BT’s open innovation ecosystem 10
3.5 Diagnostic question: Is the development of products and services and of the process that created them
simultaneous?
Every product and service innovation has to be created, so it is a mistake to separate the design of products and services from the design of the processes that will deliver them.
Merging these two processes is sometimes called simultaneous (or interactive) design. Its key benefit is to reduce the elapsed time taken for the whole innovation activity. As noted earlier, reducing time-to-market (TTM) can give an important competitive advantage. If it takes a business two years to develop an offering with a given set of resources, it can only introduce new offerings every two years. If its rival can develop offerings in one year, it can introduce innovations into the market twice as often. This means the rival does not have to make such radical improvements in performance each time it introduces a new offering because it is introducing them more frequently. The factors that can significantly reduce time-to-market for innovations include the following:
• Integrating the design of the product–service offerings and the design of the process used to create and deliver them.
• Overlapping the stages in the innovation process.
• An early deployment of strategic decision-making and resolution of design conflict.
• An organisational structure that reflects the nature of the offering.
Integrating the design of the offering and design of the process
What looks good on screen may prove difficult to create and deliver in practice. Conversely, a process designed for one set of services or products may be incapable of creating different ones. It clearly makes sense to design offerings and operations processes together. For services, organisations have little choice but to do this because the process of delivery is usually part of the offering. However, it is also useful to integrate the design of the offering and the process for products, but there are real barriers to doing it. First, the timescales involved can be very different. Offerings may be modified, or even redesigned, relatively frequently. The processes used to create and deliver an offering may be far too expensive to modify every time the offer- ing changes. Second, the people involved with the innovation on the one hand, and operations process design on the other, are likely to be organisationally separate. Finally, it is sometimes not possible to design an ongoing process for the creation and delivery of services and products until they are fully defined.
Yet none of these barriers is insurmountable. Although it may not be possible to change ongoing processes every time there is a change to the offering, they can be designed to cope with a range of potential services and products. The fact that design staff and oper- ations staff are often organisationally separate can also be overcome. Even if it is not sen- sible to merge the two functions, there are communication and organisational mechanisms to encourage the two functions to work together. Even the claim that ongoing processes cannot be designed until the nature of the offering is known is not entirely true. There can be sufficient clues emerging from innovation activities for process design staff to consider how they might modify ongoing processes. This is a fundamental principle of simultaneous design, considered next.
OPERATIONS PRINCIPLE
Effective simultaneous innovation reduces time to market.
3.5 Diagnostic question: Is the development of products and services and of the process that created them simultaneous? ■ 105
Overlapping the stages of the innovation process
We have described the innovation process as a set of individual, predetermined stages, with one stage being completed before the next one commences. This step-by-step, or sequential, approach has been commonly applied in many organisations. It has some advantages. It is easy to manage and control innovation processes organised in this way because each stage is clearly defined. In addition, as each stage is completed before the next stage is begun, each stage can focus its skills and expertise on a limited set of tasks. The main problem of the sequential approach is that it is both time-consuming and costly. When each stage is separate, with a clearly defined set of tasks, any difficulties encountered during the design at one stage might necessitate the design being halted while responsibility moves back to the previous stage. This sequential approach is shown in Figure 3.12(a).
Often there is really little need to wait until the absolute finalisation of one stage before starting the next. For example, perhaps while generating the concept, the evaluation activity of screening and selection could be started. It is likely that some concepts could be judged as
‘non-starters’ relatively early on in the process of idea generation. Similarly, during the screen- ing stage, it is likely that some aspects of the design will become obvious before the phase is finally complete. Therefore, the preliminary work on these parts of the design could commence at that point. This principle can be taken right through all stages, each stage commencing before the previous one has finished, so there is simultaneous or concurrent work on the stages, as depicted in Figure 3.12(b).
Figure 3.12 Sequential (a) and simultaneous (b) arrangements of the stages in an innovation activity
First stage in the innovation activity
Second stage in the innovation activity
Third stage in the innovation activity
etc.
First stage in the innovation activity
Second stage in the innovation activity
Third stage in the innovation activity
etc. Communication
between stages (a) Sequential arrangement of the stages in an innovation activity
(b) Simultaneous arrangement of the stages in an innovation activity
We can link this idea with the idea of uncertainty reduction, discussed earlier, when we made the point that uncertainty reduces as the design progresses. This also applies to each stage of innovation. If this is the case, there must be some degree of certainty that the next stage can take as its starting point, prior to the end of the previous stage. In other words, designers can continually react to a series of decisions and clues given to them by those working on the preceding stage. However, this can work only if there is effective communication between each pair of stages.
Deploying strategic intervention and resolving conflicts early
A design decision, once made, need not shape the final offering irrevocably. All decisions can be changed, but it becomes increasingly difficult to do so as the innovation process progresses. At the same time, early decisions are often the most difficult to make because of the high level of uncertainty surrounding what may or may not work as a final design. This is why the level of debate, and even disagreement, over the characteristics of an offering can be at its most heated in the early stages of the process. One approach is to delay decision-making in the hope that an obvious ‘answer’ will emerge. The problem with this is that if decisions to change are made later in the innovation process, these changes will be more disruptive than if they are made early on.
The implication of this is that first, it is worth trying to reach consensus in the early stages of the innovation process even if this seems to be delaying the total process in the short term, and second, there is a particular need for strategic intervention into the innovation process by senior management during these early stages. Unfortunately, there is a tendency for senior managers, after setting the initial objectives of the inno- vation process, to ‘leave the details’ to technical experts. They may only become engaged with the process again in the later stages as problems start to emerge that need reconciliation or extra resources.
Organising innovation processes in a way that reflects the nature of the offering
The innovation process will almost certainly involve people from several different areas of the business that will have some part in making the decisions shaping the final offering. Yet any design project will also have an existence of its own. It will have a project name, an individual manager or group of staff who are championing the project, a budget and, hopefully, a clear strategic purpose within the organisation. The organisational question is which of these two ideas – the various organisational functions that contribute to the innovation or the project itself – should dominate the way in which the design activity is managed?
There is a range of possible organisational structures – from pure functional to pure project forms. In a purely functional organisation, all staff associated with the innovation project are based unambiguously in their functional groups. There is no project-based group at all. They may be working full-time on the project but all communication and liaison are carried out through their functional manager. At the other extreme, all the individual members of staff from each function involved in an innovation project could be moved out of their functions and perhaps even co-located in a task force dedicated solely to the project. A project manager, who might hold the entire budget allocated to the innovation project, could lead the task force.
Not all members of the task force necessarily have to stay in the team throughout the design period, but a substantial core might see the project through from start to finish. Some members of a design team may even be from other companies. In-between these two extremes there are various types of matrix organisation with varying emphasis on these two aspects of the organisation (see Figure 3.13):
• Functional organisation – the innovation project is divided into segments and assigned to relevant functional areas and/or groups within functional areas. The project is co-coordi- OPERATIONS PRINCIPLE
The innovation process requires strategic attention early, when there is most potential to affect design decisions.
3.5 Diagnostic question: Is the development of products and services and of the process that created them simultaneous? ■ 107
• Functional matrix (or lightweight project manager) – a person is formally designated to oversee the project across different functional areas. This person may have limited authority over the functional staff involved and serves primarily to plan and coordinate the project.
Functional managers retain primary responsibility for their specific segments of the project.
• Balanced matrix – a person is assigned to oversee the project and interacts on an equal basis with functional managers. This person and the functional managers work together to direct innovation activities and approve technical and operational decisions.
• Project matrix (or heavyweight project manager) – a manager is assigned to oversee the project and is responsible for its completion. Functional managers’ involvement is limited to assigning personnel as needed and providing advisory expertise.
• Project team (or tiger team) – a manager is given responsibility for a project team composed of a core group of personnel from several functional areas assigned on a full-time basis. The functional managers have no formal involvement.
Although there is no clear ‘winner’ among the alternative organisational structures, there is increasing support for structures towards the project rather than functional end of the con- tinuum. Some authorities argue that heavyweight project manager structures and dedicated project teams are the most efficient forms of organisation in driving competitiveness, shorter lead times and technical efficiency.
Perhaps of more interest is the suitability of the alternative structures for different types of innovation. Matrix structures are generally deemed to be appropriate for both simple and highly complex projects. Dedicated project teams, on the other hand, are seen as appropriate Figure 3.13 Organisational structures for innovation processes
Pure functional organisation
Pure project organisation
Increasing project orientation
FM FM FM PM
PM PM
FM FM FM
PM PM PM
FM FM FM
FM FM FM
PM PM PM
FM FM FM
PM PM PM PM
PM PM
Balanced matrix organisation
FM 5 Functional manager PM 5 Project manager Lightweight project managers
Heavyweight project managers PM
PM PM
FM FM FM
the development of technical knowledge. Some organisations do manage to capture the deep technological and skills development advantages of functional structures, while at the same time co-coordinating between the functions to ensure satisfactory delivery of new service and product ideas. Perhaps the best-known of these organisations is Toyota. It has a strong func- tionally based organisation to develop its offerings. It adopts highly formalised development procedures to communicate between functions and places strict limits on the use of cross-func- tional teams. What is really different is its approach to devising an organisational structure for innovation that is appropriate for the company. The argument that most companies have adopted to justify cross-functional project teams goes something like this: ‘Problems with com- munication between traditional functions have been the main reasons for failing to deliver new innovation ideas to specification, on time and to budget. Therefore let us break down the walls between the functions and organise resources around the individual development projects.
This will ensure good communication and a market-oriented culture.’ Toyota, on the other hand, has taken a different approach. Its argument goes something like this: ‘The problem with cross-functional teams is that they can dissipate the carefully nurtured knowledge that exists within specialist functions. The real problem is how to retain this knowledge on which our future innovation depends, while overcoming some of the traditional functional barriers that have inhibited communication between the functions. The solution is not to destroy the function but to devise the organisational mechanisms to ensure close control and integrative leadership which will make the functional organisation work.’
Critical commentary
•
The whole process-based approach to innovation could be interpreted as implying that all new offerings are created in response to a clear and articulated customer need. While this is usually the case, especially for services and products that are similar to (but presumably better than) their predecessors, more radical innovations are often brought about by the innovation itself creating demand. Customers don’t usu- ally know that they need something radical. For example, in the late 1970s people were not asking for microprocessors; they did not even know what they were. An engineer in the USA improvised them for a Japanese customer who made calculators. Only later did they become the enabling technology for the PC and, after that, the innumerable devices that now dominate our lives. Similarly, fly-by-wire, digital cameras, Maersk’s super-slow container ships, sushi on conveyor belts and the iPad are all examples of innovations that have been ‘pushed’ by firms rather than ‘pulled’ by pre-existing customer demand.•
Nor does everyone agree with the dominant rational model in which possible design options are pro- gressively reduced stage by stage through the optimisation of known constraints and objectives. For some, this neat model of the innovation, which underlies much business and engineering design liter- ature, fails to accurately reflect the creativity, arguments and chaos that sometimes characterise real innovation projects. First, they argue, managers do not start out with an infinite number of options. No one could process that amount of information – and anyway, designers often have some set solutions in mind, looking for an opportunity to be used. Second, the number of options being considered often increases as time goes by. This may actually be a good thing, especially if the activity was unimagina- tively specified in the first place. Third, the real process of innovation involves cycling back, often many times, as potential solutions raise fresh questions or become dead ends, and as requirements and con- straints evolve. In summary, the idea of the design funnel does not describe the process of innovation, nor does it necessarily even describe what should happen. The action-centric or co-evolution perspec- tive of innovation represents the antithesis of the rational model. It posits that offerings are designed through a combination of emotion and creativity; that the process by which this is done is generally improvised; and that the sequencing of stages is not universal in innovation processes.Summary checklist ■ 109
SUMMARY CHECKLIST
Is the importance of innovation as a contributor to achieving strategic impact fully understood?
Is innovation really treated as a process?
Is the innovation process itself designed with the same attention to detail as any other process?
Are innovation objectives specified to give a clear priority between quality, speed, dependability, flexi- bility, cost and sustainability?
Are the stages in the innovation process clearly defined?
Are ideas and concepts for new offerings captured from all appropriate internal and external sources?
Are potential offerings screened in a systematic manner in terms of their feasibility, acceptability and vulnerability?
During preliminary design, have all possibilities for design standardisation, commonality and modulari- sation of design elements been explored?
Has the concept of mass customisation been linked to the innovation process?
Are potential offerings thoroughly evaluated and tested during the innovation process?
Are the resources for developing innovation adequate?
Is sufficient capacity devoted to the innovation process?
Have all options for outsourcing parts of the innovation process been explored?
Has the possibility of involving customers formally in the innovation process been explored?
Are appropriate technologies, such as CAD, digital twinning and knowledge management, being used in the innovation process?
Are the design of the offering and the design of processes that create and deliver it considered together as one integrated process?
Is overlapping (simultaneous) of the stages in the innovation process used?
Is senior management effort deployed early enough to ensure early resolution of design conflict?
Does the organisational structure of the innovation process reflect the nature of the offering?
Are some functions of the business more committed to innovating new service and product offerings than others?
If so, have the barriers to cross-functional commitment been identified and addressed?
‘Anyone who has been involved with designing and con- structing video games will tell you that game develop- ment never goes as planned. I sometimes think that it is a miracle that any game gets developed. Technical glitches, bottlenecks in production, conflicting creative egos, pres- sure from publishers, they will all throw you off course during the development cycle. It is a process that occupies the area on the borderline between art and technology.
Yet, although video game development is an uncertain and complex process, it is how the development process is managed that is the key feature in whether a game will go on to be a success.’ (Izzy McNally, Co-Owner Widescale Studios)
Widescale Studios was a videogame development studio, located in the midlands of the UK. It had been founded seven years ago by Izzy McNally and Oli Chambers, when they left a larger studio to gain ‘some creative independ- ence’. Video game software development studios are the organisations that actually create the games. There are many thousands of such studios worldwide, some large, but most employing less than 30 people.13 Some studios are owned by video game publishers, of which some also produce gaming hardware, and some, like Widescale, are independent. Publishers market and sell the games, man- age relationships with distributors, platform providers and retailers, conduct market research and advertise games.
Originally from California, Izzy was, by background, an artist and writer. Oli started as a programmer, but had moved into becoming an executive producer. (In the indus- try, an executive producer is the person who is responsible for the overall coordination of the development.) Both Izzy and Oli admitted that their desire for more creative inde- pendence had not fully materialised: ‘Since we started, we have been surviving as an independent studio by taking on contracts from the bigger studios, and we have built a good reputation. But if we don’t have another contract ready to go when the last one finishes, we are in trouble.
It can be dispiriting constantly looking for work to keep us a oat. That was why ierybryde was so exciting.’ (Oli Chambers)
The Fierybryde project
Fierybryde was an idea for a role-playing game (RPG) that had come out of a number of brainstorming ses- sions between Izzy, Oli and Hussein Malik in the middle of an unusually warm and pleasant summer. Hussein was a developer and self-confessed ‘fanatical gamer’ who had joined Widescale soon after it was founded. A role-playing game is a video game in which players assume the roles of characters who are protagonists in a fictional setting.
The senior team at Widescale were excited at the concept
of Fierybryde, and saw it as an opportunity to develop a game of their own that would (potentially) give them both creative and financial independence. The Fierybryde con- cept was intriguing, although not totally novel. The game’s setting was a combination of space exploration and ‘wild west’ adventure (Fierybryde was the name of the spaceship in the story) with various characters who possessed differ- ent skills and psychological traits. The purpose of the game was to build an intergalactic trading empire while avoiding interference from political and commercial rivals.
Traditionally, independent studios who wanted to devel- op a game such as Fierybryde had four methods of raising funds. First, they could pitch the idea to a publisher. Most video game development was funded by big publishers.
However, publishers almost always insisted on terms that were more favourable to them than the developers. Sec- ond, the studio could seek private investors who would put their own money into the company and share any subse- quent profits. The downside to this for Izzy and Oli would be a certain loss of independence. Third, the studio could attempt to raise money by crowdfunding, asking for (rela- tively small) donations from thousands of potential future users of the game in return for preferential access to the finished game. It was an increasingly popular method of raising funding, but limited to relatively small sums in total, often less than £1 million (the typical budget for an RPG would be tens of millions of pounds or more). Finally, the studio could start the development from their own saved capital, then fund the ongoing costs from the profits from their other work. This was the approach chosen by Wides- cale, who had a retained cash pot of around £700,000.
If successful, Fierybryde could provide a stable stream of income, without substantial rights and royalties going to some big publisher. In turn, this would let the studio pur- sue more interesting projects in the future. Table 3.2 shows Widescale’s projected cash ow forecast as of the start of the project.
The development process
Video game development is an uncertain and complex pro- cess, but a key feature in whether a game will go on to be a success is the way the development process is man- aged from concept through to launch. Although different studios use slightly different terms, game development is broken down into three stages: pre-production, production and post-production. Pre-production is the stage where the developers have to answer some fundamental ques- tions about the game, including the market it is aimed at, the platform it will play on, the type of game it is going to be, the budget, the basic storyline and the timescale (at least nominally). The production phase is usually the most