Thursday, October 11, 2012

It’s Budget Request Time! Business reasons for collaborative innovation technology: Cost Justification for your idea management software

First things first.:  Every large organization will have a social network dedicated to innovation.  But someone has to ask for the budget to get this done.  Unfortunately, requests like “What’s the Return on Investment for this Innovation software” in the Innovation world are typically addressed with a correction to advise people to instead consider the “Return on Innovation”. 

This blog entry will give you some guidance how to go about justifying a budget for innovation technology.

How to go about it:
It is relatively easy to point out the value of an incremental innovation yielded from an unsolicited idea.  For instance if someone says, “If we just do this, we’ll save some money”, you know how much that “money” is worth.  How do you quantify in dollars the value of a breakthrough idea that leads the company to open up a new division?  How do you value hundreds of them?  It’s a bit harder.

It’s more than just your gut feel:
Your management has told you to figure out how to use all your resources; to collaborate more with other departments and with your vendors, your partners and your customers.  Well here’s the technology that can enable that charter.

We all know social networking and business communication are becoming intertwined.  All of us send social media messages and soon they’ll completely replace email.  We stay connected at our desks and from our phones.  Social media are a part of doing business.

We all may know intuitively that social networking software, specifically those dedicated to innovation, are the future of business communication.  But that’s a tough sell when you’re asking for budget at the enterprise level.  Well here are some ways you can cost justify a purchase like this for enterprise collaborative innovation technology.

It’s not that hard:  The mechanics of an innovation budget request…
The reality is you have to look at your organization, think about what they do today…and capture a vision of what life will be like when all those smart people are collaborating on an ongoing basis.  So for instance, one company I know has scientists working on a specific issue (carbon bonding).  These scientists are in different divisions and different time zones.  With a collaborative innovation technology they collaborate on an ongoing basis.  Before they got together once every two years.  Working together, they’ve been able to spend significantly less time working on problems and challenges as when they worked as isolated individuals.  They can actually count the number of saved hours (and how much each hour is worth).  The system pays for itself in weeks!

Examples (get those creative juices flowing):

  • ·        So think about the value of having new products developed faster.  What’s that worth? 
  • ·        Think about the value of feedback from your teams that produce improvements in your processes. 
  • ·        Think about how important it would be if someone points out an industry trend that leads your organization to do things completely differently and you get into a whole new business. 
  • ·        Think about the value of challenging your workforce to come up with solutions to the problems management discuss and worry about….and having them come up with a thought management has never considered.
  • ·        Or if you’re doing all this innovation activity without a collaborative innovation system, think about how much time is spent manually filtering through ideas trying to figure out which ones are best, what categories they go into, etc.  A set of technologies can make these people more productive and you can count these hours involved. 

Let’s get started with the math:
Make your own work sheet.  Saved dollars.  Saved hours.  New revenue.  New market presence.  Add all these dollars up and I guarantee it will be such a huge number that you can cut in half….and in half again and still have a cost justification for collaborative innovation technology.  That number should make you confident enough to ask for the budget dollars.

While you’re reading these, make note of how much money is spent on these activities in the absence of a collaborative innovation technology, or idea management system.  Odds are you can come up with the ways a system like this can pay for itself in short order.

1.       Connect and Development.  I wrote about this a year ago.  It has been proven it is more cost effective to “Connect and Develop” rather than merely rely on “Research and Development”.  Others out there have already put the time, energy and money into finding a solution just like the one you seek.  It may be for a different industry or application, but if you can find it, it’s cheaper and faster than asking your internal teams to start working on it.  The famous example is the “slicer” needed for industrial plastics that used the slicer developed for cheese with some modifications.  By asking other users in a collaborative software arena, you can tap into the collective knowledge of many others to find out what you need to know.    

Count how much time is saved by connecting with experts to get answers that replace time doing research.  Add that value to your total.

2.      Finding Experts.  You can’t possibly know everyone who works at your company, let alone have an in depth knowledge of their expertise.  Collaborative software monitors the contributions of the user community, noting behavior and identifying certain skill sets.  If a user constantly makes contributions about “slicers” (might as well stick to the same example) you can find these folks when you search the topic.  And when you’re looking at an idea in the collaborative system that has to do with slicers, the software can actually suggest slicer experts.  A bonus here is when you’re looking at a potential expert, the technology can identify other users who have similar attributes with measurable relevancy scores (“if you find this person interesting, you may find these other people interesting as well”).  

 Count how much time is saved by connecting with experts to get answers that replace time doing research.  Add that value to your total.

3.      Saving Money.  No one knows your business as well as your coworkers.  As they spend their days working they note small flaws that can be easily corrected.  This is the old “suggestion box” story.  Someone makes a contribution to the collaborative innovation system of this “unsolicited idea”.  “If we just did X, we’d be more productive and save money”.  By having the “crowd” of coworkers vote on these types of “incremental innovations” the organizations can get a list of the best of these ideas.  In other words, if the posted idea gets a lot of votes, it must have some merit.   

Count how much time is saved in improved processes and the value of that time.  Add that value to your total. 

4.      Making money.  Your collaborative innovation system can enable submissions that turn into new sources of revenue.  Your sales people and customer service types are in contact with your customers.  If the customers are asking for something that your company is not offering, the submission of this “idea” can alert product management types that a need in the marketplace exists.  Better yet, you can open up the innovation social network to your customers, providing a place for them to submit their ideas for new products.  

 Count the additional revenue to be realized from new products and the speed you bring those products to market.  Add that value to your total.

5.      Problem Solving.  When someone on your team has a problem, they can use the collaborativeinnovation system to find answers.  First off they can search the existing contributions in the hopes of finding answers, bring up those contributions and review them.  If that fails, they can “ask” the rest of population for help.  “I’m running into a problem, has anyone else out there dealt with this issue before?”  Coworkers make submissions to help.  Problem solving is a great scenario to open up the collaborative innovation social network to your company’s vendors.  Your suppliers might be able to point out they have a solution to answer one of the problems you’re facing.   

Count the time saved by getting rapid answers to questions rather than spent researching an answer.  Add that value to your total.

6.      Getting into new businesses.  We all know the story of the buggy whip manufacturer.  They made better and better buggy whips, buying out his competitors, eventually having a monopoly on the buggy whip market.  But someone had to stand up and say “Hey wait a minute… shouldn’t we be making automobiles instead?”  Breakthrough or Disruptive Innovations are typically the result of “Solicited Ideas”, likely submitted as a result of a Challenge or a Campaign.  With a collaborative innovation software system, management can tell everyone, “listen I’m glad you guys are all talking together, but do us all a favor and talk about this:”… With this being the issues management has identified as mission critical.  Challenges might ask the worker population questions like “Where do you see our industry in five years?” or “What new products should we offer our customers?”   

This one is tougher, but consider how much revenue you can add to the total realized as a result of getting into a market you otherwise would have missed.  Add that to your total.

Other arguments to support your request:

More than seven years ago Ruth Ann Hattori, partner, ThinkSmart, published a paper asking “what is the cost to your company if you don’t innovate?”.  She encourages you to ask questions like “In the past three years, have any of your competitors brought to market an innovative product/service that you had the capability to create?”

Clay Christensen and Michael Raynor talk about the risks of over analysis.  If you insist your ideas prove value before they’ve had a chance to be enriched, you’re likely to kill off the best of them before they see the light of day.  This thought is encouraging you to go to management and tell them, “Forget about cost justification and return on investment; if we don’t commit to innovation we’re going to get taken to the cleaners by our competitors”.

When you take into consideration all the benefits of having your work force work together along with the productivity associated with automated mechanisms to manage the innovation process, you’ll quickly come to the conclusion a collaborative innovation system is cost effective…and you’ll be able to convince those who hold the purse strings.

To learn more about how technology can enable your organization's innovation program, please register for our free upcoming webinar:  The top dozen ways to make the job of the innovation manager easier”.
Please enroll now in our free webinar!
I’ll explore the challenges of how to optimize user adoption with the effective use of innovation technology oriented solutions in our upcoming webinar:  The top dozen ways to make the innovation manager’s job easier.  You can easily register for this complimentary event here:  Take the time to join your peers for a few minutes next month and learn how other organizations are making the innovation process work for them. 
Ron Shulkin is Vice President of the Americas for CogniStreamer®, an innovation ecosystem.  CogniStreamer serves as a Knowledge Management System, Idea Management System and Social Network for Innovation.  You can learn more about CogniStreamer here
Ron manages The Idea Management Group on LinkedIn (Join Here) . You can follow him Twitter. You can follow his blogs at this Facebook group.  You can connect with Ron on LinkedIn
CogniStreamer® is an idea management software tool.  It is an open innovation and collaboration platform where internal colleagues and external partner companies or knowledge centers join forces to create, develop and assess innovative ideas within strategically selected areas. The CogniStreamer® portal is an ideal collaborative platform that invites users to actively build a strong innovation portfolio. In addition it provides a powerful resource for internal and external knowledge sharing.  The CogniStreamer® framework is used by industry leaders such as Atlas Copco, Bekaert, Case New Holland, Cytec, Imec, Phillip Morris, Picanol and ThyssenKrupp. CogniStreamer®

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