27 Sep 2015
Entrepreneurship & Management
Measuring Innovation in Manufacturing SMEs
On May 27, 2015 the final phase of the national My Thesis in 180 Seconds competition was held at the Université du Québec in Rimouski as part of the 83rd ACFAS Congress. This competition allowed doctoral candidates to present their research subjects in simple terms to a highly diversified audience of laypersons. Their presentations needed to be clear, concise and convincing, and were required to be only three minutes long. This event was presented by Yanick Villedieu, who is the host of the program Les années lumière on ICI Radio-Canada Première. The École de Technologie Supérieure (ÉTS) was represented by Florent Lado Nogning, who enthusiastically presented his project entitled: Designing and Implementing of a Performance Measurement System for the Innovation Process in Manufacturing SMEs (in French only). Here is an excerpt from his presentation.
My research work focuses on innovation management in companies with less than 250 employees that are called SMEs. Why SMEs?
Do you know that 95% of companies are SMEs and that they create 2/3rds of the available jobs? Yet only 1.5% of innovation research targets them. You’ll certainly agree that in this world it is easier to study a Bombardier than to study, for example, STC footwear, which created 75 jobs, and manufactures a shoe that generates electricity.
So I decided to understand how innovation happens in SMEs, how the so-called ‘innovation process’ works, and especially how one can actually measure innovation performance. I created a phenomenological study, and interviewed a dozen SME manufacturing managers in the city of Montreal. I discovered two things.
- For your invention to become an innovation, it must present a solution for final users, not merely a technology.
- The managers confirmed that the innovator’s dilemma also applies to SMEs.
There is something fundamentally stressful when innovating for SME management. Managers are constantly having to ask themselves, “how can I continue to improve what I’m already doing with our limited resources? Operating is what gives life to the company. Should I ignore this and explore new horizons, which will then ensure future exploitation?” It is the innovator’s dilemma. It’s about striking a balance between exploitation and exploration. Exploitation includes all activities that use the knowledge that is already present in the company to optimize the process and improve the products. Exploration includes all activities involving new knowledge while opening the company to new perspectives.
The reality is that these companies have no choice; they must do both. This is where I come in. I designed a performance measurement system which is also called a balanced score card: this Performance Double Prism was inspired by the stakeholder theory.
We installed the innovator’s balanced score card to steer the process in real time. This balanced score card is made from a strategic innovation chart that we developed.
How does it work?
Our performance management system works like a tree. The fruit represents the customer, the trunk represents the strategy and the processes, while the roots represent professional expertise.
Our rationale: if SME management wants a company that performs well in innovation, it must expect to manage two companies at once. Management must have a strategy for the Customer of today as well as the procedures and professional expertise to support this strategy. At the same time, it must have another strategy for the future customer as well as the procedures and professional expertise to support this other strategy. This is what we call ambidextrous organization.
The balanced score cards have evolved since the 1990s with the addition of non-financial indicators. We have brought a new dimension to this addition by taking exploration and exploitation into account. Now our goal is to define the metrics with those involved in the field and the indicators measured of all these features to culminate in a Performance Double Prism inspired by the English researcher Neely and his Performance Prism.
The innovator’s secret is to achieve a balance between exploitation and exploration. When you really think about it, this also works on an individual basis: are we exploiting or are we exploring?
The rationale of our approach is as follows: if the innovator’s dilemma is a major challenge for the innovator, if a high-performance organization needs a balanced score card to steer its business activities, then the innovator’s balanced score card should take the innovator’s dilemma into account. Yet we found no example of this in the literature until now. It is therefore the Performance Double Prism that we propose, which includes both the exploitation activities indicators, as well as the exploration activities indicators.
For more information on the subject we invite you to consult the following presentation: Nogning, F.L. et M. Gardoni (2015). Performance Double Prism: A performance measurement system for exploration and exploitation innovations in manufacturing SMEs. Proceedings of the 2015 International Conference on Industrial Engineering and Exploitations Management. Dubaï, United Arab Emirates (UAE), March 3 – 5, 2015.