In a slow or no-growth environment, we know successful innovation is absolutely essential for companies to establish and maintain a competitive advantage. While that may be yesterday’s news, achieving it is hard work. How can you achieve high value from your innovation initiatives? In this article Adi Alon discusses four key success factors that can help you get a higher return on innovation.
New products and services attract new customers and, in many cases, can help companies gain market share, even when the overall market is growing slowly at best. In survey research, we have seen that nearly nine out of ten executives in the United Kingdom and the United States agree that innovation is as important for success as cost management, and many companies are increasing funding for innovation as they seek growth in an anticipated economic upturn.
Although most companies recognize the importance of innovation, not all organizations approach the innovation process with the rigor and discipline it deserves. As we have discussed previously, lack of accountability and focus can produce a negative spiral of too many low value innovations absorbing too many resources, with an ever-poorer rate of success.
Although most companies recognize the importance of innovation, not all organizations approach the innovation process with the rigor and discipline it deserves.
The first step to achieve higher return from innovation is to recognize that the concept of innovation has broader applications than many companies realize. In addition to new products or services, possible innovation targets include launching new customer relationship capabilities to transform the customer experience, revamping their supply chain to dramatically reduce time to market or introducing new business models to drive superior consumer value.
However, developing a diverse innovation portfolio, which covers the multiple facets of innovation targets, is not sufficient; in our work with companies with an established track record of successful innovation, we have observed four additional characteristics which enabled them to drive high value from innovation:
- Innovation is a business process requiring management discipline. Innovation benefits from the disciplines that apply to other key business functions. While many people believe that innovation is a creative endeavor that cannot be managed, the truth is that effective innovation requires cross-functional cooperation and accountability throughout the entire process. Innovation, however, is not a “one-size-fits-all” endeavor and organizations may need to deploy multiple processes, one for breakthrough-type innovations and another for line extension-type bread and butter innovations.
- Selectivity and balance are critical. Successful innovators have a portfolio of innovations in the pipeline, ranging from modest line extensions to bigger bets on new ideas or technologies. At the same time, however, the successful innovators keep the portfolio small; they do not place their bets on too many horses, but they do focus on the best possibilities for both low and higher-risk ideas. Ongoing trimming of the portfolio prevents the dilutive effect of having too much effort spread over too many projects.
- Innovation must adopt new technologies. To keep up with shorter product lifecycles and rapidly evolving consumer demands, companies must leverage new tools which support innovation. In addition to established tools, such as stage-gate and others used for portfolio management, companies can use social media to develop products and improve service. Social media tools can accelerate innovation at all phases of development, from ideation to prototype development to pilot programs to commercialization. Wells Fargo, for example, created an “innovation network” to connect and tap into the insights of the bank’s employees to identify and address the main threats to customer loyalty. An organization can accomplish more by mobilizing this type of broad horizontal network of participants than it can by leveraging a small group of experts such as corporate development or strategy.
As part of the effort, Wells Fargo piloted a new system based on the principles of crowd sourcing, using Web 2.0 technology and rich Internet applications to effectively source and develop ideas from diverse audiences. Such open innovation fosters internal collaboration and can also encourage cross pollination of ideas from other industries.
- Innovators must be prepared for failure. One of the hallmarks of a strong innovation program is the ability to determine – at a relatively early stage – that a project or product simply will not work. Terminating initiatives that are likely to be unsuccessful, and doing so quickly and efficiently, conserves valuable resources that can be directed to other, more promising activities. Companies must emphasize that failure is part of innovation and that a) failure on a good-faith effort is not punished and b) there are mechanisms in place to learn from failure. At SurePayroll, a payroll-services company in Glenview, Illinois, people who are trying to do a good job, make a mistake and learn from it are eligible for “Best New Mistake” awards of $400.
A steady flow of new ideas – turned into value-adding products, services or process improvements – can be a tremendous source of growth and vitality for companies in almost any industry. A disciplined, managed approach to innovation can make this process more predictable, repeatable and profitable, leading to better top and bottom-line results and overall high performance.
By Adi Alon
About the author:
Adi Alon is a senior executive in the Innovation practice at Accenture, a global management consulting, technology services and outsourcing company.