goals. The system will include the aims to be attained, manage change, and
organize the skill of the company and the indicators to consider in the innovation
activity analysis.

3.2. PHASES OF IDEA


There are many theories about the individual phases of ideas; different
authors postulate different number of phases in the idea generation process. For this
paper, I adopt Professors Hansen and Birkinshaw (2003) work on innovation values
chain. They divide innovation process as a sequential three phases.
1. Idea Generation
2. Idea Conversion
3. Idea Diffusion
Additionally, for this discussion I tried to add one more phase,
4. Idea Assessment
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Now let us review the above mentioned phases in detail and find out how
ideas are moulded into innovation.

Figure 1: Ideas to Innovation phases in different stages of business

Project Charter Launch Proposal

Idea Generation Idea Conversion Idea Diffusion Product Launch Idea Assessment

Business Plan Evaluation

3.2.1. IDEA GENERATION


“A good start is half of the work”4, says an old Albanian adage. Similarly a
good start for an innovation/ innovative product is GOOD IDEAS. But where do these
good ideas come from? People who make difference in an organization are the key
resource of idea generation process. So the fragments of ideas that come across the
organization will influence in generating a creative idea. For the idea generation
phase, the financial, practical, physical limitation and other business parameters are
not considered, this is to ease seamless flow of ideas and to encourage out of box
thinking.

Sources of ideas
Besides depending on the internal sources, organizations need to be open to
gain information from external sources for idea generation. This could be from
customers, end users, competitors, universities, independent entrepreneurs,
investors, inventors, scientists and suppliers who play a vital role. The common
fallacy among companies‟ is that outside ideas were not good as in-house ones.

4
Famous proverb from an unknown Albanian author
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The common techniques used in this phase are brainstorming, or individual team
meetings.

3.2.2. IDEA CONVERSION


Now we have lots of good ideas, but how are we utilize it? This is handled by
this phase. The main objective of this phase is to filter out ideas, so that only feasible
and refined ideas are selected. Refined ideas are the ones identified to be financially
successful and technically viable. It doesn‟t mean that ideas are simply put away, but
it is in this phase ideas are turned into revenue generating products, services and
processes.
Typical methodology that could be used in this phase is brainstorming, to
analyse the feasibility and problems. The possible problems might vary from one
company to the other. It has to be noted the tight budgets, conventional thinking and
strict funding criteria caused many novel ideas to shut down.

Tips5:
Involving people with differences (can be based on lingual, cultural,
geographical, ethnic etc.,) can be used in such brainstorming discussions/ sessions
constructively. Because this gives room to ask as many weird and challenging
questions about the ideas, which involve people‟s educational, professional and
cultural diversity.
For instance, British Telecom, the UK telecommunications group doesn‟t lag
with good ideas for its business; however its division providing services to
multinational companies failed to hit targets6. We can infer such problem arise due to
the inadequate commercial/ business skills to tackle such projects.

Significant Tools & Techniques for Idea Conversion Process


According to Robert & Cordeiro (2005), the generation of high number of ideas
depends on the tools & techniques that an organization adapts. Consequently, this
helps to avoid strangling the innovation process for lack of ideas. Thus the idea
generation can be done in several ways namely,

5
This is my personal learning from Global Management group discussion while forecasting periods in FHoow.
6
Source: http://www.independent.co.uk/news/business/news/bt-issues-surprise-profits-warning-980548.html
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1. Market surveys
According to Robert, market surveys can be done through interviews,
through panels or by monitoring the evolution of a set of demographical,
economical and consumption indicators as well as others. In this paper, there
is a survey appended which helps us to understand the organizations‟
perception on idea generation and innovation.
2. Benchmarking
Benchmarking is an important tool for competition analysis.
Benchmarking is an ongoing process of measuring and improving business
practices against the companies that can be identified as the best worldwide.
It emphasizes the importance of improving, rather than maintaining the status
quo. It addresses searching worldwide for the best companies. Hence, the
more innovative the ideas that are discovered, the greater the potential
rewards that can be gained from the adaptation of the ideas.

3. Collecting Ideas from


a. Employees
The collection of employee‟s ideas can be done through a
specific programme or through more informal methods in smaller
groups. The more ways to participate in the company the employees
have, the bigger employee participation leads to a decrease in
administrative staff (Paulo Matos, 2002)

Stewart (1997) quotes the General Electric process, where,


through series of continuous meetings in several cities, employees
propose several ideas and the bossed have to approve or reject them
right there on the spot. These programmes are successful as they
allow people to have a safe place to share ideas without any kind of
restriction.

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b. Suppliers
In business terms, competitive suppliers usually have a better
knowledge of what they are selling and how the client can obtain better
benefits. When suppliers are experts on their area, they may even
present solutions for the company‟s specific needs. So collecting ideas
from the suppliers is very important.

c. Customers
Customers are the important source of proposals concerning
changes in products and services.
According to Peter Drucker (1993), building relationship with
clients is also an important criterion as it creates a strong information
source.
However getting inputs/feedback from the end customers is not
easy. For example in consumer products business like tooth paste etc.,
so in those cases mediums like suggestion boxes, suggestion phone
lines will help the organization to address the complaints and feedback.

4. Co-operation with institutions


Certain institutions like universities and industrial associations help the
organization to have new ideas through co-operation settlements/agreements.
Industrial forums like IEEE, NASSCOM7 etc., where organization get and
provide inputs. Member organizations participate and form an ideal source for
development of innovative ideas.
For instance, Infosys, a multinational software services company,
started a campus-company programme by the name “Campus Connect8”.
This is to bring up ties with the academic institutions and there by creating a
platform for information sharing.
However, there is a notable problem with having co-operation with
academic institutions, relating to the data security. Because at the university
level, there is an interest in divulging as much as possible the information

7
National Association of Software and Services Companies (NASSCOM)
http://www.nasscom.in/Nasscom/templates/LandingPage.aspx?id=50154
8
More info about the program can be found at http://campusconnect.infosys.com
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obtained, while at the companies‟ level there is an important set of information
that the company does not want to see in the hands of competitors. This is
evident during seeking surveys/interviews for this paper, as most of the
companies don‟t wish to keep their information confidential.
5. Brainstorming
Brainstorming is a widely used technique, in which a group of people
were put together and discuss their ideas that they can think of, even if
apparently foolish. The important thumb rule of this technique is not to criticise
ideas presented until the discussion ends. An advantage of this method is the
fact that the association of several ideas can trigger new ones.

3.2.3. IDEA DIFFUSION


As we have reviewed how to select ideas for funding and developing into
products. Now, in this phase we diffuse those products and practices. Thus
Professor Hansen (2003) added that, organizations must get the relevant
constituencies within the organization to support and spread the new products,
business and practices across desirable geographic locations, channels and
customer groups.
This phase is particularly important for the large companies who have their
divisions in many geographical locations. So the biggest question that I am
interested is “what is the impact of diffusing of ideas within the organization?”
This question is not part of any of the author‟s research paper; however it is
just to quench and explore the intuitions behind.
One possible negative upshot could be leaking of your idea to the
competitors, as happened in case of Procter & Gamble (P&G). The company first
launched Pampers diapers in Germany, and then it developed ideas to establish the
product in France. However it has taken long time to do so, P&G can able to launch
its product only after five years. Meanwhile, Colgate Palmolive sensed that idea and
launched its line of diapers in France two years before to P&G‟s launch9. This is a
typical example of improper diffusion of ideas.

Idea specification is important in case there are several ideas to change a


given product, service or process. Idea specification consists of choosing the idea

9
Source: http://www.unitedbit.com/idea-diffusion-3rd-phase-in-the-innovation-chain/
[ Jayabalaji Sathiyamoorthi ]
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that will have better advantages in being applied or combine existing ideas, to find a
solution that is superior to each idea by itself.
There are several tool and techniques for idea selection process, which an
organization can avail. In this paper, two techniques are detailed.
1. Feasibility Analysis
Feasibility analysis is a preliminary study undertaken to determine a
project's viability, which helps to ensure the successful completion of specific
project goals and objectives. In addition, feasibility analysis gives a clear
picture, if an existing system is worth upgrading or not.
Feasibility analysis can be done in two perspectives, technical
perspective and business perspective (Paulo Matos, 2002). However
feasibility analysis can be done in many kinds.
In the technical point of view, the feasibility study is carried out to check
if it is possible to implement the idea at an acceptable cost. This involves
questions such as whether the technology needed for the system exists, how
difficult it will be to build, and whether the organization has prior experience
using that technology
In the business perspective, the feasibility study is conducted to check
the factors affecting the commercial viability of the business. Also to ensure
the cost-effectiveness of the proposed system i.e. if the benefits of the new
idea do not outweigh the costs, then it is not worth going ahead. So it could be
precisely called as a cost benefit analysis.

For example, car manufacturers are now greatly involved in making


use of hydrogen as the fuel source (Robert Boyd, 2007). But its use in cars is
highly conditioned for safely. Thus, hydrogen fuel project is stronger in the
technical point of view, but weaker in the business point of view.

2. Financial and Risk Analysis


In a financial analysis, there is an attempt to project all the predictable
revenue in relation to the predictable costs. Then it is applied financial
calculation to evaluate the process‟s profitability towards a value. From the
comparison between the idea‟s profitability and the risk associated to the

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same, a decision can be made about the idea. With a raising number of ideas
analysed and processed there is a better understanding of the risk level of
several types of ideas and the costs each one brings. The study of this
technique is strongly supported by a wide bibliography related to the
economical and financial areas.

3.2.4. IDEA ASSESSMENT


From the previous discussion, it is clear that Innovation develops through an
evolutionary, interactive process between actors and between different stages in the
development of an idea into innovation. Now lets us discuss Idea assessment which
is one among the core topics in this paper. So the later part of this paper is
structured to address the following questions.
 What is idea assessment?
 Why organizations need to adopt Idea Assessment?
The word „Assessment‟ in this context refers to Metric and Measurement of
Ideas. Idea Measurement is a simplified & quantified observation of ideas. Idea
Metric is a comparative measure of the performance of the ideas and product or
process. By using metrics we can find the deviation i.e., what is planned against
what is achieved?

Idea Assessment is very important to any organizations to monitor the trends


in the actual effort spent on Idea generation process. This helps to understand where
does company stand and find areas of improvements. It also helps to re-plan or alter
the ideas so that it is more technically viable.

Significance of Idea Assessment


The US government advisory committee‟s report on measuring Innovation,
stresses the importance of measuring the innovation. They add that the outcomes of
innovative activity need to be tracked and measure to determine fully the impact of
innovation on the economy. This is on a macro level, simply means to evaluate the
variations.
Considering companies at a micro level, it is indeed important that Idea
Assessment need not be made with the variations but also from customers (internal
& external) survey and feedbacks. A typical feedback will help the organization to

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19
identify the areas of improvement and areas of strength. The important aims of idea
assessment process are as follows,
1. Ideas need to be Optimally Quantitative, i.e. it will stretch out to the maximum
possible extent to guide decision making based on measurable and
quantifiable criteria
2. To help in addressing ideas submitted for the organizational perusal,
minimizing the scope of escapes in estimating the organization‟s potential
long term returns, i.e., to ensure some business important factors doesn‟t left
unnoticed.

4. METRICS FOR GENERATED IDEAS


Innovation metrics are important for at least two reasons as stated by Amy
Muller (2001). First, metrics help managers make informed decisions based on
objective data, which is especially valuable given the long-term nature and risk
associated with certain innovation projects. Second, metrics affect behaviour by
helping align goals and actions with the best interests of the company.
Defining metrics is a bit risk and misleading task for the fact that if some of the
important indicators if left unnoticed will lead to a major confusion. Such indicators
can consist of measure of the intensity or quality of innovation. Innovation indicators
should also be able to differentiate between innovation as adoption and innovation
as a creative activity (A. Arundel, 1998).
In this paper, I try to propose the metrics for IDEAS based on two majors,
namely
 Quality based metrics
 Quantity based metrics (Metrics driven by figures)

4.1. QUALITY BASED METRICS


Let‟s discuss about how to measure the quality of an idea, which leads to
innovation. A single indicator cannot provide all of the information that is needed,
although traditional indicators such as R&D expenditures or patents can serve a
variety of purposes. There has also been some success in developing techniques to
extract more information out of traditional indicators such as patents (K.Smith 1998).
Nevertheless, new indicators are required to meet policy needs and to test
innovation theories.
[ Jayabalaji Sathiyamoorthi ]
20
First, many innovation activities are not directly measurable. Organizations
use some codified knowledge to assess such activities. Codified knowledge is a kind
of tacit knowledge, which is generally undefined and firms have some internal
methods for determining them. So, literally codified knowledge can be indirectly
measured. For example, Informal contacts between firms are more likely based on
some tacit knowledge.

4.1.1. INDICATORS BASED QUALITY METRICS


There are certain indicators which can be made used to certify how much
does an idea qualifies for its succession into a product. But these indicators can‟t be
standardised entities as it is affected by type of innovation, like a product innovation
or a process innovation.
For example, consider the case of a substantial improvement in which an
organization, just want to make some minor adjustment to an existing product, in
comparison with a company developing revolutionary product that is completely new.
In such a scenario, A. Arundel, (1998) proposes some possible indicators one can
adapt to measure. They are as follows,
o Number of patents filed
o R& D performance
o R&D intensity
o Proportion of employees who are scientists/ engineers
It has to be noted that categorizing a common indicator is always a difficult
task. It has a serious drawback as the indicators fail to identify all firms that expend
some creative effort on innovation. In brief, using R&D as an indicator is biased
against firms that develop mechanical innovations, which is often based on design
and complex production systems and underestimate innovative activities in small
firms.

4.1.2. KNOWLEDGE BASED QUALITY METRICS


This metrics is designated to measure the organizations‟ performance based
on the knowledge they can generate and the ability to use them. The learning
capacity of an individual company plays a vital role in measuring the ideas.
People are assets in such metrics, because they create ideas and transform
that basic knowledge into desired product. So the rate in which people learn new
skills to keep pace with chances in technology really matters.
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21
A. Arundel, K. Smith, R. Patel, G. Sirilli claim that knowledge based metrics
acts as the root for other innovation indicators like patents, bibliometrics, and
adsorptive capacity, because all are the results of knowledge creation or the
activities that produce new knowledge.
The knowledge based metrics are however affected by “Absorptive Capacity”
and degree of diffusion of the organization. For our discussion, the absorptive
capacity gains more interest. So let us try to understand what absorptive capacity is
and how does it affect?
According to Patel and Pavitt, (1995), some technical information is freely
available to all firms, in the sense that it can be used without paying a fee for the use
of the information. However, even freely available knowledge is rarely completely
free because of the effort that is necessary to understand and exploit technological
knowledge. So the organization has to necessarily invest time, effort and money to
understand the freely available knowledge and make use of it for its future products.
Amy Muller (2001) defines absorptive capacity as the ability of a firm to effectively
use external knowledge, ranging from basic research and reverse engineering to the
implementation of new production equipment. This capacity varies with a firm‟s
experience and the range of its innovative activities. So higher the absorptive
capacity of an organization, better is the companies knowledge scale.
Disadvantages of this metric on innovation are that the boundaries are
artificial. For example there is no obvious demarcation line between knowledge
creation and dissemination or between dissemination and absorption.

4.2. QUANTITY BASED METRICS


We need to understand that risk of qualitative judgment in evaluating the
goodness of an idea to fit in the organization‟s interest, and hence to pursue it.
Hence, the need on evolving a model which can be measured at each stage is
important.
The idea is to set quantifiable parameters to measure the potentiality of an
idea and also to judge an idea‟s goodness of fit in the organization‟s context.
We know ideas root from individuals; teams make it through to customers,
while the organization provides a facilitating environment for all these activities. But
evaluating the first fit of an idea in line with the organization‟s business interest

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22
brings in a challenge, especially if decisions have to be based on a quantified metric.
Because all the success factors of an organization can‟t be quantitatively measure.

4.2.1. MEASURE OF FIRST FIT


The methodology followed here is more extracted from general financial
concepts. The rate of return or return on investment is calculated from one idea
stage to the other (see figure 1 for the idea stages), so that it can aptly be measured
by its contribution. If the contribution is acceptable for the organization then the ideas
can be forwarded to the next phase, else it could be filtered.
Groppelli and Ehsan Nikbakht (2000) concept of determining the present
value of the future income is adapted to explain this metrics. So let us see how the
return on investment is calculated.
Business domain is a unit of the business model where there is a defined set
of tasks and milestones.
Business Domain Contribution, DC = (Gross Investment – Net Returns),
from the domain of practice.

If R be the net revenue earned after tax and expenditure deductions, across
all domains of practice of the organization, and then a new metric, called “Domain
Identification Scale factor” is added. It can be mathematically explained like,
Ω = DC / R
This aptly signifies the importance of the return value and there by we can find
the importance of the domain in an organization‟s current business practice.

Ω= . Gross investment – Net Returns .


∑ (Net revenue earned after tax and expenditure deductions)

Where, ∑ is the summation of returns across all business domains of practice of the
organization.
Next the profitability of pursuing the idea in terms of the organization‟s funding
or financial venture is calculated by Return on Investment (ROI).

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23
ROI can be formulated by a simple and easy to evaluate metric of standard
practice, as follows:

ROI = . Σ Cumulative Net Profits from New Products .


(R&D Costs + Incremental Production Investments + Pre-launch Costs)

The first fit of a submitted idea can be quantifiably judged from the following novel
metric, as:
Measure of first fit, λ = Ω x ROI
Where, Ω serves as the scaling factor (as Ω <= 1) against ROI.

As innovation encompasses a broad variety of process, product, technology,


strategy, organizational, business and marketing innovation, the Measure of First Fit
(λ) can not be made too specific to cover all of them. This is the biggest setback of
metric based calculation. Thus providing an example to workout the above formulae
may not accurately work, hence sample calculations are not included in this paper.
However, through empirical surveys, a standard exit criterion, say A, can be defined,
such that, whenever,
λ >= A,
Submitted idea can be regarded as a “Fit to innovate” & innovation to be
pursued, and will meet the acceptance criterion at the first gate. But, ideas for which
λ < A, those ideas need to be filtered10.

4.2.2. R&D YIELD - US PERSPECTIVE


The Centre for Innovation Management Studies, North Carolina state
university arranged a workshop on innovation metrics in US industries in June 2006.
The excerpts from the workshop are adopted for the discussion of the quantity based
metrics, which is totally based on R&D returns. Let us discuss how it is implemented.
R&D returns framework is a quantified approach to measure ideas and innovation.
This links and relates organizations‟ profits to the R&D investment. In this method,
each and every idea generation process is considered as an R&D activity. So the

10
Managing filtered/ eliminated ideas are discussed in the later part of this paper
[ Jayabalaji Sathiyamoorthi ]
24
calculations are carried out for specific innovation activities. It is given by the
following formulae,
 R&D Returns = Profits / R&D investment
 R&D productivity = Technical progress / R&D investment
 R&D yield = Profits / Technical Progress
Once the specific R&D investment is devised for specific innovation activity,
and then a financial output metrics is defined, which are Net Sales Ratio (NSR) and
Cost Savings Realized (CSR). It is given by the following formulae,

New Sales Ratio (NSR) = Revenues realized this year from new products introduced
in last 5 years Total revenues realized this year

CSR = cost savings realized this year from process improvements introduced in last
5 years Gross profits11 realized this year

The chart in the following page will help us to understand way the R&D
returns are calculated. The factors which affect/influence the R&D productivity and
R&D yield are displayed.

11
Gross profits = Sales Revenues – Cost of Goods sold
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25
Figure 2 : R&D Return, Productivity and Yield Framework

Source: Innovation Metrics in US Industry:


http://www.nsf.gov/statistics/workshop/innovation06/bean.pdf

4.3. INNOVATION METRICS FRAMEWORK


In this section, I try to propose a simple model of the innovation framework.
To develop this framework, the three views on innovation (Amy Muller, 2001) are
adapted, besides the innovation theory. So the three views on innovation are
combined to form a framework which is used to measure the ideas and access the
companies‟ capacity for innovation.
 Resource view
 Capability view
 Leadership view

4.3.1. RESOURCE VIEW


Resource view assesses the proper allocation and utilization of the
companies' resources. It helps companies to allocate its resource in a way that it is

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26
balanced with the existing business and also the new business. Balance optimization
of the resources like capital, labour, time etc., is very important in this state.
The metrics for the resources can be sub divided into inputs and outputs. The
resource view inputs measures the resources that are allocated by the company for
innovation. And like wise, the resource view output measure the company‟s success
at innovation.

Figure 3 : Resource View

Capital

Resource Return on
Talent View Investment

Time

Inputs Output

Key indicators
Based on this view, the possible key indicators for innovation metrics are
listed below. This list has indicators for both inputs and outputs of this view. Please
note that company doesn‟t really need to measure & adapt all the indicators
mentioned below. However, under their own discretion suitable indicators can be
followed, so that they have a simple and better metrics for innovation.
The key indicators are as follows,
1. Percentage of capital that is invested in idea generation, idea conversion, idea
diffusion and Idea assessment phases for new products and services.
2. Number of talented workforce in the company, i.e. individuals who have prior
knowledge of business, either within the company or before joining the
company.
3. Percentage of workforce time that is currently dedicated to innovation
projects.
4. Number of new products, services, and businesses launched in the past year.
5. Share of wealth, which is nothing but the change in the company‟s market
value during the past year divided by the change in the total industry‟s market
value during the same period

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27
6. Percentage of revenue from products or services introduced in the past three
to five years.

4.3.2. CAPABILITY VIEW


The capability view assesses the extent to which the company‟s
competencies, culture, and conditions support the conversion of innovation
resources (see resource view) into opportunities for business renewal.

Figure 4 : Capability View


Preconditions

Capability New
Tools View competencies

Trainings

Inputs Output

Like that of resource view, the capability view can also be sub-divided into
inputs and outputs. The capability view inputs measure the company‟s culture and
innovation competence. This also involves the employee access to innovation
training, tools, and methodologies. On the other hand, the outputs of the capability
view measure the company‟s success at providing renewal options. For example, it
might measure new competencies in comparison with the existing business.
The key indicators for capability view are as follows,
1. Percentage of employees who have received training in innovation, for
instance, instruction in estimating market potential of an idea.
2. Percentage of employees for whom innovation is a key performance goal.
3. Number of innovation tools and methodologies available to employees.
4. Number of new competencies (i.e. distinctive skills and knowledge domains
that spawn innovation) measured as a simple count among a threshold
proportion of employees.
5. Number of strategic options (i.e. newly created opportunities to significantly
advance an existing business).
6. Number of new markets entered in past year.

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28
4.3.3. LEADERSHIP VIEW
The leadership view helps to evaluate leaders‟ involvement in innovation
activities, the establishment of formal processes to promote innovation, and
dissemination of innovation goals. The leadership view assesses the degree to
which a company‟s leadership supports innovation.

Figure 5 : Innovation Metrics Framework

(Source: Amy Muller 2001)

DISCUSSION ON METRICS
As discussed earlier, simple and straight metrics are always beneficial.
However, selection of the optimal metrics and the optimal value of any particular
metric will be varying from company to company.
There is no fit to all metric available. For example, innovation for a cement
producer will require different skills, resources, and competences than in comparison
with an automobile producer. Thus, the goals and targets of the innovation will vary
from industry to industry. However, the generic indicators that are measured by the
innovation metrics will be quite similar across most industries. The financial analysts

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29
of the company must analyse several metrics in order to develop a comprehensive
view of the company‟s innovation capability.

4.4. GUIDELINES FOR NEW METRICS


Robert Tucker (2002) proposes few Guidelines for the organizations for
design of an effective metrics for Ideas and innovation. The key insights of the
guidelines are as follows.
4.4.1. Comprehensive set of metrics.
Organizations‟ need to build a comprehensive set of metrics so as to get
everyone involved in the innovation initiative. Organizations can consider including at
least one metric for each of the idea generation stages. So with such a
comprehensive set, companies‟ will be more likely to detect problems (for example, a
lack of leadership involvement or a bottleneck in the innovation process) before they
become too serious.
4.4.2. Assessment of existing metrics.
Innovation has to be managed as a discipline, as a holistic process. So
organisations need to study and improve the existing metrics which is already in
place. They need to find whether these metrics suit their needs. In the interests of
standardization, they can seek consensus on a set of metrics with other managers
working in their firm.
4.4.3. Avoid complex metrics.
The simplest metrics are the best, so having a complex metrics for innovation
is totally irrelevant. Organizations have to ensure that the metrics are meaningful,
and intuitive. Such a metric will have greatest impact if they become a common
entity throughout the company.
4.4.4. Don’t measure every conceivable parameter.
Organisations need to resist the temptation to track every conceivable
parameter. So they need to select a manageable set of metrics (say not more than 8
to 10) and measure them diligently.
4.4.5. Purpose of metrics
Organizations need to keep in mind that creation of metrics is to measure
their progress, and analyse the results for comparison purposes only, not as a stick
to 'motivate' compliance

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30
4.4.6. Include a few customer-driven metrics.
Organization can consider measuring customer driven metrics such as sales
from new products to complement the internally focused metrics such as the number
of new competencies under development or undue emphasis on customer-driven
metrics; otherwise these metrics will stifle innovation projects with a longer-term
return on investment [Amy Muller, 2001].

5. LATEST TRENDS & FUTURE OF INNOVATION


5.1. IDEA BACKUP MANAGEMENT
The concept of idea backup management is to track & manage filtered out
ideas. An idea which might not fit into the organization‟s context in the present
scenario might reward it with unanticipated gains in future. Hence, tracking and
managing filtered out ideas is equally important.
In this paper, a three fold ways are proposed for handling filtered out ideas
management.
• R&D Support
• Product/ Practice Line Diversification
• Sponsoring and/or sourcing
All of these are much discussed topics in themselves, and if dealt with details
here, might lose the relevance and context of the paper. So it is left for future work.

5.2. OUTSOURCING INNOVATION


Outsourcing innovation and research activities of a company might yield to
long term budget savings and it is an eminent cost cutting measure. The great
opportunity is that we can get multi -dimensional solution for a problem.
The possible advantages that an organization might gain by outsourcing
innovation include a reduction in technological and market uncertainty, cost sharing,
risk spreading, and reduced duplication of research, economic of scale and an ability
to combine different expertises. (A. Arundel, K. Smith, 1998)
However the biggest threat is that those solutions and ideas shouldn‟t reach
your competitors. This was evident from the questionnaire results as well, as most of
the organizations think that outsourcing innovation is not an opportunity but a mere

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31
threat. The more detailed discussion of the questionnaire will be done in the later
chapters and also in appendix B.
Thus we can conclude that a company can outsource the contextual activities,
but it has to in-source the core activities. Those are what give the company a
competitive advantage.

5.3. NATIONAL INNOVATION INDEX


The National Innovation Index is just like an indicator to show the innovation
capability of a particular nation. We can compare with any other parameters like
GDP, GNP etc. It is a concept to have a coordinated emphasis on innovation
measurement and to evaluate nation‟s stand on innovation. This might help the
organizations and researchers of a country to create a strong framework for
identifying and measuring innovation in the national economy.
But generating such an index itself is not an easy task, as it requires better
existing data from the statistical agencies to allow for the consistent estimation of the
contribution of innovation in the gross domestic product and productivity accounts
and to develop greater understanding of innovation.
The US innovation advisory committee (2008) also supports the idea of
development of a National Innovation Index and they strongly believe that having a
National Innovation Index will help to assess the innovation capability of a nation and
also help them in calculating the contributions of innovation in the gross domestic
product

5.4. CO-OPERATIVE R&D


Co-operative research and development is a programme which was
introduced by European Union (EU). According to this, all the supporting nations of
EU made a contract to use the information services and markets, while at the same
time remaining closely tied to national infrastructure.
K. Smith (1999) claims, that this co-operative R&D is originated in a politically
driven effort to encourage contacts between firms in EU. One advantage is such
programmes are the improved relationships between large firms and sub
contractors, producers, consumers and collaboration networks.
On the other side of the coin, there is a “policy myth” which is stated by A.
Arundel (1998), co-operative R&D could be a panacea that will help European firms
to turn the fruits of research into competitive products, however this can be only
[ Jayabalaji Sathiyamoorthi ]
32
achieved through a good indicators, good theory (which is actually missing), and a
good analysis on co-operative R&D against its alternatives.

5.5. IDEA MANAGEMENT SOFTWARE SYSTEMS


In the current market trend, companies are competing based on the speed at
which they can generate and implement ideas for new products or services, so there
comes the need of the IDEA MANAGEMENT SOFTWARE SYSTEMS.
The idea management technology is a new type of enterprise software that
can help to make such an innovation strategy possible.
Idea management systems are basically web based applications, thus
enabling organizations to gather, share, and evaluate ideas from all employees,
regardless of their geographical locations. All the ideas are then collated and stored
into a centralized online database. These systems enable managers to measure the
bottom line impact of ideas collected and implemented, thereby making it easier to
determine the return on ideas.
There are few major vendors of web based idea management applications,
o “IdeaCentral” by Imaginatik12
o “NextNet” by General Ideas13

5.6. INNOVATION BY ACQUISITION


Innovation by acquisition is adopted when an organization wants to retain its
leadership position in the innovative product arena. So it buys innovation off the shelf
by acquiring the firms. This strategy is effective in short term and will put the parent
organization in the leadership position.
In the long run, this strategy of innovation through acquisition usually fails
because the acquiring corporation overestimates the value of synergies and
underestimates the post-merger integration difficulties. Inmost of the cases,
innovation by acquisition is always at enormous cost, either in cash or stock, to the
shareholders of the acquiring corporation. Shareholders see far higher returns when
companies successfully innovate organically
For example, as the carbonated drinks market went down in recent years,
Coca-Cola acquired Mad River Traders and PepsiCo bought South Beach Beverage

12
For product information visit, http://www.imaginatik.com/webdoc_prod_overview
13
For product information visit, http://www.innovationtools.com/Resources/ideamgmt-details.asp?a=82
[ Jayabalaji Sathiyamoorthi ]
33
Company, both makers of alternative beverages such as bottled waters, juices, and
teas laced with ginseng. (Amy Muller, Liisa Valikangas, Paul Merlyn, 2001).

6. QUESTIONNAIRE RESULTS
The innovation survey/questionnaire is drafted to get inputs from various
organizations. As a result we can understand their views on innovation and how do
they manage the idea generation process of innovation.
This questionnaire was framed merely to get inputs relevant to the course of
this scientific report, and thus other concepts were not included. Moreover,
companies were reluctant in sharing their method or model of innovation, which they
implement. Therefore, a real-time implementation for the proposed “Innovation
Metric Framework model” was not possible.

Approach & methodology


The questionnaire is framed with 15 simple self-assessment questions;
nevertheless it addresses most of the critical to success factors of innovation. The
survey is being filled by people at various levels within many organizations, so that
based on the output of the questionnaire; we can understand what are the IDEAL
models on managing ideas and innovations
The questionnaire was circulated among different organizations across
different geographical locations. The responses from the participants are captured
over emails and phones calls. The participant companies are from various business
fields like Automobile, Software Services, Software Consultants, Software Product
development, Banking services and Semiconductor industry. See appendix B for the
list of participant companies.
The questions are devised and group in such a way that we understand what
is the company‟s stand on innovation and the methodology adopted by them. In the
following section, the important key competencies are discussed. The questions
framed will act like an objective for the appropriate key competency items, the
response from the companies are quoted under inference.

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34
Data Security
Due to the participant organizations‟ concern about data security and data
confidentiality, the results will be open only for the internal discussions of this paper
only. Based on the request from the participant organizations‟, Information such as
which organization expressed what kind of views on a particular question is kept
hidden and therefore it is not disclosed.

 Organizational expertise on innovation


Questions 1 to 4 are structured to understand the companies‟ expertise and
know how about the innovation trends. This will also help us to understand whether
the company became innovative by choice or by chance. In other words, is it the
company willingly adopted the innovation methods or out of competition it was forced
to adapt Innovation, in order to in the market.
o Responses:
The responses for these questions were more positive. In fact, most of the
companies‟ have a good understand about the need and urgency of innovation.
Thus, most of the participants agreed on the organizational need to emphasis
innovation.

 Concern about people


Questions 5 and 6 are framed to understand how well the companies are
willing to take their employees and customers together in the innovation activities.
From the employees‟ point of view, this will help us to know if the employees‟ have
self interest towards innovation or they are just being driven by the order from their
superiors.
Next comes the customers, who are portrayed as kings by most of the
companies. So hearing from them is certainly important. This question will help us to
know how far the organization involves customers in discussing future ideas and
opportunities.
o Responses:
There were different responses for question no 5, a few companies reported
that they have to place some policies or some offers/ rewards in place to get
passionate to towards work. Some companies reported that their biggest strength is

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35
having people who are passionate about their current job. However for question no
6, most of the companies responded that they have a strong understanding of their
clients and market. In case of new market they have understanding to some extent.

 Innovation metrics in place


Questions 7 to 11 are framed to address the organizations importance of
measuring innovation. With the help of these questions we can be aware of
companies‟ alertness on Intellectual property and patents. Though most of the
companies were not interested to share the type of metrics they use, nevertheless
we can get an idea about whether the companies‟ believe strongly in placing a
metrics for innovation.
o Responses
Each and every company have at least one metric in place to measure their
innovation. However, they are so reluctant enough to share the kind of metric they
adopt. Only two companies reported to use ROI based metrics, or more precisely,
quantity based metrics.

 Process and methods adapted


Questions 12 to 15 are framed to know whether organizations‟ equip
themselves to face the problems and difficulties of deploying the new ideas. The
number of training programmes and workshops will give a clear picture on how much
does companies‟ prepare their employees to implement the new ideas. The
companies‟ view on the future of innovation is also captured by question no 15,
which is to outsource innovation activities or not?
o Responses
Regarding cross cultural teams, most of the companies do accept that having
cross cultural team helps in idea germination. Also during brainstorming, such inter-
cultural teams will be of advantageous in bring out multiple view for an entity.
Regarding outsourcing innovation, there are a lot of differences among the
responses. A few companies think it is very risky to outsource innovate and some
companies take it as an opportunity for sharing risks. Both the arguments are

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36
correct, so it all depends on the kind of business and also the competency area
which is being outsourced.
The detailed evaluations of the results are discussed in appendix B.

LESSONS LEARNT
 Most of the companies think that Outsourcing innovation is a mere threat.
However few of the companies still agree to the contextual activities, but it has
to in-source the core activities
 Almost every organization have a very high absorptive capacity
 Having the cross culture team in place doesn‟t directly influence the
innovation process, however it does impact in idea generation process
 Almost every organization has a defined and structured innovation process.
They device a defined phase from idea generation to innovation.
 Most of the companies, do believe in measuring their progress in innovation.
So they certainly adopt an innovation metric system, whichever they feel it is
good for them.
 Most of the employees are not passionate towards innovations, unless driven
by rewards.

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37
7. CONCLUSIONS

From this study, it is indeed clear that the Long-term success of any organization
in any competitive marketplace demands constant innovation. To have such a
sustained innovation, the company should drive idea generation program, device
appropriate metric for measurement and manage the innovation activities.
It is also clear that the long lasting innovation requires a steady flow of new
ideas. So we can conclude that the effectiveness of a company‟s innovation efforts is
measured by how well promising ideas are selected, nurtured, and transformed into
tangible products and services.
Also it is understood that the entire process cycle of the idea generation till it
developed into product is a continual process, so performing well in one stage of
idea phase and doesn‟t necessarily promise success in the successive stages.
This can be done by facilitating the awareness of opportunities, also by getting
feedback from customers and foster the spread of entrepreneurial capabilities. Thus
development of innovative capabilities is the only means by which companies can
sustain a competitive advantage
The simplest metrics are the best for different phases of idea, so usage of simple
and suitable metrics to rank ideas and allow the best ideas to rise to the top.
Emphasis on communication, organizations should listen to the feedback and
comments from customers and partners. Besides, solicit immediate input from
employees at any level and from any organization.
Learning and improvement are to be gained from each stage of the process. So
Implementation of pilot projects to gauge the costs and benefits of new data
collection efforts could be encouraged.

Quote
“The best way to start achieving a thing is to dream about it. Imagination together
with innovation results in realization.”
– Dr. APJ Abdul Kalam

[ Jayabalaji Sathiyamoorthi ]
38
8. ACKNOWLEDGEMENT

The author gratefully acknowledge suggestion and guidance by


Prof. Dr. A. Pechmann, FHoow, Germany, and sincerely appreciate the support and
inputs provided by Mr. Swaminathan, General-Manager, TVS Motors Company,
India and Mr. Selvam, Business Analyst, Airmiles - British Airways, UK. A special
thanks to the organizations that have participated in the survey and expressed their
valuable inputs. Besides, author wish to thank and appreciate the library staffs of
FH-Emden, British Library- London and Uni-Library, Oldenburg for their support in
finding literatures. The author owes lot of thanks to his parents, who are a constant
source of support with their limitless love and care.

[ Jayabalaji Sathiyamoorthi ]
39
9. REFERENCES

Amy Wong (2001), “Metrics of Innovation”, Intl. journal of strategy and business
transformation, issue 1, spring 2001, pp 1 to 5.

Amy Muller, Liisa Välikangas, and Paul Merlyn (2001), “Metrics for innovation:
Guidelines for developing a customized suite of innovation metrics”, viewed on 10th
October 2008,
http://www.strategos.com/articles/InnovationMetrics/InnovationMetrics.pdf

Anthony Arundel, Keith Smith, Pari Patel and Giorgio Sirilli (1998), “The future of
innovation measurement in Europe”, IDEA papers, viewed on 22 nd July 2008.
http://www.scribd.com/doc/239713/The-future-of-innovation-measurement-in-Europe

Alden S. Bean (2006), Innovation metrics in US industry, Centre for innovation


management studies, North Carolina State University, viewed on 9 th September
2008 http://www.nsf.gov/statistics/workshop/innovation06/bean.pdf

A. A. Groppelli and Ehsan Nikbakht (2000). “Barron's Finance”, 4th Edition. New
York. pp. 442–456. ISBN 0-7641-1275-9.

Australia bureau of statistics (1996), "Research and experimental development


business enterprises" ABS 810.40 (Canberra) viewed on October 9th 2008.
http://www.abs.gov.au/ausstats/abs@.nsf/1020492cfcd63696ca2568a1002477b5/69
352c7fd47ddad0ca256be80083ab7d!OpenDocument

Boyd, Robert S. (May 15, 2007). ""Hydrogen cars may be a long time coming"".
McClatchy Newspapers, viewed on 2008-05-09
http://www.pluginamerica.org/images/McClatchyWashingtonBureau_15may07.pdf

[ Jayabalaji Sathiyamoorthi ]
40
Gary Hamel (2003), "The future of management”, ISBN 1-4221-0250-5, Harvard
business school publication, p 27 – 45.

Hansen and Birkinshaw (2003), Incremental innovation vs. Radical innovation, Filed
under Innovation Theory, viewed on August 27th 2008,
http://innovationzen.com/blog/2006/08/04/innovation-management-theory-part-2/

Drucker, Peter (1993), “Innovation and Entrepreneurship”, Chapter 1 to 4, ISBN 0-


88730-618-7-51550, published by Harper & row, publishers Inc

EU Innovation police guide, viewed on September 18th 2008,


http://ec.europa.eu/enterprise/innovation/index_en.htm

Fagerberg, Jan (2004). "Innovation: A Guide to the Literature". In Fagerberg, Jan,


David C. Mowery and Richard R. Nelson. The Oxford Handbook of Innovations.
Oxford University Press. pp. 1–26. ISBN 0–19–926455–4.

George Bernard Shaw (1856 - 1959), quotes, Irish literary Critic, Playwright and
Essayist. 1925 Nobel Prize for Literature.

Hamel and Valikangas (2003): The Quest for Resilience, Harvard Business Review,
vol.2, pp 198-207

Horibe, Frances Dale Emy (2001), Creating the innovation culture: Leveraging
visionaries, dissenters and other useful troublemakers in your organization, ISBN 0-
471-64628-8, publisher John Wiley & sons Canada ltd

Lewis, Robert and Wayne, Cordeiro (2005), "Culture Shift: Leadership Network ",
ISBN 0-7879-7530-3, publisher Jossey – Bass Ltd.

Linda Naiman (2005), “What is Creativity?” viewed on August 26th 2008,


http://www.creativityatwork.com/articlesContent/whatis.htm

[ Jayabalaji Sathiyamoorthi ]
41
Michael Diehl and Sabine Ch. Mueller, (2001) Cognitive Stimulation in Computer-
Supported Idea Generation, view on 15th September 2008,
http://www.psych.unito.it/csc/cogsci05/frame/poster/2/ma285-mueller.pdf

N.R. Narayana Murthy, chief mentor of Infosys, interview with forbes.com (2008)
You can outsource the contextual activities, but you have to in-source the core
activities. Those are what give you a competitive advantage, viewed on 15th October
2008.
http://www.forbes.com/innovation/2006/08/23/leadership-innovation-outsourcing-
cx_hc_0824infosys.html

Patel P, Pavitt K. (1995), Patterns of technological activity: their measurement and


interpretation. In Stoneman Pub (ed) Handbook of the economics of innovation and
technological change. Basil Blackwell Ltd, Oxford

Paulo Matos Jorge da Silva e Sousa dos Santos (2002), “How to improve
management of ideas”, ISBN 1-58112-606-9, published by Universal Publishers.

PCT Board meeting (2007), “Fitness for purpose capability development plan”
viewed on October 19th 2008,
http://www.northsomerset.nhs.uk/Publications/meetings/PCT_Board_Meetings/2007/
July/13%20-%20Appendix%201%20-
%20FITNESS%20FOR%20PURPOSE%20CAPABILITY%20DEVELOPMENT%20P
LAN.pdf

Stein, Nicholas (2000), “The World’s Most Admired Companies,” In Fortune October
edition, (2000), p. 183.

Stewart, Thomas (1997), "Intellectual Capita: The new wealth of organizations",


ISBN: 0-385-48381-3 published by Double day dell publishers.

[ Jayabalaji Sathiyamoorthi ]
42
Thomas J. Peters and Robert H. Waterman (1982), "In search of excellence", ISBN:
0-446-38507-7 published by Warner Books Inc.

UK Govt, Department for innovation, “Report on universities & skills”, viewed on


September 10th 2008, http://www.dius.gov.uk/policy/innovation.html

US, Department of commerce, (2007) “Innovation measurement: Tracking the state


of innovation in the American Economy”, the advisory committee‟s report on
measuring innovation, viewed on October 18th 2008,
http://www.innovationmetrics.gov/

Tucker, Robert (2007), “Innovation metrics: Embedding innovation in an


organization‟s system”, weekly newsletter from Innovation Network, viewed on 19 th
November 2008, http://www.thinksmart.com/newsletter

[ Jayabalaji Sathiyamoorthi ]
43
APPENDIX – A

QUESTIONNAIRE ON INNOVATION

PURPOSE
This survey is solely circulated to companies whom appreciate innovation.
The results of which are used to analyse and review the data for the scientific project
(Project C), which is a mandatory subject in Master of Technical Management
course, University of Applied Sciences, Emden, Germany

SIGNIFICANCE
In today‟s economy, the importance of innovation is paramount in providing
the organization the desired competitive advantage. The following questionnaire is
structured to identify the significance of innovation and analyse the role of idea
generation process.

DATA PROTECTION
The data collected from this survey is strictly used for academic purpose and
to analysis how really ideas contribute in achieving innovation. The author takes
responsibility to ensure the confidentiality and privacy of the received information
from the contributors.

METHODOLOGY
What is your company‟s stand on managing ideas and Innovation? To get an
answer for this question, we have compiled a simple questionnaire of 15 statements.
We value your time, so we are not looking for elaborate answers; all you have to do
is simple to answer – 1. Agree, 2. Agree strongly, 3. To some extent, 4.disagree or 5.
Disagree strongly.

CONTRIBUTORS DETAILS
Family, First name:____________________________________________________
Designation: _________________________________________________________
Organization‟s Name: _________________________________________________
Email: ______________________________________________________________
[ Jayabalaji Sathiyamoorthi ]
44
QUESTIONS – Please select an answer for all statements

1. Our organization is known for its innovation and this is crucial to our success.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

2. The implications for the business of future trends and issues are analysed,
with the participation of our design experts (internal and external) and
technical specialists.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

3. All levels of the organisation are proactive in generating, evaluating and


developing ideas for new products/services/processes.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

4. Your business domain schedule regular meetings among employees to share


good & new ideas

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

5. Employees are passionate about what they do and really want to create
something special.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

6. Ideas and Opportunities we identify are driven by our deep understanding of


our customers, competitors and markets.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

7. Ideas has to be necessarily tracked and certain kind of metrics has to be


adapted

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

[ Jayabalaji Sathiyamoorthi ]
45
8. Do you think, once a good idea is deployed, and it will certainly help you to
attain your organization‟s business goal?

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

9. Measuring idea quantitatively/ qualitatively help to assess your organization‟s


innovation capability

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

10. Our intellectual property is at the core of our competitive advantage and we
protect it accordingly in the most appropriate way.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

11. We have a strong „absorptive capacity‟14

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

12. Our teams are usually made up of a broad mix of people from different
cultural background

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

13. Trainings and workshops are consistent; people are developed for bigger
roles in the organisation.

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

14. We have a defined and structured innovation process

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

15. In future, every organization might outsource Innovation

Strongly Agree Agree To Some Extent Disagree Strongly Disagree

14
Absorptive capacity is the ability of your company to effectively use information from knowledge sources.
[ Jayabalaji Sathiyamoorthi ]
46
APPENDIX – B

Question #1

Our organization is known for its innovation and this is crucial to our success.

Sno Responses

1 Agree

2 Strongly Agree

3 Agree

4 Agree

5 Strongly Agree

6 Strongly Agree

7 Strongly Agree

8 Strongly Agree

9 Strongly Agree

Six of the participant companies have Strongly Agreed.

Responses
6

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
47
Question #2

The implications for the business of future trends and issues are analysed, with the
participation of our design experts (internal and external) and technical specialists.

Sno Responses

1 Agree

2 Agree

3 Strongly Agree

4 Strongly Agree

5 Strongly Agree

6 To Some Extent

7 Strongly Agree

8 To Some Extent

9 Strongly Agree

Five of the participant companies have Strongly Agreed.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
48
Question #3

All levels of the organisation are proactive in generating, evaluating and developing
ideas for new products/services/processes.

Sno Responses

1 Agree

2 To Some Extent

3 Strongly Agree

4 Agree

5 Strongly Agree

6 Strongly Disagree

7 Strongly Agree

8 Strongly Agree

9 Strongly Agree

Five of the participant companies have Strongly Agreed.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
49
Question #4

Your business domain schedule regular meetings among employees to share good
& new ideas

Sno Responses

1 Agree

2 Strongly Agree

3 Strongly Agree

4 Agree

5 Strongly Agree

6 Agree

7 Agree

8 To Some Extent

9 Agree

Five of the participant companies have expressed that they are agreed.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
50
Question #5

Employees are passionate about what they do and really want to create something
special.

Sno Responses

1 To Some Extent

2 Agree

3 Agree

4 To Some Extent

5 Strongly Agree

6 To Some Extent

7 Agree

8 Agree

9 Agree

Five of the participant companies have expressed that they are agreed.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
51
Question #6

Ideas and Opportunities we identify are driven by our deep understanding of our
customers, competitors and markets.

Sno Responses

1 To Some Extent

2 Agree

3 Agree

4 Strongly Agree

5 Strongly Agree

6 Agree

7 Strongly Agree

8 To Some Extent

9 Agree

Four of the participant companies have expressed that they are agreed.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
52
Question #7

Ideas has to be necessarily tracked and certain kind of metrics has to be adapted

Sno Responses

1 Agree

2 Strongly Agree

3 Agree

4 Agree

5 Agree

6 Agree

7 To Some Extent

8 Strongly Agree

9 Agree

Six of the participant companies have expressed that they are agreed.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
53
Question #8

Do you think, once a good idea is deployed, and it will certainly help you to attain
your organization‟s business goal?

Sno Responses

1 Agree

2 Disagree

3 Strongly Agree

4 Strongly Agree

5 Agree

6 Disagree

7 Strongly Agree

8 Strongly Agree

9 To Some Extent

Four of the participant companies have expressed that they are „Strongly Agreed‟.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
54
Question #9

Measuring idea quantitatively/ qualitatively help to assess your organization‟s


innovation capability

Sno Responses

1 Agree

2 Strongly Agree

3 Strongly Agree

4 Agree

5 Strongly Agree

6 Strongly Agree

7 Strongly Agree

8 Agree

9 Strongly Agree

Six of the participant companies have expressed that they are „Strongly Agreed‟.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
55
Question #10

Our intellectual property is at the core of our competitive advantage and we protect it
accordingly in the most appropriate way.

Sno Responses

1 Agree

2 Strongly Agree

3 Agree

4 Strongly Agree

5 Strongly Agree

6 Strongly Agree

7 Strongly Agree

8 To Some Extent

9 Strongly Agree

Six of the participant companies have expressed that they are „Strongly Agreed‟.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
56
Question #11

We have a strong „absorptive capacity‟

Sno Responses

1 Agree

2 Agree

3 Agree

4 Agree

5 Agree

6 To Some Extent

7 Agree

8 Agree

9 To Some Extent

Seven of the participant companies have „Agreed‟ that they got a strong absorptive
capacity.

Response

7
6
5
4
3
2
1
0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
57
Question #12

Our teams are usually made up of a broad mix of people from different cultural
background

Sno Responses

1 Agree

2 To Some Extent

3 Strongly Agree

4 To Some Extent

5 Strongly Agree

6 Strongly Disagree

7 Strongly Agree

8 Strongly Agree

9 Agree

Four of the participant companies have expressed that they are „Strongly Agreed‟.

Response

0
Strongly Agree To Some Disagree Strongly
Agree Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
58
Question #13

Trainings and workshops are consistent; people are developed for bigger roles in the
organisation.

Sno Responses

1 Agree

2 Strongly Agree

3 Agree

4 To Some Extent

5 Strongly Agree

6 Agree

7 To Some Extent

8 To Some Extent

9 Disagree

One set of three of the participant companies have expressed that they are „Agreed‟.
And the other set of three companies expressed that they are agreed to some
extent.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
59
Question #14

We have a defined and structured innovation process

Sno Responses

1 Agree

2 Strongly Agree

3 Agree

4 Agree

5 Agree

6 Strongly Agree

7 Agree

8 Disagree

9 Agree

Six of the participant companies have expressed that they are „Agreed‟.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
60
Question #15

In future, every organization might outsource Innovation

Sno Responses

1 Disagree

2 To Some Extent

3 To Some Extent

4 Agree

5 To Some Extent

6 To Some Extent

7 Strongly Disagree

8 Strongly Agree

9 Agree

Four of the participant companies have expressed that they are „agreed to some
extent‟.

Response

0
Strongly Agree Agree To Some Disagree Strongly
Extent Disagree

[ Jayabalaji Sathiyamoorthi ]
61
SUMMARY OF THE QUESTIONNAIRE

 Most of the companies think, Outsourcing innovation is a mere threat.


However few of the companies still agree to the contextual activities, but it has
to in-source the core activities
 Almost every organization have a very high absorptive capacity
 Having the cross culture team in place doesn‟t directly influence the
innovation process, however it does impact in idea generation process
 Almost every organization has a defined and structured innovation process.
They device a defined phase from idea generation to innovation.
 Most of the companies, do believe in measuring their progress in innovation.
So they certainly adopt an innovation metric system, whichever they feel it is
good for them.
 Most of the employees are not passionate towards innovations, unless driven
by rewards.

[ Jayabalaji Sathiyamoorthi ]
62
APPENDIX – C
List of organizations participated in the innovation survey
 TVS Motor Company, India
http://www.tvsmotor.in/index.asp
 Wipro Technologies, India
http://www.wipro.com/
 Westpac, New Zealand
http://www.westpac.co.nz/
 HCL Technologies, USA
http://www.hcltech.com/
 Air miles, UK (A British Airways Subsidiary)
http://www.airmiles.co.uk/home.do
 Robert Bosch, Germany
http:// www.bosch.com
 Renault Nissan Technology and Business Centre India Private Limited
http://www.nissan-global.com/EN/GLOBAL/
 SAP Labs India (P) ltd
http://www.sap.com/india/index.epx
 Fastrack Design, Inc, USA
http://www.fastrack-design.com/

[ Jayabalaji Sathiyamoorthi ]
63

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