I came from Google, search for interface between R&D and CS and apparently I came to the right place. Most of your article is clear to me as we are doing it day to day, more or less. Although I’m in the opposite chair (CS manager), I do understand the pressure on R&D as well as on CS. Question is, in an organization which has a habit of issuing new sub versions and major versions quite often (and of course CS attention for bug solving decreases) what can be done in order to assure timely bug fixes, as well as keep releasing new versions as often as possible.

The question of “how to manage frequent release cycles with minimal turmoil and maximum alignment (R&D, CS, Marketing)” is a good one. I highlighted our processes and best practices that worked well for my team. These should not be a surprise, as they are aligned with the agile development best practices. However, note that implementation and execution of these practices require vigor and disciple for all parties involved. I would love to hear from others’ experiences.

Depending on your situation, management and development processes, organizational structure, or a combination of both will help you build a solution that best works for your organization. Please realize the different roles and responsibilities that are needed for successful execution. With that, build the needed reward and recognition into your structure for all involved. At the end, it takes a team to deliver, even if on the surface some happens to spend more time at the bench than others.

Agreed upon philosophy and decision-making framework for managing releases.

You cannot minimize turmoil and increase alignment if there is no predictable schedule or decision-making process for product releases. Your framework should help to:

1. establish predictable schedules for minor and major releases;
2. differentiate between minor vs. major functionality;
3. outline a process for managing your “Big List” of functionality and capturing it as a product roadmap;
4. establish an escalation process for resolving conflicts;
5. publish and communicate the POR (Plan Of Record).

Small program team with regularly run scrums (2-3 times weekly) who prioritize, schedule and manage the “Big List” of functionality and upcoming releases.

Your small cross-functional team has the empowerment to:

1. establish an agreed upon theme and set of features for each planned release;
2. manage the product roadmap details (specific features and goals) for at least the next 2-3 release cycles (depending on your release schedule, of course);
3. resolve resource conflicts by re-prioritizing scheduled minor & major release features;
4. say ‘No!’ to urgent but unimportant requests, and follow up with ‘and here is what we can do instead’.

SCM infrastructure with a branching strategy to support your build & release cycles.

An effective branching strategy is needed to establish a structure for managing your code, delivering multiple releases and supporting parallel development. Note, this is a full time job (especially at the beginning) that also requires your senior engineers to be involved in the definition. Your branching strategy will impact your architecture, your code structure, how you version, how it fits with your build & test structure, and even how you document.

Test infrastructure, test automation and rich test library to support needs of your agile development.

Yes, a good test infrastructure is a must for quality assurance. However, to effectively support your branching strategy (creating new branches and merging back in), you need to pay even more attention to your test automation and test library by providing smoke tests, integration tests, compatibility tests, validation tests, regression tests, … Your engineers will thank you!

Organizational Structure

Effective management of engineering resources is required to support parallel development and multiple release cycles. Goal is to maximize engineering productivity by minimizing splitting of time between defect fixing and implementing future functionality. As it can be challenging to balance the short-term demands with long-term needs, many organizations establish a separate team to support the current products: Current Product Engineering (CPE) team. Focused ONLY on the current product bug fixes, minor product releases and closely aligned with Customer Support team, these teams usually have a separate reporting structure as well (to minimize distractions.)

As an example, to support our product customization needs (different than minor releases), we established a CPE team. This enabled quicker response to customers without impacting our product platform roadmap. However, it also further stressed our branching strategy and our release management process. In addition, the separation can increase the complexity of internal communications, as it means yet-another-team to coordinate and bridge silos with. Building your CPE team might be a challenge as well, as many engineers prefer to be on the cutting edge of development. However, right incentives and recognitions, along with focus on customer connection and satisfaction should help with your recruiting activities.

Final thoughts

In my experience, there is no perfect structure for managing frequent product releases with parallel development. As Deming’s cycle of: Plan, Do, Check, Act illustrates, this is a journey: it is an iterative process, that requires work and discipline. Hopefully these practices will help you get further on your journey.

What has worked for you and your teams?

Technorati Tags: product release cycles, current product engineering

The Nokia Siemens Networks has created an extremely well produced website and video series, entitled “Round. The World. Connected.” that sets out to understand what connectivity means to different people and cultures across Europe, Asia and the Americas. The project focuses specifically on how the latest communications technologies are touching peoples lives and on the socio-economic impact of connectivity.

Also, make sure to check out Futures of Learning for their research insights around the world covering everything from mobile phones to social media. 

Futures of Learning is a collective blog dedicated to the topic of new media and learning. The members of the blog are part of a project, funded by the MacArthur Foundation, that is conducting an international survey of research in the field. We are focusing on two areas. One is an international review of research on how people are adopting digital and networked media. The second area is a review of learning institutions that are incorporating new media in innovative ways. We welcome suggestions for literature and programs that we should be looking at!

 

I don’t like clutter in my house. However, I do value the idea of establishing a clutter zone in the garage that holds our donation and potential garage sale pile. This Memorial Day, it was time to clear up the pile and organize it. As we started to sort through the pile, our discussion quickly turned to opportunity cost analysis of whether to hold a garage sale or not: would it be worth spending a good weekend (lets be honest, those are rare in Seattle, WA) by cleaning, tagging and waiting for a possible sale and making a few bucks? 

Framing issues from the perspective of opportunity costs can simplify the decision making process. However, letting go can still be a challenge —  wouldn’t someone pay $$ for that stuff that cost me $$$??? Whatever the previous investment or expense may have been, the feeling of being invested in the past makes it difficult to change tracks. Many projects follow this trend of throwing good money after the bad.  

Regardless, acknowledge and accept the sunk costs as sunk. Put a check for a failure and celebrate your learnings. And, establish milestones for regularly scheduled reviews with clear guidelines on funding expectations to avoid unpleasant surprises.

In case you’re wondering… within 2 hours the garage was cleaned and everything in the pile was donated to Goodwill. Yet, we still had time for a 5 mile hike in the woods that afternoon, and not to forget the wonderful feeling of free space next to the car in the garage.

The profitability equation is quite simple: when a firm’s revenue from selling its product or service is greater than the cost of offering it, then it is concluded that the firm is profitable on that given offering.

Profits = Revenues – Cost

If we further analyze this simple equation, then we recognize that the revenues are a function of the quantity of a product or service sold at a price that the customer is willing to pay. This price is chosen based on the attractiveness of that product or service to the customer, i.e. its attributes. On the other hand, the cost is also a function of product’s attributes and the quantity it is produced at. For profitability, the ultimate goal of a firm is to offer products with differentiated attributes that customers are willing to pay high prices for, while keeping costs low and competitors out.

What does that mean for your innovation? Innovation is about implementation of a new idea for the purpose of creating value: value for the firm, and value for the consumer. Innovations come in many forms, and the research on innovation and innovation types can be quite confusing, as each author has his/her perspective and terminology. Unfortunately, this is further exacerbated by the fact that innovation has become the latest buzzword or Holy Grail for firms as they look for growth.

Innovation Types

Lets take a look at some of the ways your innovations can contribute to the bottom line of your firm.

• Create cost advantage – If you can produce the same product cheaper, you will improve your profitability. If you can become the low cost producer in your industry, then you achieve cost leadership. Economies of scale and experience curve clearly play into becoming a low cost producer. Examining your value chain and value network is a good start for determining the specific costs associated with each activity, as well as how your competitor is performing that activity differently.
  1. Process innovation – when we think about improving efficiencies and increasing productivities, as well as reducing costs, we think about process innovations. The overall goal is to remove or reduce non-value added activities from the delivery of the product or service, such as FedEx’s use of scanning technology to provide shipping status of packages to inquiring customers. Six Sigma and Total Quality Management (TQM) are process management programs that are focused on increasing efficiencies or taking out wasted steps. However, don’t just limit your process innovation to obvious examples; improving the efficiencies and effectiveness of your software development processes can enable you to better your time to market for competitive advantage.
  2. Technology innovation – research and technology related developments are included in this category of innovations. While the incremental innovations are small improvements, usually derived as a result of the learning curve, radical innovations can completely displace the incumbent technology, such as transistors replacing vacuum tubes. Utilizing technology roadmaps and linking them to product roadmaps is an effective way to synchronize the two activities, and focus your innovation investments.
• Go for price premium – what differentiated product functionality or service will convince your customers to pay extra? As I highlighted in my blog “Innovate with Quality” establishing a competitive differentiation should not be limited to just technology, but you should also focus on your brand for building and growing a loyal customer base.
  1. Product innovation – this type of innovation encompasses differentiation through features and functionality that the current offers do not have. Firms tend to mainly focus on improving existing products or services, and creating line-extensions, as this is a less risky type of innovation. Some examples would include cameras in cell phones, wireless connectivity, Crayola’s special crayon that only writes on Crayola’s special paper.
  2. Value-delivery innovation – this type of innovation includes differentiation stemming from improved customer experience through branding, marketing, customer service and other networks and alliances. Examples would include Apple’s iPod, with its popularity is driven by the Apple brand, ease of use through iTunes end-to-end integration, as well as its incredible style.
• Increase the size of your overall market share – increasing the number of buyers in your market will positively impact the revenues. Innovation types discussed here, such as product and technology innovations, would contribute to increasing your overall market share. In addition, you should also investigate ways to reach customers you didn’t serve before.
  1. Business model innovation – these innovations are about developing new ways of doing business. Generating revenue by hosting online advertising, and Amazon’s plan for leasing computing power and digital storage over the web are examples of how companies are extending their reach to serve customers they weren’t serving before.
  2. New venture – this type of innovation is about taking the product or technology that exists to new markets. Hummer’s retargeting of their military personnel carrier to soccer moms is an example of a new venture. Firms’ extension into China, Latin America and other emerging/developing countries are all methods to gain more customers.
• Look for growth – firms are pursuing innovation for growth. This pursuit further requires them to invest in disruptive innovations, organic innovations, and innovations through an acquisition strategy.
  1. Disruptive innovation – this is the creation of new markets based on disruptive technologies or new business models. These types of innovations are often difficult to recognize, and can take time to develop and grab a hold in the market. Growth of digital cameras and their impact to traditional film, or PCs vs. mainframes are examples of disruptive innovations.
  2. Organic innovation – a method through which firms reposition themselves for growth by tapping into their most important assets: their core competencies and valued customers. IBM as an e-commerce-enabling company, and UPS moving beyond package delivery to a global provider of specialized transportation and logistics services are examples of organic innovations.
  3. Acquisition-based innovations – mergers and acquisitions (M&A) are a way to gain access to new innovations and markets. Although this strategy can certainly enable growth, such as in Cisco’s case, expected results can be difficult to achieve due to the many challenges and complexities that are involved in M&A. Nevertheless, acquisitions are a popular strategy for growth.

Innovation Strategy

Recognizing your innovation type, and its role within your innovation strategy helps you ensure it is aligned with your firm’s current and future objectives and goals. In addition, managing your innovation programs as a portfolio not only provides better visibility of your efforts and management of those efforts, but also presents opportunities for new discoveries and synergies.

Analysis of your innovation portfolio will help determine if you are focusing on the right types of innovations. If your innovation strategy, which is aligned to your business strategy, is highlighting the importance of growth for your firm, yet you find yourself mainly focusing on product and process innovations, you know you have too narrow a focus on innovation.

In your innovation portfolio, you should also analyze the differences of success rates between your innovation projects. The results of the analysis will be illuminating about what works and doesn’t work within your firm, and where you need to focus in order to improve the return on investment of your innovations.

Your innovation strategy and your portfolio will also help determine how to build and manage your innovation network: internal and external partnerships. Successful collaboration can bring out more creative ideas, improve knowledge sharing among groups, facilitate shorter innovation cycle times, and result in improved productivity and quality.

Sources of Innovation

Where does innovations, or ideas for innovations come from? Although not the focus of this article, it is worth considering a few departing thoughts.

• Deep customer understanding – study your customers, their workflow and pain points, but go above and beyond and deliver to their unspoken needs.
• Blend design with technology – examine all potential dimensions of your product or service and determine how you can extend its value, such as in the example of Apple’s iPod and iTunes.
• Continuous improvement – study your value-delivery chain, and look at each step and determine how the value is added; then determine if it can be done better.
• Networks and alliances – knowledge of other advancements, trends and shifts can highlight innovation opportunities.
• Look for trends – change is constant, so look for changes in demographics, behaviors, attitudes, and believes.
• Be observant – innovations come from unexpected sources, including unexpected usage of your products; be observant and be open.

Technorati Tags: innovation, sources of innovation, innovation strategy

I previously discussed the challenges of building a successful strategy, and key areas where you need to build a foundation for your strategic plans to be successful.

From experience, I have seen strategies fail at various stages and for various reasons. Some common threads were:

• lack of ownership/sponsorship as the manager moved on to bigger & better things;
• organization’s inability to change;
• lack of excitement, momentum, push and motivation;
• poor transfer between functional groups;
• organization not willing to take risks;
• decision process and information flow is f*#!?d up;
• inability to move from powerpoint slides to real-life execution: conflicting interests, values and priorities;

This blog is focused on factors that are key to successful execution of your strategy.

Define operational structure

I am not talking about a new organizational structure. Many companies reorganize to execute strategy, without realizing that they have not defined the key operational elements:

• clear communication and enforcement of roles, responsibilities and accountabilities;
• recognition and rewards linked to performance;
• well understood decision making process;
• information flow to the right people at the right time;

I can’t emphasize enough the importance of establishing AND enforcing clear roles, responsibilities, ownerships and accountabilities for success. At the end of the day, roles and ownership responsibilities have to make sense. As an example, you can’t realistically be accountable for the schedule if you are not responsible for managing the features. Any program manager will tell you, Chewbacca does not live on Endor! Yet, for many firms, the linkage between roles, performance and rewards is still poorly managed.

I previously talked about RACI and the concept of Decision Quality. Drucker also outlined seven elements for effective decision making: determining if a decision is necessary, classifying the problem, defining the problem, deciding on what is right, getting others to buy into the decision, building action into the decision, and testing the decision against actual results. A well designed metrics program will enable firms to focus on what is really important and what adds value, thereby improving the decision quality. However, your metrics, and your decisions are only as good as the information you have received. Establishing a good, unfiltered information flow at all parts of the organization, especially with the troops on the front lines, will improve your decision quality.

Stay agile and adapt

Today, being agile and quickly adapting to changing circumstances is more important than ever. Along the same lines, your strategy process needs to be agile and adaptable. Traditional processes where all the information is well known and understood are not viable for entering into new markets or developing new products.

Assumption-based strategic planning processes, such as Discovery-Driven Planning, enable organizations to understand what they don’t know but need to know, and forces a discipline of learning and retesting. Also, understanding your risk profile and communicating with your organization will not only improve your decision making process, but will also save time and prevent disappointments.

Manage white space

A strategy almost always look great in powerpoint slides, with full color, pictures and 30 point bullet lists. Powerpoint slides assume a perfect world where everything will be just right. Yet, the real world is full of white space, a fuzzy space where you don’t know what you don’t know, where things are vague and very gray.

Hand-offs, such as with technology transfer or R&D to manufacturing, should be a key focus area. Maintaining the energy, passion and momentum is key to success. Having shared purpose and rewards help, but ensuring continual ownership and accountability for performance is a must.

So, learn to manage this white space and reward those that do. For ideas on managing white space, check out my previous article: Two sides of the same coin: Managing white space.

People.. People.. People

The success of your execution is dependent on people: your team, your firm as well as the larger ecosystem of suppliers, service providers, labor unions, partners, … Each group comes with their own values, motivations, priorities and goals. How effective you are at managing this complex ecosystem and navigating the waters will determine your success levels. Transparency in your communication will help build trust and openness. A clear understanding of roles and responsibilities will support the decision making process and the overall agility of your organization.

As people, we have the tendency to resist change. Recognizing the complexity of change and developing an attack plan to address resistance will improve chances of success.

Technorati Tags: strategy execution, strategic planning

Technorati Tags: innovation strategy, Innovation Weblog, economic downturn

Focusing your innovations during down times is key to survival. You need to keep on innovating to differentiate and grow, but also innovate on products and services your customers would be more willing to buy to stay profitable.

As I mentioned before, the profitability equation is quite simple: when a firm’s revenue from selling its product or service is greater than the cost of offering it, then it is concluded that the firm is profitable on that given offering. This same equation holds true for your customers’ business as well: the benefits of the product or service outweigh the cost of acquiring it.

As the profitability equation demonstrates, the ultimate goal of a firm is to offer products with differentiated attributes that customers are willing to pay high prices for, while keeping costs and competitors out. Costs come in the form of:

• product attributes: materials, features, complexity, usability all contribute to the cost of the product;
• production costs: including manufacturing, labor, supplier, packaging, shipping;

Learn where to focus next by analyzing your existing costs and their impact in the dimensions of quality, labor, production processes, materials, environmental impact, replacement costs, energy costs, and customer service. Do the same analysis from your customers’ perspective with regards to their cost of doing business. Look at ways that you can reduce their labor costs through workflow automation, reduced need for skilled workers and job training through better usability, or with reduced energy and raw material usage.

As you lay out your cost improvement projects, don’t just go for small incremental changes. Incremental improvement will not be enough for your customer to buy or upgrade to your product, especially during economic hard times. Look for creative solutions that enable you to innovate in multiple dimensions, such as reducing complexity and materials while improving usability and building on your brand image.

In your quest for cost reduction, also remember to look for areas where costs can be completely eliminated, such as retiring product lines, removing functionality that is impacting support costs, getting out of markets that are not profitable, or fully automating existing processes, removing the need for any manual labor.

Revenues are derived from the quantity of the product/service sold at a price that the customer is willing to pay. The price is based on the attractiveness of that product or service to the customer, i.e. its attributes. You can improve profitability through:

• increased revenues by enabling new products and services;
• enabling new business models;
• increasing the value of the existing product and thereby commanding higher prices;

For growth, investigate product line extensions, potential new add-on products and services, changes to your existing business models, as well as entry into adjacent markets. Recently I noticed Dremel extended their tool line into the pet care marketplace. In your analysis make sure to look for growth markets and solutions that allow you to build upon the strength of your core business in order to minimize risk.

In the same manner, investigate how you can increase the revenues of your customers. Look for ways where they can easily and cost effectively extend their offerings, such as through an online presence, and making themselves more attractive to their customers.

Perhaps there is no better time to evaluate and question your existing processes that during the slow times. Your first step could be as simple as asking yourselves “what is the dumbest thing we do” (from the Think Differently blog) to kick-start the inquisition of the reasoning: ‘cause we’ve always done it this way.

Starting with the customer and understanding what they want will put you on the path to building attractive products. Anthony Ulwick describes his outcome-driven method to innovation in his book What Customers Want: Using Outcome-Driven Innovation to Create Breakthrough Products and Services. As he indicates, customers buy products and services to help them get jobs done: faster, more conveniently, more efficiently, more cost effectively. At the same time, customers use a set of metrics (performance measures) to judge how well a job is getting done and how a product performs. However, rarely does the customer understand or accurately voice their desired outcomes for a given job. So, understanding and effectively addressing these unserved or under-served expectations is key to the firms’ innovativeness.

Also, incorporating agile development methodology and tools into your development processes will help your team to effectively deal with undeterministic resource challenges. Of course, agile development provides more benefits to your innovation process, as I outlined before.

Your brand can benefit you in many ways:

• enabling you to charge premium prices;
• sell more of your products, allowing you benefit from economies of scale;
• provide greater acceptance of radically different offerings, reducing your sales cycle;

Disappearing into the void because of reduced marketing budget is no excuse for putting your brand on the backseat. Look for creative ways to strengthen your brand and have fun doing it.

In addition, building your ecosystem would help you gain preference over your competitors as well as expanding your customer reach, such as with NetFlix extending their on-demand streaming service with Roku, XBox, TiVo and others. Keep on the lookout for these strategic partnerships and alliances to build your brand and ecosystem.

You might have your strategy down, but your ability execute is the the final key to your success. Robert Neiman’s Execution Plain and Simple: Twelve Steps to Achieving Any Goal on Time and On Budget is a valuable resource for anyone in the leadership role. Below is his 12-step process.

1. Take responsibility – Who me?
2. What’s that again? Define your assignment in writing
3. Organize your core team and create a strategy
4. Get input and support from key players: refine the strategy
5. Hold a compelling kickoff event to create momentum
6. Make all the pieces fit. Use plans, schedules, budgets and controls
7. Yes, I really mean it. Make demands effectively
8. Follow up like crazy without driving people crazy
9. Use political skills to win constituents and overcome opposition
10. Use creative problem solving to overcome unforeseen risks, delays and obstacles
11. Energy flagging? Manage an intense push to get the final results and rewards
12. Capture and spread what you learn

Use metrics to really focus on your results, but remember to avoid common metrics mishaps that undermine your intensions. Good luck!

Update: Also check out the Interview With Jana Matthews by Robin Fray Carey on MyVenturePad for advice on what to do and more importantly what not to do in a downturn.

Technorati Tags: innovation, economic downturn, profitability

Quick background: Using ATV USB Creator, it is possible to install XBMC and Boxee on Apple TV. However, as soon as a firmware upgrade occurs for Apple TV, I’m back to square one: wait for the open source community to catch up with the fixes to ATV USB Creator, followed by reinstall and reactivate. As much as it is a hack, these hacks/solutions do increase the value of Apple TV, enabling me to access other available Internet channels, outside of iTunes.

Open architecture or open implementation allows 3rd party developers to alter and add to pieces of the underlying software to fit their specific needs. The degree of openness changes from product to product and company to company. It could be as simple as open formats to enable data interchange (OpenDocument), or extensions in the form of features/functionality to enhance the platform (FireFox add-ons), or completely new applications/products using existing foundations (RIM BlackBerry email communication over cell networks). Though open architecture strategy is challenging, it has numerous benefits:

• Enables rich ecosystem of complementary products and services for the customers;
• Provides a method for cost avoidance or cost sharing, enabling the firm to focus on their key competency and differentiation, yet still increasing the value of the product through 3rd party developers;
• Enhances the interoperability of products and solutions;
• Establishes a customer-driven innovation process, increasing the communication and feedback with the customer and marketplace;
• Potentially leads to de-facto standardization of the interface;
• Increases the profit potential of the firm through premium pricing and increased sales volume;

In defining an open architecture strategy, three key areas need to be considered: technical, business and culture.

Technical Considerations

With all its benefits, an open architecture strategy will increase the complexity of your product’s design and use. Performance, security, vulnerability, quality, flexibility, privacy are all issues that need to be thought through and designed into the architecture. Strategies for what parts of the system to expose, how to expose them, what technologies to use for open implementation and how to maintain and manage architecture obsolescence and updates, support integration and interoperation while ensuring high-quality product all need to be incorporated into the development process. Today’s virtual machine technology can go a long way to help manage this complexity and improve stability. Providing a documented virtual machine to your 3rd party developers will allow them to use selected features of your system without jeopardizing the existing software through hacks and patches.

Business Considerations

Business reason should drive the technical decisions on what and how much to expose. Your open architecture strategy requires clear answers to the questions of “what problem are we solving” and “what is important“. As an example, Google recently indicated they are looking to open their Chrome architecture to 3rd party plug-ins in order to increase their market share. Here are a few examples of key business decisions that should be taken into consideration with your open architecture strategy:

• What is the business model around the open implementations?
• How is the licensing structured?
• What is the support model for 3rd party developers and the customers using these solutions?
• What is the most effective organizational structure for managing proprietary architecture and open implementation?
• How is the value proposition changed (for the better) through your open architecture strategy?
• What is the distribution model for 3rd party solutions; how are our customers informed?
• How do we ensure the broad diffusion and adoption of our open architecture?
• How do we differentiate while maintaining/improving our overall competitiveness AND what we DON’T open?

Cultural Considerations

Successful implementation of an open architecture strategy also depends on the culture of your organization. Working collaboratively, listening to 3rd party developers to share knowledge and know-how, demonstrating systems thinking in the design when it comes to revisions, and sponsoring reference implementations are key to building a vibrant 3rd party developer community.

Welcome them in…

Today more than ever, an open architecture strategy is a vital consideration for a product line. The Apple II’s success was in part due to its open architecture, enabling 3rd parties to develop plug-in cards and software applications, which Apple’s competitors at the time lacked. The same strategy could enable Apple TV to expands its iTunes universe, while maintaining the strong end-to-end connectivity.

Finally, as you evaluate your open architecture strategy, keep in mind the following factors that could support or inhibit your success:

• How big is your installed base of users and do you have a good relationship with them;
• Do your business model, licensing and intellectual property rights support the diffusion and adoption of your open architecture;
• Are you enabling yourself and others to innovate on your open architecture;
• Do you have the brand name and reputation the market demands;
• Can your product foster a strong community of complementary services and applications;
• Do you have the manufacturing and distribution capabilities to promote diffusion and adoption;
• Do your culture and resources support the needs of a 3rd party developer community;

Remember, building a product and selling it to your customers is one thing. Enabling (and encouraging) everyone else to make your product better is like adding free resources to your team, resulting in increased appeal to a broader (and more enthusiastic) customer base.

Technorati Tags: open architecture, open implementation

Traditional risk management processes rely on the evaluation of the impact vs. the likelihood of occurrence. As every innovator will tell you, Murphy has a permanent spot in their team. Given that, accurate assessment of the uncertainties the innovation process brings would be like walking on water. More importantly, attempts at managing those risks can stifle the innovation process. Using a mindful approach to risk management, organizations can improve the effectiveness of their development activities while fostering their innovations simultaneously. To start, evaluate your existing project risk management processes and update it using the following ideas.

1. Understand the nature of the risk: Start with a high-level breakdown of your project risk areas. For each item, identify:
   • the type of risk: schedule, cost, resource, market, brand, operations, …
   • the level of impact and to whom
   • the level of innovativeness: cost reduction, incremental improvement, major revision, product extension, next generation platform, technology/market newness to the firm, technology/market newness to the market, …
2. Assess your appetite for risk: Risk appetite is the amount of risk an organization is willing to take on in the pursuit of value, such as new innovative functionality, achieving market objective, financial results and so. Every organization, project and risk is different. With that, for each of the risks identified in #1, also assess your risk appetite. To facilitate an empowered decision making process, the risk appetite could incorporate trigger levels. For new technology implementation risk:
   • threshold #1 – 2 week schedule slip – managed within the project team
   • threshold #2 – 2-6 week schedule slip – managed within the Program Management Team
   • threshold #3 – 6-8 week schedule slip – managed within the Sales and Marketing Team
   • threshold #4 – 8+ week schedule slip – managed within the Business Unit Team
3. Prioritize, prioritize, prioritize: Incorporate this understanding of your risk areas and customer impact into your prioritization process. Life is about tradeoffs. For projects, this means deciding how to allocate your resources, manage your schedule, and how much of what functionality to implement. Your risk prioritization should align with your resource and budget allocation.
4. Agree on risk management strategy: For every risk area, you need to determine how to manage the risk:
   • nullify – make it a non issue by removing the risk area, such as by eliminating the new functionality
   • transfer – identify a 3rd party to transfer the risk to, such as through partnering
   • reduce – either through reducing the likelihood of occurrence or the potential impact. For technology projects, using roadmapping processes and agile development practices are a good way to reduce new product development risks
   • agree – “yes, it is a risk and that is OK”. However, combining this acceptance with risk appetite analysis would improve results.
5. Compile a risk portfolio heat map: Incorporate risk management as a portfolio in your strategic planning process. Colorful heat maps can visually demonstrate where your investments are along with where your risk lies.
6. Align organizational structure to support risk management strategy: Build an effective team, promote the right capabilities, rebalance resources, … In the process, make sure to support and reward your leaders based on the characteristics of the innovation and risk levels they are responsible for. In the end, if they are not rewarded for failing and learning from those failures, they won’t take risks. No risk, no great breakthroughs.

In addition, make sure the following key ingredients are necessary to achieve a healthy balance of risk and innovation.

1. Build a culture of accountability and responsibility for results. Don’t forget to manage the white space!
2. Foster an environment that enforces and encourages organizational learning and knowledge sharing. It will enforce an innovation focused culture with emphasis on furthering the capacity to innovate.
3. Emphasize the KISS Principle. Keep the risk management process simple, and incorporate it into everyday decision making activities and embed it into the DNA of how your organization works.
4. Change is hard . Build a systemic process to deliver and implement change.
5. Embed the following practices into your processes and culture to ensure success:
   • senior management commitment;
   • clear and stable vision;
   • information and knowledge exchange;
   • flexibility and the ability to improvise;
   • collaboration under pressure;
   • openness and transparency;
   • data/evidence driven decision making;
6. Improve your communication skills, as good communication is key to effectively dealing with risk. It will enable better decisions, better implementation, empowered teams, increase in trust, …

In summary, by ramping your risk management process to foster your innovation projects, you will:

• enhance overall innovation capacity of your organization;
• contribute to efficient use/allocation of capital and resources;
• develop and support your people, and increase your organizational learning;
• optimize operational efficiency while balancing for innovations and risk taking;
• improve your decision making, planning and prioritization;

Technorati Tags: risk management, innovation and risk

Core competency originates from C. K. Prahalad and Gary Hamel in their 1990 paper “The Core Competence of the Corporation.” Prahalad and Hamel highlight core competency as a source of uniqueness that a company can do uniquely well, offering a competitive advantage as competitors can’t quickly copy. A core competency can take various forms: know how, process, manufacturing, relationship, development methodology, culture, talent management, branding, marketing, distribution, research & development, …

Prahalad and Hamel emphasize 3 conditions to test if a competence is true core competence. It is possible to have core competency that doesn’t meet all the required criteria, however any competitive advantaged gained will only be temporary.

1. Must be relevant — core competence must be uniquely valued by your customers, so that they will not only choose your product but be willing to pay more for them. If not, it has no effect on your competitive position.
2. Difficult to imitate — core competence must be difficult for competitors to imitate, as it ensures your products are better than your competitors. It also enables you to sustain your competitive position as you continue to improve your competency.
3. Leveraged to many products and markets — core competency must enable entrance into new markets to sustain growth.

As I mentioned before, Steve Jobs’ core value of developing easy-to-use technology for individuals, coupled with his love of design excellence (where design is the function), has shaped Apple’s innovation strategy: shape the technology to the customer’s needs, instead of forcing the user to adapt to the technology. Apple’s design philosophy starts with the belief, understanding that the purpose of the design is to create things that benefit people.

Apple’s core competencies of innovative culture, successful entry into new markets, human centered design and development have contributed to Apple’s successful execution. I expect the new product line to be attractive, following on Apple’s tradition. Studies have shown that we respond positively towards attractive things and tolerate their minor annoyances: they work better, create positive emotions, encourage creativity and the attractiveness produces positive emotions, causing mental processes to be more creative. For those who watched Jobs’ iPod announcement during the September event, you might remember Jobs’ highlighted Apple’s environmentally friendly design changes to iPod line: packaging, materials, high degree of recyclability, … The core competency of environmentally friendly design and packaging has been a visible focus area of Apple over the years. I am looking forward to hearing more about this during tomorrow’s event.

Understanding and developing your core competencies is all about focus, recognizing where your uniqueness is valued by your customers, where your competitors cannot catch up, and learning to stop being all things to everyone. Building your core competencies takes time. So, recognizing what you will need to work on today to be more successful tomorrow is just as important in your core competency analysis. The following steps will help identify the core competencies that you currently have as well as those you need to start building for tomorrow.

1. Brainstorm a list of your existing competencies, your strengths as well as factors that you feel are important to your business, to your customers and to your market. Identify and cluster any common themes from this activity.
2. For each of the common theme identified, take it a step further and determine the driving competence in that area. Your ‘relationship management‘ might really highlight the strength of your ‘customer data and analytics tools‘, your ‘retail partners‘ might be driven by your ‘retail partner training programs‘, ‘embedded development‘ might be more about your ‘home grown tools and optimization suite for performance and quality assurance.’
3. Once your list is complete, evaluate each of these items against Prahalad and Hamel’s 3 conditions to test if a competence would be considered a true core competence.
4. Review the final list that only has true core competencies and build an action plan for each item.
• If the competency identified is one of your existing competencies and strengths, great! Put together a development plan to further that competency and exploit it effectively.
• If the competency identified is not a current capability, then evaluate if a) it should be developed internally; or b) if you could partner/outsource to obtain it.

I heard somewhere that it takes 10 years for someone to be recognized as an expert in her field. Regardless of the time, building your core competency and ensuring that it provides sustainable differentiation takes effort and focus. Make sure to have the proper focus and development plan to maintain your competitive edge.

Technorati Tags: core competency, Apple