Welcome back to our course on managing innovation. This video is about planning and evaluation in the context of challenging innovation initiatives. Now, there's two key parts in the statement that I just made that I need to linger on and develop a little bit. The first is that we are talking about planning and evaluation. The second being we are considering this in the context of challenging innovation initiatives. So let's go a little bit on those. First, planning and evaluation. If you think about what we've been doing, so far, we've primarily been focused on organization design, things like structure, separation of units, culture, tight loose culture, staffing, who's going to be on the initiative. And we've talked about leadership, communication, coordination, conflict resolution. Now, this is not entirely the story, but let me put up a diagram describing what is known as the four fundamental functions of management. And you'll see a little more about what I mean. So, here are the four functions of management. They are planning, organizing, leading, and controlling. This one way, one very common way of thinking about the question: what do managers do? And so, planning, that's where you're choosing goals and courses of action to best achieve those goals. And once you plan things out, well, then you organize. You bring people on board, your staff. You establish task and authority relationships that allow people to work together to achieve those goals. And then, leadership, where you're motivating, coordinating, energizing individuals and groups to work together to achieve those goals again. And then, controlling, where we're going to be talking about this evaluation here, but this is where we are measuring and monitoring what's happening to evaluate how well the organization has achieved its goal. And of course, that feeds into planning. We take the information that we've received, and we change our plan, and we go along in a continuous cycle. So, that's why, if you look at what we've done so far, I'd say mostly we've been on the organizing and leading circles. If you took the course, the sister course on strategic innovation, well, there was a lot there about planning, but that was at a strategic level, not at an execution level. So, that's the first part of the statement about what this video is about. We're going to talk about planning and evaluation of the Innovation Initiative, but specifically, planning and evaluation where execution is concerned. Now, I also said the video involved challenging innovation initiatives, and the key is that part about it being challenging. And what I mean there is the same thing that we've been talking about all the way through, but it's particularly important here. What I mean is that for our initiative, there's substantial uncertainty. That means there's critical elements of the business model or the technology or the market and customer segments, where we don't know the answers and we can't look to the past to generate much of a meaningful forecast. That means we're going to have made critical assumptions in our business case. And whether we are right or wrong in those assumptions is going to determine the viability of this initiative. That's the kind of situation that we're talking about. Now, if we don't have that kind of initiative, you're not going to need what I'm going to talk through here. Planning and evaluation is going to be more standard, and you might think about also as more familiar and straightforward. And it's important to recognize that there's really quite a lot in terms of innovation that doesn't have that kind of fundamental uncertainty that I just talked about. I'm thinking of things around continuous improvement efforts, refining products over time, product generation, type of innovation, the kinds of things that we talked about earlier. Now, there's another way to think about the same issue. Remember the S curve and the technology life cycle from the beginning of the course. The challenging innovations that we're talking about here are very often the ones that occur in the front half of that life cycle. And if you remember, some of the things that you see here are product experimentation and market exploration. There's a lot of unknowns. There's a lot of uncertainty. There's little history or guidelines to build on. And you remember, we used the example of aircraft. And so, you had the umbrella plane and the seagull plane and so on. There's a lot of experimentation on here. People really don't know how to go at it with confidence. And so, the way to win here is to be best and fastest at figuring out what works technologically and in the marketplace. Now, this is different than the back half of the life cycle. There's a history here. There's data and experience to build on. You see product refinements, market segmentation, cost leadership. Now, there's innovation, but it's more incremental and management is based on results. Learning is valued, but it's not as critical. So the insight here for planning and evaluation is that when innovation is the central challenge, these parts of management need to be much more oriented towards experimentation and learning. Planning and evaluation need to be done differently because what it takes to succeed is different. We need to be good at experimentation and learning. So, the idea that you manage innovation differently is, of course, a familiar theme in this course. And for planning and evaluation, as in other areas, this idea of doing things differently is challenging to deal with effectively. Govindarajan and Trimble found that companies usually don't distinguish adequately in their planning and evaluation processes between established operations and innovation initiatives. And we also saw, for example, Christiansen's discussion of how strategic planning systems tend to push us towards large markets and high margins, and so cutoff work on disruptive innovations. So, this isn't something that's entirely new. What I'm going to work through is one approach to addressing this challenge of doing planning, doing evaluation properly in innovation initiatives. I'm going to focus first on planning, and that's going to be the remainder of this lesson. And then, the next lesson will be about evaluation. Now, in doing this, I'll be drawing primarily on Govindarajan and Trimble's research, but the ideas sound similar themes to those of several other researchers and gurus, notably of Furr and Dyer's book, "The Innovators Method", which is very good, and Eric Reeves, who has taken his work on lean startups, which was enormously popular into large corporations. I should also say that planning and learning are enormous areas of scholarship and practice. This is just one way, and we're just going to focus on the core concepts, so you have an orientation as to what to do. There's plenty of room to go further if you're actually in this kind of situation and all of some resources to help you at the end of the next lesson.
