Management Today Innovation Awards - The vision of a new product or service must be backed up by a process to develop it and get it to market, as shown by the finalists of the first Innovation Awards. Jeremy Myerson reports.
Who are the managers of the best innovation development process in British industry? That was the question which the first Management Today Innovation Awards set out to answer.
Organised in collaboration with the Design Council, this scheme is all about rewarding good practice and performance in managing new product and service development.
Our judges went behind the scenes in factories, laboratories and boardrooms throughout the whole of Britain to explore in detail the process by which UK businesses take ideas to market.
The objective was not to recognise excellence in the design of specific products, nor to laud their financial impact on market introduction.
Instead the awards set out to take a holistic look at how companies innovate, using individual projects to provide a 'window' on the management of the development process.
According to Andrew Summers, chief executive of the Design Council, 'The lessons about innovation that are communicated by these awards should strike a chord across much of the business landscape.'
An audit tool to benchmark new product development performance, developed by the Judge Institute of Management Studies at the University of Cambridge, provided a useful measure of how companies operating in sectors as diverse as sanitary ware, surgical equipment and speciality foods are shaping up.
An impressive total of 430 organisations responded to the Judge Institute, which organised the awards on behalf of Management Today and the Design Council. A Judge Institute team, led by Nick Oliver, reader in management studies, visited and benchmarked 14 semi-finalists in order to draw up a final short list of six. (See box at end.)
The finalists, all of them manufacturers, were then visited by the judging panel of four. The judges, drawn from backgrounds of production, technology and research, toured their facilities, received presentations on the companies and their projects, and interviewed the key development-team members at each site.
The products encountered varied enormously in their scale, function and technology - from a naan bread for Tesco's to an ultrasonic handpiece for neurosurgeons, and from a heater in a caravan to a thermal printer inside an ATM. But some innovation themes are common to all manufacturers, whatever it is they make - such as managing relationships with customers and suppliers, or building a culture of enterprise, or simply developing capabilities by learning from one project to the next.
Interestingly, the six finalists broke down into two distinct and equal camps: large firms with 1,000 employees or more (Caradon, NCR and Siemens); and small firms with 250 employees or less (Carver, Pride Valley Foods, Spembly Medical). This posed an immediate conundrum for the judges.
Two of the clearest indicators of a successful and sustainable innovation process are how well new product development is integrated into the business and how well its methodology is documented and worked through. Small firms naturally tend to score highly in terms of business integration, given the entrepreneurial leadership from the top and short chains of command which often characterise such companies. But they devote less energy to formal methodologies which are repeatable.
Large firms, conversely, struggle in the area of integration for reasons of scale, but tend to score highly on well-documented and repeatable development methodology. This is because larger company environments, with their emphasis on training, hierarchy and process, inevitably demand more formal structures.
To evaluate across the six finalists, it was necessary to draw up sophisticated cross-referencing criteria for judging, which recognised the particular strengths and weaknesses of very large and very small firms in new product development. In all, the judging criteria revolved around 10 key questions:
1. TO WHAT EXTENT DOES THE ENVIRONMENT/CULTURE OF THE COMPANY SUPPORT INNOVATION? This factor was seen as critically important in large firms, where development 'soldiers' can feel isolated from the 'generals' directing operations at the top of the organisation. But it also helps in smaller firms if everyone is on-message about the need to innovate.
Decent levels of investment in R&D and well-designed development facilities are recognisable signs of a committed culture. Titles of departments and posts are also a clue. At the Dundee plant of NCR, for example, Allan Davidson is in charge of product excellence. 'It's not about policing; it's about encouragement and coaching,' he explained.
Many of the finalists owned up to engineering a culture change that was not yet complete. Among small firms, both Carver and Spembly Medical were determined to reinvent from top to bottom the way they did things; at Caradon, the new product development department had been renamed 'Ideas To Market', uniting its engineering, marketing and design in one dynamic 36-strong unit. 'Although I prefer to call it Ideas to Money,' said Clive Whitby, head of development at Caradon.
2. HOW WELL DOES THE COMPANY 'SCAN THE HORIZON' TO FEED NEW IDEAS INTO THE DEVELOPMENT PROCESS? The ability to 'scan the horizon' was seen as essential, especially in relation to new technologies. As judge Peter Davies of PERA observed: 'The UK carries out only 5% of the R&D of G7 countries, so 95% of R&D is happening elsewhere. There are a lot of new technologies out there to look for.' Many of the finalists impressed in this area. Pride Valley Foods, for example, had demonstrated genuine vigour in scanning for new ideas in speciality breads - both in looking at the cuisines of different countries as well as exploiting new production technologies in order to replicate ethnic handmade baking on a high-volume production line.
3. HOW CONSISTENT IS THE LINK BETWEEN COMPANY STRATEGY AND NEW PRODUCT DEVELOPMENT? This issue related to the match between product innovation and overall corporate direction, and raised the spectre of a lack of alignment between the two. The finalists generally showed a good level of consistency - none more so than Carver, a Midlands engineering firm and former whip manufacturer which has set itself a cracking pace in developing new heating and water systems for caravans.
The company has been able to reduce product time-to-market from 24 months to about 12. Carver's aim is to go from being the UK market leader to number one in Europe. Only a 'pipeline' of new products will realise this strategy.
4. HOW WELL ARE PROJECTS SCREENED SO THAT THE LEVEL OF NEW PRODUCT DEVELOPMENT ACTIVITY MATCHES THE CAPACITY TO CARRY IT OUT? Surprisingly, portfolio management proved to be a development weakness. A number of managers admitted problems in prioritising innovation projects, either due to a mad dash to market in small firms or a clash of committees in large ones. However, Caradon's 'road map' of all development projects, complete with stop, wait and go traffic lights, was seen as a clear way forward.
5. HOW ARE THE LESSONS OF ONE DEVELOPMENT PROJECT CARRIED FORWARD TO THE NEXT? Project-to-project learning varied from company to company. Some had formal and explicit methods of capturing and codifying knowledge. Others allowed learning from experience to soak through the organisation 'by accident'. Siemens Communication Systems was one which left nothing to chance, having a series of formal process reviews and 'process guardians'.
6. WHAT WAS THE SCALE OF THE CHALLENGE OF THE PROJECT? Some projects were radical in intent and destined to reshape an entire product approach. Others were more evolutionary, perhaps updating an important but outmoded line. In each case, the stakes were high. Given the huge cost of new product development, the gambler's dice rolled every time.
NCR, for example, took a risk in setting out to replace dot-matrix printers in ATMs with thermal technology; demonstrating public acceptance of thermal printing was a major task facing the development team. Yet the successful introduction of a thermal-printer module by the NCR team represented an innovation step-change for the company.
More evolutionary, on the surface at least, was Caradon's redesign of the Galerie bathroom range and Siemens' update of the Realitis 6.1 telecoms switch. But in that Galerie and a sister range represented more than half of Caradon's sales, and since the technical complexity of Realitis 6.1 absorbed more than 100 Siemens software engineers, these were also challenges of considerable magnitude.
7. HOW GOOD ARE THE LINKS BETWEEN THE DEVELOPMENT TEAM AND SENIOR MANAGEMENT, SUPPLIERS, THE MARKET AND MANUFACTURING? Quality of linkages occupied much of the judging debate, so important are they to successful product development. The strongest senior management links were evident in small firms, where the individual entrepreneur at the top was clearly driving innovation - for example, Hossain Rezaei, managing director of Pride Valley Foods.
Suppliers were also seen as a factor in success, and in the best cases were involved right at the beginning of the development process. Not all supplier experiences were positive, however, and occasionally serious setbacks had to be overcome.
As Graham Loakes, design director at Carver, ruefully remarked of one episode: 'The moral of the story is, don't trust your supplier's toolmaker's toolmaker!'
Direct links with the market were often achieved by involving a key customer to drive the development process. The partnership between NCR and Deutsche Bank on the thermal printer, for example, was mirrored by Pride Valley and Tesco, and Caradon's relationship with Wimpey Homes. Despite the problems of finding the true voice of the customer amid the labyrinthine distribution networks of the building trade, Caradon was commended for its determination to do so.
In a different way, probe-manufacturer Spembly Medical, which was acquired last year by NMT Neurosciences, an American company, stayed close to the market through its clinical relationships with surgeons - 'the movers and shakers in the university hospitals', as Spembly operations director Patrick Sparkes described them.
Development and production teams can quite often fall out in a big way, especially within larger companies, but Siemens, in particular, showed an ability to interweave its engineering and manufacturing processes.
8. WHAT WERE THE OUTCOMES IN TERMS OF FINANCIAL AND TECHNICAL PERFORMANCE? The Management Today Innovation Awards produced some spectacular outcomes. The redesign of the Realitis 6.1 telephone-exchange switch made Siemens the number-one switch supplier in the UK by the last quarter of 1998, earning £81.4 million in sales, and hitting cost targets for delivery and development.
The Tesco naan bread produced by Pride Valley Foods built PVF's turnover with Tesco from £2 million to £5 million, gaining powerful competitive edge over rivals.
In other cases, more disappointing sales of a new product were offset by the introduction of new technologies, the discovery of new suppliers or the retention of a key customer.
9. TO WHAT EXTENT DID THE PROJECT EXTEND COMPANY CAPABILITIES AND COMPETENCES? At Spembly Medical, the introduction of concurrent engineering techniques was typical of the new capabilities acquired in the course of developing and bringing a new product to market.
10. TO WHAT EXTENT IS THE DEVELOPMENT PROCESS REAL, WORKABLE AND REPEATABLE? This, finally, was the $64,000 question. When companies innovate by the seat of their pants and snatch success from the jaws of disaster, the question always asked is whether they could repeat the feat, or could it all go pear-shaped next time?
Improvisation and thinking on your feet have a big place in product development, but so, too, do rigorously planned and sustainable development methodologies, especially as the size of projects and the risk increase. In this area, as in others, Siemens was ahead of the game - with its nine management phases encompassing product definition, realisation and support.
'An impeccable process,' was how judge Tony Cooke of Celsis described it. 'It's the BMW 7 series of product development. An easy-to-run system put together in an elegant way. The Siemens team evidently likes it, trains with it and works wells with it.' Fellow judge Peter Davies added: 'The company's roots are in GEC and Plessey. It is good to see a British product development process not swamped inside a global giant like Siemens.'
While Siemens Communication Systems scooped the top award, Pride Valley Foods was highly commended, in the words of the Judge Institute's Nick Oliver, as 'a dynamic small firm aggressively using innovation both in its customer relations and its production technologies to drive ambitious goals for growth'.
Caradon Plumbing Solutions was also highly commended. As Tony Cooke explained: 'Caradon has developed a transferable development process for what is still essentially a black art. In a conservative market, with a product that is difficult to make in volume, it is managing innovation well.'
In the stories of all six finalists, however, there are lessons for Britain's managers of innovation. They show that it is important to regard key customers as part of the development team; to scan widely for the best new technical solutions; to nurture a dynamic culture of innovation, so that people don't just follow the process but actually 'live' it; and to listen to users, including older users, for whom such things as panel controls on caravan heaters and printouts from ATMs can be a trial.
If the Management Today Innovation Awards suggest that UK firms are still struggling with portfolio and knowledge management, the results also reveal top marks for the ability to read markets and manage often-tricky links between development and manufacturing. Perhaps, above all, the span of business activity encompassed this year - from telecoms to toilets - shows that everyone can innovate. As Andrew Summers of the Design Council noted: 'The awards demonstrate that innovation isn't just for high-tech start-ups. You can also be successful in mature markets.'
OVERALL WINNER: SIEMENS COMMUNICATION SYSTEMS. Part of the global £40-billion Siemens group, a world leader in electrical engineering and electronics, SCS manufactures telephone-exchange systems and has a particular niche in the growing call-centre market. Its redesign of the Realitis 6.1 switch made SCS the top switch supplier in the UK by the end of 1998 with £81.4 million in sales. Ian Judson, below, led an engineering team of more than150 in an innovation management process that integrated market requirements, logistics, hardware, software, development and manufacture
HIGHLY COMMENDED (SMALL FIRMS): PRIDE VALLEY FOODS was set up at Seaham in England's north-east by Hossain Rezaei, an Iranian entrepreneur and engineer, in 1992 and has become a leading European speciality-bread maker with a turnover of £17 million. Its demanding supermarket customers include Tesco, for whom Pride Valley developed a garlic-and-coriander naan bread, shown being tossed in the air by Chris Peace, new product development leader. Development of the product reflected a managed approach to market research and production technology and it quickly doubled sales forecasts
HIGHLY COMMENDED (LARGE FIRMS): CARADON PLUMBING, a sanitary equipment maker based in Stoke-on-Trent, operates in a sector that is notoriously sluggish towards innovation, but it reinvented its product development process, creating an 'ideas to market' department responsible for about 60 new products a year. Caradon, with 2,350 staff, £350 million turnover and a heritage dating back to Thomas Twyford in 1849, has just successfully redesigned its Galerie range in the face of declining sales. That's Clive Whitby, below, raising a new product in the ceramic development department
NICK OLIVER (chairman) Judge Institute of Management Studies, University of Cambridge
TONY COOKE director of product development, Celsis
PETER DAVIES managing director, PERA Technology
JEREMY MYERSON director, Helen Hamlyn Research Centre, Royal College of Art
CARADON PLUMBING SOLUTIONS - Galerie range of bathroom fittings
CARVER & CO (ENGINEERS) - 4000 Series caravan heater
NCR FINANCIAL SOLUTIONS - ATM thermal printer
PRIDE VALLEY FOODS - speciality naan bread for Tesco
SIEMENS COMMUNICATION SYSTEMS - Realitis 6.1 telephone-exchange switch
SPEMBLY MEDICAL - ultrasonic handpiece for neurosurgery.