Innovation is The New Constant Final ENG
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The EPPM Board explored how organizations can foster innovation to drive business transformation. They found that innovation must be a strategic priority and involve contributions from across an organization, not just R&D. Customers should be the focus of innovation efforts. While culture change is required, tools like EPPM can help organizations select innovative projects, assess risks, and ensure successful execution to realize benefits. Budgeting specifically for innovation demonstrates its value and unlocks latent creative potential within organizations.
Innovation is The New Constant Final ENG
- 1. INNOVATION IS THE NEW CONSTANT
- 2. TheEPPMBoard The Oracle EPPM Board is a prestigious international steering group of senior executives, academics, and industry experts. It has produced a number of reports highlighting how senior executives can successfully prioritize and manage the project portfolio, ensuring it remains a strategic asset. Innovation for transformation Innovation is a critical factor in business transformation. The challenge for organizations is to tap into the creative instincts of their people and allow them to be expressed and applied effectively. Enterprise Project Portfolio Management (EPPM) has a critical role to play in unlocking and delivering innovation. In considering the key issues and opportunities, the EPPM Board explored the question of culture, the challenges of execution, and the manager’s ever-present running mate: risk. I hope you find the outcomes from their discussions enlightening and valuable. Yours sincerely, Mike Sicilia Senior Vice President and General Manager, Oracle Primavera
- 3. TheEPPMBoard Innovation is a hard word to use. It has become jargon, a word thrown into business conversations without real consideration for its meaning. But when it is taken seriously, it has challenging implications for senior decision-makers. Real innovation requires a skilled balance of risk and return. The November meeting of the EPPM Board took a fresh look at innovation as a driver of business transformation. In particular, it sought a new understanding of the meaning and process of innovation, in the context of globalized markets where true novelty and differentiation are hard to find. In other words, when there really is rarely anything genuinely new under the sun, how do you find and exploit opportunities for any kind of innovation? First of all, you look beyond innovation in purely product or R&D terms. Many mature markets are saturated with products whose differentiation may lie in little more than a logo, and options for color schemes. Furthermore, product innovation may not necessarily drive transformation on a wider scale within the business. When you view innovation in the context of business transformation, its impact becomes far more profound. Every department, from HR and Finance to Customer Services and Logistics, can contribute to the drive to transform by finding new and better ways of doing things. Productive discomfort The EPPM Board found that the impulse for this kind of change has to be driven from the executive team. Teams working on the operational front line may not have the longer- term view that would persuade them to change behavior. When things appear to work, you don’t waste time tinkering with potentially risky changes. But if the strategic view demands transformation, to protect competitive advantage and enable new growth, then delivery and administrative teams need to be jolted out of their habitual ways of working and encouraged to innovate. Accepting greater risk At the heart of this cultural shift is the organization’s attitude to risk. This is where the executive team may need to examine its own principles and decide to accept higher levels of risk than it may have done before. Employees must be confident that if they suggest ideas, or even try to put them into practice, they do not run the risk of reprimand or worse. Equally, they must sense that the business is open to new ideas. Creativity thrives on recognition, and if people feel that their ideas are falling on unresponsive ears – or, indeed, that others may take the credit for them – then they will be less willing to share them. What does innovation mean in a globalized competitive environment? Every department, from HR and Finance to Customer Services and Logistics, can contribute to the drive to transform by finding new and better ways of doing things.
- 4. TheEPPMBoard Customer-driven innovation There was strong consensus that the impetus for innovation must come from customers. The impulse may be indirect, in that there may be a need to protect or grow market share, or to respond to a new entrant. Or it may be that customer feedback, or net promoter scores, suggest areas for improvement and opportunities to do something new. At the same time, game- changers such as the Walkman or the iPad must be based on a deep understanding of the dynamics of the market. Even though customers may not know they need something until they see it, the developers of the new product or service must base their work on insight that clearly defines the gap in the market. In any case, the customer is at the heart of the process, and must be the focus of the outcome. If an innovation initiative does not in some way lead to a better customer experience, or better value for the customer, then its value to the organization may be questioned. Even the transformation of back office functions, such as the finance and accounting department, can have a major impact on the customer, from simplified billing, to service center agents with greater powers to make financial decisions when dealing with customers. Innovation in the supply chain For some industries, such as the automotive sector, the supply chain is a valuable source of innovation. Smaller, more agile suppliers may be better positioned to experiment and take risks than larger corporates, which may operate on much tighter margins and, simply, be too big to innovate quickly. EPPM is used to capture innovation from across the supply chain, with a single view of complex interdependencies that can highlight opportunities for improvement. In particular, EPPM is used as a powerful tool for the management of effective supply chain transformation. The Board discussed the example of an organization which had recently completed a comprehensive reorganization of its supply chain, reducing costs and improving efficiency. Regular meetings between non- executive directors and senior managers from supply chain partners ensure a strong line of communication and plenty of scope for introducing new ideas. The Board recognized that Enterprise Project Portfolio Management has been shown to be both a driver and an enabler of innovation. Companies with successful track records of transformation use EPPM methodologies and solutions to establish a unified view of resource and capacity- planning information, together with a single list of innovation projects and a summary of associated costs. The reporting capabilities, showing key metrics and progress towards goals, are also seen as powerful tools for effective execution and stakeholder engagement. As the culture begins to change, and opportunities begin to emerge, the challenge becomes one of recognizing them and capturing them in a way that allows them to be properly exploited. Given that the culture has to change if the organization is aiming for transformation, then the executive team must be ready for a steady and timely flow of management information of all kinds. A clear view of reality is essential for decisions that can both reduce risk and mitigate the impact of any problems. Collaboration tools such as corporate social networks help to remove the barriers – both cultural and technological – that work against easy communication and the flow of ideas. Gamifying the process of generating and evaluating ideas can also help to boost wider engagement with innovation programs, and winnow out those ideas that have greatest support across the organization. The view emerged that the best ideas tend to come from across the organization, rather than from the close confines of a project management team. The suggestion was that project teams may be too narrowly focused to consider the wider needs of the organization. How do you recognize and capture innovation from all areas of the organization?
- 5. TheEPPMBoard Execution was recognized across the Board as the single most challenging aspect of any innovative project. Forbes research shows that 41% of senior decision-makers cite inefficient execution as the principal reason for project failure*. On the plus side, support from senior management and competent execution are also shown by the research to be the keys to success for a project. In large enterprises, ideas for change that come from the C-suite may be subject to many levels of interpretation by the time they reach the point of action on the front line, which can significantly dilute their impact as originally envisioned. The other serious threat to effective execution, particularly with long-term change, is the movement of people. Promotion, reorganization, departures, and arrivals can all take the impetus and shared understanding out of a project. The well-intentioned enthusiasm of newcomers, who are taking over from the original team, can rarely be as deeply felt and effective as the shared vision of those who were there at the beginning. Enterprise Project Portfolio Management can play a key role in capturing best practice and mitigating the impact of change. It can also give those at senior level a clear view of how the original vision is unfolding, alerting them to any risks of dilution that may arise when new people move onto a project. As an engine of execution, EPPM has a strategic and operational role. By providing a unified, end- to-end view of projects that may previously have been managed with a variety of incompatible and inadequate tools, it presents a single view of the truth to all stakeholders. This enables more effective and efficient execution at the operational level, and allows senior managers to ensure key projects are on track. Trust the PM Culture was again highlighted by the Board as a critical factor. Organizations that give project managers and other teams high levels of autonomy, and responsibility can unlock plenty of innovative potential, whereas those with closely enforced regimes of accountability may stifle the instinct to innovate. Technology can also be used to foster innovation. Paper- based processes, which are still widespread in industries such as construction and manufacturing, inevitably impose limitations on the ability to implement new ideas. Digitization and automation can enable closer collaboration that accelerates the flow of information, reducing cycle times and time-to-value for new ideas. *Forbes Insights in association with Oracle: Making The Change – planning, executing and measuring successful business transformation. As we have seen, customers will have a major influence on decisions around prioritizing innovation opportunities. There is a clear case for focusing on opportunities that deliver positive outcomes for the customer, provided that other risk factors do not outweigh the benefits to the organization. The Board explored the idea of building innovation into the budget cycle, with specific pots of investment allocated to support more radical, higher-risk opportunities. In effect, this is an expression of the old gambler’s adage that you never bet more than you can afford to lose. By determining that innovation is a strategic priority, and putting its money where its determination is, the executive team will be sending a strong message to the business that innovation is on the agenda. There is a central role for Enterprise Project Portfolio Management in this process. The ability to model risks and assess different outcomes provides decision-makers with the insight they need to make informed decisions, based on timely, comprehensive data. Assigning a value to innovation Allocating budget also puts a value on innovation as a process, which helps to focus the attention of decision- makers on this aspect of their responsibilities. And with specific sums to invest, the starting point for the risk assessment process is more clearly defined. Discussions also examined the relative scale of opportunities for innovation, with the view that the best opportunities are not always the biggest. With funds available for higher-risk, smaller-scale ideas, it may be more appropriate to assess the cumulative contribution of smaller steps towards transformative innovation, rather than seeking out major projects that may take much longer to deliver impact. What are the factors that determine whether or not to invest in developing or adopting an idea? Execution – how do you keep innovation on track? TheEPPMBoard
- 6. TheEPPMBoard Summary Innovation is both a driver for transformation, and a key outcome from it. Many organizations will need to undergo a significant cultural change before innovation can flourish. But business transformation calls upon all areas of the organization to find fresh ways of working. Enterprise Project Portfolio Management is the engine that drives innovation and enables transformation. It is applied from end to end, from planning and project selection through to successful execution. Organizations that deliver innovation successfully use EPPM to address some of the key challenges, including risk assessment and project selection, cost control, and execution. EPPM methodologies and solutions also support the process of gaining buy-in from all key stakeholders, and serve to accelerate effective project delivery. The EPPM Board placed the customer at the heart of the drive for innovation. As customer expectations evolve, especially in the age of digital service delivery, organizations must evolve to keep pace with, or exceed, what their customers demand of them. At the same time, businesses must look beyond their R&D or product development teams for innovation. Processes, partnerships, and organizational structures can all contribute radical ideas for changes that ultimately translate into better outcomes for customers. Paradoxically, success can be one of the biggest obstacles to innovation. When things are working well, the risks involved in innovation can deter senior decision-makers from engaging with initiatives for change. But competitive pressures, particularly from emerging economies, alongside the shift in customer expectations, mean that the status quo is not an option. Managers must commit to innovation, and they need tools that allow them to do so with adequate controls and a clear view of the risks and potential rewards. This is where culture becomes a critical factor. Change in the C-suite must translate into a more entrepreneurial way of thinking and working at every level. The good news is that the evidence from the EPPM Board suggests that there is a wealth of innovative spirit lying latent within many organizations. Taking the steps to make innovation a key priority can unleash that potential for creativity and positive change faster than may have been imagined. One the most effective of those steps is to budget for innovation. Ringfencing funds for investment in new ideas helps to protect the organization from any risk, while maximizing the potential for finding innovation that can have transformative impact. The challenge then becomes one of effective execution and the Board again cited culture as the critical factor. The executive team must be able to ensure that the vision remains intact as it is passed through the organization to the operational front line, or its impact will be lost. An understanding of risk, and a willingness to engage with it, are the hallmarks of effective managers, because they are measures of their ability to foster and execute innovative ideas. With the pressure for transformation now acting on enterprises in every sector, managers must be ready to test their appetites for innovation, backed by tools and intelligence that can enable better-informed decisions, while ensuring that their impact is felt deeply, sustainably and with rapid rewards. Learning lessons The Board also considered the impact of project failure in the context of a commitment to transformative innovation. Once risk is accepted as a dimension of innovation, then failures should be seen as learning processes that contribute valuable intelligence to the longer- term goals, rather than sticking points that prevent further exploration of opportunities to innovate. As with the movement of people, the ability of EPPM to capture best practices and other insights can be valuable in guiding future decisions on innovation. DISCOVER MORE The Oracle EPPM Board produces regular reports and findings, all of which can be accessed at: oracle.com/eppm/eppmboard Or email: serena.walker@oracle.com
- 7. Produced byThe EPPM Board for Oracle Primavera The EPPM Board Thought Leadership paper: Innovation is the new constant Oracle Corporation UK Ltd. Oracle Parkway, Thames Valley Park (TVP) Reading, Berkshire RG6 1RA General inquiries: 08705 332200 UK Headquarters: 0118 924 0000 Copyright © 2015, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice.This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document.This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.oracle.com