Support : eNewsletters : Eye on Innovation : Issue 5, November 2011

Centers of Excellence: Creating an Innovation Pipeline

"Excellence is to do a common thing in an uncommon way."
— Booker T. Washington

Credit: U.S. National Archives and Record Administration, Records of the Office of Government Reports, 1932 – 1947

How does a company like Apple, the #1 innovative company in the world, innovate and create game-changing innovations such as the iPod, iTunes, iPhone, iPad and more? What is Apple's secret recipe for innovation success? Apple leverages its diverse system of employees, customers, suppliers, partners and global networks, proven innovation process, and a winning culture to seize new opportunities in the marketplace and grow its business. Apple sold over 15 million iPads in 2010, with revenue of over $9.5 billion within the first year of launch. Time magazine named the iPhone the Invention of the Year in 2007, and the new iPhone 4S broke all records by selling more than one million in the first 24 hours of its presale. Each year Apple has continued to release one new innovation — a new one or one that makes a current technology with new features that much better.

How are organizations such as Apple reaching new heights? Many corporations are turning to "centers of excellence," increasingly common phenomena in companies who are trying to improve performance and achieve results at higher and higher levels. There are Testing Centers of Excellence, Project Management Centers of Excellence, Customer Service Centers of Excellence, and even Innovation Centers of Excellence, to name just a few. These centers rely on employees, customers, suppliers and others to reach new heights.

This issue of Eye on Innovation focuses on Innovation Centers of Excellence, describes the concept and how they work and identifies companies employing them with some of their many achievements. To find answers, we'll explore Dialog's business and news sources, as well as scientific and technical databases.

Source: Dialog NewsRoom, Business Wire, Business & Industry™

What is a Center of Excellence?

A "center of excellence" is typically defined as "a place where the highest standards of achievement are aimed for in a particular sphere of activity."  These centers encompass a team of people that promote collaboration and use best practices around a specific focus area to drive business results. Why would a company want a center of excellence? The best answer is because it obtains valuable results. A recent Forrester study of business process management (BPM) shows that having a center of excellence significantly enhances the ability of an organization to meet or exceed the goals that center supports. A need to achieve results should be the primary motivator. And, those results should be well thought out and clearly articulated to serve as the foundation for the creation of any center of excellence.

Although these centers are usually unique to the organization or business unit that creates them, there are several common characteristics.

• Centers encompass a group of subject matter experts on a given subject/topic.
• A central repository within the center holds the company's research and study materials, thus providing a clearinghouse of the process, standards and policy design.
• A center is the source of educational opportunities on the given subject/topic.
• Metrics and systems of measurement for development and monitoring of success stem from the center.
• Centers of excellence must understand the status of the current organization, its goal for the future and steps to reach that goal in order to provide positive impact on the growth of the organization.

Designed to provide appropriate oversight and management of innovation and growth-focused business activity, these processes have been tested and proven effective.

Creativity and innovation drives business

An Innovation Center of Excellence has many responsibilities and often serves as the critical hub of innovative and creative activity for an organization. This networking system ensures alignment of the innovation strategy across the entire organization. It also demands that the time, attention and focus of the organization's thought leaders and innovators is on the delivery of that innovation strategy.

Key innovation ingredients

Innovation requires a collaborative effort. Governments must help build institutions, develop human capital and adopt policies that are friendly towards markets and technological innovation. In turn, the private sector must do their part by participating more in financing and executing R&D projects, making venture capital available, and through increased investment in knowledge-intensive sectors. It is important to take action that will help accelerate innovation in a particular area or economy.

Activities necessary for an innovation center of excellence include the following:

• Create a collaborative framework so that innovation workers can share and solve problems within the organization. This requires capturing and disseminating to the organization learning generated by innovation research and product development activities.
• Build an innovation community and a team of innovation specialists.
• Provide access to critical information, such as product design, best practices and customer usage, competitive intelligence, technology trends and scientific theories, empowering workers to more efficiently and effectively deliver on innovation tasks and initiatives.

Sources: ABI/Inform®, Business Wire

Collaboration promotes big ideas

Collaboration yields a competitive edge, and companies are starting to tap in-house expertise to suggest innovations that can be successful, increase profits and keep research costs in check. Some companies also turn to customers, suppliers, and the public for innovative ideas. Companies spend approximately $250 million annually on collective intelligence tools, and this figure is growing 15 percent to 30 percent a year.

Collective-intelligence software, such as Idea Central, Spigit Inc., Imaginatik, Crowdcast and others, enables companies to mine the collective intelligence of their workforce, organize the resulting suggestions and then predict ones most likely to succeed.

• The telecom giant AT&T uses collective-intelligence software called Spigit Inc., a high-tech version of the suggestion box, to solicit ideas from its workers. Aside from proposing ideas, employees can see suggestions from colleagues and even bet on the best ideas. AT&T now has about 40,000 employees that have signed up for its internal network.
• Electronic Arts, a video game maker, wanted to better identify winning products six months to 12 months before release so the company could better target marketing expenditures to back them. About 400 employees predict new-product quality and ship dates, using a software service from Crowdcast.
• Goodyear Tire & Rubber posted 17 technical challenges to suppliers and received 195 responses. The aim was to create a new channel through which Goodyear and its suppliers could not only solve specific problems but also share information about breakthroughs in compounds, materials or processes that would lead to a competitive advantage.
• At Southwest Airlines, employees submit ideas to an internal web site with the goal to help the airline identify and implement ideas to generate revenue, reduce operating costs and enhance the customer experience. Spigit, the software used, helps the airline measure and analyze ideas submitted by employees and work out how best to implement those ideas for a quick return on investment.

Source: Dialog NewsRoom, Dialog Global Reporter, Cengage Gale PROMT®, Trade & Industry Database™

Where are the next innovation centers globally?

INSEAD, one of the world's leading and largest graduate business schools with affiliates in Europe, Asia and the United States, announced its Global Innovation Index (GII), 2011 Edition, showing Switzerland on top this year with Sweden and Singapore in second and third places, respectively. This year's rankings indicate that innovation has become a global phenomenon with six European, two Asian and two North American economies in the Top 10 (see Table 1). BRIC — Brazil, Russia, India, and China — economies and emerging markets in general are significantly improving their innovation capacity: China, Brazil and, to a lesser extent, India have achieved encouraging results. The World Intellectual Property Organization (WIPO) Director General, a reporting partner on INSEAD, stressed that "Innovation is central to economic growth and to the creation of new and better jobs. It is the key to competitiveness for economies, for industries and for individual firms."

Source: Cengage Gale Promt®, Cengage Gale Trade & Industry Database™

Final thoughts for the future

Since Dr. Henry Chesbrough, director of the Center for Open Innovation at the Hass School of Business at the University of California, Berkeley, published Open Innovation in which he defined open innovation as breaking down the boundaries of the corporation so that "valuable ideas can come from inside or outside the company and can go to market from inside or outside the company, as well," this paradigm has been of great interest and experimentation in corporations.

Innovation is moving out of the confines of the R&D labs and is becoming integral to the way companies design their futures. Integral to medicine, pharmaceuticals, food, automobiles, and many other industries, Centers of Excellence are increasingly a way of doing business.

Watch for continued collaborative efforts especially with external partners, how open innovation can transform a business, either through a breakthrough "eureka" idea or continuous and incremental improvement of a product or service. To bring winning products to market in this global economy, collaboration will be the name of the game in 2012.

Source: Chesbrough, H. 2003. Open innovation: The New Imperative for Creating and Profiting from Technology. Cambridge, MA: Harvard Business School Press.

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