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A G R E AT E R M E A S U R E O F have a cycle time of four to seven years,
C O N F I D E N C E
depending on the technology and product
types. Different product opportunities and
time frames may require different types of
innovation or engineering mindsets.
For instance, the opportunity space for in-
novation while working on a rapid-response
to a customer's product option request is
very different than the innovation in creat-
ing a breakthrough technology. A good deal
of day-to-day engineering activity is aimed
at rapid delivery of new or updated prod-
ucts to market and tends to be concentrated
in a company's "bread-and-butter" product
Encouraging
lines. Long or unpredictable development
schedules can be very costly due to the burn
rate of project expenses, lost sales because
and Managing
of delayed shipments, and opportunity costs
associated with delayed start-up of the next
project. So the financial mindset typically
Innovation associated with product development activ-
ity involves shortening time-to-market to
improve profitability.
The intensity of short-term product de-
velopment activities can be so overwhelming
Larry Pendergrass, Keithley Instruments, Inc., that work on longer-term technology devel-
opment is often forgotten. An organization
may become mainly reactive and less proac-
tive to the needs of the market place. Engi-
Innovative technical products can make money for both their users neering can get into a rut with a limited scope of innovation, resulting
and their producers. Creating them requires an engineering organi- in ho-hum products that may do little more than meet basic customer
zation that fosters the natural innovative spirit of engineers, while needs. To avoid this, some engineering resources must be devoted
meeting stakeholder expectations. solely to longer-term development activities, and the engineers that
work on them should have fewer constraints on the types of innova-
Profitable Innovation tion they investigate. The aim is to keep a steady stream of innovative
Engineers are natural innovators and are expected to turn out products flowing that provide a high level of value-added benefits to
novel products for diverse marketing opportunities, and do it within customers, and a high level of profitability to the producer.
the framework of a company's business model. However, the engi-
neering organization must be set up to reinforce this innovative spirit
and get the most out of each product development team. The deploy-
ment of these teams requires the setting and balancing of multiple
priorities. For example, many engineered product companies have to
prioritize opportunities and resolve conflicts between new technol-
ogy investment, new product platform development, smaller incre-
mental product rollouts, and the release of specialized or customized
products based on these platforms. All of these opportunities require
innovative engineering, all can be profitable, all are necessary for
a well-balanced organization, and all can go on simultaneously if
R&D activities are effectively managed.
Such product line issues are frequently framed in terms of bal-
ancing opportunities in the short-term (incremental product rollouts
and specialized or customized options), medium-term (new product
platforms), and longer-term (generating breakthrough technologies)
against their payoffs. While short-term activities may have less than Figure 1. Partial organization chart for technology, product, and business
a two-year cycle time in development, the longer-term activities my development.
Encouraging and Managing Innovation April 2004 1
Project Team Model an organization more easily meet all its ob- generate an idea for a new product line con-
The structural model for many prod- jectives. However, the development of new cept, but the scope of their research should
uct engineering organizations is a group of technologies can take a company outside encompass technologies not associated with
teams, with each team assigned to a particu- its financial and engineering comfort zones. any particular product line that the company
lar product or product line. (See partial or- It involves financial commitment and risk. currently produces.
ganization chart in Figure 1.) The way these Although the risk taken is usually propor- This is risky business. A company's ex-
engineering teams are set up can help man- tional to potential reward, increased uncer- ecutives, board of directors, and various
age risk, encourage innovation, and improve tainty may cause a company to under-invest stakeholders must be willing to invest in this
the odds for success. in long-term goals. The amount a company type of activity, where it is not at all clear
Some teams work on new products, some is willing to undertake depends on its re- what such a team will produce. Perhaps only
on product line extensions, and some are sources, the strength of various stakeholder one idea in ten will result in something of
involved with upgrading and maintaining interests, and the ratio of risk to reward for commercial value. It could be a new product
existing product lines. Team activities de- each project. platform, a technology that leapfrogs exist-
pend on where the product is in its life cycle. So how much should a company invest ing product capabilities, or it could result in
Naturally, the financial objectives are grow- in product teams that work on these longer- nothing financially viable. Visions of the lat-
ing sales and profitability. The engineering term, risky new technology goals? This de- ter are what motivates companies to dilute
objectives are inventing or improving so- pends a great deal on the company's type of technology team R&D by giving it product
lutions to customers' problems--well-de- business, its maturity, the issues it faces on development assignments. One way to avoid
signed solutions that are economical, have a an annual basis, the position of the compe- this is to keep the technology team small
clear marketplace contribution, and are dif- tition, etc. If a company tries to invest too enough that the organization can afford to
ficult for the competition to imitate. Internal heavily in longer-term goals, its other goals not use it for current project work. Other
financial pressures dictate accomplishment may flounder. If the investment is too lean, resources should be used to solve technical
of these objectives in the shortest time prac- products may become stale and the compe- problems and keep product development
ticable, without undue risk, while conserv- tition may take market share. For an engi- projects on schedule.
ing company resources. This always involves neered products company in today's business
tradeoffs in project scope, costs, and sched- environment, the ratio probably needs to be Creating an Environment for
uling. about 90/10 or 95/5 with regard to short- Innovation
Most of the objectives and activities just term/longer-term activities. An innovative organization is one that
described have a relatively short-term time The organizational structure may be such looks for ways to encourage creativity in
horizon. So where does technology innova- that any given engineer serves on more than everyone. Since engineers are by nature cre-
tion fit into the organization and business one product development team. However, it's ative, a major organizational goal should be
model? Historically, the right breakthrough best if the technology development team has development of a culture that enhances this.
technologies, effectively implemented, help a unique set of members, and they devote at The way engineering teams are led and man-
least 90% of their time to activities involv- aged has tremendous influence on innovation
An innovative ing new technologies and acquiring core
competencies that could benefit the firm in
the future. Delegating short-term product
--positive or negative.
It is incumbent on company executives
and organizational development specialists
organization development work to the technology team,
or "loaning" its members to product devel-
to work with project managers and team
leaders to optimize team structures. All or-
is one that
opment teams in a role other than simply ganizations reflect the most significant is-
consultation will tend to disrupt technology sues facing a company. Each organization is
R&D. Conversely, product team members a compromise, with a major focus on fixing
looks for should focus about 90% of their time on
short and mid-term activities, but keep 10%
of their time untied to product releases and
the biggest problems of the day. But these
problems change over time. To reduce the
need to change a structure too frequently, an
ways to free to pursue other activities, such as pet
ideas and technology education. This will
organizational model should be developed
that gives due consideration to longer-term
encourage
allow some contribution to the longer-term time horizons and larger strategic issues fac-
needs of the organization. ing the company.
A major element of the technology team's It is also important to have a set of clear
creativity in charter is idea generation, centered on break-
through technologies. Team members should
be looking for convergence and synergies
objectives, responsibilities, and measure-
ments for each team. This includes the tech-
nology development team, whose efforts
everyone. in new technologies and potential product
platforms. From time to time, the team may
may otherwise lack focus. A further require-
ment is periodic monitoring of team goal set-
2 April 2004 Encouraging and Managing Innovation
ting and activities, with an eye to continuous
improvement. However, the role of executive How Do You Measure Innovation? mediate outputs could include the number
management should be leadership in estab- of published papers or patents issued. These
Nancy Thomas, Keithley Instruments, Inc.
lishing overall objectives (destinations), not outputs could be some of the inputs to the
creating a detailed map of the course taken. Measures of innovation can be highly next stage, which would transform them to
Leave the details to the engineering teams. subjective, but there are some general intermediate outputs, such as circuits, pro-
These steps help avoid the perception that guidelines that help a company create in- duction processes, etc. (Figure 2). Interme-
an engineering class system has developed, ternal metrics. The rationale is employ- diate outputs could then be transformed at
with some teams or team members resid- ing the right amount of scarce resources the following stage into pre-ultimate out-
ing in an ivory tower. Such perceptions are and improving their deployment to ensure puts, which are products and or services.
damaging to morale and the teamwork that they meet R&D goals and other corporate While it might be tempting to call the latter
must continue between project teams and objectives, such as long-term profitability. ultimate outputs, consider the company's
the technology team. Technology teams are, Frequently, an input/output model is used measurement objectives and the economic
after all, part of an engineered products busi- in making these measurements. The vari- value of products and services to custom-
ness. As such, their existence is encouraged ables should be tailored to the company's ers. In other words, how profitable are the
by virtue of the positive and measurable overall business model and operating envi- products and services for both the supplier
business impact they have. ronment. and the user? To answer this question, de-
Inter-team cooperation can be further It's important to recognize that some velop a balanced and complementary set of
enhanced and encouraged by clearly defin- outcomes are difficult to trace to innova- information from the different stages of in-
ing the roles of each team. For example, the tion. These include such things as com- novation and their outcomes.
technology team needs to take responsibil- petitive position (market share), operating While it is difficult to apply financial
ity for developing new technology to the efficiency, growth in profitability, and cus- metrics to the measurement of innovation,
point that implementation risks are reduced tomer satisfaction. Even the inputs may be thoughtful allocation of costs and benefits
to a reasonable level before turning it over difficult to quantify, such as expenditures provides valuable R&D insight, if not over-
to project teams. Proceeding successfully actually devoted to R&D, the time frame sight. Allocations may be by market, prod-
from invention to implementation requires a associated with these expenses, and prod- uct line, or specific customer. Nonetheless,
thorough and practical understanding of the uct lines that result or benefit from them. beware of bias in the selection of metrics
application. It must be clear how an untried Carefully define what the company wants and individual assessment of results. Due
technology can intersect the product plans to achieve with its innovation metrics be- to the complexity of innovation processes,
with minimal risk and can be used to solve fore settling on the inputs and outputs. isolating the precise impact of products
customers' problems or improve internal Then create a mechanism for capturing the and allocating them to specific innovative
processes. data best suited for these objectives. inputs is difficult. Therefore, the process
In most engineering organizations, when When choosing the metrics, consider must be well defined and consistently ap-
engineers have proven their technical prow- possible `stages of outcome' associated plied. With these precautions, at least rela-
ess and have demonstrated leadership, they with R&D. For example, measures of im- tive measurements should be useful.
are given their first role as a project manager.
For this reason, many project managers in
engineering companies were once the best
engineers in their fields. However, manage-
ment is a career change, and many engineers
step up to this challenge without fully un-
derstanding the nature of the change. They
may not understand their personal value as a
manager, which involves setting objectives,
developing people and businesses, and then
stepping aside as their team takes credit.
Instead, they hold on to the idea of "value
through technical knowledge". At first, this
type of leadership may seem very much ap-
preciated by a team with whom the manager
has worked previously. However, it will soon
be thought of as "micro-management", as
over time the manager loses his/her technical
edge and others on the team are not allowed
Figure 2. Input/output model for technical innovation.
to develop into technical decision makers.
Encouraging and Managing Innovation April 2004 3
This tends to quash innovation. problems; their satisfaction is derived from a ing product development cycles. Although
In product development teams, innovation sense of accomplishment when they do this. thoughtful leverage of existing technolo-
can be encouraged by developing a technical Still, most people like to be recognized for gies and designs can be a good practice to
leader while focusing the project manager their accomplishments. While it's difficult to improve development cycle times, too much
on excellence in management principles. In plan, schedule, and measure innovation (see leverage can kill innovation. When projects
fact, it is often beneficial to have a project sidebar), public recognition of results will start generating cookie-cutter products, they
manager lead a team of engineers that are encourage engineers. are unlikely to be innovative.
skilled in an area other than the manager's Recognition can come through internal Finally, it is important to recognize that
expertise. The project manager clearly needs means such as personal statements from one innovation can come in many ways, and in
to be technically respected by the team, but of authority, public recognition at employee many forms. Innovation is more than just
may be respected for accomplishments in gatherings, presentation of work at sympo- creating new technologies. Managers need to
another related field. He/she needs to under- siums, publication in application notes or be skilled in recognizing and rewarding in-
stand how to ask questions and probe for an journals, filing patents, etc. Many compa- novation in all areas of business. For exam-
engineer's grasp of the problems at hand. But nies have a patent disclosure and disclosure ple, innovation can take the form of cost re-
it is frequently best if the project manager review process to uncover possible patents to duction technologies or quality improvement
is not an expert in the technical area being file. Recognition through a small monetary methods. It can take the form of innovative
managed. This will reduce micro-manage- award and public thanks for all disclosures, methods of risk management or business ap-
ment and improve innovation. whether a patent is filed or not, is one way to proaches, such as make/buy decisions and
A project manager must know the me- encourage greater participation in innovative contract manufacturing. It can be seen in in-
chanics of managing a project's scope, thinking. Even if an innovation is not patent- novative methods to motivate, develop, and
schedule, and resources. This person should able, an internal patent disclosure committee reward people.
also understand how to motivate team mem- can still provide recognition of an engineer's Innovation will suffer if managers do not
bers to get the best out of them, make the creativity. Another way to recognize and en- adequately account for opportunity costs
team an enjoyable one with which to work, courage creativity is to give engineers time when setting goals for the organization. For
and be a visionary in terms of objectives. to write bylined white papers and technical example, decisions to continue with a cost
These things set the environment for innova- articles for publication, which describe their center when it is no longer the company's
tion, but do not establish a project's technical innovations. At Keithley, we have also estab- core competency, rather than outsourcing
direction. Appointing a respected technical lished awards for technical achievements, this activity, carries with it an opportunity
leader to work with team members in setting and show recognition through the Joseph F. cost, i.e., foregoing some innovative activi-
technical direction empowers the team to be Keithley QSII (Quality, Service, Innovation, ties. Look for opportunities to free internal
innovative. This leader and team members and Integrity) Award. resources that are no longer working on core
should be the experts on technology and es- competencies and use these resources where
tablish the technical areas that are pursued Avoid Counterproductive there is the best chance of being innovative.
in meeting product objectives. They are the Environments Make these reviews a regularl part of inno-
ones who must reduce the risks associated The flip-side of the coin is avoiding vative efforts, since yesterday's core com-
with the product's critical performance re- things that discouragement innovation. Dis- petencies may not be tomorrow's. Continu-
quirements, development costs, and time to respectful, destructive contention in teams ally assess externally available technologies
market. will do this, especially if an authority figure to determine those that are worthwhile to
Another reason for using this team struc- becomes overly directive. So, technical lead- adapt. Acquire them via outright purchase,
ture is that project managers are often re- ers and project managers must watch out for joint ventures, or strategic partnerships.
sponsible for salary reviews and other mon- it and guide discussions in positive ways that Recognize that some of the most impor-
etary rewards to team members. If these are are not threatening to team members. Where tant partnerships take place between your
not part of the technical leader's function, there is destructive contention and lack of own marketing, engineering, and manufac-
team members will be more independent mutual respect, or people aren't really lis- turing groups. For example, Manufacturing
and less hesitant to speak up on technical is- tened to, this eventually leads to no conten- has much to say to Engineering about the
sues. As long as engineers are paid fairly for tion. People will not speak up, and all ideas direction a design is taking and can contrib-
their contributions, and don't feel financially are not brought out for consideration because ute greatly in innovative thinking toward the
threatened for offering constructive critiques, there's no positive payoff. Without construc- major goals of the project. Manufacturing
this too can be good for innovation. Other tive contention, innovation suffers. strategy and R&D strategy should align with
benefits of this structure are enabling proj- Another enemy of innovation is a risk each other, understanding that the primary
ect managers to supervise more engineers, to averse environment. This can develop when goal of both organizations is to make money
take a larger more strategic view, and to see there is too much emphasis on short-term fi- for the company. However, the sub-goals
more directly what is going on. nancial results, which may be accompanied of the two organizations are, by their very
People go into engineering because they by overly lean staffing, too many projects nature, different and yet compatible. A de-
want to be creative and like to solve technical and goals, and excessive stress on shorten- sign should be manufacturable with existing
4 April 2004 Encouraging and Managing Innovation
processes if possible, or have a business case in this article, where innovation is not en- too much on your plate, you may not hold the
so compelling that it warrants investment in couraged. However, don't expect this to be course and will see little innovation make it
new manufacturing methods and equipment. the norm. into your products. Strike a careful balance
Engineering must earn Manufacturing's trust Many of your global competitors take in your organization.
that production avenues currently available a long-term view of market opportunities.
have been explored before seeking develop- Some can afford to devote large amounts of About the Author
ment of new processes. money and manpower to engineering and Larry Pendergrass is VicePresident of
production. And yet, some of the techniques New Product Development for Keithley
It's a Jungle Out There described in this article do not cost a great Instruments, Inc. in Cleveland, OH. He
Global market pressures are making in- deal of money. Some may be nothing more has spent over 20 years in engineering
novation more important than ever. Com- than cultural and mindset changes to get the and management for various engineering
petitors near and far are looking for ways most from your people. Look at your orga- companies such as Hewlett-Packard Co.
to capture more market share. A review of nization critically. Ask what you can afford. and Agilent Technologies, Inc. He has a
competition may reveal some who are grap- Don't starve innovation with an overly short- M.S. degree in Physics from U.C. Davis.
pling with environments like those described sighted view. On the other hand, if you put
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