Featured Story May-June 2016
Transitioning towards Employee-Driven Innovation: Lessons from Pioneers

by Dr. Lia Tirabeni, CPS Department, University of Turin, Research Fellow MSL

Introduction

Traditional R&D laboratories, organized in a centralized and closed way (Manolopoulos et al, 2011) tried to build a mass market business for products based on a new technology that appealed only to a narrow market (Hesseldahl, 2001). With a failure rate approaching 90%, R&D expenditures under scrutiny and lead-times for success averaging nearly eight years, the US ICT industry clearly needed a new approach to innovation (Ulwick, 2005). Thus, companies began to adopt the principles associated with the customer driven approach: first understand what the targeted customers' needs are, then invest in the creation of a new product to meet those needs. Indeed, this approach has become the mantra for organizations and innovation activities. But after twenty years of customer driven thinking, US companies still find that 50 to 90% of their new product and service initiatives fail (Ulwick, 2005).

In the present research, we propose new practices of innovation management through which employee-engaged organizations can identify an innovation and test ideas and concepts not only with customers but with employees too. Through this methodology the uncertainties and risks linked with innovation could decreased because: (i) a common language between innovators and users/employees has already been created; (ii) resources can be more effectively directed towards the right opportunities; (iii) when the opportunities to pursue are defined, all relevant organisational resources can be focused on developing the right idea in the right way.


Employees' role in driving innovation

Over time, many new practices have been introduced in organizations in order to capitalize more and better on employees' competences and knowledge. First, employees are seen as a resource for idea generation. The focus is on the employees' creativity and the best ways to capture it (Mumford et al., 2002). From the suggestion box to the Idea Management Systems (Sandstrom and Bjork, 2010) employees were encouraged to share ideas about how to improve procedures and products. More recently, Employee-Driven Innovation (EDI) has been proposed as novel a form of direct participation in which the employees take the initiative to develop, propose and implement change (Hoyrup et al., 2012). Hoyrup and colleagues (2012) underline the need to focus on all the employees in relation to innovation, and how to engage them in various collaborative forms of innovation depending on each and everyone's specific job roles and competences. One way of advancing in this direction is to conceive employees as users of product/service innovations but also other forms, e.g., process innovations within the company where they 'may exhibit behaviours typical for user-innovators, albeit inside their own firms, by modifying or creating processes, products, or services' (Zejnilovic et al., 2012: 3).

The challenge for EDI today is to move away from an unstructured approach, where employees decide to behave as users on their own, to more specific programs in order to enhance EDI' impacts on innovation. As Kesting and Ulhoi (2010) summarize their conceptualization of EDI, it makes theoretically perfect sense to break down hierarchical barriers in order to involve ordinary employees and make them contribute creativeness, networks and specific knowledge to the innovation process.

Based on the above, we formulated two research questions:

Q1. How can employees be more involved in the innovative process in order to inspire a more innovative business model?
Q2. What are the major gains companies can reap from EDI that create an innovation advantage?

By examining leading companies' approaches to EDI, we attempt to provide some enlightening answers to these basic challenges. Due to the exploratory nature of the research, the case study methodology is applied (Yin, 2002). From a first panel of 10 companies we selected the final sample - Microsoft, Google, Apple - with the use of unstructured interviews and meetings with innovation experts in different universities (Turin, Westminster, AUEB, Milan's Politecnico). The companies chosen are universally recognized for their ability to create innovative product appreciated by the market and their unique innovation-oriented structures and organizations.


Cases Analysis

3.1. Microsoft

Among the employee engagement practices at Microsoft, the 'ThinkWeek' represents a long-standing tradition (Guth, 2005). It offers employees the opportunity to engage in cross-company dialogue with executives and the ThinkWeek community around topics that impact the future of the company. This helps to establish a whole internal process for evaluating and implementing the employees' great ideas (Microsoft. 2014. "Think Week"). Another way the company uses to obtain this objective is the 'Garage' that represents 'a protected habitat for Microsoft employees and their wild ideas' (Warnick, 2014).

Microsoft has since long engaged employees with many tactics in the innovation process. Precisely, we detail two practices: "Dogfooding" and "Synch-and-stabilize". Dogfooding means rolling out new software to the employees first, letting them experience and report problems to ultimately improve the public release. The idea is that if you expect the public to buy and use these products, you should be amenable to using them yourself. Dogfooding lets employees test products in real-world scenarios and report flaws (Dvorak, 2007). Microsoft implements the dogfooding process through three phases of early product adoption: investigation, rollout and reporting, evangelism (Microsoft. 2014. "About Early Technology Adoption (Dogfooding)"). In the Synch-and-stabilize approach, teams and individuals are allowed to be creative and retain the autonomy of small groups. Teams synchronize what people are doing working in parallel on different features, and periodically stabilize the design changes or feature innovations that they are making (Cusumano, 1997). The first version of Windows NT represents one significant example: 4.5 million lines of code and a development team of about 450 people. Helped by such a number of employees, Microsoft is able to discover and solve problems before they can generate millions of customer complaints. The results seem to directly reflect the investment in testing as well in process and product improvement (Cusumano, 2013).

3.2 Google

Google applies a bottom-up approach that helps to create an unconventional innovation culture. One example, among many, are the "Innovation Grouplets". These are autonomous groups formed into the company without any decision-making authority; grouplets start only with a specific idea based on 'employees job to be done' and aim 'to convince the rest of the company to adopt it'. For example, 'Testing on the toilet' detailed below is a testing grouplet idea, a group of employees autonomously formed around ideas related to test phases (Google Software Engineer. https://www.mattcutts.com/blog/engineering-grouplets-at-google/).

3.3 Apple

Apple is considered one of the most innovative companies ("2013 Innovative Companies." Forbes) and the world's most valuable brand ("2013 World's Most Valuable Brands." Forbes). Apple challenges its employees to drive innovation, and the iPod creation represents one famous example of this (Edwards, 2011). Apple accomplished a culture of excellence, where employees feel they are part of creating the greatest products possible. Apple applies various methods to challenge employees to achieve competitive advantages. One example is employing retail workers to test new apps. From July 2014, Apple is seeking employees from its retail stores to test the OS X Photos application and iCloud Photos feature (Mlot, 2012). It isn't the first time. In the last two years Apple has offered many testing programs to retail staff. It typically offers career experience programs for retail employees that have worked at Apple for at least one year. These opportunities allow employees to try out various positions within Apple Corporate. It utilizes retail employees for these efforts as a method of further intertwining the culture of both major parts of Apple's employees base and to provide a wider and controlled testing environment. Apple provides various tools for users to offer their feedback: Web forms, discussion lists, mailing lists, engineering questionnaires, and bug reports. This testing is to be done on personal Macs belonging to employees, and is not standardized in-store OS X Mountain Lion training (Gurman, June 21, 2012). After the OS X Mountain Lion testing program experience, Apple started something similar with OS X Mavericks. Further, Apple has provided pre-release versions of Mavericks to its AppleSeed beta testing group (Gurman, Mark. 2013. "Apple expands OS X Mavericks testing to Retail, iOS 7 to Cupertino locals for feedback" June, 18. 9to5mac.com). These programs will offer additional testers for Apple, while enabling retail employees to become familiar with the forthcoming operating systems before formal trainings begin.

Concluding Remarks

We aimed to identify EDI practices from leading organizations in order to advance the understanding of this concept and practice, providing some guidelines for implementation in other companies and sectors. From the literature we generated two questions. Table 1 summarizes the findings.
Tab. 1 Addressing EDI challenges

Tab. 1 Addressing EDI challenges

























All these EDI practices share the active involvement of a large number of employees. The trade-off between guiding the EDI efforts with structures, processes and systems on the one hand, and letting results emerge as a natural output of the workings of an innovation-focused culture on the other, is subject to experimentation even in these leading companies. In an effort of fusing the best tactics from two worlds, strategic intent, supporting structures and processes including training are combined with trust in peoples' abilities, drive and self-motivation. Google puts more faith in self-organization around the employees, while Apple more strongly emphasizes processes and procedures enabling EDI. Concerning what part of the innovation process can benefit most from the involvement of all the employees, Microsoft and Apple focus essentially on pre-release versions of new products to be tested by as many employee-users as possible. Hence, products' prototypes are engineered by specialists and 'ordinary' employees mostly contribute to testing. In Google, conversely, a broad range of employees are involved from the very first stages of idea generation and contribute throughout the whole process until public launch. The gains reaped from EDI are many, including getting feedback on new products to discover potential problems, and building an innovation culture that can create a stream of competitive advantages.

This text is based on the conference paper:

Tirabeni, L., Pisano, P. & Soderquist, K.E., (2015), "Transitioning towards Employee-Driven Innovation: Lessons from Pioneers in the ICT Sector", Proceedings of the 10th European Conference on Innovation and Entrepreneurship - ECIE, University of Genoa, Italy, 17-18/9 2015, pp. 707-715.


References

Cusumano, Michael A. 2013. "Software Development: Management and Business Concepts," in Computing Handbook edited by Teofilo Gonzalez, Jorge Diaz-Herrera, and Allen Tucker, Third Edition, CRC Press. (81): 1-16 chapter 81

Cusumano, Michael A. 1997. "How Microsoft makes large teams work like small teams". MIT Sloan Management Review. 39(1): 9-20

Dvorak, John C. 2007. "The Problem with Eating Your Own Dog Food" November 15. PC Magazine.  http://www.pcmag.com/article2/0,2817,2217007,00.asp.

Edwards, Benj. 2011. "The birth of the iPod." October, 23. Macworld. http://www.macworld.com/article/1163181/the_birth_of_the_ipod.html.

Gurman, Mark. 2012. "Apple asks retail staff to test OS X Mountain Lion ahead of July launch." June, 21. http://9to5mac.com/2012/06/21/apple-asks-retail-staff-to-test-os-x-mountain-lion-ahead-of-july-launch/.

Guth, Robert A. 2005. "In Secret Hideaway, Bill Gates Ponders Microsoft's Future." March 28. The World Street Journal. http://online.wsj.com/articles/SB111196625830690477.

Hesseldahl, Arik. 2001. "The Return of Iridium." November 30. Forbes.  http://www.forbes.com/2001/11/30/1130tentech.html.

Hoyrup, Steen, Bonnafous-Boucher, Maria, Hasse, Cathrine, Lotz, Maja, and M?ller, Kirsten. 2012.  Employee-Driven Innovation: A New Approach. UK: Palgrave Macmillan

Kesting, Peter and Ulhoi, John P. 2010. "Employee-driven innovation: Extending the License to Foster Innovation", Management Decision, 48(1): 65-84

Manolopoulos, D., Soderquist, K.E. & Pearce, R. (2011), "Coordinating Decentralized Research and Development Laboratories: A Survey Analysis", Journal of International Management, 17(2): 114-129.

Mlot, Stephanie. 2012. "Apple Launches Employee Discounts, Mountain Lion Testing". June 22. PC Magazine. http://www.pcmag.com/article2/0,2817,2406184,00.asp

Mumford Michael D., Scott, Ginamarie M., Gaddis, Blaine, and Strange, Jill M. 2002. "Leading creative people: Orchestrating expertise and relationships." The Leadership Quarterly 13 (6): 705-750.

Sandstrom, Christian,  and Bjork, Jennie. 2010. "Idea management systems for a changing innovation landscape". International Journal of Product Development 11(3) 310-324.

Ulwick, Anthony W. 2005. What Customers Want: Using Outcome-driven Innovation to Create Breakthrough Products And Services.  New York: Mcgraw-Hill.

Warnick, Jenninfer. 2014. The Garage. Microsoft Stories,   http://news.microsoft.com/stories/garage/index.html.

Yin, Robert K. 2002. Case study research: Design and methods. Third Edition, Applied Social Research Methods Series, Thousand Oaks, California: Sage Publications.

Zejnilovic, Leid, Oliveira, Pedro, Veloso Francisco M. 2012. "Employees as user innovators: An Empirical Investigation of an Idea Management System." project CMU-PT/OUT/0014/2009. Portuguese Science and Technology Foundation (FCT) and the CMU Portugal Program.

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Microsoft
Google
Apple
Q1
- Flat structure with direct communication paths

- Employees are entrusted with great responsibilities

- Involvement and contribution recognized

- Bottom-up culture; ideas and improvements take roots in operational work and flourish through a peer-to-peer experimental development process
- Culture of excellence, where employees feel they are part of creating the greatest products possible

- Hiring of people with strong self-drive and encouragement of that drive

Q2
- Use of many employees in development increase chances of discovering bugs and maximizes the number of ideas generated

- Improved software quality

- Innovation culture through focus on employee involvement

- Many Google products are products of employee ideas, grown organically through initiatives such as 'grouplets'.

- This creates an innovation culture of motivation through involvement and ownership of emerging products

- Product use and evaluation of pre-releases is part of the development process and has quality gains.

- Employees are made ambassadors for brand and products through generous discount programs