Many companies today hope to avoid disruption and gain a competitive edge through innovation and digital transformation. This is a great strategy, and arguably the only one that can carry a business forward as commerce, industry, finance and sociopolitics continue to evolve.
The challenge is that innovation is not simply a treatment that can be applied to a business—although many executives today see it as such. Innovation is a concept, a method of working. As such, both its place in business strategy and its implementation must be carefully considered and planned.
While there are no cookie-cutter approaches to innovation, there are some simple do’s and don’ts that can help firms become more innovative.
Mistakes most companies make and how to avoid them
1. Borrowing ideas from other firms without knowing how they’ll interact with your company culture.
All companies, even similar companies in the same industry, are unique. Admittedly, this may not appear to be the case superficially and at first glance. Edward T. Hall’s iceberg model of company culture (below) tells us that, while a portion of a company’s culture is readily apparent, a great mass of hidden values, methods, and routines lies hidden beneath the water and drives the bulk forward.
Thus, executives can be excused for hoping to simply transplant innovative ideas from other companies to their own. Unfortunately, this is somewhat like trying to graft a shoot onto a living plant. With care, attention, and (plenty of) resources, it may grow—but it’s just as likely to fail. The unseen support system that nurtured the original seed—core values, narrative, biases, discipline, expectations, etc.—may be missing, in which case the graft is rejected.
What this means concretely is that, before implementing innovative ideas from other firms, do enough research to understand how these initiatives began, what hurdles were encountered, and what allowed them to thrive. Executives shipped off to Silicon Valley to visit startups and tech giants will come back with plenty of ideas, but they will need significant reworking to fit into a new business.
2. Starting off too big, too much, too fast, with no real plan for follow-through.
In their excitement and eagerness, executives run all kinds of high-profile innovation schemes to get the ball rolling. Hackathons, idea challenges, and innovation suggestion boxes can result in an explosion of great ideas, but if there’s no process in place to organize and make use of them, little will come of it. Ideation is an integral part of innovation, but businesses need to have a system in place to filter ideas based on the existing business before throwing everything at the wall to see what sticks.
Such events also create an emotional level of excitement that’s difficult to maintain. When this happens, it reaffirms any doubts managers and employees had in the scheme to begin with, which can stop initiatives dead. In the same vein, huge investments in new labs or research spaces, new talent and leadership, or the acquisition of startups are costly and often fail to generate an expected ROI. Likewise, hosting events, sponsoring a startup accelerator, and offering workshops can spark attention from the media and investors, but serve just as well to highlight failures as successes.
Successful innovation happens when good ideas are nurtured and given the attention they need (and bad ideas are quickly recognized as such and retired).
3. Underestimating the importance of people and culture.
In the same vein, it’s important to remember that innovation doesn’t exist in a vacuum. It’s a concept which must be carried in the minds of leaders, managers, and especially employees. “Changes come to life through the work and behavior of individuals,” says Eva Gaskova, former senior project manager at IBM.
The established workforce needs to be convinced of the utility and interest in being innovative and must be supported in being so. This means leaders who are committed to forging alliances with the existing organizational status quo and who inspire rather than berate. Don’t ignore the need for an internal communications strategy focused on innovation that can celebrate achievements and speak honestly to failures. Importantly, people need to know how they can get involved and whom to go to with their ideas.
Innovation will be, by definition, contrary to any long-established practices in your business and will no doubt be met with some resistance. Seek out dissenting elements and convince them of the importance of being innovative. Likewise, bring in new blood who can see your current organization from a new angle, one that differs from veterans and insiders.
Finally, provide employees with the tools, support, and especially job security necessary to take risks. Certain cultural elements may need to be dismantled for a working environment that’s more conducive to innovation, especially those in project management. An agile workforce, for example, is usually better able to respond to calls to innovate.
4. Failing to clearly define and appropriately measure success
Just as important as the act of innovating is clearly defining and measuring its success. Executives should carefully consider what they’re hoping to achieve through innovation. This is no time for fuzziness. Clear goals couched in objective terms provide a more substantive framework for innovation than this loosely defined concept has on its own.
Consider the desired impact in terms of output, efficiency, productivity, cost, revenue, and conversion. Definitions needn’t be the same across departments, but they should show a clear benefit to the organization and customer.
Next, develop ways of measuring progress and success. Guttorm Aese et al. recommend two simple indicators (below): R&D-to-product (RDP) conversion and new-products-to-margin (NPM) conversion. They are objective, quantifiable, transparent, and simple to understand. Soren Kaplan, former head of internal strategy and innovation at HP, recommends metrics centered around ROI, organizational capability, and leadership.
Clearly defining, measuring, and tracking input and output metrics offers clarity to executives, investors, and managers; facilitates the appropriation and redirection of resources; and makes it easier to identify successful initiatives to be repeated.
Characteristics of companies that have successfully innovated
Successful innovators share a few common characteristics:
They invest more in innovation and budget for failure
According to a report from the Boston Consulting Group and subsequent analysis by VisualCapitalist.com, innovation leaders invest 70% more in innovation than industry peers. As a result, they see a 400% greater return in new product sales.
Industry leaders also invest more in the cultural aspects of innovation. Innovation, like digital transformation, is seen as a permanent fixture, not as a periodic initiative. Businesses need to invest not just in ideation but also in testing, which means setting a budget for failure. (This is where the metrics from Point #4 above will be particularly eloquent.)
They are committed to innovation
Similarly, BCG’s Global Innovation Survey underscores the importance of committing to innovation. Committed innovators, which make up 45% of surveyed companies, say that “innovation is a strategic priority and they invest accordingly.” Committed innovators get more out of their investments, too:
“Almost 60% of them report generating a rising proportion of sales from products and services launched in the past three years, compared with only 30% of the skeptics and 47% of the confused.”
They started small, succeeded, then systematized
In line with Point #2 above, successful innovators, at least in the beginning, start small and focus on a few initiatives—or even just one. Don’t waste time hunting for elusive, industry-changing ideas. In fact, in the long run, your best returns won’t come from any individual project, but from perfecting the process of innovation. The act of innovating must be learned and understood by executives, managers, and employees. This happens through many small iterations. Small successes should be analyzed, then systematized.
Of course, there’s nothing wrong with trying to fit these iterations into a wider strategy. In fact, initiatives should align with some central definition (see Point #4). The point is not to bite off more than you can chew.
They treat innovation as a system-level problem
The best innovators approach innovation holistically. This touches on many of the Don’ts from above. Innovation must be understood and championed up and down the organizational chart; it must be undertaken in light of existing or planned business operations, values, processes, and culture; it should involve a diverse set of stakeholders and requires cross-team and cross-departmental cooperation; and perhaps most importantly of all, it must take into account and ultimately benefit the customer.
Conclusion
Bottom Line. Innovation doesn’t exist in a vacuum. Successful innovators are committed to innovation, invest appropriately, start small and then systematize successful initiatives, and approach innovation holistically. Like digital transformation, innovation requires cultural changes, clear definitions of success, and planning and leadership from knowledgeable executives.
Found this article interesting?
Would you like help in planning your innovation strategy that both helps your customers while achieving business objectives for your company leveraging the power of big data, AI and FutureTech?
Eularis do not indulge in innovation theatre (hackathons, crowdsourcing innovation et al.). Organizational redesign, innovation, and process transformation to achieve innovation that delivers results needs to be part of an overall plan. If that is where you are at, Eularis can help.