Failing to Embrace Innovation on an Enterprise Level

Truly innovative companies cultivate innovation in all aspects of their operations

Innovation is often perceived to be a technology, R&D, or new product development undertaking. Truly innovative companies innovate at all levels - innovation in business model, delivery, customer interface, packaging, business process, materials and, yes, technology and R&D. It’s challenging for companies that fail to innovate across the entire business platform to effectively deliver their innovations to market and fully reap the rewards of those innovations when they do reach the market. An innovation in one part of the company can cascade into disruptions in other parts of the company, or in long held business models and processes resulting in internal resistance to adoption. An innovation mindset must, therefore, occur across all parts of the business to capitalize on the potential of any single innovation most effectively.

Innovation failure

As an example, a large energy services firm that had specialty chemicals as part of its offering made a significant investment in developing a highly sophisticated sensor that would allow it to monitor and predict fouling rates very accurately. The sensor allowed them to not only optimize chemical dosing in real time, but also allowed them to make predictive models of equipment run life and fouling rates. When applied to large chemical plants or petroleum refineries, extending run life by months, or reducing fouling related energy loss can equate to millions of dollars in annual operating savings.  Despite this remarkable innovation, the technology was ultimately shelved because the company was unable to innovate its business model to accommodate the sensor. Their business model at the time was to charge for their chemicals on a dollar per pound basis. They discovered through their sensor that they were universally over-dosing their chemical in these applications. Dosing at the appropriate rate based on the sensor would have the effect of cutting their chemical volumes by 25% - 50% and would ruin their business. Additionally, they found that customers loved the technology, but frequently preferred another chemical vendor and wished to use the sensor alone with a competitor’s chemicals. The company had success on a trial basis selling the raw data from the sensor that could give the customer insight to their operations, but operational modifications enabled by the data could reduce chemical demand as well.  They could not reconcile the disruption that the new sensor technology would bring to their existing business model. Unable to effectively innovate a new business model to capitalize on their technological innovation and capture non-chemical revenue streams, the breakthrough was shelved, and no return was recognized for the appreciable investment made.

Innovation success

I worked in a business servicing the oil & gas industry through frequent replacement of consumable operational items. We discovered one of our remotely located customers operating in an environmentally sensitive area had challenges managing their solid waste volumes. The local landfill was nearing capacity which might force them to ship waste hundreds of miles at considerable added cost for disposal in the future. We developed a reusable shipping pallet, nearly eliminating our packaging waste. We were also able to provide replacement parts that eliminated rigid internal components, allowing the spent consumable to readily compact upon disposal, further reducing solid waste from the replacement parts by >80%. In addition to the waste reduction, the reusable shipping containers offered substantial protection from exposure to the elements, allowing the customer to store replacement parts outside on the process units rather than inside a warehouse, minimizing warehouse space and speeding maintenance activity. The innovative packaging solution was spearheaded by an individual salesperson who took the initiative to identify a commercially available solution, work with the manufacturing group to manage the shipping / return lifecycle and make a viable justification for the investment. Any function – shipping, receiving, warehouse, manufacturing, finance – could have been a potential barrier to implementation. Instead, implementation was facilitated by the underlying commitment to innovation across the full spectrum of business functions in the organization. As a result, this innovation and others enabled the account to grow to several million dollars per year.

As illustrated, an innovative mind set must be fostered across the entire enterprise and within each functional area to reap the full benefits that innovation can deliver. Without an enterprise wide innovation effort, game changing creativity can succumb to the dark forces of corporate inertia, managerial indifference, and systematic barriers to implementation.

Over the past couple of months, I’ve highlighted innovation failures and barriers to effective implementation of innovation across businesses:

·       Failure to innovate at all           

·       Failure to understand what your customer values

·       Failure to adequately resource innovation

·       Failure to execute innovation

·       Failures of discipline in bringing innovation to market

·       Failing to embrace innovation across the entire business

I hope these articles and the associated comments from your peers are challenging your thinking about how you might improve your own organization. 

If it’s not you that’s innovating, then it’s your competitor

Market innovation never rests. Innovation drives corporate growth, productivity, and profitability. As such, every individual in the organization should have a development goal tied to innovation. It is important to recognize that most of the barriers to successful innovation are self-imposed. It is imperative that innovation is a cornerstone of every business, and that corporate leadership creates an ecosystem in which innovation can flourish. Leaders and team members alike must constantly evaluate their own actions and purpose. To avoid organizational barriers and enjoy the benefits of breakthrough innovation, corporate leadership must embrace innovation at the highest level and create an expectation of innovation across the entire business.