International Innovation Management

Companies are under increasing pressure! New products have to be developed at ever shorter intervals as a result of increasing internationality and customer demands. International companies, in particular, are trying to increase their competitiveness by increasing the synergies between subsidiaries and locations. There are often significant overlaps in the product or competence portfolio.

In the case of subsidiaries with their own profit & loss responsibility, processes are optimized in line with their market requirements, aiming to be able to react quickly to the changing needs of their customers. Such decentralized innovation structures make it difficult to exchange information across company boundaries. But it is exactly in the area of innovation, where time and resources are scarce, and especially in industries with long development and product life cycles, the lack of cooperation and lack of innovation management can become a competitive disadvantage.

The key to success is to coordinate the innovation strategies of the individual subsidiaries with the desired positioning of the company. This is only possible if the Group management has insight into current developments and planned investments at various locations and can influence them. This responsibility should be ensured by a neutral body (e.g., corporate development or the CTO). Its task is to optimally bundle and allocate the innovation activities, available resources and innovative capabilities of the individual companies.

So how can Group managements exploit the synergy potential and increase their innovative capabilities? Our experience shows that the following measures make it possible to manage innovation activities throughout the company:

Measures to control innovation activities

• Harmonization of innovation processes
• Superordinate portfolio management
• Measurability of innovative capacity
• Operationalization through user-friendly innovation tool

1. Harmonization creates transparency and ensures effective decision-making

In harmonized innovation processes, innovation activities run through identical phases and decision points (so-called milestones) – regardless of the location or subsidiary at which they are carried out. This enables evaluation and decision criteria for “go” or “kill” decisions to be applied homogeneously and thus to be comprehensible for the company management. This makes the innovation process more transparent and the decision-making process more effective and consequently faster.

2. Superordinate portfolio management secures the basis for decisions on targeted resources and budget allocation

Detailed information on the management of the various portfolios (trend, ideas, concept and project portfolios) is periodically brought together in a management process appropriate to the level in question, where it is evaluated at the respective milestones from an overall operational perspective and thus subjected to conscious and transparent decision-making.

3. The measurability provides direct feedback on the impact of the innovation activities

A defined and meaningful KPI scorecard serves to develop further and perfect the process and the respective innovation activities. To determine and specifically increase innovation capability, process effectiveness, and efficiency must be made measurable using uniform performance indicators.

4. An innovation tool increases the focus, reduces the effort and thus facilitates control

A user-friendly innovation tool supports the focusing  and identification of essential trends, efficient clustering of ideas, and strategy-based portfolio management. Many companies also observe that the clean and consistent management of innovation projects is a heavy administrative burden. Our experience shows that this effort can be reduced massively by using an easy-to-use tool.

As the world’s leading supplier of individual solutions in the special steel sector, the customer set itself the goal of renewing its product portfolio by around 16 percent every six years. To achieve this goal, the integration of the business units (BU) was strengthened as part of a Group initiative, thus pooling the innovative capabilities of the business units. The client was the central “Technical Development” department. Involved were all R&D facilities of the 4 BUs with a total of approx. 400 development engineers.

Aim of the project

The aim of the project was to create the conditions for the central coordination of Group-wide innovation activities in technical development. To this end:

• the innovation strategies of the BUs were to be aligned,

• transparency was to be created using harmonized innovation processes, 

• the control and measurement of the innovation pipeline was to be made possible using uniform KPIs, and

• the management of the innovation project portfolio was to be facilitated from a Group perspective.

Approach

The project comprised four phases. The planning was developed by the core team and approved by the steering committee, which was made up of the divisional and business unit heads.

1. Analysis phase

In the first step, all relevant information on existing R&D resources and facilities, ongoing projects, and planned strategic investments was collected. The collected data were reviewed together with representatives of the BUs. At the same time, the BU-specific innovation processes were recorded and analyzed. The best practices identified (e.g., evaluation methods, KPIs, IT tools, etc.) supplemented the design criteria for the design of the target process, which were defined in advance together with the technical development.

2. Process Target Design

Based on the established design criteria and the knowledge gained from the actual recording, a target process was designed, which is valid for all BUs. This “target design” was agreed upon in bilateral meetings with the BUs and approved by the steering committee.

3. Detailed Design & Roll-out Plan

After the adoption of the basic structure of the target process, all process steps and milestones were elaborated and documented in detail. Based on this detailed description, it was possible to determine the implementation effort using gap analysis and design BU-specific implementation plans. Additionally, the service catalog for the development of an IT tool was specified, with the help of which the required information – for example, on ongoing projects – can be transmitted directly to the Group.

4. Design of the micro-level

Finally, it was possible to realize the synergy potentials and anchor them in the functional areas of engineering, production, and purchasing using cooperation and center of competency models. Their project expenditure could be reduced to a minimum with clear methodical management and well-prepared work packages.

Results

The results are impressive! The five most important ones were:

1. Harmonized innovation processes at Group and BU level (based on a best practice approach)
2. Adapted coordination and control process (coordinated with other functional areas of the Group such as business development)
3. Specified catalog of requirements for the IT tool
4. Adaptation of the organisational design by introducing competence centers (for three cross-divisional Steel Groups and for new technologies)
5. Innovation cockpit with newly defined key performance indicators (KPIs)