Confidential
MSc Business Administration
Entrepreneurship and Innovation Track
Master Thesis
A study of Hewlett-Packard Netherland’s internal innovation structure –
Identifying an innovation value chain
Vendela Eklund
(10651993)
Supervisor: Dr. W van der Aa
Co-reader: Dr. G.T. Vinig
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TABLE OF CONTENT
TABLE OF CONTENT ... 2 ABSTRACT ... 3 1. INTRODUCTION ... 3 2. LITERATURE REVIEW ... 5 3. METHODOLOGY ... 164. THE THREE CASE STUDIES ... 22
5. RESULTS ... 25
6. DISCUSSION ... 45
7. CONCLUSION ... 52
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ABSTRACT
In this study, I investigated if and how
a local subsidiary from a global organization works
with innovation. The objective was to determine whether there is a process or structure behind
it and to see how idea formation, conversion and diffusion were handled, detecting strong and
weak links. The method included interviews that were conducted with employees and
managers from the Enterprise Group from HP Netherlands. In total twelve interviews were
undertaken and used for this empirical investigation, focusing on three case studies. The
results confirmed the hypothesized situation and relationship between a global organization
and the local subsidiaries lack of time and practical knowledge about how to work with
innovation and its components. Evidently, innovation is taking place but without any specific
process or structure which helps the development. The findings contribute to existing
literature on how an organization is managing innovation and where strong and weak links are
obvious. Most importantly this undertaking has practical value for managers in that these
findings stress the importance of an integrated and planned approach in managing innovation.
Conclusively, a summary of the strong and weak links was found to facilitate the relationship
between structural differentiation and the speed and success of innovation. More research is
needed to validate these results through more case studies as well as further investigations
with a broader set of employees.
1.
INTRODUCTION
After ten years as an employee at Hewlett-Packard, my initial idea for my master thesis was to conduct research about something completely different. However, after some encouragement and critical thinking I changed my mind, realizing what an advantage it has provided me, challenges that spurred interesting questions and the master thesis as an opportunity to examine them. With this background I possess extensive knowledge about the IT industry, about Hewlett-Packard and its culture, organization, its weaknesses and strengths. Moreover, my access to an international network within the company which transcends dispersed business units and functions has provided with the access needed for such an endeavor. During this last year of my studies, I have put a lot of thought into how we used to work with innovation in our local subsidiary in Sweden. Many thoughts emerged and a scope that interested me started to take form.
In a large American corporation as Hewlett-Packard product innovation is mainly taking place at the corporate level. As such, subsidiaries are in general not involved in company product innovation. However, subsidiaries are working with the adoption of corporate product innovations and business
4 models to fit the local markets. At a certain moment in time, the corporation’s requirements and recommendations are not enough to meet competition locally. Hence subsidiaries have to innovate around new business models, concepts and ways to deal with customers in order to stay competitive. Recent year’s competition has hardened as servers and storage turn into commodity products and IT suppliers has a tendency to lock customers in through technical solutions. In order to keep up with competition, HP has turned to innovation as a quest for solutions that would allow the company to sustain its competitive advantage.
The scope of this thesis includes the ways in which top management at HP seeks new ways to improve idea generation, implementation and thus, innovation. Even though being one of the world’s largest IT companies and a strong innovation organization on corporate level, the Enterprise Group (the business unit for servers, storage, networking, software, services and consulting) in the Netherlands is constantly working on their market share ranking and sales targets and dealing with the open question such as, what is needed for being an attractive customer choice? Idea sprawl is commonplace, but there seems to be room for improvement around business model innovation for Hewlett-Packard BV. As the role Innovation Manager does not exist on a local level, the management team and local organization is responsible for making innovation happen. However, from a management level there is a wish and vision that more would be done within this area, an innovative mindset which in the long run would lead to a stronger position against competitors.
Accordingly, this thesis will look into how the innovation chain comes about within the Enterprise Group. There is a wish to think in new tracks regarding the way the organization works with customers, partners and sales patterns. Initially, all the phases involved in the Enterprise Group’s definition of innovation thinking will be analyzed. That is, if they follow any models, which models these would be and what strengths and weaknesses exists within the innovation process. As a objective, I hope I will be able to clarify in which areas the management should put more emphasize on and organize a way of structure around their innovation process.
The objective of this research it to identify, explore and understand which processes the Enterprise Group within Hewlett-Packard Netherlands uses for innovation creation. Using the Innovation Value Chain (Hansen & Birkinshaw, 2007) together with some of the lessons from Kanter’s “Innovation: the classic traps” (2006) as a framework, the research objectives are threefold:
1. To identify if and what model or process currently is used around (business model) innovation 2. To understand in which stages of innovation limitations exist and where improvement is
needed
3. To identify which and how these innovation practices could be improved and conclude these in a list of practices and a direction/framework for implementation and execution
5 With these research objectives in mind, a research question which would involve all elements is here proposed:
Which are the current processes used for business model innovation within Hewlett-Packard Enterprise Group and within which stages could innovation opportunities be identified?
After having declared the background, the research problem, the question and objectives of this thesis, the following section includes the literature review and hypothesis pertaining to the proposed research model. Subsequently, we will elaborate on the findings and discuss implications for managerial practices.
2.
LITERATURE REVIEW
Literature around innovation processes is covering many aspects; how, what, with whom and which resources that would be needed to spur innovation. Whilst some researchers are looking at the innovation process as a whole others are more focusing on the organizational capacity for innovation and what an organization could do in order to increase the level of innovation. Both aspects are important to get a complete view of a company’s ability and possibility to make a healthy analysis of its internal innovation capacities. For this particular research, more practical and hands-on models are more valuable and applicable in order to reach the wished outcome which is of practical use. Hence, literature on overall organizational capacity and organizational change management is not further discussed. From a company view, there could be challenges understanding the importance to separate these two views. After all, the human capital is one of the foundations of an organization, and the culture of a company builds and sets the standards. It is a communicating device; one aspect does not exclude the other. Accordingly, this review will discuss the practicalities and processes.
From an innovation process perspective, there is interesting research to access. The literature is often proposing hands-on guidance and applicable recommendations for companies on what they could check and do within their company in order to crystallize improvements. For this particular research a couple of articles and literature is particularly relevant. Hewlett-Packard is an American corporation with presence in all parts of the world and a majority of the articles used has been written and based on research on worldwide corporations.
2.1
THE INNOVATION VALUE CHAIN
One of the bases for this thesis has been a framework from Morten T. Hansen and Julian Birkinshaw. Hansen and Birkinshaw (Hansen & Birkinshaw, 2007) present innovation as a key business process. Just like other business processes, they state that this process can be transformed to improve speed, quality and profitability. They explain that all companies have different needs as their innovation
6 succeed in its innovation it must find out where they already have skills and where they could improve. Just importing best practice in general will not per se improve that particular company’s innovativeness. In order improve the innovation levels the solution is to find a workflow around all aspects of the innovation process; from the initial idea generation stage, further on to the conversion stage and finally the diffuse stage where the ideas are put into practices. This workflow is called the
Innovation value chain and works as a custom-made and end-to-end method, helping companies to put
their attention to the weakest point instead of improving the already strong aspects.
Each and one of the different stages have sub-stages which all in all give a guideline and framework where it is possible to detect the strongest and the weakest links in a company’s innovation chain, and it is claimed that executives should view the process of transforming and executing an idea as an integrated flow. The first phase is examining how a company generates ideas; the Idea Generation
phase. This phase examines the possibilities to produce new ideas as innovation starts with good ideas
and it is important to understand how and where these ideas originated from. The framework digs deeper in the sources of these ideas, whether they are created in-house, through collaboration across business units or through collaboration with external parties, i.e. partners and customers. Hansen and Birkinshaw (2007) notice that combining knowledge and understanding from different parts of the company usually leads to the better outcomes but that not necessarily is an easy task.
The key questions, in all phases, have key performance indicators linked to them. The reason for this is to have a concrete measurement if the company is successful in each and every area. Within the idea generation phase, number of high-quality ideas within and across the units and outside the firm are measured. As a next step in the process we find the Idea Conversion phase. In this phase, Hansen and Birkinshaw (2007) discuss the importance of managing the ideas that are generated in the previous stage. They argue that two types of risks are common within corporations. On one hand there is the company where too tight budgets and conventional control instances put an end to the inventiveness. On the other hand, there are companies that try to realize every new type of project or idea and in the end there is no clear logic how the new ideas fit in company strategy. The main focus in this stage is that in the end, ideas must be converted into revenue generating process, services or products.
The conversion stage screens the way the company selects respective idea; if there is a good screening process in place and if the new ideas get enough funding. The indicator that this is a performing stage is the percentage of all the ideas that in the end ends up being selected and funded. In the conversion phase it is also screened how the idea moves from idea to first result, a so called development link. Here, the key performance indicator is the percentage of funded ideas that actually lead to revenues. Eventually a new product, practice, service etc. is an object for the Idea diffusion phase. It is not obvious that just because a new idea is turned into a physical product or service that it will be well spread in an efficient way to customers and within the organization, but also to partners and
7 distribution channels. Since it is a large corporation, this question applies well to Hewlett-Packard. Diffusion is far from automatic, as Hansen and Birkinshaw (2007) write in their article.
2.1.1 The weak links: solutions and suggestions within the IVC
As a next step in their guide to a functioning Innovation Value Chain, Hansen and Birkinshaw (2007) have presented possible solutions and suggestions for how to decide which innovation strategy could be the one for each and every detected weak link. A company first need to have undertaken an analysis of the different stages, and identified where they are strong and where they actually are weak; where there is improvement to be done. Hansen and Birkinshaw (2007) claim that “by failing to recognize the weak link and focusing more time and resources on an already strong link, the management team undermines the company’s overall efforts”. Suggestions for the so called Idea-Poor company are to focus on building external networks and they mean there are two methods of doing this. One is to develop a solution network which would be used to finding answers to specific questions. It could start with a customer problem or needs and then be interpreted and formulated into a description.
The next step is to take this description and get bring it out, share it, with an external network consisting of anyone who could be giving interesting input, and to see if someone can offer solutions. The second method is to build a so called discovery network, which origins from a specific product or technology area and then build up new ideas around this. This is done through focusing on learning on future technological development and new business idea through personally connecting with people with appropriate profiles. Obviously, they write, the learnings must be translated into the specific corporate scope and business. Complementary to the external network building is the internal network
building. Employees must be connected with one another to be able to cooperate and Hansen and
Birkinshaw (2007) makes a clear comment; “the occasional cross-functional brainstorming session won’t do the trick, (…) what is needed is an ongoing dialogue and knowledge exchange between people from different units. A constant dialogue between people and the units is needed; collaboration just does not happen by chance. The authors give a good example of an organization which has developed communities of practice; each and every one which includes volunteers from different parts of the organization and with different expert areas. Specific problems are solved and representatives are actively representing technology summits from all business units.
Another weak link could be the idea conversion phase. Apparently many companies are struggling with this phase, and they are called the conversion-poor companies. The authors mention that through the numbers of people involved and complexity of an organization, a complex process is often found in larger corporations. The formal process is many times more a pain than a gain. Hansen and Birkinshaw (2007) have two innovation practices to address this problem. The first one is
multi-channel funding, which suggests creating (financial) possibilities and multiple multi-channels to pull ideas
8 of simple reasons that he does not like it, he does not have time to investigate it more detailed or that he claims that there is not budget for the particular idea.
A different way to do it would be to open up possibilities outside the manager’s direct view; an amount of money dedicated to developing the concept and converting it to new concepts. Opening up such a “side-channel” would gain a more objective view on ideas. Of course, also in such a process, proposals should be turned into business plans and milestones. Also the time allowed to put into projects and processes is an important aspect to remember. Another method would be to create a so called safe haven for the company. This is taking the multi-channel method a step further by creating separate units for converting the ideas into something viable. It is vital that this unit would have a strong linkage with rest of the business units and corporation.
The last strategy explains how to fix the diffusion-poor company. Some problems faced in the conversion phase are also faced here; managers allowed with quite an amount of autonomy, which could lead to neglecting of new ideas. And even though an idea is converted into a ready product, practice or service, the risk of damaging the process is still possible. In order to get a better pull for the new ideas, the authors explain that executives have to create a big buzz around the new concepts, making a thorough and complete marketing and introduction plan. One idea suggested is to use a so called idea evangelist, responsible for bringing out the news in the organization. Important is that this is a wide reach out; across the company, bridging business units and countries as a highly decentralized culture can make it difficult to launch a new concept (Hansen & Birkinshaw, 2007).
Hansen and Birkinshaw (2007) emphasize that managers continuously must screen each of links in the chain, to regularly improve. This means not just continuing with business as usual; if a company decides to implement a value chain perspective, new key performance indicators have to be applied. One needs amongst others to set up goals and determine what a good idea actually means and how much ideas perhaps will come from outside. Also, managers implementing the value chain view will also have to develop new roles for the employees. The authors conclude that companies should be aware of innovation “quick-fixes”; one solution does not fit all companies, the innovation value chain is however company tailored.
2.2 INNOVATION RADAR
The Innovation Value Chain offers some more detailed reading and sources of knowledge for the company which has identified its weak spots. One of these readings is an article from MIT on the
Innovation Radar (Sawhney, Wolcott, & Arroniz, 2011). This reading is valuable to reflect on when
investigating where HP puts its efforts and main focus when it comes to innovation. It is also interesting to compare the efforts on a local basis and potentially compare to what is initiated on a
9 corporate level; if the view on local initiatives is another one and if other areas or radars are given focus. The innovation radar was developed based on both academic research and literature on innovation, but what makes it interesting just as the Innovation Value Chain is that it is mainly based on interviews from managers and corporations; worldwide company managers were pulled on views and answers in order to create this model.
Now frequently used during innovation analysis, the Innovation Radar (Sawhney et al., 2011) serves as an efficient tool for reviewing twelve dimensions of a company in which strengths and weaknesses in each and every can be detected. The objective of these dimensions is to help companies to get a better understanding of where to concentrate innovation efforts. The authors suggest that managers should think holistically around innovation, and not only concern, for example, product innovation. This applies well to the thesis as practices and processes most definitely are in scope. Sawhney et al (2011) defines business innovation as “the creation of substantial new value for the customer and the firm by creatively changing one or more dimensions of the business system”. By this statement, they elaborate further on some characterizations of what innovation is. They claim that innovation must bring value, not new things. They also claim that innovation indeed can happen in any part of the dimensions, and as last; business innovation is systemic, which also is stated in the innovation value chain, but here from the twelve dimensions angle. The Innovation Radar presents and communicates all of the dimensions that serve as business foundation, and some of them are of extra interest for this thesis. To begin with, the different offering the company creates, i.e. the products and services. As from a product perspective, HP is mainly inventing in the U.S, but from a service perspective the local HP office has impressed by innovating around current offerings, to be continued in below reading. Another important dimension within offering is the solution that the company brings to the customer; which means integrate their products and services into a valuable concept. Through this the company can offer, as Sawhney et al (2011) describes; “both breadth of assortment and depth of integration” (p31). This is interesting reading, as precisely solutions and integration are such vital parts of HP’s competitive offerings to its customers. Customers is the second dimension on the Innovation Radar. It could sound obvious, but also within this dimension innovation can and should take place. The authors (Sawhney et al., 2011) give examples as discovering new customers or analyzing unmet needs of the customers. The dimension customer experience is looking even more into the customer’s experience with the brand and company. This is also important to take into account and aspects to work with on a local basis, as these could be possible to change. Value capturing is also an interesting dimension to be considered. This is the dimension in focus when innovations are concerning untapped revenue streams, for HP interesting to consider in terms of move from hardware sales to services.
The next three dimensions; Processes, Organization and Supply Chain, deliberates on the “how” of innovation; the possibilities to improve internal business processes, to make supply chain more efficient or to make minor or major changes within the organization to unleash potential, economical
10 and resources. This is a variable example which HP worldwide constantly is elaborating on and an aspect good to have in mind when talking about innovation. The last dimension of the innovation radar discusses “where” a company makes its products or services available and how that can be further developed; if the network offers new possibilities to sharpen an offering, if the brand gives further possibilities to explore or of the points of presence in terms of retail channels could be widened.
The vision for Sawhney et al (2011) is to have the innovation radar as a basis for strategic innovation discussions; how the current dimension is doing versus their main competitors. To use the innovation radar as starting point can potentially lead to other outcomes than usual, as companies according to Sawhney et al (2011), mostly keep on innovate on the areas where they already innovate, or that they look into what the whole industry is doing and just do the same. The authors mean that when examining and making a decision to pursue innovation on a particular dimension, usually other dimensions are also affected. Hence could a decision to innovate at one place of positive consequences on other. For HP it could be of potential value of initiating a discussion around company innovation using this as a tool for idea generation.
2.3 THE CLASSIC TRAPS OF INNOVATION
One of the two foundations for my framework for this research is an article written by Rosabeth Moss Kanter in 2006. Her article “Innovation: The Classic Traps” (Kanter, 2006), discusses mistakes that companies keep on doing every time innovation is on their agenda. Her context is relevant for this thesis as her main points could help to find any traps that HP potentially could encounter. Kanter (2006) writes that innovation tends to go in and out of fashion, and that innovation always comes up as an enabler to growth every time. Her suggestions are based on research and observations on large corporations. She gives a practical guidance on how to avoid these traps and mistakes. The conclusion is of practical use and implies four different lessons that an organization can make use of.
The first mistake she discussed is the Strategy mistake. A company needs to have an overall strategy for innovation which includes what type of scope to have when determining which projects to invest in or not. In the article this is also explained by barriers being too high and that the scope being too narrow from a management point of view. With this advice companies are encouraged not only to put effort and investments in ideas that are expected to generate very high amount of revenue, but also to pay attention to ideas that are of smaller size and revenue estimations. It also encouraged not to be too revenue impatient; thus willing to take some risks in developing a new concept.
The next lesson Kanter (2006) wants to teach is the Process mistake. This occurs when companies are putting too many control instances in place, for example the same level of financial planning and reviews as already is applied on existing business. Kanter claims that new ideas need much more space to develop as an innovation process could take sidetrack and unexpected turns. Kanter mentions
11 the paradox that established corporations most often want managers to stick to plans and that people are rewarded for doing what they are committed to do. Perhaps other metrics would be relevant for a new type of business or market. The third lesson that Kanter wants to teach is about Structure
mistakes. This focuses on the internal organization and making sure that there is no conflict between
two internal entities. Kanter discusses the danger of making a separate unit, apart from the main business. It could be an innovation advantage of its own, but when incorporated into the main business many of the innovative aspect of it could be lost. For management it is a balance act in between understanding a new idea or the risk of feeling threatened by it. Companies should create environments where interpersonal connections are tight between innovations and the rest of the business. The fourth and last point Kanter makes is the Skill lesson. In this lesson she stresses that it is important with the human side of innovation, putting the best technical people on a project does not mean the project will be successful. Kanter underlines the importance of a strong leadership, and making sure that people are staying in the team, even though some persons would get promoted to new roles within the organization. Connecting people and making them satisfied in the environment through building relationships are crucial factors, as Kanter puts it; innovation needs connectors. People who knows how to find partners in the mainstream business or externally, these people flourish in cultures which encourage collaboration.
For each and every pitfall there is a remedy recommended by Kanter. If a corporation recognizes the pattern or some points from the innovation traps, these remedies could be considered slowly starting to change the current situation. For a Strategy remedy, Kanter suggests building on an idea funnel, a so called Innovation Pyramid, in order to widen the scope and to avoid the very narrow thinking. This pyramid consists of three levels of stages; the top one showing the big bets that get most investments, the second one consisting of a portfolio of midrange ideas which are under development and the last stage comprising a broad base of early stage ideas which needs continuous improvement.
For this thesis is it of relevance to have a concept like this in mind to see if a similar means of help is used at HP. Other suggestions of remedies are to add flexibility into the review systems; an example is to have special funds set aside for unforeseen opportunities, making it possible to always be able to put money in for innovation. An innovation process would also benefit to get exception from some of the corporate requirements as existing business and new business should be treated differently. In terms of
remedies for issues around structure, a company should facilitate and tighten the links between the
new venture and existing business; productive conversations should regularly take place between innovators and the mainstream business. In the case where the innovators are a part of mainstream business, which could be the case for HP, these connections should also be sharpened. Finally there is also a cure for the company where the right skills are not put in place. Kanter suggests selecting for interpersonal skills and supporting the innovators with a culture of collaboration.
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2.4 INDIVIDUAL CREATIVITY AND ITS EFFECT ON INNOVATION
Another researcher that is of valuable reading is Professor Tessa Amabile who focuses on connecting the organization as a whole and the level of individual departments and projects (Amabile, 1996). This reading is relevant to this study since it very clearly comes across that innovation at a company is originally driven from the individual. This is an important point in the research question; what it takes from the people at HP to innovate, both individual and in a team, and in which way they are stimulated to do it from a management level. Her theory proposes that the creativity produced by individuals and
teams are the primary source of innovation within an organization. Earlier studies of creativity have
assumed that creativity is something that only a few individuals possess, but the attitude of modern studies is that all individuals to a certain extent are creative, anyway in specific domains in a specific point of time. Amabile presents a model to show how and where the three components of creativity work together. The three components are expertise, creativity skills and task motivation, and these three components determines to total level of creativity. Amabile discusses extrinsic and intrinsic motivation factors as these have a major impact on the total level of creativity. According to her model, the work environment can have a big impact on creativity by influencing motivation. This reading is interesting for this study, as one of the parameters for innovation is indeed creativity, and this means to look more in detail into the employees’ possibility to contribute to innovation within HP. Amabile recognizes that there is a way to judge creativity, as this otherwise could be considered a very subjective matter, and this way is called consensual assessment. This means that a project is considered creative when other people who also are familiar in the same domain consider it creative. The second component is expertise which Amabile considers to be the foundation for all creative work, and includes having knowledge or technical expertise within a specific faculty. But if a person does not possess the component of creative thinking, which according to Amabile to some extent depends on personality traits, it will not lead to creativity anyway. An individual who has an incentive to execute an activity most likely will only perform this “good” or “adequate”, assuming the person has right level of expertise, but without the creative thinking skills it will not yield any creative work. Creative thinking skills depends on features linked to self-discipline, independence, leaning towards risk-taking, tolerance for uncertainty, persistence in case of facing frustration and finally a relatively big unconcern for social approval. This is particularly interesting in the aspect of this research, since the social approval phase could be an obstacle for innovation. The final component is intrinsic task
motivation, which according to Amabile determines what an individual actually will do; not only what
he or she is capable of doing. Amabile discusses extrinsic and intrinsic motivation factors, but concludes that the intrinsic motivation factors have shown to be more conducive to creativity. She continues, that for business purposes, the motivation factor rules out the other factors, partially because no amount of skill or approaches in creative thinking can compensate for the lack of intrinsic motivation. Thus, according to her model, the work environment has a tremendous impact on creativity by influencing motivation. Expertise can be enhanced through training, and
creative-13 thinking techniques can also be implemented by managers. Task motivation is influenced by constraints and enablers in the work environment, and that is where the biggest impact can be made. Amabile continues by integrating the model with an organizational work environment. Her theory suggests that the elements of the work environment will impact an individuals’ creativity and that the
creativity produced by individuals and teams is the main source of innovation within the organization.
From an organizational point of view, some components are particularly highlighted. One is the organizational motivation to innovate, which is the organization’s elementary orientation towards innovation, as well as its supports for creativity and innovation. Amabile writes that the attitude towards innovation must come from higher management, but that the lower levels also are important in terms of communication and interpreting that vision. An orientation towards risk, that creativity is valued and an offensive strategy are some of the elements that are most important. Also reward and recognition for creative work and active communications around information and ideas are important aspects. The second important component is the management practices that are implemented in the organization as a whole but also on an individual level in departments and projects. Amabile points out that management practice for creativity include the aptitude to create good and functioning work groups where people trust each other and communicate well with one another and where they challenge each other’s ideas in a constructive way.
2.5 THE STAGE-GATE PROCESS
The Stage-Gate idea-to-launch process (Cooper, 2008) could also give guidelines for a company
searching for a useful process tool to generate more innovation value. This is a useful tool for
companies that are dedicated to escalate their innovation capabilities and want to have a very structured way to do it. Within this model different challenges in different stages of innovation are recognized and worked with. Some companies have made it a very successful tool, but it takes much commitment and will of execution to make it a part of company standards. The Stage-Gate process guides the user through a practical and hands-on scheme. It takes the user/company through five different stages; making sure all activities are considered in order to continue in to the next phase. It starts at a Discovery phase, moving through scoping, building of business cases through development, testing, validation and finally the launch stage. What makes the Stage-Gate process unique is the focus on the gates and criteria that make an idea promote to the next step. For practical implications on my research the Stage-Gate process gives detailed information on how an innovation process could be assessed; by considering the level of concrete execution to HPs routines and ways of generating, handling and implementing ideas. The Stage-Gate process emphasizes the importance of external factors when a new idea is assessed; as strategic fit, competitive advantage, market attractiveness and technical feasibility to mention a few (Cooper, 2008).
For this research it is of value to detect if anything similar to the stage-gate process is used or if similar types of criteria are used but in a more informal way. When taken into use at a company, each stage of
14 the process must be explained with clear goals and purposes and then executed with granular effort. The different stages are designed to gather information to reduce risk and uncertainties and each stage costs more than the previous one, it is explained as higher and higher bets are put into the process. A characteristic for the process is also that different people from different functions and roles within the organization are involved; it is not up to one specific department to be responsible for one stage, this applies on all stages within the process. Another part that would be interesting to find similarities with HP is the different gates and the decision points that are used. In each gate deliverables from previous gate must be examined. The project is judged against criteria which are supposed to remove projects that not will fit. The project is also scored and according to a point system. Finally, the gate consists of
outputs, basically a decision whether to go further, kill, hold or recycle the project. There is also an
action plan and deliverables for the next stage conducted.
2.6 LITERATURE CONCLUSION
All this literature gives ideas and angles for further research and for discussions. However, for my specific research topic some elements and sections are of more importance than others. Of all the ideas from the literature I will use the ones below.
The first part of the literature which will be used is the innovation radar (Sawhney et al., 2011). This tool will help to identify and categorize in which areas the case studies were activated from or from where they were originated, which potentially shows some interesting similarities or differences.
The second part of the more specific reading is the innovation value chain (Hansen & Birkinshaw, 2007), which is the base for my framework and provides a broader company perspective. The structure of the framework makes a useful tool to use when exploring HP and how they work with innovation since it covers parts like external and internal idea formation and how a company collaborates between different units. The outline of the IVC can hopefully be matched with the work flow at HP and potentially it can also point out areas for recommendation. The IVC specifically also mentions how to test an organization and how to pinpoint the weaker and stronger links, which this research strain to do. All three phases will be examined in the research.
The third important literature is stage-gate idea-to-launch process (Cooper, 2008) which also has valuable input for the research; it is a further implemented tool than the IVC. The stage-gate deeply asses the different gates within an idea funnel in a company and for my research makes sense to withdraw the main criteria from the thresholds to see if HP has something similar, even though not having implemented the sales-gate process. From this literature I will conclude if HPs criteria for
15 The fourth part which has served with some points to discuss and examine in the interviews is Kanter’s (Kanter, 2006) article on the classic traps of innovation. There is no concrete tool to apply to the research, but she mentions two subjects that are worthwhile to build in to my framework, without making it double considering the IVC. Two of her four lessons are therefore integrated; the lesson on Strategy and the lesson on Skills. The parts on strategy is integrated because it mentions two points on a more general level and makes a starting point for the discussion; if and what strategy HP has around
innovation and what their scope is in terms of size and expectations is. The part on skills I also believe
is important to build in. Skills and the human side of innovation are obviously aspects of importance, and I think it has a point to bring in this view from Kanter into the framework.
Hence, as a fifth and final part, I also find Amabile’s article about creativity and innovation in organizations interesting (Amabile, 1996). She highlights that the elements of the work environment will impact an individuals’ creativity. Since her research shows that the creativity produced my individuals is the primary source of innovation it is interesting to see if any findings around the work
environment can be made. Neither this is a specific tool, but it perhaps it will enlighten or confirm a
pattern within the organization.
2.7 FRAMEWORK
A framework was created to give the research both framing and structure. The five parts of the framework are intended to provide a holistic view of the innovation intentions and processes at HP. As an entrance and basis of the framework the first part is strategy. Before researching more about details and processes it is of importance to start with a broader view and understand what view the company has on innovation and what is said and communicated around innovation within the company. The strategy section mainly includes Kanter (2006) discussion about innovation traps; what attitude towards innovation the company has and what focus it is on the innovation efforts. Another dimension of the strategy section is to investigate if HP has anything like an idea funnel or a long term vision and structure around building an idea pyramid. The strategy section gives a background and sets the scene for the following sections. The next part of the framework is taken from The innovation value chain (Hansen & Birkinshaw, 2007) with the three phases as a tool to discover. The idea generation discusses the ways new ideas are brought up in the company and if there is a structured way to do it or not. The next section examines the idea conversion and how that is done at HP, how it is brought into a new product or service and the actions behind. The last part of the innovation value chain is idea
diffusion which is also integrated part of my framework, inspecting how a new initiative is brought out
to the organization and to customers. The final part of my framework is skills; something which just as strategy applies throughout all the phases of the innovation value chain. Skills, creativity, the human impact and the importance of generating ideas and driving innovation will be brought up and discussed from the start. Skills are discussed by Kanter (2006) and also by Amabile (1996). From Kanter’s perspective how to organize a team which is working with innovation to perform even better
16 and from Amabile’s perspective how to bring out creativity in people in order to invent more within the company. Hansen and Birkinshaw (2007) are not discussing skills as a main point, but throughout the phases they present the personal factor is always present. The framework will be the basis of my researching interviews in which I will ask and discuss the different sections one by one. This means the interviews will follow the same structure, but most likely will take different directions. The framework also functions as a structure and serves as an outline for both the result and the discussion sections.
3. METHODOLOGY
The purpose of the study is to examine and describe practices and possible processes for innovation at the HP organization. This section will describe the research methodology of the study, explain the sample selection, and describe the procedure for collecting the data and working conditions and finally provide and explanation of the procedures for analyzing the data.
3.1 RESEARCH METHODOLOGY
An inductive qualitative research methodology was used for this study (Pratt, 2009). The study was of illustrative art where interviews was undertaken to base the analysis on. The in-depth interviews were the main source of data collection as this choice of research method was most appropriate for the research question. With this method both practical implications as well as more detailed information about strong and weak areas could be discussed (Leech, 2002). As a complement to the interviews also concrete collaterals was analyzed, to double-check and support findings from the interviews. This included e-mail with conversations but also presentation materials as organization schemes and product presentations.
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3.2 SAMPLE SELECTION
The scope of the analysis was the Enterprise Group of Hewlett-Packard, one of the major business groups with 160 members with different functions; sales, product marketing, support etc. To make the data collection more focused and sharp and not only on a general discussion level, a number of case studies were selected to be the main focus of the discussions. In order to have an appropriate set of case studies that would make the research as dynamic as possible, the case studies were selected together with the contact person at HP. Three case studies were selected, representing initiatives that at the currently were in different phases of development and stages of success (Yin, 2009). The cases were carefully chosen to display one initiative which was far developed and successfully assimilated in the organization, one case which had a good start but still on its way to be even more integrated in the business and the final case was selected as it still was in a development phase and it was of value to benchmark this to the more successful ones. Between the three case studies parallels could be drawn in order to understand if and which the common factors were; what was similar and what had been done very differently, examples being the origin of the scope and practices used. A weakness of this approach could be the risk that not enough breadth is retrieved from the sample that only focusing on three case studies potentially could leave important aspects out. That was a matter considered, but still the advantages of getting discussions with more body and a clearer discussion object weighted heavier than the alternative of just randomly choosing twelve persons in the organization.
For each and every case the appropriate persons were selected to be interviewed, persons who was actively involved in the each project. The intention was also to have participants with dissimilar roles in order to catch the different types of mentalities and approaches characterizing each and every one; product type, customers and competition (Yin, 2009). Also the contact person at HP helped with this
CASE STUDY Flexible Capacity Service Converged System One Cisco Attack TYPE OF PROJECT
Develop a new set of services with a financial model behind
Localize and adapt a
corporate initative Initiate different types of activities
SCOPE OF PROJECT
Fullfil customers' need and demand through extending HPs range of
services
Bring a solution concept to customers
Bring in new ideas to manage and fight arising competition
IMPACT
Move to a service sales model, increased possibilites for customers to
buy services as they grow - increased sales and customer satisfaction
More knowledge around HP's broad supply of solutions - increased sales
Strengthen HPs position towards competition - maintain and increase sales
INITIATED 2007 2012 2013
PHASE (IVC)
Idea diffusion / idea formation (2nd
round) Idea diffusion Idea generation
STATUS
Considered successful. After long struggle a breakthrough in the
organization.
Considered successful. Localized corporate
initiative.
Still in development phase, idle for break-through
INTERVIEWEES 4+4 4+2 4+3
TIMELINE
From first idea to a functioning business model: 6 years
From first idea to integrated offering: 2
18 selection, knowing the background and involvement on each participant. Job descriptions of the interviewees were business unit manager, sales manager, product manager, contract managers and regional specialist managers to mention a few. For each case study hence four persons were selected, where some of these persons were also involved or had information on the other initiatives. In total could seven out of the twelve interviewees give information on more than one case study and therefore the amount of total twelve interviewees was considered appropriate to acquire enough data. This could be criticized by arguing that this sample not would be big enough. The interviewees can be divided into three subsets, which make the overview of quotes and information easier to comprehend and put in a context.
3.3 DATA COLLECTION
The interviews were conducted at the HP office in Amstelveen in May 2014. A total of twelve persons with the above mentioned functions were interviewed as the unit of analysis. The interviews were semi-structured. A framework and a structure was created as a basis for the interviews, but still making room for the likelihood that the interviews would take different directions and discussions. The questions were selected to get information about all the five sections of the framework and were formed to get a full understanding of every step of the value chain and which potential trap the project had encountered. The interviews always started with some lighter conversation, about my background at HP and how it was to study again, also with small talk about innovation in general and different views and aspects on that. The interview conditions at the HP premises were good, in terms of time length and organized meeting rooms and facilities. The interviewees were, after explaining the purpose of the interview, involved and engaged in the discussion and questions that was brought up, innovation and the conditions at HP obviously being an interesting subject to discuss. People tended to stay on even though time was running out, also willing help on a second round if needed.
To be aware of during the whole research process was my potential bias of having worked at HP for many years. I did have an opinion and perception of my own, hence the choice of thesis topic, of the strengths and weaknesses for creating innovation. However, during the research I tried to take an objective approach and since the interviews took place for another subsidiary than I used to work for this didn’t become a concern. Some of the interviewees I had met before. In the end, I suspect that this together with my knowledge of HP increased my credibility as an interviewer and researcher.
3.3.1 Validity & Reliability
Aspects of validity and reliability were considered. The main aspects are outlined below.
Interviewee A Interviee B Interviee C Function Sales / business manager Specialist within an initiative Business Development
19 a) Enough interviewees vs cases
Since three case studies were conducted and a total of twelve persons were interviewed, a question was if that amount of interviewees would be sufficient, as it in a quick glance counts to four interviewees per study. As already mentioned, as some persons had been involved in more than one study I could get more answers out of every interviewee, which also gave the advantage of their different understandings and comparisons over the projects. I realized that this actually could increase the reliability of my research instead of being a shortcoming.
b) Right profile of interviewees
An important aspect is the background of the interviewees. It is vital to bear with that all of the interviewees are reporting into a sales organization. Some of the interviewees have a background as sales specialists and some are managing a sales team. An aspect that I was highlighted on is to consider if whether sales persons are the right persons to innovate or not, more correctly to be expected to innovate. Perhaps this type of activity should be given to a certain job function within HP and not sales. From my research’s standby I however do claim that this sample is valid to interview on innovation, as innovation could involve the organization as a whole.
c) Enough knowledge about other undertakings at HP
Presumably, the interviewees gave me as much information as they knew they had about the conditions to innovate. However, a certain set of people were interviewed, with different backgrounds, numbers years at HP and job functions. Even though this was considered when selecting the interviewees, ensuring a good information spread, there could still be practices and processes occurring at HP that these persons don’t come to think about or are involved with in their daily job. As a researcher I could do my best in my interviews to catch this information, but in this large organization there could be certain aspects overlooked.
d) Intended investigation
Another open point about validity was to make sure that the interviews gave information on what I was researching; ensuring that I investigated what I intended to do. The discussions could take many different directions and to make sure that I got answers on my questions I had to steer them forward, keeping the discussions on track.
3.3.2 Generalizability
A final aspect to consider is if it was possible to make a general conclusion of the research. Again, twelve persons were interviewed on behalf of three case studies. Even though, as written above, it was possible to discuss more than one case with some interviewees, it could have been argued if this population would give a breadth enough to generalize. The interviewees were having very particular thoughts and arguments on matters, and it is dangerous to rest an analysis only on opinions. However,
20 the fact that the search also included practical matters and questions around processes and structure, the interviews contained a mix of views and practicalities. Due to some aspects I do think that this is possible.
1. The different profiles of the sample group give a good spread.
2. A major of the main takeaways originates from a majority of interviewees. The spread of answers and views does not differ extremely from one person to another.
3. The intended research had a practical aspect.
All-in-all, there are as well strengths as weaknesses in the methodology of the research. The main strengths are the relevance of the persons involved in the case studies and their in-depth knowledge of the different aspects. The main weaknesses are the few experts on each and every case study and the risk that there is potential information not brought up to the surface.
3.3.3 During the interviews
The interviews all took different directions and in the end turned out quite dissimilar from one another. All in all, the interviewees were positive to be able to contribute to the research and made an effort during the interviewees. All of them had ideas and visions of what innovation is and what the interviews was to bring out, but the ideas and visions were very unlike. Some persons had a strong opinion about strengths and weaknesses at HP and an idea of how that could be different and improved. Some other interviewees were more focused on the specific case study and the details that surrounded the initiative. Hence, there was a balance act to get as much detailed information as possible from the different case studies, at the same time as a more general discussion about innovation, culture and strategies also gave much useful information. In a couple of interviews I had to ask more precise questions around the idea formation and conversion, and also what could be limitations and possibilities for the organization. In other interviews there was almost no need to ask many questions at all, it seemed like the interviewees had many thoughts gathered and which now could be shared. I was encouraged to get back in touch if I had any questions or wonderings. Three persons also showed a slideshow on a PC or a drawn overview on the slides, showing examples of presentations were initiatives
Challenges could arise when I realized that too much time was spent on the details. After all, I wanted to understand the happenings in the different stages, but I also understood it could be difficult for some interviewees to see the whole picture. Of course, they could only share what they found important and perhaps a specific period they had been active in the process. A challenge was also to try to anticipate what not was told; any underlying circumstances or events that the interviewee had experienced but basically forgot to tell or did not consider as important for the interview. From my perspective also the small details was contributing to the overall result.
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3.3.4 After the interviews
With all interviews recorded on an iPad, the analysis part was started. Since some interviews lasted longer than one hour, in total approximately 14 hours of recorded material was available. With the literature and my framework as a basis I created excel document which would work as a helping tool. This functioned as the tool for finding input, information, comments and quotes within a specific section; on x-axis representing the interviewee and on the y-axis representing the topic and question, seen below. With this I got large but manageable overview of the data. Throughout the transcription and analysis a broad set of thoughts were noticed and noted, however not everything is fit for the thesis and research question. With all the analyzed data I got a foundation for discussion and a sense of what the strengths and weakness were. However, to digest and reflect on the outcome I discussed it with the contact person at HP a couple of weeks after the interviews. With this I could discuss a couple of questions and bounce the findings and hopefully also get if not objective but other subjective view on some aspects.
Name X
Role X
Case study X
Background of initative General comments / history Strategy Company culture
Product driven / revenue driven Patient to build a funnel, portfolio of ideas
Programs Idea formation / generation Forums for ideas
Internal collaboration External input
Management involvement More obstacles / possibilities HP capabilities to innovate Idea conversion Management support
Tight controls: Planning, reviews, financing
Risk aversity
Integration with mainstream business Connections between innovations and the rest
Idea diffusion In existing business Communication int & ext Skills Personality - what does it takes?
Own initative, time, drive Other comments
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4. THE THREE CASE STUDIES
As a basis for the interviews undertaken for my thesis, a couple of case studies were selected. These case studies would represent three different initiatives with three different characters in three different stages. The first one representing a successful case of innovation already established in the market. The second one would represent successful case which came from corporate headquarters and after a full local make-over was introduced in the organization and market and in the end successfully standardized as case number one. The last case chosen is an initiative which not yet has reached any success within the organization or market, and is still in a developing phase. There is a wish to make this a successful initiative but something makes it stagnate in development. The combination of these three different cases would make an interesting and dynamic base for the research.
Case 1: Flexible Capacity Service - established service
HP has a good position as a trusted advisor with many customers, which is a major advantage instead of selling products only on discounts. Some initiatives came from customers where an extended customer relationship is the foundation and where an open dialogue and discussions have been taken place. With the innovation now called Flexible Capacity Service, FCS, the customer was looking for flexibility; solving cash flow problems for customer adds value in another way than previous hardware sales. The idea behind FCS originated from something already existing within another business area, but further had to be developed.
The original offering was called URS, Utility Ready Storage, and which originated from the storage business unit in around 2007. Customers had a long time been asking for accessing data storage at the same pace as they were growing, without paying for extra storage space and with the risk of an upfront investment and binding too much money into IT infrastructure. They wanted to use storage in a different way, and at this point in time the cloud was not what it is today. The idea of URS was to provide the customer with only the storage that they needed for a particular moment, and also to be able to expand it on demand. However, it turned out that this was quite a complicated idea to realize. HP did not want to take a too big of a risk in putting hardware on customer sites for which they immediately not could yield revenue and the process of selling this to the customer seemed to be taking a long time.
This idea had originated with management support, and attempts had been made to make it to a good business model, but the earlier idea and test pilot showed to be loss making. The questions was if and how could this be turned around? Even though HP was making a loss or having a difficult time making the request into a concrete offering, the customers where still requesting such a service. The development of precisely this service is an evolution that has been taking years, and according to the five interviewees who are working with this initiative it is much of hard work put behind. Step by step
23 in the right direction and high work intensity level has led to the success story the Flexible Capacity Service is within HP today.
From being a solution offered by the hardware division it was moved in to the service organization which presented a totally other possibility, and challenge, to offer it to customers. Certain individuals were convinced that this solution would be an offering for the future, and with that determination they kept on developing the proposal. Today, just a few years later, we see that the IT landscape is moving towards services, but a couple of years ago it was a hesitation to start moving that direction. Looking at the Innovation Radar (Sawhney et al., 2011) and the twelve dimensions of innovation, the invention of FCS took place at a couple of the dimensions. The main one is the offering dimension where the creation of a new service which was asked for by customers took place.
A new solution was created, presenting a new financial model which earlier not had been possible to sell in such a supple way. The other dimension were the FCS was innovated on is the customer
dimension, as the customer was one of the sources of origin for this service. Especially the value
capturing dimension stands out since the FSC is a new way to create revenue streams. As an indirect impact one could also mention organization as a dimension, as the new service helps the firm to change towards a more service oriented approach. With a dedicated team and solid management support the Flexible Capacity Service is now adopted as a worldwide offering and service, and the solution is now in further development stages. This is considered as one of the most successful innovations from a local subsidiary, and in this research I will look into the details of the process.
Case 2: Converged System One – converted and localized
The background from the next study initiative originated internally. HP had on a worldwide level created packaged offerings for a specific solution. The solution was called BladeSystem Matrix and consisted of specific pre-configured servers, storage and network, all ready to sell and ship. It was a solution build to prove the strengths of the total offering that HP could provide in terms of a datacenter solution. In the US there were quite many companies that could be target for such a large solution, but on the Dutch market it turned out to be another story. When presenting this to customers in the Netherlands, one realized that this multifaceted sales offering in the end was too complex for the customers to comprehend. And a complicated offering that a sales person upfront knows do not fit customer needs will most likely not be a successful sell. The sales message and solution was by HP sales force brought out to customers, but without direct success. From a worldwide level, targets were set on each region and country in terms of units sold on this specific packaged solution, which created a certain pressure on the business unit.
Instead of leaving it at that and keep on pushing for the Matrix, some persons started to change the marketing and sales message, making it more adaptable for the customers. This could sound like an
24 obvious thing to do, but to invent a new packaged solution and concept in the processes of HP is not easily done, approvals from many different levels needs to be received. The solution that was created was called Converged System One, CSO. It was based on a worldwide product solution, but adapted and changed to fit another audience. The visions of its creators were to make things simpler and easier both for customers and for the sales force. In the interviews it was compared with the packaging of a car; it is actually only a few couple of elements that concern the buyer, he is most likely not interested of knowing all the components of the driving vehicle. What he might be most interested in is the color of the car, the wheels and the capacity of the engine.
The CSO was packaged and presented in a way similar to that. Also with this initiative it became a very personal engagement for the people involved, also in the sense that they knew they would reach resistance. When the solution finally was approved and packaged, it was launched together with local marketing activities and campaigns. The offering gave a new possibility to present the message and strength of HP; the trilogy of servers, storage and networking. From what hindsight could appear as a simple change or implementation of a new packaging, there are lessons to be learned about engagement, processes and innovation at detailed level.
On the Innovation radar offering is again a dimension where innovation took place, together with
value capture, potentially through presenting a new offering expanding the ability to reach out to
partners and customers in a different way. Without working directly with the brand, the scope of the initiative is still to let HP illustrate as a company with entire solutions. It is a study where it is transparent how important every part of the innovation value chain is (Hansen & Birkinshaw, 2007) and it is also an example of how important it is to have a strong marketing message. It makes it comprehensible for the customer, but as one of the interviewees commented they still have to be flexible; “(…) but in the end, if a customer says he want to buy a Matrix, we build something together and call it a Matrix”.
Case 3: Cisco Attack – a vision of activities
The last study focuses on an initiative that still is in its evolving phase, where a commercially product or service not yet has materialized. The Converged System One could be considered as a part of this undertaking. The initiative is within HP called Cisco Attack, CA, and as the name suggests is easy to reveal the objective and mission behind. At an early stage during my interviews it became clear that this is a project “on demand”, as opposed to the FCS where there is a customer asking for special needs or requirements or to compare with CSO which was created to bridge an HP offering and the market.
The concept Cisco Attack was created by the HP organization in order to put attention to one particularly important area. It is focus area that is recognized worldwide which drills down to the sub
25 regions and countries, and the local subsidiaries are encouraged and demanded to act on this. The past years increased competition from competitor Cisco within areas such as servers and networking has made HP fear that market shares and sales will decrease, which already is the case. In order to tackle this, HP has to be innovative in terms of sales, marketing, keeping, managing and investing in new customers. In the Netherlands, this initiative has been dedicated to be driven by a couple of persons, and they are working on filling the heading “Cisco Attack” with appropriate content, ideas and innovation. This means that there is another angle of this initiative than the innovations above, which also clearly comes across in the interviews. It is an area which get focus and attention, but still not is measuring up to wished outcome; something more concrete and tangible. This is also the reason why this case was chosen for the case study; to see what type of activities has been taken place for this initiative. The interviews will draw attention and reflection how this could be and what a potential weak link in the chain could be. It is not yet clear where this initiative acts on the innovation radar, from the interviews it becomes transparent that the solution, the customers and the customer experience seem to be the main dimensions where this will take place.
These three case studies; the Flexible Capacity Service, the Converged System One and the Cisco Attack were the starting points of my discussions and conversations with respective interviewee. Together with the usage of my framework it generated much information and many opinions and reflections. In the following piece of reading this data is presented, in an as detailed version as possible. The main points of the framework serve to be the headings and later on, main focus of analysis.
5. RESULTS
With the framework as a basis the main aspects makes the headings and discussion points.
5.1 STRATEGY
5.1.1 Creating a supporting culture
In the interviews almost all participants confirm that employees are triggered to work independently and to be creative in the way to work with the customers, with processes and with business models. A majority of the interviewees explain that this is something that just is in the corporate DNA of HP, you just know it is that way. However, a few others mention that this has to be reminded and prompted for people to actually be aware. One interviewee comments that the fact that there is a great deal of independence must be clearer communicated. And however, open management support alone would not be enough to trigger local innovation. In some aspects the motivation for innovation is product and revenue driven within HP, the initiative called Cisco Attack being a good example of this with four of the interviewees point out this specific task.
