Sunday, October 29, 2006

Leveraging Diversity-Use Brainstorming Session

Every company, every manager needs to do some brainstorming - to get ideas to overcome new challenges. Tough new problems need to be addressed via creative solutions. A common technique to deal with such situations has been "brainstorming". Brainstroming is a very old technique of collecting all possible ideas to solve the problem and then choose a set or solutions or create a hybrid solution to tackle the problem.

In today’s global marketplace, cultural diversity becomes a valuable asset to be used during brainstorming session. Cultural diversity helps an organization look at the problem statement in different ways and comeup with different solutions. Cultural diversity also prevents ‘group think’ and help develop better solutions.

How to start

Multicultural organizations do not find it difficult to collect people with diverse backgrounds in one place. But for organizations with a lower level of diversity, getting diverse people in one place can be a challenge. If that were to be the case, one needs to take extra effort to get the right kind of people in one place. The size of the group also has a huge impact. Typically the group size should not exceed ten people. Ideally the group size should be between 6 to 10.

Recently, I had to run a brainstorming session - on how we could develop and sell a unique sales proposition to a British customer. Unfortunately, my current organization is totally dominated by Indians and in the room there were only Indians trying to brainstorm on developing new sales techniques to sell to a British customer!! In such situations, having a diverse workforce is invaluable.

Running the session

Person who runs this brainstorming session must not be a manager or a person of very high authority in the organization who can override the others in the brainstorming session.

Typically, all members in the sessions must be equals or peers - or atleast they must treat all members in the session as equal. If the person who runs the session has a good sense of humor and is sociable it will be better. The person who runs the session must be an excellent communicator and have a very good command over the language.

Given the global nature of the business, it is often difficult to bring the right people into one room, so one needs to use other communication tools. The only method to get people in remote sites involved in a brainstorming session is to use video conferencing. Although this is not the best method, but among all the communication tools available, video conferencing offers the best alternative to meeting face to face. Note that for best results, all members must meet face-to-face.

Set the right environment

A brainstorming session must be conducted in a relaxed environment. Members at the session must be able to dedicate all their time and thoughts to this session without disturbance of phone calls, emails etc. For that reason, companies often choose a neutral venue such as a hotel room. I recall that once, we had a brainstorming session in the conference room of another company - so that members will not be disturbed.

Define a problem

The session should start with one person defining the problem, defining the objectives of the organization and the objectives of the session. The quality of the session is highly dependent on the accuracy of the problem definition - but avoid defining the problem too narrowly. Once a problem statement is defined, objectives are set, allow other members of the group to define their own version of the problem & objectives. People with diverse backgrounds always happen to have a different definition of the problem/objectives. Encourage all members to take a shot at defining the problem. Once everyone agrees with the problem statement and objectives, write it down on a board or on paper so that everyone can see it.

Make everyone contribute

The central idea of a brainstorming session is to get different opinions/ideas to solve the existing problem. It is therefore imperative that all members must contribute. If there are members who are not speaking up, encourage them to speak: "Do you have an opinion on this Clayton?"
While it is important to encourage others to speak, it is equally important not to discourage anyone by ridiculing their opinions/thoughts. All thoughts/ideas must be considered. Any criticism by the participants must be strongly discouraged.

Record all thoughts

During a session there will be lots of thoughts. It is a good idea to record all the ideas/solutions/suggestions put forth by the members. Having flip charts, printable white boards are useful to capture the written ideas. But for verbal ideas, it will be better to record all the conversations in audio format (tape or MP3) and circulate these among the members after the session. If possible, create a video of the session also. (Till date I have not see a video recording of a session, but with the increasing prevalence of video cell phones, this may become a common practice in the future)

Plan for Post Session Analysis

The biggest problem associated with a brainstorming session is that people come out of the session and the person who called for the session does not follow-up on the ideas generated during the session. Thus wasting all the efforts. Best way to tackle this problem is to form a 2-3 member committee during the session who will go through all the ideas - and comeup with an implementation or a follow-up plan. This committee is responsible to inform the other participants on the progress of the post session analysis and the action taken.

Closing Thoughts

Brainstroming sessions are nothing new, but most of the times companies fail to utilize this tool effectively due to lack of diversity among the members in the session. If a company has a diverse workforce and is facing a complex problem, the management can make the best use of its workforce diversity by encouraging a brainstorming session - and following up with action after the session.

Also see:
  1. Leadership & Diversity
  2. Building a Diverse Workforce
  3. Soft Skills For Global Managers
  4. Managing Diversity for High Performance
  5. Encourage Diversity to attract top talent
  6. Distinguish Yourself As a Culturally Diverse Candidate
  7. Making Multicultural Virtual Teams Work

Common Mistakes in Recruiting a diverse workforce

Managers and team leads understand the need for creating a diverse workforce. Unfortunately, most managers make two common mistakes in recruiting for multicultural teams.

Mistake-1: Creating a token Diversity

Managers often feel the need to increase their diversity, but often tend to ignore it and hire people who have more in common with themselves, i.e., a Caucasian manager tends to hire only Caucasians, Indian manager tends to hire Indians from his local state etc. In the process, the organization becomes lopsided to a very great degree, and then managers wake up to the fact that they need to increase diversity in the organization. This late realization results in creating a token candidates - who are hired primarily to show that they are creating/encouraging diversity.

My wife once went for a job interview, the interviewer was not serious, instead of doing a due diligence through the interview process, he confessed that ‘he had to hire’ a woman for the job! And he has been instructed by the CEO to hire at least one woman in the team. Obviously my wife rejected the offer. This example shows how damaging the concept of "Token Diversity" can be. In an other example in the US, a manager had to hire a ‘black’ (or African-American) engineer - and once the person was hired, the manager did not have faith on him and never gave a serious task to the "Token" candidate. (needless to say that the person left the organization in few months)

Most managers often consider only the visible dimensions of diversity: i.e., gender, race and sometimes religion. This narrow view results in creating a few "token candidates" in the organization. This act actually is more damaging to the organization, as it creates tensions in the organization.

Other team members will be reluctant to say anything - for the fear of being seen as racist or discriminatory. The "token" diversity employee feels alienated and unwanted in the organization - and fails to contribute effectively to the organization. Thus having a small number of diversity workforce is actually more damaging to an organization and offers little or no value to the team in terms of new ideas, creativity and innovation.

Mistake-2: Diversity by Numbers

Organizations which realize that they are having too little diversity - then proceed to do the second mistake. This usually follows with a directive from the executive offices or the board to increase the diversity within the organization. So the managers respond to this order by hiring only diversity candidates - and this will be mostly for low skilled jobs, or in some cases in their own teams. The hiring standards are often changed to accommodate diversity candidates - this effectively destroys the productivity of the teams.

In case if diversity candidates are hired only for low skilled jobs, then a certain section of the organization will feel alienated - e.g., low end manufacturing employees - that they create problems to the organization. Also other qualified employees feel let down by the management when they promote/hire diversity candidate for the sake of showing numbers. This destroys the team morale and has a long term damaging effect on the organization.

Closing Thoughts

To be a successful business in today's multicultural business environment, managers need to create a sense of inclusion where people feel valued and integrated into a company’s mission, vision and business strategy at all levels irrespective of their diversity backgrounds. Once a person is hired, their contribution must be recognized in terms of work rather than their background.

When employee’s skills and knowledge are recognized, appreciated and utilized, they are more engaged in contributing to an organization’s success. Employees are more willing to go the ‘extra mile’ and share ideas and innovation. They spread the word that your organization is a great place to work. This enthusiasm rubs on others and it will attract more talented people to the new jobs - who can bring new ideas and diverse ways of thinking, solving problems and expanding market share.

Also See:

Leadership & Diversity
Building a Diverse Workforce
Soft Skills For Global Managers
Managing Diversity for High Performance
Encourage Diversity to attract top talent
Distinguish Yourself As a Culturally Diverse Candidate

Monday, October 23, 2006

Making Multicultural Virtual Teams Work

If I ask any manager, project lead or team lead, they all agree that teamwork creates wonders for any organization. Yet, most of these managers struggle everyday to make their team work together. In an global IT services delivery model, teams often consists of muti-cultural, multinational individuals who are separated by huge distances - leading to creation of multicultural virtual teams.

In my previous articles, I have written about the benefits of diversity in teams, I have written on how to make virtual teams work, how improving communication between team members enhances work productivity , managing workforce diversity etc.

In my career, I have always worked in a multicultural, multiethnic, virtual teams. Making these team work cohesively and motivating the team for high performance is always a challenge. Recently, at my workplace, I heard several team managers complaining about performance issues in their teams. These problems were exactly the same ones I saw in Silicon valley a decade ago, and these still persists even today in several organizations. This prompted me to write this article.

The Challenge

Today, IT services companies work in an offshore-onsite model, where a part of the team works from India, while another part works at the customer premises - often in US or Europe, and another part of the team consists of members from the customer organization. In addition, members from the customer organization often consists of virtual teams. As a result, the team members never see other members even once. The challenge for managers is to figure out how to make one virtual team work effectively with another virtual team.

In addition, there are several political/personal compulsions driving each segments of the team. For example, team in India will be driven towards local organizational objectives - such as resource utilization, training & skill improvement etc., while the team members in US is driven towards customer satisfaction, members from the customer organization are driven towards productivity gains and financial gains. These objectives can easily become opposing objectives if not managed properly. Thus the first challenge for the manager is to understand the objectives, motivating factors, and drivers of each segment of the team.

First Symptom of the Problem

Last week, I met Mr. Murugan (names changed) who was leading a large database program. He was frustrated with the internal problems of the team, as a result the team had lots of problems internally to deliver the results. Internal problems has driven several members of his team to quit their jobs. The resulting attrition in the team made customer( Mr. Braker) anxious. Braker was an IT manager at a leading British Telecom company, and he was forcing Murugan to make a firm commitment on the delivery. Murugan knew that he could not deliver the project to the customer in face of recent attrition, so he forced the remaining members of his team to work longer and harder - and even without taking weekends off. The increased workloads on the remaining members of team made more members quit. At this point it became clear that this project was doomed.

The problem facing Murugan and Braker was that their team was split across five geographic locations and there was poor coordination between members at different locations. Different members of the team were driven by different factors and worked to achieve different objectives. One section of his team in Kolkotta were working towards increasing their skill sets and team size - thus they were focused on hiring and training. Team members in Pune and Mumbai were driven by profitability and resource utilization, so the team size was reduced to a sub-optimal level. Team in London was driven by customer satisfaction - and their eagerness to please the customer, they volunteered to do some extra work. Members from the customer side, i.e., Braker’s team members in Leeds & London wanted to present a good picture to their management - so they started increasing the scope the project. All this created a potent mix - which was impossible to manage by Murugan.

Managing Multiple Virtual Teams is Tough

Managing multiple virtual teams requires different management & leadership skills. Managers need to have a global mindset, leadership skills with a global perspective, and ability to communicate across cultures. Murugan’s team worked in groups, but these groups were unable to work as a team. Individual team leaders were very effective in running their operations, but often failed to see the big picture. In addition, neither the team leads nor Murugan had the individual skills or expertise to develop a global organization. Added to this, the customer organization was also widely distributed and their leaders lacked the skills needed to manage a global project - instead the customer management team treated this project like an outsourced project that would be delivered by the on-site team.

Solution lies in Organization Development

After analyzing the situation, the first response was to conduct management development program to train all the managers and team leads - focusing on the skills for managerial effectiveness. But I know that would not be enough. This approach would inevitably fail. The better approach would be develop a organizational development process which will create managers who can foster a global work teams across organizations. The process should create teams what can effectively solve complex cross-cultural, cross-organizational problems, make balanced decisions, and inculcate among team members creativity and commitment towards organizational goals. And that will enable the organization to achieve excellence through high performing multicultual virtual teams.

Creating a global team

Organization development starts with creating a great team. Team formation has a great impact on the workings of a global multicultural virtual teams. Team leader must know the strengths and weaknesses of its members and seeks to capitalize on each member’s strengths. The onus of selecting the team members falls on the shoulders of team leaders. Team leaders must be personally involved in the team creating efforts. The success of a team (and hence the project) heavily depends on how this team is formed.

Building high performing teams involves identification, initiation, motivation, inspiration and consolidation of diverse team members. Of course integrating different members from different cultural back grounds is bound to have difficult challenges, making the task of building a perfect high performing team is a an enormous task.

The next challenge is to foster effective communication between teams. (See: Improved Cross-cultural Communication Increases Productivity)

However improved tools of communication like Intranet, Internet, telephones, e-mail, use of web based collaboration tools, VoIP etc., have made the task of forging relationship between multiple teams a bit easier.

Forging relationships

The first step in building a virtual team is to forge relationships and establish strong communication between members and between teams. These high performing teams shall have a definite purpose with clear cut challenging goals and strategies for achieving goals and role clarity. Members should feel a personal and collective sense of power, have access to necessary skills and resources. The organization's policies and practices shall support team objectives. Members must have mutual respect and willingness to help each other. Team members must be empowered to take appropriate actions as needed.

High performing teams need a lot more motivation. Members need to motivate each other through recognition and rewards. Team leads and Managers have to be empowered to reward team members as appropriate. Team must celebrate successes. In Intel, team members were empowered to give instantaneous awards, group recognition awards and project recognition awards to fellow team members.

The high performing teams will recognize and appreciate contributions of individual members. Similarly team accomplishments will be recognized by members. Members have mutual respect and the organization should recognize the team contributions. The members of high performing teams feel good about their membership of the team, confident, motivated, having a sense of pride and satisfaction about their achievements resulting in a strong sense of cohesion and team spirit. The above characteristics of high performing teams result in high output, excellent quality, effective decision making and clear problem solving process.

more to come....

Tuesday, October 17, 2006

Types of Intellectual Property

I had written few articles on protecting intellectual property. WTO recognizes 14 types of IP, But from a common legal standpoint, US courts recognize only four types of IP. Intellectual property must be registered in one of these four categories to claim legal protection.
Even to claim protection, companies must correctly register their IP with the state and federal authorities first. If a company’s IP are infringed upon, the company must then file a complaint with the state or federal courts to prosecute the offenders.

The four legally protected categories of IP are:
  • Patents

    Inventions has to be registered with the government and these are called patents. A patent registration process can take more than one year, and if it is granted, the inventor gains the legal right to exclude anyone else from manufacturing or marketing it. Patents cover tangible and intangible things. Today it is prudent to register patents in foreign countries also. This will help prevent international competitors from infringing on patent in other countries. Patents have a definite life span. Once it is registered, the legal protection for a patent lasts for only 20 years. After which the patent becomes a public property.

  • Trademarks

    A trademark is a name, phrase, sound or symbol used in association with services or products. It often connects a brand with a level of quality on which companies build a reputation. Trademark protection lasts for 10 years after registration and, like patents, can be renewed. But trademarks don't have to be registered. If a company creates a symbol or name it wishes to use exclusively, it can simply attach the TM symbol. This effectively marks the territory and gives the company room to prosecute if other companies attempt to use the same symbol for their own purposes.

  • Copyrights

    Copyright laws protect written or artistic expressions fixed in a tangible medium - novels, poems, songs or movies. A copyright protects the expression of an idea, but not the idea itself. The owner of a copyrighted work has the right to reproduce it, to make derivative works from it (such as a movie based on a book), or to sell, perform or display the work to the public. You don't need to register your material to hold a copyright, but registration is a prerequisite if you decide to sue for copyright infringement. A copyright lasts for the life of the author plus another 50 years.

  • Trade secrets

    A formula, pattern, device or compilation of data that grants the user an advantage over competitors is a trade secret. It is covered by state, rather than federal, law. To protect the secret, a business must prove that it adds value to the company - that it is, in fact, a secret - and that appropriate measures have been taken within the company to safeguard the secret, such as restricting knowledge to a select handful of executives. Coca-Cola, for example, has managed to keep its formula under wraps for more than 117 years.

Closing Thoughts

Legal means to protect an IP is complex. It is best to retain an IP lawyer who takes care of registering IP and provides continuos advice on protecting it. Companies in emerging economies have to invest seriously to develop a process and means to protect their IP. Indian & Chinese companies have to play catch-up with the US & EU companies when it comes to protecting their IP.

Also see:

Protecting IP Assets of an Organization
Creating a Culture for Innovation and Protecting Intellectual Property - Part 1
Creating a Culture for Innovation and Protecting Intellectual Property - Part 2

Monday, October 16, 2006

Employees as Brand Ambassadors

In my earlier article on Unappointed Brand Ambassadors, I had writen about how people who are external to the company act as Brand Ambassadors and how they affect the company brand value.

In a service organization - like the one I am working right now, the biggest brand ambassadors are employees who interact with customers on day-to-day basis. The common trade term for these people is "On-site Employees". Brand building via front-end employees has been a widely discussed subject. There are a great deal of books on Brand building. A New Brand World: Eight Principles for Achieving Brand Leadership in the Twenty-First Century by Scott Bedbury is my personal recommendation.

In this article I want to share my thoughts as a marketer. I think that in a services firm, a brand value is not a measure of how the marketing team wants to present the company but as actually consumers perceive it via their interaction with the employees of the service providers.

Especially for falling brands - nobody in the marketing teams of these companies implied to damage the brand. If a company experiences tough times, it is easy to blame the management but not always trivial to suggest a breaking out solution. However, the brand image is not always undermined by the lack of money. At least not always by money invested in tangible assets. Company culture, especially culture of company ambassadors, is the most influencing factor for the brand image.

Employees are the main Brand Ambassadors

Every employee in a company should understand, believe, and know that servicing customers and building positive perception is the most important factor gaining new or retaining existing customers - not a price of the product or service. The customers already have picked up the company when they compared prices and quality or analyzed other "dry" conditions of the deal. Even if they're still evaluating all this factors an average employee can't make many changes here. What he/she can still change to better or worse is its perception. Perception will remain with the customer or the prospect regardless of the momentary decision of getting the service or product.

Customer perception is something that ultimately defines the role of their recommendation - positive or negative - it's very discrete and rarely neutral. A phenomenon here is that the customers answer the recommendation question instantly but for the company it takes years to shape that image.

I believe that to build a positive image; an image for a company, It must take care for its customers. This is possible only when customer care is declared in its mission and the employees are well aware of its importance and well rewarded for extra steps and initiatives they undertake to pursue the mission. I'm sure in many cases it's not a question of additional money but additional steps that can be only invented by employees.

In case of Indian IT services companies, on-site employees have to play the role of company ambassadors. These employees must be presentable to the cutomer, have excepetionally good communication skills and importantly must have a service mentality. I encourage these on-site engineers to ask questions and understand the customer's intentions and objectives before starting full time on the project. Understanding customer's objectives will help the company do a better job, recommend superior solutions, avoid costly mistakes and win customer's loyality.

The following are a few examples what I've personally met in recent times.

Lufthansa senators (the highest frequent flier status) flying even in an economy are greeted by the chief attendant and thanked for flying Lufthansa personally. Of course, it's part of the policy but it costs to Lufthansa almost nothing and adds to the image of personal attention a lot. Why Delta doesn't do it to its platinum flyers?

Clerks at Marriott after checking-in go out of the stand, approach the guest, and hand the key personally, explaining locations the hotel services. 10 minutes later they give a call to the room offering additional help. Again, a small extra step to demonstrate the care that costs nothing but makes the customer feel special.

Delta customer service are usually very kind and willing to help. If the requested flight is not available they'll try to offer you so many options taking into account your needs that you'll feel not comfortable after a while of keeping them on line so long and not taking anything. If you call the service and it doesn't happen to you simply try another one - it's not part of the instructions but 90% of the agents do it as part of their job. Isn't it strange that Delta customer service has such a good name but Delta itself is in trouble?

A travel agency answered a ticket price question (asked via e-mail) formally correct - by providing the price. It didn't mention that there are no seats available for the requested date - the customer found it in the next e-mail (answered another day). Why couldn't the clerk, answering the e-mail, demonstrate a bit of initiative, mention that there is no seats for the requested flight, and offer a couple of available options? She didn't have it in the instructions...

Company ambassadors

People directly interacting with customers must have the mission of leaving the customers pleased (if not always satisfied) in their blood. They're the ones who only can suggest small but very valuable improvements. They should treat every customer as if she were their best friend - not giving a discount but providing the best advice and care they ever can give. Having direction instructions handy instead of getting a formal location's address, offering to return a call (instead of asking customer to call back), finding a zip code in the Internet (instead of asking to complete forms and come again) - all these simple additional steps can be undertaken by employees themselves without special policies or permission from the boss. It doesn't take too much time but adds a great value to the word of mouth about the company.

Closing Thoughts

Customers drive to a facility of FedEx (even if a competitor is across the street), they take a Lufthansa flight with connections (even if a competitor has a direct one), they select trusted IT service provider (even if a competitor one is cheaper). Brands are built by trust and care. If the former is mostly up to the company's policy and strategy, the later is mostly up to the ambassadors i.e. up to each employee to create the right perceptions.

Sunday, October 15, 2006

How to Run an Interview

Every senior manager or a top level business executive will have to interview another peer or a middle level manager. In the knowledge driven economy, hiring the right manger is crucial for the organization. But given the current shortage of talent, companies cannot afford to lose a good candidate.

Here is a set of guidelines that will enable you to get the right candidate.

  • Know what you want

    Before you meet the candidate at an interview, clearly understand what you want. Define the post, define the role, have a clear set of expectations from the candidate. This will save everyone’s time and help you plan decent questions.

  • Be prepared for the interview

    Many managers are so busy that they don't prepare for the interview - and hope to ‘wing it’. Sharp & intelligent candidates will figure out that you are unprepared for the interview and may be put-off by the shoddy interview. Preparing for the interview will also help prevent the mistake of hiring the wrong candidate.

    At a manager level, the interview is a two way process. The candidate is also interviewing you and your organization. If your preparation is sloppy, it will create a negative impression on the potential candidate.

  • Get the room ready

    Ensure that the room is ready for the interview. This means booking the room in advance, having arrangements for water, coffee/tea during the interview, getting the white board and flip charts in place etc. The quality of the room and the facility can create a good impression on the candidate. This impression helps the candidate choose your organization if selected.

  • Be consistent but flexible

    When interviewing a bunch of candidates, it is a good practice to level the playing field by asking questions of equal difficulty. I often start off by investigating their resume and building on it. This allows me to frame questions which are relevant to their past experience and how that can be applied to the job for which they are being interviewed for.

  • Let them shine

    The main point in an interview is to let the interviewee do most of the talking. The best way to ensure that is to ask open ended questions such as: "What was the toughest challenge you faced in your current/previous jobs?", "What was the toughest decision you had to make in your work?" Etc. The idea is to let them speak - and then you can pickup from what they said.

  • Keep a record

    Maintain a record of the interview. Note down the answers, main points etc. during the interview process. The recording process must be objective - to the point that it should help you choose between different candidates, help you filter out unsuitable candidates and most of all, it will help you defend your decision - when explaining it internally to your organization.

  • Don’t Discriminate

    Discrimination of any sort can be dangerous. Legally your decision to choose a candidate over another (from different race/religion/sex/age group etc.) may be OK, but if any candidate files a discrimination case, then the reputation of your organization and your personal reputation within the company is at grave risk. The best policy is the let meritocracy win!

Closing Thoughts

For many managers, interview is a regular business process - some have acquired the art of interviewing, but in today’s busy world, even the best of the interviewers are prone for mistakes. Having a plan for the interview, getting the questions in place and conducting the interview with an eye for hiring the candidate is essential for the organization. In my past experience, I had heard one manager telling that he wanted to hire people who are smarter than him - this was an indication of his seriousness, his preparedness and his modesty. All these factors help in selecting a right candidate.

Tuesday, October 10, 2006

Protecting IP Assets of an Organization

In my last article, I had written about non-legal means of protecting IP. The main means of protecting a company’s IP has always been via legal means: either by registered patents, trademarks, copyrights, Industrial design rights, etc. But all these protection mechanisms imply that the company must disclose its intellectual property to an government agency responsible for registering IP.

Sarbanes-Oxley Act & IP Protection

Sarbanes-Oxley Act has made it mandatory for US listed companies to follow certain procedures and practices to protect their IP. Companies listed in the US stock exchanges must implement some form of "best practices" and disclosure processes and controls with regard to intellectual property assets.

Private and other non-US companies can learn some of these best practices to protect their IP by following the standards set by Sarbanes-Oxley Act. For Indian IT companies, it is prudent to follow Sarbanes-Oxley Act even though its not listed in the US. Mainly because it increases investor confidence and clears the path for a future US listing. In addition, it provides for an increased protection to their IP.

Sarbanes-Oxley Act requires all public companies to provide enhanced disclosure in its filings with the U.S. Securities and Exchange Commission (SEC) of issues and business matters that materially affect, or are likely to have a material impact on, its business and financial performance. This includes potential revenue gain from licensing of patents, potential losses due to IP related litigation and the estimated value of its IP.

Disclosure Norms in Sarbanes-Oxley Act

At the core of the Act is the requirement that public companies establish and maintain "disclosure controls and procedures" to ensure that information required to be disclosed by a public company in its SEC reports is communicated to the company's management in a manner which allows timely decisions regarding required disclosure.
The effectiveness of disclosure controls and procedures must be reviewed and evaluated on a quarterly basis. The Act does not prescribe the steps a public company must take regarding timely and accurate disclosure of matters related to its intellectual property assets, and neither the courts nor the SEC have provided any guidance on this issue.

Implementing IP Best Practices

While it is not possible to predict what a court or the SEC could determine at a later date as to appropriate disclosure controls and procedures regarding intellectual property assets, listed below are five steps that are recommended for public companies to implement IP best practices in light of the uncertain requirements of the Act regarding intellectual property.

Step 1 – Inventory Intellectual Property Assets

Every public company has some IP assets. For some companies, these are the most important or key assets. However, it is not possible to make any meaningful assessment of how these assets contribute to the financial performance of a company without doing an inventory to determine the types of intellectual property the company owns or on which it relies in order to conduct its business.

The areas to examine include at a minimum:

  • Patents and Inventions
  • Works of authorship such as videos, books, manuals, plans, specifications and software
  • Business processes, know-how, trade secrets and other proprietary information
  • Brands, trademarks and service marks

These are collectively termed as "IP Assets".

There is no easy way to gather the necessary information to create the inventory of IP Assets. I recommend that an audit team of internal legal and business personnel, coupled with outside financial and/or legal advisers, be assembled. This team can decide on the best information gathering process based on the organization and culture of the company.

One vehicle that companies often use is to solicit this information through an electronic questionnaire sent to the heads of business units, as well as to the legal department. The questionnaire will ask the business unit heads through appropriate questions to list the IP

Assets on which they rely for the functioning of their business unit.
Business Unit Heads need to provide:

  • A list of all patents and pending patent applications
  • A list of all trademark registrations and pending applications
  • A copy of all form consulting and nondisclosure agreements.

Alternatively in some companies personal interviews need to be conducted in order to obtain this information. Irrespective of the approach, creating an inventory list of IP Assets is an essential first step.

Step 2 – Determine the Value of Each IP Asset

Once the information is collected from the business units and legal department, an initial assessment must be made as to the relationship of each of the identified IP Assets to the company's financial performance to determine whether the asset is essential, critical, useful, or minimally important to the company.

One way to do this assessment is to make a judgment as to the economic result:

  • If the company were unable to use the asset in its business
  • If use of the asset were restricted
  • If others could use the asset without restriction.

At this stage, the company can also consider retaining an IP valuation expert to assist the company in determining the value of the IP Assets.

After each identified IP Asset has been assessed, it is advisable to determine for all identified IP Assets, other than those characterized as minimally important, how well the IP Assets have been protected from an intellectual property perspective.

Protection can be afforded through different mechanisms. For example, for a proprietary technology that is critical to the company's business, it is recommended that patent protection be sought – perhaps in the U.S. and abroad – and maintenance fees continue to be paid following issuance of the patent.

If there is a brand or trademark associated with a key product or service that contributes significant revenues to the company's bottom line, it is important to know whether the mark or brand has been federally registered and, if relevant, perhaps registered abroad.

If the company's products include works of authorship such as software or books, it is important to know whether the copyright for such works has been registered, and to ensure that agreements are in place with the authors of those works so that ownership rests with the company.

If the company has proprietary information or other trade secrets, it is important to know whether the company has had employees and consultants sign non-disclosure agreements. If the company has utilized consultants, freelancers or independent contractors, it is important to know if IP assignment agreements have been executed.
Upon completion of Step 2, the company is in a position to determine:

  • The current value of its IP Assets
  • How well they have been protected legally
  • Whether the company can enforce its IP rights in the event of infringement

For example, if the company failed trade mark outside the United States would not be a certainty. This would, in turn, reduce the value of that brand or trade mark.

Similarly, if the company had paid a consulting firm to produce a piece of software which provided the company with a key competitive edge in its business, but failed to obtain an assignment of intellectual property rights, the consulting firm would be free to make that software available to the company's competitors.

In that case, the software would have less value. Because value is lost or created based on the intellectual property protections obtained, it is critical for every public company to create a plan for protecting its intellectual property, which is Step-3 of the recommended IP "best practices."

Step 3 - Establish an IP Protection Plan

An Intellectual Property Protection Plan must be created to establish:

  • The varying levels of intellectual property protection to be obtained for any class of IP Asset
  • The process for determining the appropriate level of protection for each IP Asset.

For IP Assets which are essential or critical to the business of the company, it is essential that a maximum level of protection be sought:

  • For a key brand or trademark, the company will, at a minimum, want to make sure adequate clearance checks had been performed prior to use
  • Obtain federal and, if relevant, comprehensive global registrations
  • Obtain a copyright registration for any associated logo or design element
  • Obtain ownership from any vendor or third party who created it
  • Adopt strict usage guidelines
  • Obtain maximum domain name protection
  • Monitor use through subscription to a trademark watch or monitoring service.

For less important trademarks, a lower level of protection might be obtained. The determination as to what level of protection to seek for a particular IP Asset is a determination to be made by a combination of legal and business personnel.

To assist the business personnel in making that determination, a checklist or criteria document can be prepared and distributed. For example, every work of authorship a company employee creates is eligible for copyright protection and can be registered.

While copyright registration is relatively inexpensive, the universe of documents, papers, reports and other works created by company employees is so vast, seeking copyright registration for every work is neither practical or advisable. On the other hand, there are powerful benefits to obtaining copyright registration. So depending on the importance of the documents - a decision needs to be made.

Thus, every public company needs to evaluate whether it owns or distributes works where it is advisable to obtain copyright registration. For example, if the company sells a product which is itself eligible for copyright protection, such as software or a book, it is clear that copyright registration is a must for the product & the associated documentation. For example, Movie companies typically copyright all things associated with that movie - scripts, production videos, interview with actors etc.

Dealing with whether to file a patent application requires a similar though different approach. Filing to obtain a patent for an invention is more costly than copyright registration and thus the decision on whether to file for any particular invention requires legal, technical and business input.

Certainly, if there is a substantial likelihood the invention when productized will have significant commercial value, filing a patent application is most likely the way to go. Indeed, in certain industries (e.g., pharmaceutical), obtaining patents on products is the primary form of intellectual property protection which is implemented.

For some IP Assets, certain measures can be implemented without specific reference to assets, so that appropriate steps can be taken before the asset is developed or reduced to practice. To protect the trade secret status of a company's proprietary process or know-how, a series of non-disclosure agreements need to be in place for a variety of different circumstances.

Similarly, appropriate agreements need to be in place to ensure that the company owns the IP Assets it develops or commissions and pays third parties to develop. For example, a consultant or vendor owns the copyright and patents in the work product it produces for the company, unless the parties have entered into an agreement assigning those intellectual property rights to the company

Step 4 – Implement the Plan and Audit/Monitor Compliance

Once a Plan has been completed, it needs to be implemented. First, employees need to be educated about intellectual property rights, the Plan and how the company's financial well being depends on the IP Assets. These educational efforts include in-house seminars and the dissemination of complementary written materials. Most importantly, however, is a message from the CEO of the company, reinforced by the division heads, setting as a company objective the identification and protection of IP Assets and emphasizing the importance of these assets to the company's bottom line.

Unless a corporate culture is attuned to intellectual property rights, any seminar and written materials on intellectual property will likely have only a minimal impact.

In tandem with the educational efforts, the company needs to implement the Plan with regard to the IP Assets identified in the initial inventory. To the extent the company is not in compliance with the Plan, remedial steps need be taken as soon as possible.

In certain cases, it may be impossible to remedy certain deficiencies resulting in a loss of intellectual property protection. If the loss involves a critical IP Asset, then a determination needs to be made as to whether this loss is a reportable event under the Sarbanes-Oxley Act.

For example, such a determination would need to be made if the U.S. trademark registration for a key brand or trademark were lost due to failure by the company to file a required affidavit of continued use with the United States Patent and Trademark Office, resulting in a dilution of the company's rights.

Once the initial implementation and analysis has been completed, the company needs to monitor compliance and do periodic "maintenance" audits. Processes and policies need to be put into place to capture and assess any change in the value of any IP Asset and whether such change materially affects the financial status of the company.

Strategic transactions involving the acquisition of IP Assets need to be included as part of the Plan and included in maintenance audits.

It is recommended that a public company identify an individual or team within the company to receive information regarding new IP Assets developed, acquired, and transferred through sale or otherwise, and/or circumstances or events which could result in a change in the value of IP Assets.

Larger public companies can consider the appointment of an IP Compliance Officer knowledgeable about intellectual property law and skilled and experienced at valuing and evaluating IP Assets.

Step 5 – Report procedures to report changes to IP assets

Obtaining information regarding IP Assets and more particularly any material changes in value to particular IP Assets is not very useful unless there is a procedure and process in place to ensure that this information is communicated to the company's management, including its CEO and CFO, charged with overseeing compliance with the Sarbanes-Oxley Act and SEC reporting requirements.

Clear lines of communication must be established with sufficient redundancy so that valuable information regarding IP Assets does not fall through the cracks. The Sarbanes-Oxley Act also requires that the company evaluate on a quarterly basis the effectiveness of the controls and procedures implemented regarding intellectual property. The quarterly meeting needs to be a part of a regular schedule of meetings of the group of individuals charged with IP related Sarbanes-Oxley compliance.

Closing Thoughts

Compliance with the Sarbanes-Oxley Act is mandatory for US listed companies. For public companies listed elsewhere, following some of the guidelines is important in protecting its IP. Protecting IP Assets that are important to a company's current & future financial performance.

Thus it is advisable for any public company or a large private company to follow "IP best practices", including implementation of adequate disclosure controls and procedures, and assume reporting responsibility to the company's management regarding material changes in the value or other features of IP Assets that could materially affect the company's business and financial performance.

Also See:

Creating a Culture for Innovation and Protecting Intellectual Property - Part 1
Creating a Culture for Innovation and Protecting Intellectual Property - Part 2
Customer as Co-Innovator
Global R&D Network
Virtual Scale - Alliances for Leverage
Cutting Edge R&D in India
Understanding Financial Value Creation
Innovation A Core Business Concept Part-1
Innovation A Core Business Concept Part-2
Collaborate to build Competitive Advantage
Globalization of R&D
Organization Development in High Tech Startups
The Value of Talent
Giving Your Top Performers a Reason to Stay
Improved Cross-cultural Communication Increases Productivity
Managing Diversity for High Performance
Promoting Organizational Change Through Communication
Hiring in high-tech firm: Build Vs Buying Talent

Sunday, October 08, 2006

Creating a Culture for Innovation and Protecting Intellectual Property - Part 2

This article is the continuation of my pervious article. The main idea for this article comes from an e-mail which asked:

"Can anybody tell me the" Role of Human Resource Development in creating a culture for Innovation and Protecting Intellectual Property".As we all know that the Intellectual property is an intangible asset of a company. In order to protect this intangible asset what HRD initiatives or the proactive measure are to be taken , rather than resorting to legal methods. Although legal remedies are available, but they are time consuming and the damage might have been done by the time legal process is completed"

In this article, I will write about what is Intellectual property? And then go into ways of protecting intellectual property. As the question was to know if there are any process/procedures to protect one’s IP without resorting to legal means, I will concentrate on that first, and then deal with legal means. Since the subject is so vast, I cannot cover all the aspects of protecting an IP in this article, Instead I will just go over the main points only. There are several books that have been published on protecting IP - I have listed my favorite set of books in this topic. This article does not go into depths of IP protection laws. IP protection laws vary from country to country and different IP’s are governed by different IP laws.

What is Intellectual Property?

Intellectual property is a general term which applies to all the creative ideas generated by any individual. This includes invention, discovery, writings, paintings, music, films, garments, drama/plays etc.. Intellectual property also applies discovery of new items: life forms, materials, laws of physics, chemistry, mathematics etc..

WTO defines it as: "Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time."

In short intellectual property includes all original ideas. However, the basic public policy has distinguished intellectual property into three parts:
  • Protected IP
  • Public domain IP
  • Private IP

Public Domain IP

Human civilization has always advanced by sharing knowledge. Thus the fundamental philosophy towards intellectual property is to make it a public knowledge which can be shared openly and freely with all citizens. For example, works of Shakespeare or Kalidasa or as simple works such as this blog are public domain IP. This means that others can copy, modify and use these works in anyway possible.

Protected IP

However, to encourage innovation and to incentivize creative individuals - the concept of protected IP came into being. The rationale for the protection of intellectual property is to facilitate and encourage the pursuit and disclosure of innovation into the public domain for the common benefit, by granting authors and inventors exclusive rights to exploit their works and invention for a limited period. Once the period of protection lapses, the IP becomes a public domain IP. Almost all countries have formulated various laws to protect IP, and these laws have to be according to WTO rules. However, IP protection laws vary from country to country and the implementation of IP protection laws vary greatly between nations.
WTO classifies IP into different categories:

  1. Copyright
  2. Geographical indication
  3. Industrial design rights
  4. IP cores used in electronic design
  5. Moral rights
  6. Patent
  7. Personality rights
  8. Plant breeders' rights
  9. Plant variety protection
  10. Trade dress
  11. Trademark
  12. Trade secret
  13. Traditional knowledge
  14. Domain Name

I will describe the types of IP and its implications in the future articles.

Private IP

Private intellectual property refers to all IP which is not publicly disclosed nor are these protected by the existing IP laws of any nation. Private IP refers to intellectual property which is developed but it is kept out of public knowledge. Military secrets - such as designs for a fighter plane, a battle tank etc.. are all examples of private IP.

Private IP is probably the oldest and the best form of protection offered to any intellectual property. Even today, a vast portion of IP is in the private domain - owned by governments, individuals and corporations. The best example of private IP owned by a corporation is Coca Cola - the recipe of Coca-Cola is a company secret. It is an private IP owned by Coca-Cola corp.

In the past - for several centuries, people, societies were very reluctant to share any IP. Medical science was one such profession where knowledge was shared only among a select few and this enabled these individuals to exert high levels of influence and power over the society. Similarly, few communities protected their knowledge in weaving, metallurgy, engineering etc..

The biggest disadvantage of private IP is that it can be stolen or copied or reinvented by others. Once others have copied it or independently developed it, the original owner cannot claim any exclusive rights or protection for his IP. History is full of such examples where one managed to steal the secrets or copy other’s ideas. For example - during the cold war, Soviet Union and United States engaged in spying over other’s research and development efforts. They copied off each other designs or re-engineered other’s innovation etc.. Soviets designed their version of space shuttle ‘Buran’ by seeing the American Version. See the familiarity in the picture.

Protecting Private IP

The oldest means of protecting any IP is to make it private. By making it a trade secret, a company can protect its IP. Coca Cola, Pepsi Cola, Fruto Lays, etc.., have made their products a company secret. Thus others cannot copy it. ( at least in theory)

Steel manufactures, chemical manufacturers etc. have developed their own unique processes to improve productivity - but these are made as company secrets and are not shared with public.
However, the modern technologies and trade rules makes it difficult to keep a company secret for long. Competitors can reverse engineer any product and know the material constituents and the process of creating it.

Industrial espionage - the act of stealing industrial/corporate secrets can cause huge losses to the original owner of the IP. However, the owner of a private IP cannot claim any legal protection against industrial espionage because these IP’s are not publicly disclosed. For example, the development of the Tupolev Tu-144 supersonic aircraft, with its rapid design and similarity to Concorde, was one of the most prominent examples of industrial espionage in the 20th century

The only protection offered to private IP is that the pirate can be held liable for breach of various laws other than IP theft - like trespassing, breaking-in etc.. The recent HP spying case makes a good example of protection against industrial espionage.

Stealing company secrets or confidential information is illegal in most countries. For example in India, stealing company secrets or confidential information is a crime punishable with a 5 year prison sentence.

However, in most country laws, the burden of proof lies with the accuser - i.e., the company or the organization must prove that the individual or organization in question has indeed stolen its IP. This implies that the company seeking protection to its IP’s must prove that the IP in question was indeed a company secret and it has taken serious efforts to protect its secrets and the accused had indeed stolen that information. The challenge in these cases is that the company must disclose more of its IP in the court to prove that the IP in question was indeed its own secret. The possibility of disclosing more of company secrets makes it unattractive to pursue a legal solution to protect its private IP.

The original question was basically on how one can protect an IP without resorting to legal means. The best way to do that is to make that IP private - or at least make most of the IP private. Private IP allows for exclusive rights for an infinite time.

Culture and Innovation Protection

Just like innovation is greatly dependent on the culture: National culture, Corporate culture, and Individual culture. Protection of IP is also highly dependent on culture.

Before advent modern intellectual property rights, there were only socially-enforced systems for protecting intellectual works. Society considered it a taboo to copy other’s works. Plagiarism was strongly criticized and condoned.

If a culture encourages innovation, then that society knows the dangers of plagiarism. An example in wikipedia shows the link between culture and IP protection: "..customary code of non-infringement used by clowns to recognize each performer's exclusive right to their unique style of makeup, costume and persona. The universality of "The Code" supports the belief amongst clowns that this traditional protection is more effective than that provided by trademark and copyright law."

I have worked in Silicon Valley companies and these are highly innovation oriented companies. Here, the general culture is to innovate and protect that innovation. In the similar vein, IP protection is also ingrained into the work culture at these companies. The common practices are:
All employees are trained in company’s security policies. These training programs are repeated at regular intervals to reinforce and change the employee culture.

  • Employees are trained in IP protection laws: patents, copyrights etc..
  • Employees are encouraged not to violate patents/IP of other companies
  • All internal documents are marked ‘confidential’ or ‘secret’ or ‘top secret’.
  • Employees are encouraged not to talk about their projects with others outside the company
  • Employees are encouraged to file as many patents as possible
  • All confidential documents are stored and managed in a central server
  • Employees are encouraged not to carry a copy of these documents in their laptops, instead all employees are given remote access to the corporate network via VPN
  • Paper shredders are placed in all work places to encourage destruction of confidential papers & printouts
  • Documents are classified into different categories of secrecy: Top Secret, Secret, Confidential etc.. The access to these documents are controlled - and copying/printing of these documents are prevented. In some companies, the top secret documents are printed only by a central document administration office and is sent to employees who are requesting it. These documents come with a color coded binders which indicate the level of secrecy. These documents are tracked closely so that any loss of documents is noted immediately.
  • A random & a routine data protection audit is carried out to check how the employees are protecting the company data.
  • Meetings are held behind closed doors and casual meetings in corridors are strongly discouraged.
  • Breachs/Violations in company secrecy policy or data protection policy are dealt with immediately and adequately. A severe loss or breach of information may result in dismissal of an employee.

These IP protection policies are uniform all over the organization irrespective of the countries - this reinforces the company culture.

Companies have to build a culture of IP protection via series of policies, training programs and leadership demonstrations. Practices mentioned above are done on daily basis by all employees - this reinforces a culture of IP protection within an organization.

Other Means to Protect IP

Protecting IP also means preventing piracy. Controlling the technology used to copy or develop a product prevents piracy. For example, in the days of LP records - the poly vinyl records were the means of distributing music. Since these records could be manufactured by a select few firms, piracy was restricted. But with the advent of compact cassettes, small fly-by-night operators began to sell pirated music cassettes. In India, thousands of small time operators sprung up in 1980’s who were selling pirated music. With the advent of CD recorders, copying music CDs became very easy - even individuals could copy CDs in their home PCs. Later with the advent of Internet, Peer-to-peer networks, and MP3 formats piracy became a global menace.

Currency notes is another example of controlling the piracy via control of manufacturing equipment. Machines used to print currency notes are highly regulated and controlled. This enables governments to control the use of counterfeit currency.

Difficulty in copying & distributing counterfeit products is a proven method to protect an IP. For example, semiconductor chips and cars cannot be counterfeited. But individual patents which are used in developing the product can be violated. If patents or trademarks or copy rights are violated, then one has to resort to legal measures to protect their IP.

WTO & IP protection

The most comprehensive agreement on IP protection was developed by World Trade Organization (WTO) in 1994. During Uruguay round of negotiations, a comprehensive & binding agreement was drawn upon all members states.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is an international treaty administered by the WTO which sets down the minimum standards for most forms of intellectual property regulation for all member countries of the World Trade Organization.
Specifically, TRIPs deals with: Patents, Copyright and associated rights, such as rights of performers, producers of sound recordings and broadcasting organisations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents, including the protection of new varieties of plants; trademarks; trade dress; and undisclosed or confidential information, including trade secrets and test data.

TRIPs also specifies enforcement procedures, remedies, and dispute resolution procedures. However the variances in the local implementations of IP protection laws creates challenges in protecting an IP globally.

The idea under TRIPs was to apply IP rules equally to all member states, however developing countries were allowed extra time to implement the applicable changes to their national laws. Two tiers of transition was agreed on depending on their level of development. Developing countries such as India, Brazil, Russia, China etc. had to transition to a common standard by 2005. The transition period for least developed countries was extended to 2016, and could be extended beyond that.

The TRIPS agreement introduced intellectual property law into the international trading system for the first time, and remains the most comprehensive international agreement on intellectual property to date.

Closing Thoughts

IP protection is a complex subject. Though there are several legal means to protect one’s IP, the legal procedures are complex & expensive. Often small & medium firms in developing firms are unaware of these laws & rules. Most small & medium firms cannot afford expensive lawyers to register their IP with the concerned agencies, let alone protect their IP. So in this article, I have written mostly about how to protect their IP internally - through organizational culture and through the use of private IP.

Probably in the coming months, I will write about legal means to an protect their IP globally and discuss the various protection clauses for different types of IP.

Books on IP:

I recommend the following books on IP & IP protection. There are lots of books on IP - but these are what I consider as the most essential.

Thursday, October 05, 2006

Creating a Culture for Innovation and Protecting Intellectual Property - Part 1

"Creativity, it has been said, consists largely of re-arranging what we know in order to find out what we do not know." George Keller

Recently I received an email asking: Can anybody tell me the "Role of Human Resource Development in creating a culture for Innovation and Protecting Intellectual Property?"

This question is a very very complex one. There is no simple answer - to effectively answer this one needs to understand the concept of creativity and innovation. Therefore I decided to write down the answer in a way as simple as possible. This set off a train of thoughts that eventually resulted in today’s blog. This article is not a complete answer for the question - but it gives a guideline to find the final solution.

What is creativity?

To begin with lets examine the concept of creativity. Creativity can be best defined as "Creativity is a process involving the generation of new ideas or concepts, or new associations between existing ideas or concepts. From a scientific point of view, the products of creative thought are usually considered to have both originality and appropriateness."

An alternative, more everyday conception of creativity is that it is simply the act of making something new with is useful and appropriate.

Although intuitively it is a simple phenomenon, creativity is in fact quite complex. Unlike many phenomena in science, there is no single, authoritative perspective or definition of creativity. Unlike many phenomena in psychology, there is no standardized measurement technique.

Organizational Perspective of Creativity

Today organizations thrive on creativity. Entire high tech industry, pharmaceuticals, construction industry, architecture firms, publishing houses, art dealers, movie industry, music industry all are dependent on creativity for growth and survival.

From an organization perspective - few organizations are more creative than others. 3M, Google, Yahoo and Apple have become icons of corporate creativity. But creativity is not limited to these companies alone, IBM, Intel, AMD, Microsoft, Oracle, and a host of others file hundreds of patents every year. This implies that creativity can be imbibed into the organization.

In the context of creativity in organizations, it is useful to explicitly distinguish between creativity and innovation. In such cases, the term innovation is often used to refer to the entire process by which an organization generates creative new ideas and converts them into novel, useful and viable commercial products, services, and business practices, while the term creativity is reserved to apply specifically to the generation of novel ideas by individuals, as a necessary step within the innovation process.

Innovation begins with creative ideas, creativity by individuals and teams is a starting point for innovation; creativity is a necessary but not sufficient condition for innovation.

What is Innovation?

There is no single definition for innovation. Definitions for innovation include:

  • The process of making improvements by introducing something new
  • The act of introducing something new
  • A new idea, method or device.
  • The successful exploitation of new ideas
  • Change that creates a new dimension of performance

Often invention is confused with innovation. Invention is creation of new tools. Where as innovation includes invention and a lot more. Innovation includes invention of something new, developing a new use for existing use, developing a new process or a method to solve existing problem and economic value creation from creative ideas.

From a business point of view, the last point is most important: Creating economic value by new means is innovation.

Innovation in organizations

Innovation typically involves creativity, but it should not be confused with creativity. Innovation involves acting on the creative ideas to make some specific and tangible difference in the domain in which the innovation occurs.

For example, Amabile et al propose:
"All innovation begins with creative ideas . . . We define innovation as the successful implementation of creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for innovation; the first is necessary but not sufficient condition for the second".

For innovation to occur, something more than the generation of a creative idea or insight is required: the insight must be put into action to make a genuine difference, resulting in new or altered business processes within the organization, or changes in the products and services provided by that organization.

Types of Innovation

As mentioned earlier, innovation is much more than invention. This implies that there are several types of innovation - companies need not invent new things & yet be innovative. For example, DELL innovated the direct sales for computers. Dell did not invent the computer, Dell did not invent direct selling. Dell innovated a new business model - selling PCs directly to customers.

Types of innovation

  • Product innovation, involves the introduction of a new good or service that is new or substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.

  • Process innovation involves the implementation of a new or significantly improved production or delivery method.

  • Service innovation, is similar to product innovation except that the innovation relates to services rather than to products

  • Business Model innovation involves changing the way business is done in terms of capturing value e.g.

  • Marketing innovation is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing. E.g.. Sears introduced catalog sales. McDonalds innovated joint marketing promotion with Disney.

  • Organizational innovation involves the creation or alteration of business structures, practices, and models, and may therefore include process, marketing and business model innovation.

  • Supply chain innovation where innovations occur in the sourcing of input products from suppliers and the delivery of output products to customers

For example, financial innovation of adjustable mortgage rates created a whole new way of financing a house. Another example of financial innovation is co-promotion credit cards where customers can earn points/airline miles by using a credit card.

Disruptive Innovation and Incremental Innovation

In the world of business, we often hear the term "Disruptive Innovation". Disruptive innovation are the ones which challenge and destroy the existing business systems. For example MP3 players destroyed the market for music CDs and Walkman. In general, disruptive innovation tends to bring in radical/revolutionary changes in the business environment.

Disruptive innovation are relatively rare - when compared to Incremental innovation. Incremental innovation refers to slight improvements to existing products/services. For example Video iPod is an incremental innovation over the original iPod.

Sources of Innovation

Having defined creativity & Innovation, we can now discuss about sources of developing an innovative organization. For most part of the human civilization - there has been two sources of innovation. One is manufacturer innovation - where a business creates a new product to sell to customers.

The other main source is customer induced innovation. In this case customer develops a new use for the existing product or demands a new product which meets his needs. A new source of innovation is now becoming popular - Customer as Co-Innovator .

Innovation by businesses is achieved in many ways, with much attention now given to formal research and development for "breakthrough innovations." But innovations may be developed by less formal on-the-job modifications of practice, through exchange and combination of professional experience and by many other routes. The more radical and revolutionary innovations tend to emerge from R&D, while more incremental innovations may emerge from practice - but there are many exceptions to each of these trends.

Customer innovation though widely popular - but rarely credited to a individual customer. For example iPod or personal MP3 player was actually a customer induced innovation. While the MP3 format was a manufacturer innovation. MP3 format was developed by Berlin University research labs.

Whether innovation is mainly manufacturer driven or customer driven. But creating economic value from that innovation is totally dependent on the internal working of the organization.

Creating an Innovative Organization

Creating an Innovative organization starts with having a innovative culture - the values, rules, customs and incentives that govern the way we work and the way organization functions.
In the world of innovation, culture comes down to shared attitudes, values and beliefs. It determines how well we encourage creativity, risk-taking, entrepreneurship, and networks to share knowledge and ideas. In short cultures which encourage creativity tend to be more innovative.

Innovation also depends on:

  • Human capital: i.e., People and their skills. Organization must hire creative people - with appropriate skills.

  • Organizational and physical infrastructure: R&D labs, leadership and the environment.

  • Financial infrastructure: Willingness to invest money & resources for innovation.

  • Legal infrastructure and civil justice system to protect the intellectual property. (I will discuss more about Intellectual property protection later in the next part.)

  • Social capital: Relationships between people and between organizations. Innovation rarely takes place in vacuum. People should be able to network with others - both within and outside the organization and between organizations to exchange ideas - that eventually foster innovation.

Human Capital

If one were to look at the centers of Innovation in the last century, one will see that most innovation came from a few select places in Europe, Japan, Asia and US. These geographic centers such as Silicon Valley, Boston, Cambridge, Berlin, Moscow, Bangalore etc. have highly educated & talented people. It is this talent that is driving companies, capital and more people to these locations - and that is inturn creating the right ambiance for innovation.

Innovation within an organization will never occur without talented & creative people. Organizations have understood this concept and have invested in developing educational facilities, training facilities within their organization and also in the local neighborhood. For example companies( e.g.. HP, SUN) in Silicon Valley fund local universities (Stanford, UC Berkeley, etc.) - these universities in turn train new individuals (Larry Page, Jerry Young etc.) and they in turn create new companies (Yahoo, Google, et) and the cycle continues.
Innovative organizations are committed towards developing Human Capital.

Organizational and Physical Infrastructure

To be innovative organizations need the right infrastructure - in terms of R&D facilities, labs, computers, software etc. In addition to physical infrastructure, it also needs organizational support in form of leadership & guidance. Having a strong support from the top leadership within an organization helps to encourage innovation. Leadership support ensures that the right infrastructure for innovation is in place and people have access to it. Leaders also inspire employees to try something new & be innovative.

For example look at Google, employees are encouraged to spend 20% of their time on pursuing their own ideas. This has led to a whole lot of innovative ideas at Google: Google maps, Google earth, Google mail, Picasa, etc. The leadership attitude at Google can be seen from the statement from Larry Page: "We're willing to tolerate that ambiguity and chaos because that's where the room is for innovation."

Financial infrastructure

Access to financial capital is key to innovation. Most innovators need money to test & try out their innovation. Without this investment, new ideas will never be implemented - and will remain only on paper. If one looks into Silicon Valley, it becomes clear that Silicon Valley thrives because of venture capitalists, bankers, Corporate R&D funding, and Government R&D funding. Bangalore became a technology center primarily because of all the investments done by the government in developing the various R&D centers in the city. In general, it can be said that to encourage innovation one needs to:

  • Create an environment that encourages more financial institutions and other private sector sources to lend money to business - both large, small and new startups.
  • Encourage new private sources of capital and more financial institutions, to lend to and invest in new businesses.
  • Encourage venture capitalists and angle investors to setup operations.
  • Reduce regulatory barriers and regulatory costs for new business.
  • Encourage innovation via tax incentives.

Legal infrastructure and civil justice system

Innovators need legal protection to protect their new ideas from piracy. In the initial period after the innovation, individuals or organizations must have protection from piracy - else larger organizations with huge resources can hijack the innovation for profit. Yet the value of the innovation must become a shared good. This is why the patent laws are created and the patent law protection is not permanent - and has a definite time span. Having access to patent offices, ability to quickly file for patents and a strong legal system to protect the patents, trademarks and copyrights is essential for encouraging innovation.

Social Capital

Innovation rarely takes place in isolation. Innovation needs a right social environment in terms on culture, community encouragement and customer needs.

Today most of the innovative companies tend to be clustered in few geographic locations. Such clustering allows employees to interact with others, share ideas, develop ideas, validate ideas and improve ideas during the process of innovation. Clustering of companies also provides a sense of security to employees in terms of employment - as they can find an alternate job if their current idea fails. Thus innovative people are attracted towards these clusters.

Clustering of companies in one geographic location also allows for networking of organizations. Startups can network with Venture capitalists, with legal firms, with banks, with business consulting firms etc. It this kind of networking which allows startups to flourish and grow in the initial stages.

Clustering can improve competitiveness and innovation. Companies and communities can benefit from increased competition. Thanks to increasingly sophisticated technology and telecommunications, the competition is becoming more fierce - thus encouraging greater amount of innovation. Competition creates a demanding environment. Knowledgeable customers armed with a choice of suppliers tend to force companies to innovate.

The best network for innovation can be seen in the Silicon Valley of California - where there is a well established network of universities, companies, legal firms, financial companies, venture capitalists, and government R&D centers. By contrast, companies that enjoy monopolies - have failed to innovate.

Innovation & Culture

Among all the factors, Culture probably plays the most important role in innovation. By culture, I mean the social culture in the general society. How does the society treat new ideas? Does it encourage it? Does it discourage it? Does it scorn on people who do things differently? Does it encourage people who are different?

Innovators come from societies which is open for new ideas, new ways of doing things. Culture reinforces the behavior and strategies required to succeed in any given environment. But environment dictates culture, too. If we live in a business environment that favors innovation, then such behavior will become prevalent. There is an old saying, which goes: "Necessity is the mother of invention." The more demanding the environment in certain respects, the more likely the organization or individual is to respond innovatively.

Closing Thoughts

Innovation requires creative thought, technical & scientific ability, financial skills, market demands and customer acceptance. This can be created only through innovative communities - which is network of organizations and individuals.

Now coming back to the original question: Can anybody tell me the "Role of Human Resource Development in creating a culture for Innovation and Protecting Intellectual Property?"
Innovation is always a human endeavor. Without the right human resources - people and people skills, no innovation is possible.

(I still haven’t answered the question on protecting intellectual property - I will do that in the next part of this article.)

Also See

  1. Customer as Co-Innovator
  2. Global R&D Network
  3. Virtual Scale - Alliances for Leverage
  4. Cutting Edge R&D in India
  5. Understanding Financial Value Creation
  6. Innovation A Core Business Concept Part-1
  7. Innovation A Core Business Concept Part-2
  8. Collaborate to build Competitive Advantage
  9. Globalization of R&D
  10. Organization Development in High Tech Startups
  11. The Value of Talent
  12. Giving Your Top Performers a Reason to Stay
  13. Improved Cross-cultural Communication Increases Productivity
  14. Managing Diversity for High Performance
  15. Promoting Organizational Change Through Communication
  16. Hiring in high-tech firm: Build Vs Buying Talent

Sunday, October 01, 2006

Managing Virtual Teams - Use of Collaboration Tools

Today virtual project teams are composed of people separated by vast distances who communicate primarily by computer and telephone, and is more the norm than the exception. They use networks to develop a sense of community among project team members who may be far-flung geographically and to keep channels open to various regional and functional units that can contribute to the project or be impacted by it.

Web enabled project management software helps virtual project teams plan and track progress of widely dispersed project components, keep the various components in sync with each other, manage project change across the board, and deter local scope changes from overwhelming the project. Project teams today move faster and work under more pressure than ever before. To expedite information sharing and to accelerate decision making, project managers are using team collaboration tools.

Collaboration tools also help manage multi-cultural teams. But only when used with care. Most virtual teams consists of culturally diverse members - who can understand at least one common language. The project manager must therefore establish a common communication standard which is acceptable by all members. I prefer using standard communication templates for inter-team communication. These templates does not allow use of local phrases or slangs, and enforces a standardized communication between the team members. The downside of these templates is that one loses the wealth of eloquent language in communications - but on the positive side, a simple straight forward communication helps manage multi-cultural teams better.

There are two such tools that are ideal for small firms & startups. One is Proworkflow and the other is Agenda. ( However, these tools may not be ideal for large enterprises - as they will not meet several requirements that are typical of a large organization)

Project Workflow Management

Today I work in an IT services company - where teams are distributed all over the world. A small part of the team works along side with the customer while 90% of the team works far away from the client. In such an environment, the complexity of project management is so high that it is actually impossible to manage a project without a good project workflow management software.

Recently, I had the opportunity to implement a Project Workflow Management software for a project at British Telecom company. In my previous company too we had implemented a customized project management software - called "OpenAccess".

A web based project workflow management software enables all members to login and coordinate their activities, the project manager can assign tasks to members and monitor the progress. The project status and tasks are communicated via email in a standardized templates - this minimizes miscommunication and improves team coordination.

Project workflow management tool should do the following:

  • Create/Edit projects
  • Assign resources/people to projects
  • Create tasks & assign responsibility to complete those tasks
  • Monitor project status - Track the current status w.r.t allocated time for the task
  • Warn on overdue tasks - via emails & color coded indicators
  • Generate quick summary on timely basis
  • Manage time sheets for members - to help resource management
  • Manage billings for contractors and consultants who are shared across projects
  • Generate invoices against completed delivery
  • Manage contacts for project members
  • Provide a Project bulletin boards to share project notes
  • Generate detailed project reports
Project Reporting Software

Every project management software needs a good reporting system. Project reporting tools are vital for the smooth functioning of Project management office and effecient resource management. Typically a project reporting software should be able to:

  • Generate the reports about employees' and their teams' tasks;
  • Export, Print or Email all reports.
  • Project Summary - Tasks and status including staff reports.
  • Project Summary -Includes all Staff Time Records
  • Summary of all project’s financial details: Invoice, unpaid, overdue etc.
Closing Thoughts

Managing virtual project teams needs software tools to improve comminution and coordination between team members. In my experience - these tools are vital for the success of International projects where people of multiple nationalities are working across geographies. These groupwares help organizations mitigate cultural differences and overcome cross-cultural communication problems.