Simply Clever Innovation Management

At Škoda Auto, they created an innovation blueprint describing how they apply all available tools in order to create continuous enhancement of innovation maturity.

The Blueprint and Structure

First, it’s about setting the strategy that explains “why” to innovate and define the “focus”, the desired opportunity fields. Then, it’s about managing the portfolio, with the right governance and metrics, and funding.

Following those, innovations are being designed and built, leveraging different tools and techniques, and following a dedicated process. Finally, it’s about pushing a culture of innovation, including leadership, incentives, training and networks. They maintain the Culture Mindset indeX that measures the innovation mindset and helps identify areas for culture development.

From a governance perspective, they are now organized into domains around which they innovate; car (new features and functionalities), services (also directly to consumers) and company. Because of the interconnectedness of trends, this enables more effective collaboration between departments like sales and marketing, production and technical development.

The domains “car” and “services” are steered by a Customer Innovation Council, whilst the domain “company” is steered by a Company Innovation Council. The Innovation Sounding Board, consisting of board members and key middle managers, is responsible for endorsing ideas and helping to accelerate their implementation.

Identifying Opportunity Fields

When it comes to the focus, the opportunity fields, first there’s Škoda Auto’s new corporate strategy labelled “Simply Clever”; modern accessible mobility with everything you need and

surprises you love. From the Volkswagen Group, sustainability/decarbonization are also embraced.

The additional 3-5 opportunity fields are carefully evaluated, and then defined for the next 12-18 months. From a wide range of innovation topics, they filter out non-mature topics, topics with low impact and topics that are already worked on intensively enough.

Once the opportunity field has been defined, in the next phase it’s about gathering ideas from various sources, internal and external, usually totaling up to 200 ideas. Ideas often come from multiple sources and are brought forward by enthusiastic individuals. Depending on the capacity and alignment with a specific business unit, if an idea resonates, either the innovator or an advocate takes charge of driving it through the qualification process. The innovation management team provides support, including funding for proof of concept (POC) and facilitates discussions with management. As the idea matures, it is handed over to the appropriate department expert who implements it, creates a business case, and obtains the necessary approvals.

Evaluating Ideas

Overall, they balance impact versus effort. “Customer value” is weighed at 45% and as such prioritized; “Business Value” comes second at 30%, leaving 25% for “Execution Value”.

Impact: Customer value

• Customer need / Demand: How desirable is the solution/service for customer (is there an identified customer problem to be solved or customer proposition to be made)?
• Competitive advantage: Does the solution provide a lasting, unique, competitive advantage, or limit current non-competitiveness?
• Usage frequency: What is the usage frequency of the product/service/solution?
• Brand fit: How well does the solution fit to our Brand values: human, simplifying and surprising?

Impact: Business value

• Financial value: What are expected financial benefits (revenue or savings) of the solution (cumulative 5 years after pilot/implementation start) in mn EUR?
• Adoption / Scaling: How many customers will the solution capture? / How many internal customers (depts.) benefit from the solution?
• Enabler for additional business, e.g. Data exploitation: How big is the potential for additional business opportunity/development, e.g. data exploitation, enabling further services or use?
• Strategic contribution: How much is the solution contributing to our strategic goals? (including core business contribution, order in-take, AaK, KPIs, Data utilization, Sustainability, etc.)

Effort: Execution value

• Time to market: How fast can we launch the solution (MVP)? (after approval of the business case)
• Resource needs: How many (human and financial) resources are needed to deliver the complete project? (5Y timeframe including pilot)
• Dependency on others (competency needs): Do we have sufficient knowhow/ capabilities/technology/capacities at our disposal and the “degree of freedom” to apply it? (consider dependencies within VW Group)
• Confidence level: What is the level of certainty in pursuing the idea? (Degree of evidence/data, benchmarks, facts to back-up the idea)

As far as “Business Value” goes, beyond financial estimates, adoption/scaling potential and strategic contribution, the idea's ability to enable additional business opportunities has become quite important.  With regards to the sub-criteria for “Execution Value”, there is a difficulty of balancing time to market with the longer development lifecycle of cars, which can deprioritize certain ideas.

After the scores are aggregated, any significant differences in ratings between their own opinion and colleagues from product marketing, technical development, or customer experience are discussed. If there is a difference of more than two in the ratings, they either agree on an average or discuss the reasons for the differences.

There is a risk of over-intellectualizing the scoring process during opportunity qualification. The value lies in the discussions that arise from scoring, rather than overly focusing on the numerical scores. It is important to discuss each opportunity field and provide detailed descriptions of the benefits and expectations associated with the idea.

How do they define “must-have” ideas? These are ideas to catch up with the competition and market standards. They typically address a critical customer need; customers would switch to a different brand otherwise. Of course, the idea should not go against the brand promise. Beyond, they also define “highlight” ideas, that might “wow” the customer and differentiate versus the competition.

They make decisions when it comes to prioritization and implementation based on portfolio charts that display “Customer Value”, from “low” to “high”, and “Execution value”, from “difficult” to “easy”, and with “Business Value” reflected in the size of the dots.