The recently-published Innovation Tools 2010 Innovation Climate Survey contains some excellent insights and indicators that innovation is once again on the upswing, at least among a large chunk of respondents. But it also underscores a persistent misunderstanding of what innovation really is and why it's different from creativity, ideation, invention or product development.
The recently published InnovationTools 2010 Innovation Climate Survey contains some excellent insights and indicators that innovation is once again on the upswing – at least among a large chunk of respondents.
But it also underscores a persistent misunderstanding of what innovation really is and why it’s different from creativity, ideation, invention or product development. There’s also an over-emphasis on the front end of innovation – the ideation phase – when most breakthrough innovation typically occurs at the back-end – the commercialization phase – where invention becomes market disruption.
In more than 25 years of working with over 200 client companies – from start-up ventures to Fortune 50 megacorporations – I have identified patterns that correlate well with future success in innovation. My observations and top ten best indicators are described below:
- Spending on innovation is not a reliable metric for two reasons – often, things that are not directly related to innovation are lumped into the innovation budget item (e.g., patents, inventions, creativity, marketing, etc.). Secondly, spending by itself provides no insights into a company’s innovation posture/culture or its processes to achieve future innovation success.
- Spending on R&D is not a reliable indicator of future innovation success, although it’s often used as a leading indicator by companies, Wall Street and industry observers. Number of patents held or new patents granted are also commonly used, but erroneous innovation indicators. There’s an endless list of defunct or struggling companies, like Motorola and Xerox, who own thousands of patents, spend billions on R&D and yet cannot monetize their intellectual property.
- Spending on product improvement is not a reliable indicator of future innovation success, and for many industries, is negatively correlated.
- “Voice of the Customer” programs are often nails in the coffin of what could be innovative companies – as Henry Ford famously said, “If I had listened to my customers I would have invented a faster horse.” Your customers, even your best customers, will too often mislead you into producing products that might serve their own needs but not the broader market or new adjacencies.
- “Day in the Life of Your Customer” programs are better – see how your customers are using your products and services (as well as your competitor’s) in their actual work environment throughout the work day and look for additional ways you can make that customer’s work activities easier, more productive, more profitable, safer, more predictable or more effective.
- Seeking ways to defeat your competitor’s strategies is an even better approach to achieve true innovation – especially if the path of inquiry is grounded in the assumption that beliefs starting out with “Everyone knows that…” are wrong.
Top 10 predictors of future innovation success
I have found the following ten indicators/metrics to be excellent predictors of future innovation success in the companies that I have worked with:
- Senior management, especially the CEO, has established and articulated profitable revenue growth as the core objective for the company.
- Specific targets are established for each operating division and the company as a whole for how much of future revenues will come from new products and services (e.g., 30% of revenues will come from products and services introduced within the last 3 years).
- Innovation and creativity are encouraged, recognized and rewarded for ALL employees, regardless of their titles or job descriptions.
- Company policy allocates a minimum of 10% of each employee’s time to be spent on independent thinking and innovation/creative endeavors.
- Every employee has a personal career development plan that is regularly revisited as part of performance reviews.
- The primary function of HR is considered to be personnel development, not administering comp and benefits.
- All employees must satisfy continuing education requirements throughout their careers.
- Managers are rotated through different disciplines in the course of their career with the company.
- Open innovation is the stated policy of the company.
- There is a functional Chief Innovation Officer (may not necessarily have this title) and Directors/VPs of Innovation in every SBU.