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1. Introduction
Idea Management is the practice of systematically collecting focused business ideas with
the goal of selecting high impact concepts that generate tangible and intangible benefits
for the organization. Idea Management is implemented as a process, supported by
computer software, and involves a core group of process experts, together with the
support of management and the participation of employees.
According to Bain & Co.’s Innovation Survey 1, 91% of executives across all industries
believe that increasing their company's capacity for innovation is "critical to creating
future competitive advantage and earning profits". Idea Management provides a tangible
infrastructure to deliver this capacity. Like all processes, Idea Management requires an
investment of time, people and money in order to implement and maintain the process. It
is, though, a relatively new discipline, and companies are usually implementing the
process for the first time, or are replacing a failed program. Companies therefore are
seeking to justify the required investment in Idea Management and increasing their
innovation capacity in general.
The goal of this White Paper is to demonstrate that the Idea Management process,
particularly the event-based approach, delivers significant and measurable results.
Moreover, we recommend that companies use this White Paper to build a business case
to support the acquisition of appropriate internal resources, external expertise, and
process support for their Idea Management activities.
1
Bain & Co. Innovation Survey 2002, published in Harvard Business Review (Oct 2002).
At the most basic level, companies collect ideas from brainstorming sessions and other
sources, and store them as an Idea List in an Excel spreadsheet or some other simple
system. This is too basic to be considered an Idea Management application as there is
no idea sharing, no support for a review process, and no attempt to strategically harness
ideas for business advantage.
Figure 1: ROI depends on the type of process and the quality of ideas
The next level is the traditional suggestion box. Suggestion Programs – or schemes as
they are known in the UK - can generate significant cost savings, with research showing
an average cost saving per implemented idea of $5,5382.
2
Employee Involvement Association, Statistical Report (1998).
These programs tend to have little collaboration, are heavily focused on cost reduction
and process improvement, and are mainly used in manufacturing environments. Indeed
less than 10% of companies using old fashioned programs collect revenue generating
ideas.3
Basic Idea Management systems are similar to Suggestion Boxes in that they collect
ideas, and provide evaluation tools to select top concepts. They offer additional benefits,
though, as they tend to collect both cost reduction and revenue generation ideas.
Basic programs tend to restrict who can access the ideas and who can build on ideas,
effectively formalizing the old ‘black box’ mentality of the suggestion program. Some
programs offer limited idea collaboration tools, but in practice these features usually go
unused4. Moreover, many of the ideas generated through this method offer narrow
solutions that sometimes create negative impacts elsewhere in the organization.
The shortlist for the “Environmental Idea of the Year 2002” competition
included an idea from 3M UK. The idea was a combination of waste reduction
and cost savings: The UK group produced a significant volume of paper
reports. The idea that was proposed and implemented consisted of printing
double-sided reports, thus reducing paper use and expense. The company
presented an analysis that demonstrated a cost saving of £5,700 per year
(approximately $9,000), although the focus was on reduced waste.
Unfortunately, another employee had the idea to save even more money by
buying cheaper paper stock. This paper stock jammed up the printers when
double-sided reports were printed, causing time waste in the business, and
frequent on-site visits from the printer repair company 5.
Our research has found that collaborative idea development is critical to increasing the
value of the top ideas, and raising the probability of developing high value concepts6.
Advanced Idea Management systems use the collective brainpower of employees and
externals to generate raw ideas, and also take advantage of asynchronous collaboration
3
Employee Involvement Association, Statistical Report (2002).
4
The Idea Central product from Imaginatik has used collaboration functionality since 1999 (V1.0). However, our
research found that only 2 - 5% of ideas attracted comments and collaborative builds despite the existence of
the functionality. In 2002 the company embarked on a research project to identify the reasons for low
collaboration, and as a result implemented a number of changes to the software (V3.5 onwards) and the
business process to improve use. Thanks to increased user friendliness and the inclusion of more direct
collaboration tools, many companies now report that 50 – 70% of ideas attract builds, and that almost all top
concepts have been collaboratively developed.
5
IdeasUK Conference 2002, Chester (UK).
6
“Building Ideas Through Collaboration”, Imaginatik Research (Oct 2002) and “What Makes Online
Collaboration Work”, Imaginatik Research (May 2003).
tools that allow geographically dispersed individuals to refine the ideas, and work on
concepts at an early stage. As a result, the idea pool is richer and deeper than a mere list
of suggestions.
In addition, Advanced Idea Management systems are designed to support focused idea
gathering around events or campaigns. This approach is based on the concept of
directed ideation and yields ten- to thirty-fold more high impact, high value concepts than
the ongoing Idea Management approach. The top companies use a combination of
ongoing and event-based idea gathering initiatives to maximize the chance of finding top
concepts.
In order to calculate the Return on Investment, we consider only the use of Advanced
Idea Management systems that cover a broader range of business activity, through the
support of effective collaboration, concept development, and event-based idea
generation9.
Advisory Services Consulting advice and guidelines help structure the Idea
Management activities, and provide key skills and frameworks to
the main stakeholders.
7
For example, SimNet from TQS.
8
For example, Prism from ISDE, NextNet from General Ideas, and IdeaLink from BrainBank.
9
For example Idea Central 4.0 from Imaginatik (Winner of the Basex Excellence for Collaboration Award - May
2003).
Other External Other costs may arise through the use of research databases
Resources (e.g. subscription to a global NPD database of products), the
creation of marketing materials for Idea Management initiatives,
etc.
Reward & Rewards and recognition cover any additional costs beyond
Recognition normal salaries and bonuses, that reward people at a financial
cost to the company. In most organizations the cost is negligible,
but some firms pay a percentage commission based on net cost
reductions, which may prove to be a sizable ongoing amount.
Even though Idea Management is a new process, most companies have some form of
innovation activity currently underway. A company can either consider this as a base
level of infrastructure with sunk costs and therefore only take into account the additional
improvements, or count the whole investment amount.
Companies spend varying amounts of money to support their Idea Management projects.
Research by Imaginatik has found that internally developed basic and advanced Idea
Management systems cost significantly more than commercial software packages. A
leading Wall Street bank spent $2 million to design and built an in-house Idea
Management system in early 2000, only to cancel the project before it was complete.
Several consumer product companies have spent upwards of $250,000 building systems
internally or using outside IT contractors. In contrast, most companies who purchased
commercial software spent not more than $250,000 on software licenses, and the
majority spent less than $100,000 for all external services.
In addition to the software cost, companies often follow a rule of thumb of spending two
to three times as much on the internal resources to support the implementation. This
varies substantially depending on the company, however.
Finally, some companies have provided a break-down cost on a per event basis for the
provision of innovation services to their internal ‘customers’. This cost encompasses all
relevant fixed and variable costs for running the program over a sustained period of time,
and is used to cost-justify internal events, and in some cases for cross-charging services
between departments.
Advanced Idea Management systems and processes can be applied to many business
activities, from opportunity identification and product development, to commercialization
and process improvement. The types of return can be classified in three major areas:
returns from specific ideas, returns from improvement of the company’s innovation
processes, and benefits from the achievement of other corporate objectives.
Return from Specific Ideas The top concepts generated and selected from an Idea
Management program will yield tangible benefits
through their implementation. Examples include
products that generate additional revenue, sales and
marketing tactics that accelerate revenue growth, and
process improvements that reduce costs.
The connection between the original idea and the financial return of the concept’s
implementation is not always easily established. The output from the Idea Management
system is a prioritized list of ideas which may require extensive development efforts
before they can be implemented. Most submissions are raw or seed ideas that are often
described merely by a few lines of text, occasionally supplemented by a chart or picture.
In some cases, the Idea Management process is used to collect ideas that have already
been implemented elsewhere in the organization, in which case the return is quite certain
and easily quantifiable.
10
Source: Company information.
11
Cap Gemini Ernst & Young, Center for Business Innovation (1998).
Most ideas require a significant amount of creativity, hard work and resources before they
can be implemented, and therefore the success of the concept is only partially due to the
original idea. Yet the return would not have existed without the seed idea, and so the net
revenue or cost saving should be counted as a return from the Idea Management
program.
The ROI can be calculated based on either identified returns (i.e. the projection of the
expected revenue increase or cost saving) or realized returns (i.e. when the projects
have been implemented).
Given the diverse nature of the application and the types of return, we will consider the
benefits in detail for the following areas:
?? Revenue Acceleration
?? Process Replacement
?? Employee Involvement
Managers can mistakenly assume that they fully understand the target market for existing
products, but they fail to consider alternative markets and uses outside the core
business. Idea Management helps to broaden the pool of potential contributors,
increasing the likelihood of market growth ideas and concepts.
The ROI for new markets for existing products is measured as the specific returns from
newly identified or realized market opportunities.
Idea Management events are frequently used to generate a pipeline of new products
concepts, promising technologies, and service innovations like high impact marketing
initiatives. The diversity of the idea pool allows the organization to tap into a wide range
of experiences, insight and knowledge, and to make use of the fact that the company’s
employees and their families are often critical consumers of its products. Moreover, the
collaborative aspects of Advanced Idea Management systems, such as Idea Central,
provide an opportunity for employees to build on other people’s ideas, turning originally
poorly-defined ideas into high quality concepts.
The ROI is therefore measured as the specific returns from identified or realized
opportunities for new products and other growth concepts.
Companies invest heavily in the creation of new products and services, but often fail to
take products to market quickly and effectively. There are relatively few organizations that
systematically focus their innovation efforts on the commercialization phase of new
products, and yet this is an area ripe for improvement.
The use of Idea Management events at this phase can help generate ideas to speed up
the launch process, find new tactics for marketing and selling the products, and develop
methods of accelerating production adoption and maintaining ongoing purchases of the
product. The entire idea pool of an organization, stretching from manufacturing through to
sales and customer support, can be tapped to generate and share high quality ideas, and
be used to develop and sanity check plans prior to implementation.
The returns from revenue acceleration are quick to deliver and relatively easy to measure
based on the benefits of the specific ideas selected for implementation.
Bristol-Myers Squibb used Idea Central to collect product launch ideas for their
Glucophage family of diabetes products. During a four-week event in June
2001, 3,000 employees worldwide were invited to contribute ideas to help
accelerate the launch of these critically important products (the patent on the
original drug was due to expire in January 2002). The employees generated
500 ideas and 12 were selected for implementation. In the first six months of
launch, the drugs booked $633m in sales, exceeding market expectations by
over $200m – and the result of “innovative direct-to-consumer marketing”. 12
The Idea Management process can also be used to generate process improvement and
cost reduction ideas. There is normally a threshold of what constitutes a top concept,
usually a certain dollar value of cost saving. The individual ideas selected generate
quantifiable returns in their own right, and these can be allocated to the Idea
Management program.
IBM Software Europe was looking to improve internal processes and drive cost
reductions. The CEO of the division sponsored an Idea Central event that
generated 150 ideas over the course of four weeks. The top ten ideas
generated a realized ROI of over $435,000 in the first year. The top idea saved
$300,000 through reduced IT expense in the use of transnational computer
networks. The idea came from an administrative assistant in Holland. 13
There are a variety of ways that a company can solicit and develop new ideas for a
business area. Some organizations, such as Hallmark and Cadbury Schweppes, have
developed a strong in-house capability for brainstorming. Others tend to use external
consultants or marketing agencies to facilitate creativity sessions.
Most of these methods involve a significant time commitment from a relatively small
number of senior people. The cost of a creativity session is between $5,000 and $25,000,
with out-of-pocket expenses for outside consultants and business travel. Some
processes require a much greater expense, with ethnographic studies costing $100,000
and up, and some specialized creativity sessions costing even more.
Focusing on the goal of the session, namely the generation of high quality, innovative
concepts, it is clear that a well-designed event can yield similar returns in terms of quality
concepts. The Process Replacement approach considers the organization’s current way
12
Wall Street Journal, March 2002 & “Innovation in Action: Bristol-Myers Squibb” Imaginatik Case Study (2002)
13
Source: Company Information.
of managing innovation, and compares its cost with that of introducing a new Idea
Management method that should deliver equivalent or better results.
Imaginatik clients report that the average cost of running events supported by Idea
Central is $2,000 to $3,000 per event, based on the overall cost of implementing and
maintaining the program and running a number of events per year. They have therefore
been able to demonstrate a significant return by inviting their employees to participate in
events, rather than use costly external resources.
This replacement should not be taken to extremes, though. In fact, research has found
that the combination of specialist support for creativity sessions and a robust Idea
Management environment, provides the optimal range of tools to cover most innovation
requirements. It is not an either-or decision, but a decision on how to prioritize precious
financial resources, and which tool to use for a particular task14.
The Keepsakes division of Hallmark Cards was looking for product ideas to
generate $5m in revenue for the 2004 season. In September and October 2001
they conducted a series of innovation activities to generate high quality
concepts: a four-week Idea Central event, a three-day creativity session with
senior management at the Eureka Ranch, a request for input from the MIT
Media Lab, and internal brainstorming sessions with the project team. Six
concepts were selected from all the methods, and were tested for marketability.
The top concept came from an employee in the Advanced Technologies group
– through Idea Central.
In a similar vein, events can be used to ‘stretch’ budgets of departments under budget
pressure, by replacing expensive methods with less expensive Idea Management events.
This allows the department to make better use of existing resources, whilst applying
innovation processes to all areas of the business.
Mott’s Inc., a food and beverage company, has used Idea Central to run over
twenty-five events in 2002 alone in a range of different business areas,
including brand naming, developing new marketing concepts, and new product
development. The use of employees to drive ideas has allowed the marketing
14
“Involve Everyone in the Innovation Process”, C. Prather & M. C. Turrell, Research & Technology
Management, Vol. 45 No. 5 (Sept 2002).
The lack of quality concepts towards the front end of the Innovation Pipeline15 increases
the likelihood that the projects selected for development will be sub-optimal and more
likely to fail. In addition, there is a lot of scope for collaborative input that can help
improve the concepts at an early stage, highlighting potential trouble areas that can turn
out extremely expensive later in the process.
A successful Idea Management process helps by augmenting the quality of the ideas and
projects in the pipeline, thereby saving significant amounts of resources that may
otherwise be wasted. In addition, the process can improve the efficiency of existing R & D
and product development efforts by making better use of scarce resources.
The diversity of ideas is increased by opening up idea gathering to the wider employee
population, and this in turn raises the likelihood of yielding radical breakthrough products,
technologies, and concepts.
One of the softer benefits of Idea Management is the promotion of a more open, risk-
inclined culture. In certain industries, companies are very concerned to attract the best
talent, and often this is achieved through being formally declared an innovative company.
The top employees tend to have more choice over the organization they want to work for,
and considerations such as the ability to experiment and share ideas become important
factors in their decision making.
63% of the managers and 62% of the hourly workers answered that they
believe 50% or less is used. 16
15
“The Innovation Pipeline”, M. C. Turrell, Imaginatik Research (March 2003).
16
Kepner-Tregoe "Minds at Work: How Much Brainpower Are We Really Using?" based on responses from
1,500 managers and hourly workers (2002)
The next generation of worker is more IT literate, and expects to be actively involved in
the activities of the organization. These employees will not be as passive as preceding
generations, and companies will need to find a way of managing the expectations and
aspirations of these workers.
Idea Management provides an outlet for this in a controlled and focused manner.
Although the benefits are hard to quantify, the value of being an ‘employer of choice’ is
well known at a strategy level and in Human Resources.
Idea Management is similar in its ability to support top level strategic goals, and as such
contributes to the delivery of corporate strategy outside of formal financial measures. The
Bain & Co. Innovation Survey found that 80% of executives list “innovation” as one of
their top three objectives for 2003. There are a number of actions that need to take place
in order to achieve this objective, such as investment in R&D, process support for new
product development, and building an overall innovation capacity.
The benefits of Idea Management accrue over time and through various means. It is
desirable to keep track of the benefits generated through the program to demonstrate the
ongoing value from the investment in the infrastructure and process.
Companies tend to focus on different aspects of the return, depending on the industry
and the company situation. For example, production facilities tend to concentrate on cost
savings and process improvement, whereas consumer product companies focus on
marketing concepts and growth opportunities. Ultimately an organization should aim to
get benefit across a spectrum of business activities. Frequently a company will initiate
projects based on a particular focus area, and then over time expand to include other
types of idea.
In terms of return, our research indicates that companies need to define an appropriate
target rate of return, and then focus the collation of metrics with the goal of slightly over-
achieving the target. In this way the project sponsors can maintain credibility, continue to
demonstrate their value, and justify ongoing investment in building up the organization’s
innovation capacity. If one is overly ambitious in stating the benefits, it opens up an
opportunity for skeptics to question the overall validity of the initiative.
The risk of failure should be regarded as critical for the future of the company, and
therefore all parties have an interest in making sure the program is established and
resourced to maximize the chance of success.
17
Source: Company information.
There will always be some key individuals who cannot be convinced of the benefits of the
Idea Management approach. Depending on the seniority and the position of these
individuals, this may become a significant barrier to doing anything at all in the area of
innovation. Often the criticisms stem from the lack of measurable impact that can be
ascribed to projects. Indeed, Idea Management suffers somewhat from the negative
perception of Knowledge Management with its often ‘fuzzy’ nature of the benefits.
Idea Management is fortunate, however, in its ability to generate benefits very quickly
and in a measurable fashion. Companies should use the ROI method to help alleviate
suspicion, and reduce the perceived risk of embarking on Idea Management projects.
7. Conclusion
Idea Management is rapidly emerging as the critical infrastructure to support the growth
in innovation capacity. As innovation gains executive attention, it is crucial to demonstrate
the potential benefits of the methodology, and determine the appropriate level of
investment in building this capacity.
The benefits of the process can be reaped across the entire organization. However it is
recommended that project sponsors start their projects by focusing on a particular
domain or type of idea, such as cost reduction or revenue acceleration. In this way
sponsors can rapidly demonstrate success, and then embark on more ambitious
enterprise-wide activities.
The costs of Idea Management are well understood and allow significant rates of return.
The return on investment comes through the delivery of specific ideas generated by the
Idea Management process, through the support of innovation in general, and through the
achievement of wider organizational goals.
Given the success of the early adopters, all companies should now be considering the
type of process and the level of resources that would allow them to achieve corporate
targets within their specific organizational environment.
8. Contact Details
For more information on Idea Management, and other research from Imaginatik, please
visit www.imaginatik.com/research or contact:
E-Mail: research@imaginatik.com