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Innovation Center Process

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Innovation Center Process

  1. 1. Beyond Process: Innovation Center Culture & Value Caroline Little, MDes 2009 IIT Institute of Design, Chicago With assistance from: Professor Jeremy Alexis and Hanna Korel Innovation centers today are at a crossroads; some have already evaporated, and those that are still in existence are working to define their true purpose in this state of heightened economic insecurity. Using examples from (6) innovation centers, this article describes how centers are adapting and what makes them successful, as well as providing insight around how design can best be used to create change inside organizations. A few years ago, before the housing market bubble burst and onset of a major financial crisis, organizations were looking for ways to make innovation an internal part of their processes. After all, design (along with its arch-angel, innovation) was seen as the way to stay competitive in a world increasingly saturated with products and services. Organizations as diverse as the Mayo Clinic, T-Mobile, SAP, and Safeco (now Liberty Mutual) began investing in making design integral to their organizational structure. Innovation centers seemed to be the new hot commodity, displacing R+D labs as companies took a risk on using design to help solve problems and shape their future. Design had a moment. But did it have staying power? If we fast-forward to today’s increasingly challenging business environment those innovation centers seem fraught with fragility. SAP’s Design Services Team announced its disbanding in April of this year, and many of the representatives at the (8) innovation centers interviewed for this article report a change in their role or scale-back to the types of projects they are assigned. Business Week reports that for the first time since 2005 (when the survey began), companies estimate that their innovation spending will be flat or down in 2009. After 2 to 3 years of rapid growth, innovation centers may be a casualty of the new economic reality. However, beyond their return on investment potential, innovation centers seem to fail or succeed based on how well they leverage design’s strengths. For the discipline to continue its progress being integrated into the business world, practitioners and advocates must recognize how design can best be utilized. It helps to first understand why companies wanted to make design thinking internal to their organizations in the first place. For the companies that support innovation centers, design is no longer considered a solely aesthetic pursuit, separate from the whys and the hows of the development process. Instead, design is utilized as a core innovation tool- a process in and of itself. This “Design with a capital D” is founded on a few main principles that make it different than traditional business strategy: a deep understanding of user needs (achieved primarily through ethnographic research), a long tradition of cross-functional and disciplinary teamwork, and rapid and iterative prototyping. While design thinking remains fuzzy, its definition and discussion beyond the scope of this paper, most everyone can agree it is one possible method used to structure innovation. 1
  2. 2. Examining the dissolution of the SAP Design Services Team (DST) provides a good start to the discussion. Hasso Platner, co-founder of SAP, initiated the formation of the DST to bring design thinking to software development. The team was designed on the model of IDEO University as an in-house training center tasked with spreading design thinking throughout SAP. From the beginning, the DST was positioned as an outside advisor- first as an educational team, and later as an in-house consultancy. The DST focused on new market entry or long-range projects (3-5 years out from implementation) and, like true consultants, ended the relationship with the business unit once recommendations were made. The team earned the moniker “Hasso’s boys,” from the idea within the SAP organization that DST employees were put in a position of power based on their association with the company co-founder, not because they added real value to SAP enterprise. In fact, a major challenge for DST transitioning to an in-house design consultancy role was the team’s initial lack of credibility. Consider that SAP was doing quite well before a small group of designers (not even industry experts) decided they could do better. It’s no wonder there was some derision and apathy towards DST on behalf of the rest of the SAP enterprise. It should be noted that these feelings are in no way a reflection of the type of employee hired to work at the DST, as SAP had strict standards including not only a background in design thinking but also a depth of understanding in technology and business processes. The hurdle that the DST could not seem to overcome was in expecting the 50,000-strong SAP to listen to the cries of a small team of 20. Does this mean that large organizations can’t have small innovation centers? Of course not. But it does mean that the innovation center team must in some way lay the groundwork for future success before expecting an organization to change on their say-so. Kaiser Permanente’s Garfield Center for Innovation succeeded in using an educational component as a key part of their service to the main organization by keeping their user base engaged in the process. The Garfield Center is a prototyping space, outfitted with different medical environments, that allows a range of KP teams to test ideas and quickly see the results of the design process in action. Tim Brown of IDEO, who worked with KP to design and structure the Garfield Center, notes in his 2008 HBR article “Design Thinking” that KP’s prototyping of service innovations (he uses the example of a nursing shift changeover) “will of course not be physical, but must be tangible.” SAP’s DST focused on higher-level strategy innovations while the Garfield Center looks at problems closer at hand for users of the KP system. While both innovation centers had an initial goal of training large organizations in the practice and importance of design thinking, KP successfully began this integration by showing results in a way its users inside the organization understood and respected. Fundamentally changing the way SAP does business (putting design before engineering), without a clear value proposition didn’t foster widespread support for the DST group. SAP employees could not see the value in knowing this new process, or understand how it would have a direct and immediate impact on their professional goals. Furthermore, the DST did not help its cause by continuing to work on high-level projects that did not provide immediate support to problems at hand. 2
  3. 3. A weakness of design thinking overall, especially in contrast to traditional business strategy, is a lack of measurability, or “proof.” SAP was asking business units to embrace a process that hadn’t been tested, at least in their own minds. Much as it is difficult to put a definition for design thinking down on paper that doesn’t include several sentences, its value is similarly hard to speak to without examples. Innovation centers that rely on design to change organizational behavior without showing direct outcomes of the process often realize too late that their strategy is flawed. A core competency of the design thinking, at least the kind taught at the Institute of Design, is the ability to take a complex situation and make it understandable and relevant through storytelling, diagrams, and prototypes. Design, even that of the strategic realm, still relies on tangible outcomes to provide context and clarity. The innovation center employees at both T-Mobile and Liberty Mutual began as high-level strategy consultants much like SAP’s DST. However, both the Creation Center (T-Mobile) and Open Seas (Liberty Mutual) have since re-calibrated their innovation center strategies to better relate to organizational needs. Both centers were designed as physically and operationally separate entities from the mother organization. While T-Mobile’s main headquarters are in the suburbs, the Creation Center opened in swanky new offices in downtown Seattle. The philosophy behind this separation was to keep innovation center employees unconstrained by day-to- day details, as the both Creation Center and Open Seas were originally expected to generate radical and experimental ideas. For example, Open Seas initially researched areas tangential to insurance (e.g. moving, or sending a child to college), and later explored how created concepts would fit in with current practice and business strategy. This retrofitting of ideas more commonly found in R+D lab technology innovations is problematic for a few reasons. As we’ve seen from the SAP example, if innovation centers are not relevant to the mother organization, they lack a clear purpose for being and the credibility necessary to affect real change. And even though existing company employees were integrated into the centers, because the staff members are all not subject-matter experts, the ideas generated have an even harder time gaining traction. It is important to remember that while an innovation center may be charged with creating the strategy for new concepts, it is ultimately the main organization that must move these ideas into implementation. The relationship between innovation center and mother organization exists on more than an operational level; it’s about day-to-day, personal interactions. Creating and maintaining positive collaborations with organization staff is critical; a failure to leverage the institutional and subject matter knowledge of organization staff is not only foolhardy, it can keep ideas stuck behind innovation center walls. Both T-Mobile and Liberty Mutual realized the lack of connection between their innovation centers and main organizations was causing friction, and have begun to draw the Creation Center and Open Seas into more supporting roles. Ideas are now expected to have a higher “hit” rate, and there is more focus on communication with and solving problems for the main organization. Open Seas’s separate facility has been shuttered and the team has been reintegrated into Liberty Mutual’s main offices. Being too close (a part of the main organization) and being too far way from (separate from the main organization) is a tightrope act most Innovation Centers must walk on a daily basis. By their name, Innovation Centers are expected to think long-range and blue sky, but design thinking works better in a more discrete and 3
  4. 4. constrained environment. Taking the risk of sounding trite, design is fundamentally about solving problems; when innovation centers aren’t set up with a problem (or set of problems) in mind to solve, or at the least a core, shared vision, they tend to flounder. The main business is frustrated with a lack of “success,” and innovation center employees feel limited and underutilized. The SPARC design group at Mayo Clinic has made relationship management a key part of their practice. SPARC considers the units it serves not as clients, but as true partners the journey to make the Mayo Clinic experience better for all constituents. SPARC currently works around (5) practice areas: culture and competencies, wellness, prediction and prevention, delivering care away from the Mayo campus, and revitalizing the patient experience. Incorporating design thinking into the Mayo Clinic operation is less of an educational task in the eye of the SPARC team than a change management process; having good concepts is of course important, but only if the proper foundation is laid to help Mayo units understand how the change can support their work. This kind of relationship building is important for not only gaining trust and access, but for eventually creating a larger strategic presence in the organization. SPARC is on its way to achieving this overarching goal; due to the group’s early success, SPARC was absorbed into a larger unit- The Mayo Clinic Center for Innovation- in 2007. The McDonald’s Innovation Center, by far the most mature center in existence, began in 1994 as a four-person team asked by the CEO to imagine the restaurant of the future. This specific project focus, while remaining relatively low-cost and low- risk for the McDonald’s organization, allowed the center to gradually ramp in staff and capacity based on success, employee initiative, and enthusiasm from the mother company. We can only speculate at the reasons for such positive organic growth, but it may be related to the initial projects staffed with individuals direct from the McDonald’s organization, a large number of constituents to serve (restaurant crew, customers, and franchisee owner/operators), and a clear corporate value proposition. The McDonald’s Innovation Center currently operates a very sophisticated system of test kitchens that allows the center to test service operations and procedure from restaurants around the world. McDonald’s Innovation Center’s clearest sign of success is the “pull” they have from the field (nationally and internationally) to solve new problems and prototype potential solutions. Far from being detached from the everyday business, McDonald’s encourages innovation center employees to observe and participate in McDonald’s restaurants (to fully understand the process), and hires crew for their test kitchens that also work shifts in real world restaurants so they have added perspective on innovations tested. Indeed, the innovation center has become a key part of McDonald’s overall business strategy. Ironically McDonald’s Innovation Center’s formula for success is also its Achilles heel; their ability to solve existing problems so effectively means they don’t always get the support or freedom to explore longer-term ideas. Design thinking is encouraged and lauded, but is it at the expense of a larger culture of innovation? McDonald’s monitors its failure rate for their ideas in the same way newer centers might measure their success rate, just to make sure a certain percentage initiatives are pushing the envelope and promoting longer-term thinking. McDonald’s Innovation Center has almost institutionalized the three key attributes of design thinking noted earlier in this article: user research, iterative prototyping, and cross-disciplinary teamwork (in the case of McDonald’s- representatives from design, operations, business 4
  5. 5. and human factors). SPARC at Mayo Clinic shows the same promise of the early McDonald’s team: both centers emerged out of an initial small team, and are a lesson in the importance of nurturing design internally before asking it to operate on a systemic level. Having a strong core vision, even if it comes from foundational project- for McDonald’s, the restaurant of the future, for SPARC, understanding the relationship between patient understanding of their condition and their satisfaction scores with Mayo- seems key for design to have the biggest impact on an organization. We’ve seen that while certainly design can be integrated into, recognized by, and relied upon by corporations, hosting an innovation center alone does not seem to be enough to keep sparking new, fresh ideas. The friction that exists between forward-thinking “innovations” and day-to-day challenges, including understanding how the business operates and the constraints around new idea implementation, prevents innovation centers employees from acting as in-house design consultants. This keeps the door open for external design consultancies to provide the range of thinking and execution necessary for concept development and evolution. These two groups dovetail well, as innovation centers that understand and promote design internally can use external consultancy work to further initial projects, validate concepts, or provide fresh insight. This may beg the question- why create an innovation center at all? One could argue that any funding for a dedicated team devoted to using design is a statement of purpose rather than the accomplishment of any final goal. Innovation centers represent an opportunity for future growth by reshaping how organizations use design and think about their next wave of products and services. As a long-term investment, an innovation center cannot be slotted into a predetermined function, but must and grow and change in role and scope based on success with and buy-in from the supporting company. Truly successful innovation centers do not have to convince or coach organizations to change, but see this shift occur naturally over time. Special thanks to: Maggie Breslin, Mayo Clinic Maura Collins, T-Mobile Enric Gili Fort, SAP Matt Guilford, City of Chicago Sue Jin Kim, Microsoft Jeanne Liedkta, UVA Darden School of Business Chris McCarthy, Kaiser Permanente Rob Moore, Liberty Mutual Elisabeth Power, Liberty Mutual John Reinertsen, McDonald’s Contact: Caroline Little - carolinejlittle@gmail.com 5