Innovation is no longer the domain of a chosen few companies and sectors. In an era of rapid technological and market change, companies of all sizes in virtually every industry must increase their capacity to innovate. This means removing boundaries (to the flow of ideas, talent and capital) and enabling interactions to connect dispersed insights and generate traction.
This universal requirement to innovate puts pressure on companies to find the best ways to nurture, manage and measure innovation so that they deliver superior financial results. For most companies, that means opening up the innovation process more to customers, employees, and partners.
To understand how companies are responding to the innovation challenge, it’s helpful to look at how those in charge of managing innovation initiatives view innovation, what their companies are doing to optimise its rewards, and how they believe they can create business value and financial returns on their efforts. It’s about observing innovation across a complex set of organisational challenges, including strategy, operating models, culture, metrics and more. Below are a number of key learnings, that we believe are the cornerstones of any successful corporate innovation project.
1. Enlist a mix of people
It’s clear that the days when innovation was a niche process are over. Now, the key is to enlist the right mix of employees, customers, technology partners and others from the ideas stage onwards, to ensure that the innovation strategy fits with the company’s business strategy and delivers measurable rewards.
With this in mind, some companies are opening up the innovation process at an early stage to a broader set of stakeholders, both inside and outside the corporation, including customers and consumers. This customer-engagement strategy has demonstrated that from idea to launch, a product, service, or digital iteration is about twice as likely as a survey peers’ to expect growth of 15% or more over the next five years (1).
2. Use inclusive operating models
Bringing new parties into the innovation process can deliver significant benefits, from improving strategic alignment, nourishing fresh ideas and talent, failing faster and bringing successful innovations to market sooner. This is why more inclusive operating models — such as open innovation, design thinking, and co-creation with partners, customers, and suppliers — are now all embraced by progressive companies instead of traditional R&D.
Almost 50% of the major corporations surveyed in 2017 chose:
- Open innovation
- Design thinking, co-creating with customers, partners and suppliers
- LEAN start-up methodology
- Innovating in emerging markets, exporting to developed markets
- Taking risks, failing fast, trying again
- Internal incubators
- Investing in start-ups via corporate venture capital (1)
3. Look outwards for innovation
The most innovative companies don’t do it alone. Rather, they push the boundaries of innovation both within and outside their organisations by breaking down traditional barriers and tapping a wider ecosystem of ideas, insights, talent, and technology — and incorporating the customer through the innovation process.
When it comes to an inclusive operating model, over one-third of companies in 2017 said that customers are their most important innovation partners (2). The majority of companies also said that their customer and consumer engagement strategies help define innovation requirements from the early ideas phase onwards, with the goal to find business opportunities and solve unmet needs.
4. Big companies lead the way
This desire to break new ground is shared by many organisations and backed by financial commitment. Companies investing in innovation were found to be more likely to be focused on break-through innovation than on incremental improvement (1). Whatismore, larger companies with $1 billion or more in revenue had a greater tendency than smaller companies to focus on break-through innovation. They were also more likely than smaller companies to work with technology partners, engage in reverse innovation, adopt design thinking, and encourage open approaches to innovation.
5. Breakdown organisational walls
From the ideas phase of any potential innovation onwards, bringing people into the innovation front-end from the business-strategy side of an organisation is critical to making innovation pay off in the long term — and to avoid innovation being a potential loss. It requires knocking down silos and looking horizontally within each company, as well as reaching across many sectors and industries.
Traditionally, this is something that smaller, streamlined companies were often able to do with greater ease but which eluded bigger enterprises. And yet, larger businesses are better candidates for design thinking and collaborative approaches to innovation, as they typically have greater financial resources to devote the time required of an iterative design process, and the patience to try different approaches before the right solution is reached.
6. Open innovation rules
Open innovation can, as we know, lead to breakthrough solutions to difficult challenges. But too few of these solutions ever get implemented, often because important players in the process tend to see open source methods as a base challenge to their professional selves. A 2017 study of NASA scientists (3) by a group of academics from the Stern School of Business and Harvard supports this position, revealing that a high number of scientists questioned preferred to see themselves as “problem solvers,” versus the more productive approach of considering themselves “solution seekers.”
An open innovation framework can go part way to helping companies meet challenges such as this, by engaging customers early on, teaming with business and technology partners, and bringing together the right business leaders, strategists and employees from across the organization to develop an innovation culture and operating models that close the strategy-to-execution gap. Companies that master this become innovation leaders.
7. Remember the role of human experience
Successful innovation requires more than great technology skills. Human experience and insights of all kinds help shape and deliver new ideas, solutions, products and services, ultimately bringing value to markets and businesses. That’s why today innovation teams seek input from across a variety of disciplines, rather than relying disproportionately on technology-driven skills and insights.
For example, ‘big data’ can tell you that customers behave a certain way and if they embrace or reject a given innovation. But data alone won’t explain why they behave that way. Bringing the right human judgment and intuition to bear on the data (and not just from the analytics department) is critical to obtaining useful insights for innovation. Soft skills like these are clearly valued by executives who say that employees are their most important partners in innovation, ranking them above technology partners.
8. C-suite leaders have a vital role
Innovation is often associated with start-ups and agencies but hardly needs to be limited to them. Lean start-up methodologies are more and more used in today’s organisations. This requires strong C-suite leadership, perhaps the most important factor to successful innovation. Such leadership could go far in helping companies overcome their organisational challenges to innovation: encouraging behaviours and fresh thinking as well as clear business models while increasing the innovation budget. C-suite leaders are symbols of what is important. (4)
It’s a far cry from the days when innovation was viewed as a functional capability existing only inside isolated R&D centres. Instead, organisations are now focused on creating innovation cultures across their companies, and in bringing new thinking and ideas to innovation initiatives from both in and outside their corporate boundaries. Indeed, inclusive innovation operating models, such as design thinking and co-creation with customers, partners, and suppliers, now are all far more prevalent than traditional R&D and these new innovation approaches are delivering results.
At the same time, the free spirit and fluidity of innovation go against the grain of traditional organizational levers of planning, control, and efficiency. What to some is a creative effort may be to others a glaring inefficiency. The two faces of organization need to operate in harmony: one takes care of the present; the other of the future.
As companies invest more in innovation, they must strive to do a better job of aligning their innovation efforts with their business strategy. Innovation spending has to drive business value and financial performance. For that to happen in any consistent way, innovators should understand and help define future business models that can support the innovations they create.
(1) PwC, Innovation Benchmark report, 2017
(2) BCG, The most innovative Companies, 2018
(3) SAGE Journals, Dismantling Knowledge Boundaries at NASA: The Critical Role of Professional Identity in Open Innovation, 2017
(4) HBR, October 2018