For many organizations, innovation is one of the central business functions guiding their future growth.
Today, to remain stagnant with product offerings in the marketplace is an inadvisable tactic. Evolution the only viable option for sustaining competitive business advantage.
However, while around 85% of organizations believe that innovation is very important, a large majority of companies only focus on making incremental changes to their offerings and admit they are at a significant risk of disruptive innovation from competitors.
Innovation teams would argue that innovation is all about vision and execution; to effectively innovate, organizations need to carefully focus on the strategic process of innovation management.
What is innovation management?
To help breakdown the innovation management process, we put together a comprehensive guide on the mechanisms involved in executing a powerful innovation program.
In the innovation sphere, it is well-established that innovation can be broadly categorized into three types: sustaining, disruptive, and radical innovation. To effectively manage an innovation program, it's important to understand under which category your initiative fits under.
Sustaining Innovation is all about making gradual improvements to a product, service, or process. This form of innovation is fundamental to keeping businesses afloat and accounts for the majority of a company’s budget allocated to innovation spending.
Disruptive innovation takes it up a notch. Disruption is usually a word thrown around in association with the word innovation. Think companies like Uber or Airbnb, which have created business models that disrupted or created new markets and acknowledged consumer demands which previously weren’t addressed.
Radical innovation is the game-changer. It’s the ultimate goal innovation visionaries dream about; this kind of innovation is about creating solutions to needs consumers were not even aware existed. Radical innovations have the power to completely change the way the world functions and have a significant impact on the daily lives of people. Take, for example, the creation of Facebook which pioneered digital communication as we know it.
Creating a culture of innovation
Innovation is an incredibly collaborative exercise that requires the right kind of environment to succeed. For effective management of innovation programs, it is a fundamental requirement that the organizational environment sets parameters that foster a culture of innovation. These parameters include the following conditions:
1. Management needs to support innovation
One of the most important factors for fostering an organizational culture of innovation is strong C-Suite leadership. Innovative leaders project a clear vision of the future and help to inspire innovative thinking. They instill trust through their expertise and encourage teamwork and collaboration. Without support from upper management, innovation has no grounding and no framework to grow.
2. The organization needs to promote free thinking
Innovation is about vision and imagination, to quote Einstein, “Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution.” To advance innovation, businesses need to remove barriers that inhibit freethinking and create environments that spark imagination and creativity.
3. The organization needs to exhibit innovative behaviors
Thoughts are important, but actions are just as significant. Organizations need to stimulate innovative behaviors by going back to organizational psychology 101: use positive reinforcement to stimulate productive behaviors in employees. Encouragement and openness are key to progress and behaviors that promote innovation need to be advanced.
"Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
How to define your innovation management strategy
You can’t just sit back and let innovation come to you—make it happen with a clear, goal-oriented innovation strategy that aligns with your business strategy and is guided by consumer needs.
Align your innovation and business strategies
A strategy is critical to management activity. Before executing an innovation program, businesses need to understand how their innovation process fits into their overarching organizational goals. However, many companies still grapple with the challenge of aligning their innovation strategy with their business strategy. Sixty-five percent of companies investing 15% or more of their revenue in innovation state that this alignment is one of their top strategic challenges. To ensure alignment with business strategy, innovation managers need to carefully refine each strategic step of their program.
Set clear innovation goals
As with any good strategy plan, an innovation management strategy needs to begin with defining the goals of the program. Goals set within an innovation program should reflect business strategy goals. The goals of the innovation program can vary greatly—from objectives set to generate revenue by improving or creating products to designs initiated to improve customer experience and satisfaction or business operations.
Let the consumer guide innovation
At its core, innovation is about addressing the ever-changing and evolving needs of the consumer. Innovation departments need to employ insights from their internal teams as well as third-party consultants who have experience in different organizations and sectors, to develop a broad and holistic understanding of consumer trends.
Within consumer research what's most important to consider is that consumers don't always know what they need. This is the space that disruptive and radical innovation fills. Take, for example, Ford Motors. Henry Ford revolutionized the transportation industry by creating a new process of mass production for the car in a time where the transportation needs of the consumers were focused around faster horses and bigger chariots.
Through the innovation of mass production, Henry Ford created a need that consumers did not know they had. To establish a serious competitive foothold in the market, the creation of the consumer need is crucial.
Where to find innovation
The tactic an organization employs to develop innovation can vary; they may build it, partner with providers to develop it, or buy it from a third-party. Broadly speaking, sources of innovation can be defined as either internal innovation and external innovation.
As the name would suggest, internal innovation comes from within an organization. This is not just limited to an innovation or R&D department; internal innovation can come from any department within an organization. At large multinational companies, encouraging innovation across the board can often be a challenge because of barriers such as proximity to innovation departments, language, and even timezone issues.
Internal innovation is where fostering a culture of innovation really counts. Ensuring that management is on-board and that the organizational environment encourages free-thinking and innovative behavior is key to overcoming internal innovation challenges and differentiating your product.
External sources of innovation can come from anywhere outside the walls of an organization. Sources can include third-party consultants, vendors, academic partners, accelerators and incubators, as well as innovation communities. A popular tactic employed by innovative companies is to launch an open call for innovation, utilizing a platform facilitated by an innovation management software provider to incentivize external communities to contribute ideas. Open calls are one of the most effective means of sourcing innovation today.
While technically falling under the category of external innovation, startup innovation really deserves its own heading. Today, startups are leading the way in innovation. As much as the word innovation gets thrown around corporate boardrooms, the application of innovation strategy can often prove difficult in these organizations because of outdated corporate structures.
Startups are different—they work on agile and lean methodologies that create environments more likely to foster innovation. For this reason, organizations look to partner with and acquire startups as one of the central focuses of their innovation strategy, and rightfully so given startups’ dominance of the innovation space.
Innovation management process
Idea generation is incredibly crucial for innovation. For effective management of innovation programs, it is important that ideas are gathered and then taken through a systematic process of development. The innovation funnel is a mechanism employed by innovation teams to conceptualize the process of idea generation to solution output. The model centers around a process of idea divergence and convergence, and keeping track of metrics along the way.
The first step of the innovation funnel involves the gathering of a lot of ideas. Here, organizations can employ numerous tactics to source ideas and innovation from both internal and external communities. Ideas are accepted based on predefined criteria set according to the overarching strategy of the program.
In order to approach the process of idea generation in a systematic way, many organizations decide to utilize a strategy and innovation roadmapping tool to help them accept, store, and evaluate ideas in the most effective way.
The next step is to capitalize on the best ideas. The process of converging ideas involves carefully narrowing down and filtering ideas that are relevant to the business. Involving stakeholders from all relevant departments to help evaluate and develop the best ideas is important here. Testing and evaluating ideas at multiple stages is crucial.
Determine innovation metrics
Metrics are the final part of the innovation management strategy. Before any new innovation is put out in the market innovation teams need to establish how they will measure the success of their programs.
Here are a few popular metrics innovation teams use to determine outcomes:
Securing future business
Number of ideas and products in the pipeline
Value of innovation portfolio
Time to market
Business today is all about innovation
The technological innovations that advanced in the 20th century were made possible by growth in the fundamental knowledge and scientific innovation in the 19th century. Back then, product evolution that took centuries was hailed as rapid innovation. Today, however, innovation moves at unprecedented speeds, taking much shorter spans of time to advance from idea to solution. This rate of movement puts significant pressure on organizations to be innovative in order to remain competitive and relevant.
Spending on innovation is on the up, with companies expecting that between 2017 and 2020, their investment in innovation is will rise by more than 25%, with one-third of those same companies expecting to raise their investment by more than 50%.
Innovation is a clear priority for many companies, however, it's no easy task. For an organization to ensure they are on the right track, they need to understand the innovation they want to develop, create an organizational environment that fosters innovation, and engage in a systematic and strategic process of innovation management.
With clear objectives and innovation idea management processes in place, organizations can cement their place in the global market.