Setbacks are an inevitable part of any innovation process and integral to managing innovation. Indeed, some are a necessity, since they provide the learning opportunities that ensure only the fittest ideas survive. Yet, from our experience advising leading organisations, we know that, when innovation activities hit certain “stress points”, they can come to a grinding halt.
An idea that initially looks cost-effective may turn out to be prohibitively expensive to develop. A technology that initially performs well may fail during its transition into commercial production. A business may wither because the organisation that gave birth to it lacks the skills base to keep it alive.
These are the kinds of problems that executives imagine will stop them from bringing innovations to market. However, there are other stress points that, while less easy to distinguish, are more likely to destroy value – for example, the misalignment of an idea with the organisation’s overall strategic purpose.
Our research suggests there are, in fact, five broad categories of innovation stress point, which correspond to various phases of research, new product and new venture development as shown in the diagram.
Thankfully, all these stress points are predictable and avoidable in most cases. When those responsible for innovation have a holistic view of their process, and of the stress points that are likely to threaten it, they can prepare more effectively. Treat setbacks as learning opportunities rather than disasters.
Innovation is not just about grasping at value; it should begin with a clear definition of purpose. Alignment to this purpose is what prevents your people from wasting resources through duplication, conflict or the pursuit of inappropriate business models.
Political issues, such as the reaction of middle-managers to a radical change of direction in a core business, can be avoided. The key to overcoming these softer issues is to improve communication across all levels of an organisation and with external partners as necessary. A system of communication must enable the CEO to act as a ‘queen bee’, receiving information continually about new sources of value, sending out squadrons of workers to harvest that value, and, if necessary, moving the whole hive.
With such systems in place, ‘stress points’ become valuable opportunities to learn about the markets in which an organisation operates and to recalibrate their overall innovation strategy.
Leading innovators like venture capitalists take a portfolio approach to investing in ideas, while focusing on market needs. Many companies – typically with less innovation experience – fail to set out the investment criteria and that in turn prevents teams identifying the right ideas, and in worst case scenarios encourages wrong selections. A big stressor is the adoption of ideas that have short term value – and which promise to make the team look good quickly – but which are incompatible with long term strategy. VC models of selection can be very valuable for any innovation planning process.
Most innovation stress points are encountered during this phase. Enterprises don’t necessarily have the entrepreneurial capacity to take innovations to market outside their traditional customer base, though they begin the innovation process confident they can do this. It may also be that their management processes or funding options put the opportunity under additional stress.
Other stress points here include issues of project accountability, internal communications, start-up experience, partnering and the failure of ideas to fulfil their initial promises.
Companies might look across the three previous stress points and still have an aversion to external partnering. External partnering is a significant stress point in an open innovation environment yet partnering can provide solutions. It calls for a set of skills around value identification, constructive negotiation, trust, and long term relationships management. Assuming it is possible to put these in place or that they already exist, partnering can be a breakthrough strategy.
So you’ve negotiated all the stress points only to realise you’re likely to fall short on the capacity to scale. Scaling issues can arise from a variety of sources, not untypically from the supply chain where you need negotiated and closely monitored supply contracts for the tipping points in your expansion strategy. But it could equally well arise from internal redeployments as the start up team move onto other tasks and your new project suddenly looks thin on experience.
Many stress points can be avoided by defining an innovation strategy clearly – but that is clearly easier said than done. The reality is many organisations define their innovation strategies retrospectively, having allowed staff to pursue ideas in many directions. Organisations also, typically and understandably, focus on the successful outcomes of innovation strategies, without learning about their competencies from their failures.
Yes, there’s much to learn. To conclude this article I’d like to focus on just one stress point. They are all important but external partnering has a special place in open innovation.
Just as the best ideas may come from outside your organisation, so an external organisation may be best-placed to handle your innovations at certain stages of their development. This is the essence of open innovation: generating more value from an idea by sharing it with a partner who can help bring it to market at greater speed.
Equally, if you engage actively with external partners such as venture capital firms then you are more likely to be alerted to “false negatives” – i.e. ideas that you decided not to fund internally but that may have commercial potential elsewhere – and to “false positives” – ideas that you considered viable but that look less attractive to an external, dispassionate eye.
A common stress point related to partnering during this phase is therefore a lack of strategic alliance capability. If an organisation’s overall innovation strategy does not allow for external partnerships then the chances are it will not have resources dedicated to soliciting help from outside. Alternatively, its existing joint venture and partnership structures may not be flexible enough to respond to the short-term needs of a venture in trouble.
It therefore makes sense to build your strategic alliance capability and embed the processes that will allow venture teams to regard partnering as another weapon in their armoury. These steps can be aided through internal workshops and through the arrangement of networking events such as the Joint Opportunity Assemblies run by the H-I Network.
Leading organisations also make it easy for external innovators – especially smaller companies – to get in contact, suggest potential collaborations and forge strategic alliances or joint ventures. They have systems in place to reassure such partners that they will be treated fairly in terms of intellectual property rights.
Innovation is the main game in town right now and we’ve described five sets of stressors that inevitably occur. The correct approach to these stress points is initiative the contingencies that allow you to deal with them successfully – and to do that you need a feedback loop that reflects your organisations strengths and weaknesses. Why – so you can always be sure of learning.
By Andrew Gaule
About the author
Andrew Gaule is the founder of Corven’s H-I Network a thought leadership forum comprised of senior executives from some of the world’s leading organisations. Andrew also leads the Corven Innovation and Venturing practise.
Andrew has led innovation, venturing and growth initiatives at leading global organisations from the financial services, FMCG, defence, technology, health and government sectors. These programmes have delivered new sources of value, driven strategic renewal and supported organisation culture change.
Andrew is the author of ‘Open Innovation in Action – How to be strategic in the search for new sources of value’ which includes case studies from H-I Network clients P&G, QinetiQ, Shell, DSM and Tate & Lyle. Andrew has an economics degree from St John’s College, Cambridge, is a qualified chartered management accountant and gained his MBA at Henley Business School. When he is not working he is busy with his two young daughters and learning Mandarin.
Andrew Gaule is a speaker at the 13th Annual Corporate Venturing & Innovation Partnering Conference February 16th – 18th 2011 in Newport Beach, CA, USA.