Innovation Management - Term Paper Example

«Innovation Management» INTRODUCTION Technology and competitiveness relationship has become an important area of investigation for both the theoretical and empirical analysis[Bru95]. Organisations operating in all sectors are rapidly investing in technology and innovation to improve their processes and to enhance their efficiencies. Wal-Mart stores have developed a computerised inventory management system in which the orders from suppliers are electronically made and the warehouses and retail stores are maintained. The suppliers automatically receive the information about the lack of a particular product in the warehouse or in the distribution outlet and in this way whole system in maintained. In this way, by ensuring the concept of Just-in-Time inventory, the high warehouses costs and inventory shortages can be reduced. The Wal-Mart retailers have recently invested in Wal-Mart Satellite Network (WSN) which is a multimillion dollar project and through this network more than 1200 Wal-Mart facilities can be joined in a private two way satellite communication network[Jag94]. Boston Consulting Group found in a recently conducted global survey of 1,600 senior executives that organisations have put innovation as an important priority in 2010, after hunkering down in 2009 and around 72% of the participants have considered innovation as one of the top three strategic priorities because of which they have increased their innovation spending[Ste10]. In order to study the potential for technology-enabled innovation in products, services and processes in an organisation and to evaluate the effectiveness of internal processes associated with innovation management, this report has been created. POTENTIAL FOR TECHNOLOGY-ENABLED INNOVATION IN PRODUCTS, SERVICES AND PROCESSES LBG is operating in an information intensive industry. The following table shows the typical core brands offered by LBG and the main sources of technology for the brands. The IT vision of LBG is: “To have a fully integrated operation which provides timely, efficient and valued services to our customers, and is underpinned by streamlined IT services and a rationalised property portfolio. By end of 2011, we plan a reduction in roles of almost 10,000 and run-rate costs reduction of £965m.” LBG aims to deliver the projected synergy savings across four areas: Procurement (£350m) through advanced supply chain management and leveraging of scale IT (£336m) through the creation of a single integrated IT platform serving multiple brands Property (£133m) through consolidating our highly fragmented office property estate into a portfolio focused principally on eight major conurbations and the delivery of the property aspects of Retail’s branch rationalisation strategy Operations (£122m) through the application of lean principles and good operations management to deliver more efficient and high quality processes Significant investments can be seen in IT because company is lacking strong and integrated IT mechanisms. According to Ryan, Santander is one of largest banks of the world and it has gained through an IT system through acquisition. The acquired IT system of the offers an advanced core banking platform to give the single customer view. The bank has adopted SAP which is being used in various Chinese and Indian banks. Similarly, LBG also has various opportunities to improve its products and services through innovation. The table shows main tasks of innovative strategy of LBG. Although LBG is focusing on all positions, paths and processes to improve the innovation, however, more focus has been seen on processes innovation. Source: Joe Tidd, John Bessant, and Kevin Pavitt (2005) The Four Ps of Innovation Space LBG has adopted an incremental approach to achieve innovation. Various brands are operating under the umbrella of LBG group, therefore, by introducing and acquiring various brands offering different product and service lines, organisation aims to offer innovative products and services to customers. By following an incremental approach, LBG has been striving to improve its processes efficiencies and effectiveness. The organisation recently introduced “Today’s Work Today” strategy (which will be discussed in following section). Ryan explained that the company does not follow any culture of radical innovation and appears to be a steady mover and focuses on slow incremental innovation. The company has developed good predictability models, based on which important predictions are made. The company is achieving both the internet sales and sales through telephone. Internet has become an Innovation Galaxy Channel for the organisation. Ryan argued that American banks believe in that customers have to see all products of the company online. The availability of banking services online has made Banking Supermarket an online Service. On the other hand, various processes are still based on 20 years old systems. Therefore, Ryan argued that company achieves innovation and product front challenges by focusing on one-to-one marketing. Company is doing 25% of today’s work in the same day however; LBG aims to focus on “Today’s work today” strategy by at least completing 50% of work in the same day. LBG aims to become the best provider of financial services to a diverse customer base[LBG10]. LBG can excel in the product lines of financial services because paradigm of LBG shows that LBG aims to diversify its services in financial sector. Source: Joe Tidd, John Bessant, and Kevin Pavitt (2005) Since Lloyds is operating in an information intensive industry therefore, organisation has huge opportunities to bring technology based innovations in its products and services for effective innovation management. THE EFFECTIVENESS OF INTERNAL PROCESSES ASSOCIATED WITH INNOVATION MANAGEMENT Innovation Audit In order to identify, how will the organisation is doing to manage innovation, an innovation audit was conducted at LBG. The audit was completed by Patrick Ryan, the IT strategy director. Following diagram shows the innovation audit conducted by Ryan. The diagram shows that actual score of innovation for Lloyds Banking Group is significantly lower than the ideal score. The ideal score for strategy innovation is 7, however, Ryan’s responses to the questions of Strategy scale has given the score of around 3. It means that Lloyds Banking Group has achieved average score in strategy innovation. LBG has attained significant processes innovation, as evident from its score of around 5.5 against the ideal score of 7. The learning innovation is also showing average score of above 3. Company is also showing satisfactory innovation in linkages as the score is above 4. The innovation at organisational level at LBG has scored above 3 against ideal score of 7. Therefore, it has been analysed from innovation audit of LBG that organisation is actively seeking to improve its innovation management however; still there is a huge gap between the actual and ideal position. Moreover, it has been identified that LBG should give a great focus towards learning innovation, strategy innovation and organisational innovation. On the other hand, organisation has been significantly effective in process innovation and linkages innovation. Diagram: Audit Innovation Audit completed by Patrick Ryan – Idea taken from Joe Tidd, John Bessant, and Kevin Pavitt Components of Innovative Organisation Following table shows the examples of components of innovative organisation at LBG. Components Features Shared vision, leadership and will to innovate To ensure integration under strong leadership, Mark Fisher has been appointed as Group Executive Director Appropriate culture Team work and culture Key individuals Highly experienced such as March Fished, Patrick Ryan Effective team working By bringing teams together Lloyds Wealth Management business has been created High involvement innovation More process innovation approach Creative climate HR system has been integrated to offer easy access to data Source: Joe Tidd, John Bessant, and Kevin Pavitt (2005) Process Model of Innovation at LBG The innovation audit has shown that organisation has been actively improving the internal processes. In order to evaluate how company achieves the aim of innovation management associated with its processes, an example has been taken. Process Model of Innovation – Today’s Work Today (A Process Innovation Strategy) at LBG Source: Joe Tidd, John Bessant, and Kevin Pavitt (2005) 1. Search The service process is long and the tasks of single day process and multi-day process go to the pending list, which not only shows the lack of efficiency at the organisation, but also results in inconveniences for the customer. As identified by LBG, around 25 percent of Group Operations work is completed in the same day and an average of 4 days are required to complete the work. 2. Select Strategy: Today’s Work Today is the new strategy of the company which aims to “complete the work that the customer gives the company on the same day – not within 24 hours, but the same day.” In simple words, it means that items that come in” today” are finished and out to the customer “tonight”. Objectives: The objectives of implementing this strategy, as defined by LBG in March 2010, are as follows: To strengthen customer advocacy, as they see that company can complete routine tasks quickly and efficiently, and will therefore trust the organisation with a bigger proportion of their banking and financial needs. To reduce failure demand, as the questions like ‘where is my work?’ will reduce and management will not have to spend time managing work in progress. Another objective of this strategy is to tackle the problems as they occur and show because such problems with completing the work or in our process are more visible. Finally, this strategy will help the organisation to focus on getting the work completed right first time, every time. Target: In order to implement the strategy, LBG set the target that the employees have to complete all actions to serve the customers on the day of receipt of a request into LBG. The target is to complete 50 percent of the work in the same day whereas; current actual performance is 25 percent. The organisation has categorised its services into two kinds of processes “Single Day Processes” and “Multi Day Processes”. 3. Implement A structured approach has been identified at LBG to achieve process innovation. Total five steps are involved to achieve the target. The diagram summarises the implementation process. a. Identify value stream b. Qualify demand c. Create ideal d. Identify barriers By involving stakeholders and users of the processes, the barriers can be identified. e. Remove barriers Tools to remove barriers Operational Design Is operational model right? Whether high value step right for value stream Consider: which site process work? Geographical locations of work? Working hours relative to when customer work was created? Skills and resources at site? This process will join end to end process and has important implications for transportation RACES (reduce work, automate process, combine with other activity, eliminate, simplify) Workplace Organisation After making a spaghetti diagram of current value system, hand offs have been defined and most appropriate layout is selected. The diagram shows that people from each process can sit together in work cells. Understanding Constraints Prioritisation Prioritise the processes because non value added internal admin routines have to be completed first because they do not involve customers. Failure Demand It is the work which bank creates and this work should be managed whilst removing the root cause. Prioritisation DAMIC (Define, measure, analyse, improve and control) DAMIC will be used for problem solving. Mistake Proofing Therefore, by building quality into process with error proofing, the management decided to deliver work to customers more quickly and reduced number of items reworked. 4. Capture By continuously measuring the newly implemented system, LBG evaluates the benefits of process innovation. Interestingly, company also believed in “Maintaining the system” therefore, following components have been made a permanent part of value stream. These components include Forecasting, demand and resource planning, flexibility, absorb variety, keep things visual, good at solving problems and manage as value stream. Managing Innovation at LBG In order to analyse how proactive is LBG in terms of innovation, an interview has been conducted with the Executive Director, Mark Fisher. Mark has explained in detail about the integration achievements that are expected to be delivered in the second half of year 2010. According to Fisher, Innovation in Lloyds Banking Group is our Integration Programme, Culture & Systems. The objective of innovation management is to satisfy customers, improve process efficiencies and to reduce the costs for the company. According to Fisher, LBG has announced more than half of £2bn cost saving target instead of £1.5bn. Achieving the cost savings target surely conveys a successful integration of banking at LBG. In the last six months organisation has achieved significant innovations through integration achievements. To improve the internal processes, company rolled our one HR information system and has joined all colleagues’ data in one place for the first time. Moreover, for company staff, company completed the roll out of “Your Performance” and expanded “Your Learning Site”. Moreover, to provide employees with a Group wide internal vacancies platform, JobShop has been created. To reduce costs, organisation has reshaped its business. Company has appointed one supplier to provide cleaning, security and catering services and IT support because of which significant service and cost savings have been achieved. By the end of 2010, company will be using 1.4million square feet less of office space than when company began Integration because company exited 35 buildings in addition to the 83 sites which it exited in 2009. Various Systems and Process of LBG have been integrated such as the introduction of an in-house, daytime counter and ATM cash replenishment model into our Halifax and Bank of Scotland branches. This ensures we will have one model in place to support the one counter system we’re introducing in Quarter 4 this year, as well as saving us £12 million a year. Moreover, company has shown massive progress on planning the largest migration of customer accounts ever undertaken. Therefore, through significant efforts the entire group is going to achieve significant financial gains and people satisfaction. Customer Innovation In an interview with IT Strategy Director, Patrick Ryan, he stated that company is currently putting its 90 percent efforts on integration and 10 percent efforts are for light weight. The currently emerging technology of the company is a Knowledge Strategy. This strategy focuses on achieving customer insights. According to Ryan, for a bank knowing single customer view is very important therefore, banks struggle to get a single customer view. He also explained that over the 20 years, the product centric view has become a trend and customer solutions are now a suite of products such as what does a customer have. Ryan stated that Lloyds is a good pack leader and various good brands are working under the umbrella of the group. At LBG, to offer good experience to customer today the organisation offers on “Brands now then LBG”. In order to achieve a single customer view, the next step is to connect the Divisions SME/Pensions /Insurance /retail bank products into a single customer view. In this way Treasury can give a holistic view of the customer and offer an evolving market campaign which is more focused and customized promotion. Conclusion and Recommendations Based on above discussion, it has analysed that LBG has been actively focusing on managing innovation by introducing technology based improvements and other innovations through other ideas. However, to achieve the ideal state of innovation management, organisation should consider following recommendations. LBG should also focus on new products and services development To become an innovation organisation, company should also improve its strategy innovation and learning. To achieve this aim, staff should be given high involvement in organisational strategic decisions. Various systems of organisation are 20 years old and changing them does involve the risk however, initiatives should be taken to improve processes. Bibliography Bru95: , (Amable & Verspagen, 1995), Jag94: , (Sheth, 1994), Ste10: , (David & Dreischmeier, 2010), LBG10: , (LBG, 2010), Read More