|Book Review: The Innovation Manual|
The Innovation Manual: Integrated Strategies and Practical Tools for Bringing Value Innovation to the Market
Written by: David Midgley. Chichester, UK: John Wiley & Sons, 2009. xii+316 pages.
David Midgley views innovation as the most interesting topic in business. He wrote this book as a guide for managers who need to create significant increases in value when bringing innovations to market. His challenge for these managers is to shift their mindset from product innovation to a world of business models and customer value.
Midgley shapes his approach to meet this challenge using both his experience in structuring and directing executive programs at INSEAD and his consulting work with business units in North America, Europe, and Australia. He identifies five key tasks that managers must complete to bring major innovation to the market successfully. He discusses the best way to tackle each task with proper tools for carrying it out. He considers differences between industries in how best to manage innovation. He recommends how managers might adapt best practices to their unique circumstances.
Readers scanning the extensive Chapter Notes section (pp. 292–307) will find helpful references to the published sources used by the author to develop his five key tasks and their tools. He makes several references to articles on product innovation tools and best practices in PDMA toolbooks and the Journal of Product Innovation Management.
Target readers for this book are midlevel managers with some experience in innovation who looking for an easy-to-read approach to managing over the life cycle of a technology innovation. Seasoned practitioners will find practical insights on migrating, as a product matures, to a new business model. For product development managers contending with innovation strategy in the frustrating front end of development, Moore (2005) is a more valuable guidebook.
Chapter 2, “Creating Advantages in the Minds of Many,” provides the foundation for the rest of the book. To achieve success, in the author's view, a manager needs an up-to-date understanding of how customers adopt innovations. In the standard model of innovation adoption, customers weigh the costs and benefits of the innovation and decide whether to adopt it. The innovating business unit competes to gain a share of the market through marketing campaigns. These campaigns include clear messages about the main benefits of the innovation and what is novel about it.
In the author's view the standard model is out of date and should incorporate advances made in the past two decades in understanding human decision making. The bedrock of Chapter 2 is a series of clear descriptions of advances in cognitive psychology, neuroscience, personality psychology, and computational sociology. Accompanying each description are lessons on applying this new knowledge to influence the rate and success of an innovation's adoption. (Recent reviews of two books dealing with emerging knowledge on how we decide [Hardenbrook, 2010] highlight the importance of understanding decision making in product development.)
Midgley recommends three action steps to create advantage in the minds of many. First, understand the importance of creating the information environment in which desirable customers will evaluate the innovation. Second, involve the customers throughout the development process. The standard model's use of representative samples, focus groups, and traditional market research surveys give way in the new model to selective samples and subtler methods. Third, start from the end. The business unit must be clear not only of the needs of desirable customers but also on how best to release the potential of the market for the innovation.
In Chapter 3, “Chartering Innovation within the Organization,” the author makes the case that the traditional Stage-Gate™ method needs changes to meet the new challenges of major innovation in services and business models. The toolkit for this chapter contains strategy canvas, scenario generation, and discovery-driven planning. He outlines six steps to draw a strategy canvas using as reference a book by his INSEAD colleagues (Kim and Mauborgne, 2005). He then lists seven simple steps to building scenarios. Discovery-driven planning works backwards from a quantifiable target of success and continually tests assumptions. There are four documents for this planning: the reverse income statement, the operations specification, the key assumptions checklist, and the milestone-planning chart (pp. 97–103).
Co-creating innovations with customers demands managers pay attention to having the right people on the innovation team. The first section of Chapter 4, “Selecting, Preparing and Supporting the Right Team,” examines what we know about the strengths and weaknesses of the types of teams used in innovation. The second section sets out principles for selecting, preparing, and supporting teams. Particular attention is paid to these principles for the core team engaged in the front end of development where the focus is on creating a winning concept embodying the innovation. The size of the core team—five to six members gets the vote of most experts—and the project sponsor, the senior executive to whom the team will report, are important. “Occasionally organizations do strange things, like appointing a sponsor whose only incentive is to kill the project, or one already supervising 20 projects, but usually they avoid these mistakes” (p. 121). The toolkit includes two straightforward tools: team member selection guide and first meeting agenda. A third tool, diagnostics for checking the work climate in the team, is complicated. After a short introduction the author gives information for getting the questionnaire instrument and accompanying manual from the original authors.
Building on the foundations set down earlier, the author next takes on “Co-Creating the Innovation with Customers,” Chapter 5. First he addresses the question of when to seek customer views. Building on the foundation laid down in Chapter 2, he recommends involving customers from the beginning in discussions about the business unit's objective and potential innovations that might meet this objective. Often failure in new product development occurs through “Organizational overconfidence (‘we know what is right for the customer’) or the egos of managers (‘obviously the project I've been working on for a year will be a success’)” (p. 145). The author devotes no space to a discussion of sophisticated demand forecasting models. Many such models do exist but the foundation material in Chapter 2 suggests they are not likely to work well in the early phases of development. A major challenge is linking customer needs to product and service features. Two approaches help resolve this challenge: means-end analysis (from the psychology and marketing fields) and quality function deployment (which links voice of the customer with the voice of the designer or the voice of the business).
A turnaround in a business unit's innovation results requires abandoning the things that do not work and doing more of the things that produce results. Change management principles are outlined in the next chapter, “Changing the Organization to Deliver the Innovation.” However, four important points made by innovation experts and often neglected by change experts are taken on and expanded in this chapter. The first is tolerating failure. Often this occurs not through any fault of the project team but because of the uncertainty inherent in developing innovations. Second, emphasize economic rewards and rewards for the team as a whole rather than the individual. Third, choose a sponsor who will advise, mentor, and protect the team and who will provide their primary point of contact with senior executives. Fourth, make sure the members of a gate committee understand their dual responsibility. They are responsible for both encouraging innovation and for killing bad ideas.
“Building the Market for the Innovation,” Chapter 7, expands on one of the main themes of the book: marketing an innovation effectively is just as important as developing the right innovation. A clear view of the target customer is a precondition for the next step—designing the right offer. The powerful offer comprises more than the core product or service. It also includes aspects such as pricing, terms and conditions, place of purchase, after-sales support, and user communities. This offer both increases the benefits the target customer notices in the offer and decreases the costs they experience in buying and using it. Positioning the offer in the mind of the customer is the final step in building the market for the innovation. Positioning statements look deceptively simple but their impact is great. They need serious thought and debate among the project team before they fix the final design of the innovation. At the end of the chapter the toolkit includes a simple positioning template with an example of how to use it (pp. 265–66).
“Putting It All Together,” Chapter 8, summarizes and integrates the author's ideas and opinions for helping innovation managers achieving significantly greater increases in value in bringing innovations to market. “My intuition is that most global firms are good at significant incremental innovations and this is what they do most of the time. It is not true that most innovation is minor or trivial. Where the real challenge lies is increasing the proportion of successful breakthrough innovations. If this is 15 to 20% of all innovation now, then huge returns will accrue to those raising these proportions to 25 to 30%” (p. 288).