Is your organisation an innovation factory?

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Innovation is mandatory for organisations to thrive and even survive today. The days when organisations could ‘set and forget’ their play are behind us. Organisations must innovate with continuity to remain relevant and viable. 

Although an essential ingredient to organisational success, innovation is difficult for most organisations. It is not an easy feat, be it for small or mid-sized firms or large and well-established entities. Innovation is particularly difficult for well-established companies. They are generally better executors of strategy than they are innovators. Larger firms tend to optimise their existing business model to continue success than leverage game-changing creativity.

Whether an organisation is small, mid-sized or large, it must innovate. The desire to innovate must start at the top with the board and the C-Suite for larger firms, and with the owners, leaders and managers of mid-sized firms.

Innovation is a complex, company-wide endeavour. It requires discipline, practices and processes to structure, organise, and encourage it. What organisations need is an operating system. It need not be rigid. It need not follow a prescriptive pattern or operation, but there must be a larger operating system at play when organisations innovate. The practices that make up innovation in a firm will often overlap with other practices and be iterative and non-sequential. But broadly categorised, they will belong to the strategy or execution pile.

The practices that are strategic will help set and prioritise the conditions under which innovation is more likely to thrive. The practices that are execution oriented will deal with how to deliver innovation consistently and repeatedly over time, with enough value to impact performance positively.

Although there is no set formula or algorithm for innovation-led growth, leaders can start by asking the right questions. I share with you some of the questions I ask my CEO clients to help them commence the innovation dial or move forward on it…   

Is innovation-led growth a critical measure in your business? 

Vision alone is not enough. Organising the worldwide web’s information or placing a desktop in every household are great visionary statements. Although an inspiring vision can be a compelling catalyst, it must be realistic enough to encourage action.

In a corporate scenario, inspiring statements alone are inadequate. The high-level aspirations must dovetail into estimates of the value that innovation will generate to meet financial objectives. Your innovation-led projects must be measured on both qualitative and quantitative dials. When you quantify a target for innovation-led growth and make it a component of future strategic plans, it helps create accountability for innovation. The target (if a stretch goal) encourages your management layer to include innovation projects in their business plans. Note that mid-level managers will likely not back innovation-led growth unless there are goals to do so. If they can achieve their targets, quotas and numbers using ‘business as usual’ dials, they will do so. 

Merely establishing a quantitative measure for innovation will also not be enough. The growth target value will need to be assigned proportionately to the relevant business owners and then steamed down to the organisations they lead, with apt performance targets and timelines. If the targets are not a stretch goal, you will likely miss your organisational innovation number. If the timeline is not firm and measured, you will encourage inaction within the desired timeframe. 

Performance parameters can appear painful to leaders and managers more accustomed to leveraging traditional business operations and business as usual to reach their goals. CEOs, too, are likely to go through the motions if no one is evaluating and measuring their performance on the innovation measure.

Do you have a wide portfolio of the right innovation-led initiatives?

Most organisations have an abundance of creative insights. The challenge is generally not with the number of ideas available to a firm. The struggle is more about which ideas to support and scale. This can be particularly challenging in larger firms during market uncertainty, when supporting the next wave of growth may seem too risky. 

Innovation is a risky business. More can go wrong than right. To get the most returns from innovation initiatives, organisations must manage the risk profile of the projects and the entire portfolio. Since no one can predict with certainty which innovation projects will yield returns, leaders must pick their bets and set boundaries around the fields of innovation they want to play on. They must put time, effort and resources into assessing the innovation opportunity spheres they want to explore. Identifying the spheres to play in and setting a defining boundary around these spheres requires robust strategic analysis. Defining the spheres and prioritising will allow you to assess whether you have the required resources and time to appropriately back your most valuable opportunities. Organisations should embark on projects they can sufficiently finance and support and terminate the ideas that prove less promising.

Once the opportunities for innovations are explicitly defined, organisations must set a framework for precisely what people will work on and a governance process that assesses performance to an expected value, progress versus time scope, and risk of the initiatives. There is a uniform and single mix that will apply to all organisations. Some organisations take on several relatively safe, short-term innovation projects. They have little chance of achieving growth targets, and they never challenge the risk parameters. Other organisations spread themselves thinly across several innovation projects instead of focusing on those with the highest potential for success and resourcing them to win. The leadership skill here is taking on the right number of projects that toe the line between risk and reward.

Are you leveraging deep and differentiated insights that translate to winning value propositions?

Innovation requires insights that are actionable and differentiated. Insights excite customers and introduce new categories into the market and new markets into existence. It is a common misunderstanding that innovation requires extreme degrees of creativity and genius. The fact is that innovation is often born from other approaches besides exceptional creativity. If business leaders have an affirmative response to these three questions, innovation can follow:

  • Is there a problem worth solving?
  • Is there a vehicle to solve the problem?
  • Is there a business model that solves a problem that can yield consistent revenues?

If leaders methodically look for answers to the above questions, they can set the playfield for innovation. Most successful innovation requires you to answer these questions. You could argue that nearly every successful innovation begins with answering these questions. Organisations that approach these questions deliberately collect the data, synthesise a comprehensive and well-thought-out response to each question, and lay the groundwork for their innovation factory. 

Are you creating novel business models to provide scalable and sustainable profits?

In their quest for innovation, business leaders must question not only their products and services but also their business model itself. Innovation of the business model – which allows for a change in the business model’s delivery, diversifies revenue streams and distributes the profit model’s intake – is an essential component of a robust innovation portfolio. As new technologies threaten to replace old ways of working and doing business, business-model innovation has become more urgent. Established firms must question their ‘way’ of doing business and reinvest their model and approach to the market to ensure continued profitability.

Most established organisations approach innovation through the lens of new products and new services. They are hesitant to approach the innovation through a revised business model unless the business model’s viability is under threat. Leaders must assess the organisation’s products and services along with the business model. Which products are no longer market worthy? Which services are antiquated? And is the business model for taking these products and services to market still relevant?

Leaders will need market intelligence and must separate viable opportunities from noise. They must establish funding pools to furbish new businesses that don’t fit into the existing structure. Leaders must constantly evaluate the firm’s position in the value chain. Emphasis and focus must embrace business models that deliver value to groups of new customers and burgeoning markets. 

The Board and the CEO or the ownership and leaders must sponsor pilot projects removed from the core business. This serves as an expansion board. It also serves to combat conceptions of what the organisation does and does not do. The test projects will also be a testing ground for emerging value propositions and novel operating models.

Are you beating your competition through innovating effectively and efficiently?

Often, companies are their own obstacles when it comes to innovation. The non-conformists and mavericks bypass the organisational approval processes to deliver remarkable innovation. If organisations are to deliver innovation with consistency, they need to arrive at a balance. They must hold in check the bureaucracy that stifles innovation. Equally, they must ensure that innovation results from the collaboration between various functions and organisational decisions that enable innovation. Leaders must ask themselves, ‘Is our management layer armed with the appropriate knowledge, skills, capability and experience to make the right decisions at the right time to enable innovation?’ Leaders and managers must be adept at moving innovation through an organisation to create and maintain a competitive advantage without exposing the organisation to unnecessary risk.

Organisations can win on the innovation dial by testing the ideation with customers early in the innovation process. Sometimes going through all the internal approvals can force modifications that diminish the initial value proposition intended. To arrive at the initially intended innovation, it is essential to break down the barriers between the ideation and the intended end customer.

Organisations need members of the management team to take ownership of innovation projects and be responsible for all aspects of the project, end-to-end. The project teams must be truly cross-functional, not just in philosophy. A great way of achieving this is to locate the members on innovation projects in a common physical space to ensure that they give the project the focus and time required. The members of the innovation project must put the project’s success above the success of their respective functions.

Are you innovating at scale in the right markets and market segments?

Some innovation ideas are intended for niche markets. Others, for national or regional geographies. And yet others for a global scale. Considering the scale and reach of the idea upfront is vital to allocate the right resources. The notion of ‘we will scale up over time’ can kill the reach and opportunity. To realise the innovation’s reach and true potential, you must harness the resources to ensure you can deliver the new product or service at the desired volume or quality. The entire innovation ecosystem, including manufacturing partners, supply chain players, distribution hubs etc., must be prepared to execute an efficient and effective rollout.

Are you winning by capitalising on external networks?

Regardless of the sector you operate in, your innovation projects will require collaborators. These entities will often sit outside the organisational firewalls. The knowledge levels and talent required to realise the true value of the innovation will surpass organisational boundaries and geographic terrains. Successful innovation projects access the skills and talents of people inside and outside the firm to speed up the reach and scale of innovation and uncover new ways to create value for their customers.

Effective collaboration with partners, both within the organisational firewalls and outside it, goes beyond securing ideation and insights. It can involve sharing costs and finding expedited routes to market. Firms that innovate well work strenuously to develop innovation ecosystems. They become collaborators of choice that other firms want to partner with on their innovation ventures. This increases the inflow of great talent and the generation of great ideation.

To capitalise on external networks, companies must find out which partners focus on the same spheres of innovation as them. They must then decide which partners are the best fit for their innovation journey. This helps narrow down the number of partners in the mix and allows the firm to focus on their collaboration efforts with partners of best fit.

Organisations that are strong at innovation regularly review their partner networks. They extend the networks, prune them, and finetune them to ensure they are working with the best innovation ecosystem. Organisations adept at leveraging external networks are deeply aware of what is most required and beneficial at each stage of the innovation process. They throw a wide net to begin with in their search for partners. As they get closer to commercialising the innovation, they become more selective about who precisely they wish to work with. 

Are your people organised, rewarded and motivated to innovate?

Organisations that do well with their innovation play encourage, support, and reward innovation. The companies that are great at innovation embed it in their culture. They set targets for innovation and define the spheres they want to innovate in. Organisations will also need to make functional and structural changes to promote collaboration, learning, and experimentation.

Organisations must encourage people to share ideas and knowledge by locating teams working on different types of innovation in the same place. The structure of project teams must be reviewed with discipline to ensure that teams have new members who bring new ideation and approaches. Collaboration between functions, entities and other firms in the value chain can take years, even decades, to establish. In larger companies that are more mature and tenured, collaboration can become even more difficult to foster. You often hear of large firms setting up small groups termed ‘innovation hub’ or ‘innovation garage’ to enable small groups to work on important projects. These hubs and garages are not constrained by the normal working environment of the firm. They build new ways of working that can be scaled up and absorbed into the larger organisation. 

Large organisations often struggle to reinvent themselves to innovate. Fixed ways of working, rigid routines and cultural issues become an obstruction. Successful innovation and the associated benefits follow the firms that break through the barriers.

RK is the CEO & Co-Founder of Resonate.

RK is Resonate’s chief strategist, thought leader, and IT industry veteran. Our clients depend on RK to advise on their business strategy, channel strategy, and sales strategy. 

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