• Innovation

Innovation Tournaments with Christian Terwiesch

“If ideas and creativity are so vital to success, why is managing innovation approached in such an unprofessional way?” asks Wharton's Christian Terwiesch

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It is well-understood these days that the advantage firms need to keep ahead of the competition is one of ideas and innovation. If you cannot create new products and services you are unlikely to remain at the front of the pack for long. Christian Terwiesch has observed that while this is well-known by leaders there is still little understanding of how to go about achieving it. “If ideas and creativity are so vital to success, why is managing innovation approached in such an unprofessional way?” he asks.

Terwiesch, of course, has a solution. He noted that other strategies in finance and marketing would be rolled out in a way that enable options to be measured and senior management to have oversight of the process, whereas innovation was typically seen as being a sporadic, ad hoc, fragmented activity across an organisation – or if more structured, one that was allocated to people away from the frontline of customer engagement.

An early part of the problem maybe to do with semantics. Terwiesch is keen to distinguish between ideas, innovation and projects. Innovation is where the focus should lie – defining it as ‘the novel match between a solution and need that creates value’, until you can add those last three words it remains just an idea. Terwiesch is a believer in Linus Pauling’s exhortation that “The way to get good ideas is to get lots of ideas and throw the bad ones away” saying that companies need to generate hundreds, or preferably thousands, of ideas to start finding sufficiently good ones to turn into viable innovations. But how to do this in a structured way? 
“In an ideal world you should try out all ideas to see whether they are able to create value, and then discount those that do not do so sufficiently – but I tell companies that if they are able to do this in the real world then they are not creating enough ideas. What is needed is a more mass approach to idea generation; crowdsourcing them and then democratizing the innovation process.” The process Terwiesch and his colleague Karl Ulrich have developed to do this is through Innovation Tournaments.

Innovation Tournaments leverage the collective power of all of a company's employees to unearth new ideas and insights into how the business can progress. It uses fairly basic Internet technology to structure the process, but the outcomes can be both hugely innovative as well as empowering people in organisations who normally would not have any voice. 

Essentially, tournaments encourage everyone in a company or division, to enter ideas on new products, services or processes. These ideas are then reviewed by self-selecting peer groups of ideally 15-20 people, and the ones deemed to meet pre-identified criteria, that they can be implemented within six months, that they offer real revenue generation potential, or the like, then go to the next level of evaluation. The crucial elements are to get serious quantities of ideas into the system, several hundred as a minimum, but several thousand is better; and then to get people engaged in the initial reviews. The reviewers will most likely be idea generators themselves, Terwiesch notes that 'typically people like to review'. The reviews are backed by a professional R&D review team who randomly check the peer review teams evaluations to offer a form of control. 

The tournaments require top-down sponsorship to make them work. Terwiesch emphasises that people need to know that the CEO or Chief Innovation Officer, at least, are driving the project, that it is something to be taken seriously. This can often take the form of feedback on certain ideas by these top people, to show that they are engaged. It is less important that senior management offer ideas themselves as they already have opportunity to make their ideas heard, but to encourage the front-line workers to unleash their insights and innovation potential, and so encourage the creation of an innovation culture where new ideas are celebrated and valued. 

Terwiesch suggests that to build energy and momentum tournaments should be set to a clear calendar where they have a set start and finish point. Asynchronous tournaments, which remain open continually, run the risk of losing that energy and cease to attract ideas from the less obvious parts of the workforce. 'The key thing is to limit the 'ideation' stage to two months or they lose momentum' he says. 

While a sizeable workforce is also a prerequisite to create the critical mass of ideas for innovation tournaments, industrial sector is not. Terwiesch has run tournaments in private equity companies, nature conservancy organisations, insurance companies and the healthcare sector with consistent levels of success. The first thing though, is to get the tournament structure in place… 

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