ISSN 0798 1015

Vol. 39 (Number 35) Year 2018. Page 12

Design of a minimum viable innovation management system: university case

Diseño de un sistema mínimo viable de gestión de la innovación: caso universitario

Carlos Mario DURANGO Yepes 1; Jorge Alonso QUIROZ Carvajal 2; Nelson LOZADA 3

Received: 06/04/2018 • Approved: 25/05/2018

Contents

1. Introduction

2. Innovation process models

3. Elements of an innovation system

4. Implementation of the case study in Higher Education

5. Learned lessons

6. Conclusions

Bibliographic references

1. Introduction

There is an extensive literature corpus on innovation processes that describes the process phases and its management, from idea to commercialized product (Rothwell, 1992; Tidd et al., 1998; Trott, 2005). One of the best-known linear or sequential innovation models is Cooper’s Stage-Gate model (1990), which divides product innovation in stages with gates which serve as decision points between phases. A more recent model is that of Innovation System in Higher Education Institutions, which consists in a “combination of elements common to any innovation system that, implemented through designed and validated tools, facilitates the work’s process” (Anthony, 2010). Such process is carried out under the learn-by-doing model: applying the methodology on a concrete innovation opportunity, the institution acquires and puts in place capabilities to replicate the process with innovation opportunities and increasingly complex and sophisticated businesses, supported with Lean Startup and Design Thinking.

Lean Startup is an entrepreneurial project management methodology that facilitates the launch of businesses, services and products and which has been highly successful since the publication in 2008 of the book thus entitled by Eric Ries. Although it stemmed from the technological startups in Silicon Valley, its potential as philosophy and management method is applicable to the launch of diverse projects and products of all kinds. The concept of minimum viable product is associated to lean startup: it is not necessary to achieve the perfect service or product initially; what is required is a prototype or basic product that evidences the essential characteristics of what you want to do, which permits to measure the reactions of potential users and prove as soon as possible whether you are advancing in the right direction.

The term Design Thinking is used to refer to the study of designers’ practices (for example, Cross, 2006; Dym et al., 2006; Lawson, 2006), and their application to problem-solving processes which are "open” and centered on the human aspect in other areas such as business, management and organizations (Rittel & Weber, 1973). As an approach to product innovation (Melles et al., 2012), Design Thinking improves decision-making practices in other fields such as health care services and systems (Duncan & Breslin, 2009), management and strategy (Lester, Priore & Malek, 1998; Dunne & Martin, 2006), organizational operations and studies (Romme, 2003), and more recently, projects of social innovation and impact (Brown & Wyatt, 2010).

The aim of this work is to define the innovation portfolio of a higher education institution (HEI) through an innovation system that allows its effective management. To achieve this, the paper is structured as follows: firstly, we develop a conceptual synthesis on innovation process models. Secondly, the central concept of innovation system is defined. Thirdly, the implementation of the case study is defined. Fourthly, the learned lessons are set out. Finally, the conclusions are presented.

All innovation models have advantages and disadvantages, and no model can pretend to be exhaustive and cover all the different viewpoints for all the areas of application. The opposite is also true; there is no model that provides a “one size fits all solution”, since there are too many variables influencing innovation processes (Du Preez & Louw, 2008). According to these authors, a synthesis of the innovation process models in the literature suggests the following:

1. Most innovation process models imply a pattern of the following steps or stages: (a) idea generation and identification, (b) concept development, (c) concept evaluation and selection, (d) development, and (e) implementation.

2. Innovation can be market pulled, technology pushed, or a combination of both.

3. Integration between the different functions within the innovation process is paramount, and can often be the discriminating factor.

4. The latest (open) innovation process models favor a network approach where innovation is not only focused internally, but externally.

5. Most of the models ignore the exploitation of the new innovation within the market. Exploitation is the only mechanism to competitiveness and financial survival and should therefore be included in the framework.

The innovation system comprises five stages for the achievement of the innovation goals, termed minimum viable innovation model (Anthony, Duncan, & Siren, 2014), which are developed in the following order: first, define the innovation points, determining the gap between your current operations and your growth goals, and the types of innovation that fill this gap. Second, focus on a few strategic areas, identifying three strategic opportunities that meet a specific market demand and which no one else is offering or doing well, with some technology that enables to do it more efficiently; a competitive advantage that helps us against competition. Third, transform ideas into projects, classifying the portfolio of ideas, evaluating the technological and market risk level of each one of the prioritized ideas, analyzing the opportunities each idea in the portfolio offers and managing the projects’ life cycle through the stage-gate methodology. Fourth, governance and controls must be defined, that is, a governance systems centered on monitoring, resources allocation and the search for continuous improvement sources. Fifth, leadership, talent and culture: it must include leaders with vision and talent for innovation who reward talent and foster the culture of continuous development.

3.1. Growth gap definition

The purpose of institutional growth gap definition is finding the existing gap between growth aspirations and the likely growth the institution could achieve if nothing extraordinary is done, under stable external environment conditions. Extraordinary growth results from new efforts, acquisitions, expansion of core activity, adjacent markets, or from the creation of a value proposal totally new to the current market or a user segment not yet being served.

Graph 1
Depicts the growth gap

Source: own elaboration

To calculate the growth gap, it is necessary to have defined the criterion through which the institution is going to measure its growth, such as student registrations, total billing, budgets, among others. Once this criterion is defined, it is calculated through the methodology proposed by Anthony et al. (2010).

3.2. Innovation portfolio management

In order to develop the innovation system, the innovation bucket must be first defined, which is understood from the types of innovations the institution must develop to then manage the innovation portfolio.  It is important to know that the innovation process can be distinguished into three types and these depend on the environment where they are implemented. According to the range of disruption they bring about, they are classified into three types: incremental, adjacent and transformational.

Incremental innovation

Incremental innovation projects consist mainly in “optimizing existing products or programs for existing users. They can take the form of small improvements to existing programs or incremental inroads into new markets” (Nagji & Tuff, 2012). Examples of these are improvements to the curriculum formulation in a program or in any of its already present associated services (enhanced program). These innovation projects only require resources and capabilities that the institution already possesses; therefore, they represent low risk. They are oriented towards the existing market and modify already existing programs or products.

Adjacent innovation

Adjacent innovation projects are those in which “the institution leverages something it already does well, to enter new markets or to satisfy new needs of existing clients. It basically means giving new uses to the institution’s existing capabilities” (Nagji & Tuff, 2012). A good example of this is when the university institution decides to launch a tertiary education platform to promote the formation of technical specialists in specific areas. It is aimed to new markets or covers new needs of existing users.

Transformational innovation

Transformational innovation projects are those in which “institutions develop new programs, platforms or products to satisfy new markets and new clients’ needs. They are also known as disruptive innovations. Examples of them are Starbucks in-store experience, and iTunes, among others. These projects represent the highest risk, since in many cases the firm has to build new capabilities and obtain new resources” (Nagji & Tuff, 2012).

3.3 Innovation Ambition Matrix

The tool developed to help organizations manage their innovation portfolio is what has been termed Innovation Ambition Matrix (see Graph 2). It is a refinement of a classical diagram devised by the mathematician Igor Ansoff to help enterprises allocate funds among growth initiatives. The Ansoff matrix clarifies the idea that tactics must vary whether a firm launches a new product, enter a new market, or both. The new version of the matrix substitutes Ansoff`s binary choice of products and markets (old and new) with a range of values (Nagji & Tuff, 2012). It is thus recognized that the novelty of a company’s offer (x axis) and the novelty of its customers’ markets (y axis) are a matter of degree. For this, three distance levels are overlapped, which are described as follows (Nagji & Tuff, 2012):

On the lower left side of the matrix, the main innovation initiatives are found – the efforts to make incremental changes to existing products and the progressive advances in new markets.

On the opposite corner of the matrix are transformational initiatives, aimed at creating new offer to serve new markets and customer needs.

Adjacent innovations are in the middle, and they can share characteristics with the core and transformational innovations. They are innovations consisting in taking advantage of what the firm does well in a new space.

Graph 2
Ambition in innovation

Source: Nagji and Tuff (2012)

3.4. Innovation production system

Developing a sustainable value creation system requires that the university knows and masters all aspects of innovation from identifying the idea to its implementation. Most of the universities know that they should not focus only on service innovation, but also on processes, the strategy, the business model, the delivery of the service, among others. An innovation production system has four components:

 1. Classification of the portfolio of ideas, 2. Evaluation of market and technological risks, 3. Opportunity analysis at the early stage of each project, and 4. The process of transforming ideas into products through stages and decisions (Stage- Gate).

Classification of the portfolio of ideas from the theory of three innovation horizons.

In the same way as ideas and projects in an innovation system enter a process allowing to categorize them and establish their priority, this same classification should give the institution the possibility of establishing the time of executing them. “The theory of the three horizons of innovation” proposed by Baghai et al. (2000) is used for this classification. They highlight that a company distributes its innovations in three categories called “Horizons”:

-Horizon 1, mature businesses.

-Horizon 2, fast growing businesses.

-Horizonte 3, starting businesses.

Each one of the horizons must be addressed in an independent manner since they deal with different approaches. Innovation horizons enable the organization’s work team to plan, set goals and allocate complementary resources for the management of an innovation. Visually, it allows the company leaders to understand the north of their organization.

Graph 3
Horizons of innovation ideas

Source: Baghai et al (2000)

Table 2 exhibits the use of the horizon matrix for the first challenge in the innovation portfolio.

Risk matrix of prioritized ideas

The purpose of this matrix is to evaluate the level of market and technological risk of each one of the prioritized ideas (Day, 2007). Tables 3 and 4 show the use of the risk matrix for the idea of a social innovation technological platform, which, combined with graph 3, allows to rate the risk of said idea between 40-60%. This rating is also done for the rest of the ideas in the innovation portfolio.

Opportunity analysis for each idea in the portfolio

The R-W-W matrix (Real, Win, Worth it) of Dominick M. Schrello, cited by Day (2007), allows to conduct an opportunity analysis at an early stage in each project. It seeks to evaluate the reality of the opportunity, the value the institution can offer, and whether it is worth carrying out.  If the score for one idea in the matrix is lower than 50, it does not qualify for the innovation portfolio; if it is between 50 and 80, it enters the portfolio but has to be validated in the market; if it is between 80 and 100, it continues in the process. The idea of the technological innovation platform scores 85 in the application of the RWW matrix, which allows it to continue in the innovation process (see Table 5).

Project life-cycle management. Stage-Gate Methodology

Once the proposal has passed the RWW matrix test, it will enter a funnel made up of stages, and it has to go through a series of gates to successfully complete it (technical viability and strategic relevance assessment) where various criteria will be validated by validation teams (different at each stage) that will ensure the proposal is meeting the defined goals and is directed towards achieving the growth expected by the institution (1990).

According to the type of project, and as the proposal passes each stage, decisions become binding in terms of allocating the technical and work team resources necessary to set it up. Therefore, validation teams are more specialized each time, and undoubtedly of a higher hierarchical level within the institution.

4.1. Description of the case study

This case study implements the first three stages, that is, the growth gap and the generation of ideas and concepts, arriving with these concepts at an innovation project portfolio. The institution under study does not have a formal innovation management process. Based on the project innovacampus, coached by Purdue University, a more structured innovation management process based on the innovation system model was developed in order to improve the ecosystem of regional innovation and, particularly, the university subsystem.

4.2. Methodology

The methodology was divided in four stages, as described below:

Theoretical foundation and synthesis; data collection; case analysis in light of the theoretical foundation; and synthesis of practical contributions. In the first stage, the minimum viable innovation system model is assumed. In the second stage, the institutional growth gap is calculated, strategic challenges in four areas are defined as well as the type of innovation, and information from key respondents from the institution is gathered, based on input matrixes (RWW, Risk, Horizon) required by the innovation portfolio and the innovation funnel. In the third stage, the learned lessons are presented. Finally, the conclusions or practical contributions synthesis are drawn.

4.3 Findings

Calculation of the institutional growth gap

Nagji and Tuff (2012) found that firms that allocated an average of 70% of their innovation budget to the incremental innovation of their core initiatives (“safe bets”), 20% to adjacent initiatives, and 10% to high-risk radical/disruptive ones outperformed their peers, generally realising a premium of 10% to 20%. Adjacencies are defined by new student registrations, updates and course validations.

The agreed growth goal was set at 20% of the projected main revenues to year 2021, that is to say, COL$68,086,797,783 * 0.2=  COL$13,469,969,455, instead of COL $ 15.514.747.504 as shown in Table 1. These resources would be recorded as adjacent innovation.

Table 1
Calculation of the growth gap

Source: Own elaboration

The second result consists in identifying at least four strategic opportunities:

The first challenge or opportunity is the design and implementation of a technological platform allowing the offering of the HEI’s social services, which means the institution will have a technology enabling greater efficiency in its offer. Such challenge leads to the innovation of a more effective institutional process.

The second challenge relates to social knowledge transfer on the part of the HEI for the solution of local, regional, and national social problems. With this, the institution is able to meet a demand not covered by the current offer.

The third challenge consists in offering training services internationally certified by the HEI.

The fourth challenge is to implement an office for the transfer of research results that articulates the innovation processes in the HEI. This permits to benefit from the competitive advantage in the social services related to pharmaco-dependence, which most universities lack.

The third result consists in classifying the four previously mentioned opportunities or challenges through a matrix of innovation horizons, which exemplifies the first challenge (see Table 2). The same matrix allows to classify the other three challenges (see Table 6).

The fourth result consists in evaluating the level of market and technological risk of each one of the prioritized ideas through a risk matrix which exemplifies the first challenge (see Tables 3 and 4). The same matrix allows to evaluate the other three challenges (see Table 6).

Table 2
Matrix for innovation horizon

Source: Own elaboration

 -----

Table 3
Matrix for market risk

Source: Own elaboration based on Day (2007)

 -----

Table 4
Matrix for technological risk

Source: Own elaboration based on Day (2007)

-----

Graph 4
Risk derived from the market and service

Source: Day, 2007

Based on coordinate (16, 20) and Graph 4 (intended market vs service), where these two values graphically meet, a risk value between 40-60% is obtained. Likewise, the risks for the other three challenges are obtained (see Table 6).

The fifth result corresponds to the analysis of the opportunities of each challenge or idea in the portfolio through the use of the RWW matrix. As way of example, Table 5 shows the first challenge. This is done in a similar manner for the other three challenges.

Tabla 5
Matriz RWW

Source: Own elaboration

The innovation portfolio is built based on the five previous results. This is synthetized in Table 6.

Table 6
Innovation portfolio

Source: Own elaboration

Since the technological innovation platform idea is assessed as a viable opportunity as a  result of its rating over 80%, then the next step is managing that idea by passing it through the innovation funnel (Table 7).

Table 7
Project management: State-Gate

Source: Own elaboration

The institution needs to fill the gap between what current operations produce and where it wants to be in five years’ time.

The greater the growth gap, the further innovations will have to be from the core, and the longer it will take to realise revenue from them.

If the growth gap is considerably large, the institution may want to divide its new-growth initiatives into two or three categories.

The quality of the innovation product, whether service or process, strongly depends on the quality of the process used to develop and put the innovation into practice.

The stage-gate model guarantees quality through the application of decisions at the review gates, which reduces risk and development time of the project, meeting with client requirements.

A critical success factor of innovation is the involvement of different people, interests and viewpoints in an innovation process, while at the same time focusing on the clients.

This paper proposes an innovation system using a mixed approach of Lean Startup and Design Thinking.

The selected idea within the innovation portfolio aims at designing and implementing a technological platform that supports the HEI’s offer of innovative social services.

The selected idea of a social innovation technological platform is defined as a rapidly growing emerging business that will yield medium-term earnings, classified in horizon 2.

The HEI defined an innovation portfolio where all its innovation projects are adjacent, that is to say, the institution leverages on something it already does well in order to enter new markets or to satisfy new needs of existing clients.

The appropriation of this methodology on the part of diverse groups in the academic and administrative community will enable to improve the current innovation portfolio.

Anthony, Scott D., David S. Duncan, and Pontus M. A. Siren. (2014). Build an innovation engine in 90 days. Harvard Business Review, 92(12), 59-68.

Anthony, S., Altman, E., Johnson, M., Sinfield, J. (2010).  Guía del innovador para crecer. España: Editorial Deusto.

Baghai, M., Coley, S. and White, D. (2000): The alchemy of growth. Cambridge: Perseus Publishing.

Cooper, R. (1990), Stage-Gate systems: a new tool for managing new products - conceptual and operational model. Business Horizons, 33(3), 44-54.

Day, George (2007). Managing risk and reward in an innovation portfolio. Harvard Business Review, (12), pp.1-12.

Du Preez, N., and Louw, L. (2008). A framework for managing the innovation process. Picmet 2008.

Nagji, B., and Tuff, G. (2012). Managing Your Innovation Portfolio. Harvard Business Review, (5), 2-12.

Rothwell, R. (1992). Successful industrial innovation: critical factors for the 1990s. R&D Management, 2(3), 221-239.

Tidd, J., Bessant, J., & Pavitt, K. (1998). Managing Innovation: Integrating Technological, Market and Organizational Change. England: John Wiley & Sons Ltd.

Trott, P. (2005). Innovation Management and New Product Development. 3rd edition. England: Pearson Education Limited.

1. Chemical Engineer, University of Antioquia, Medellín, Colombia. Specialist in Organizations advisory and consultancy, Medellín, Colombia. Master’s in Technology Management, UPB, Medellín, Colombia. Head of Laboratoty Office, Fábrica de Licores y Alcoholes de Antioquia, Lecture teacher at University of Antioquia. Email address: carlosdster@gmail.com

2. Business Manager, Specialist in Organizations advisory and consultancy, University of Antioquia, MBA, University of Antioquia, PH. D. Candidate in Engineering, National University of Colombia, Professor, Faculty of Economic Sciences, University of Antioquia (Colombia). Email address: alonso.quiroz@udea.edu.co

3. Business Manager, Mg, Professor, Faculty of Economic Sciences, University of Antioquia (Colombia). Email address: nelson.lozada@udea.edu.co