Transforming Your Innovation Performance

Corporate innovation can be hard. Yet, as competitive advantages erode quicker and quicker, it is increasingly vital. Action along four dimensions will increase your innovation performance.

While everybody wants to be innovative ...

The Deloitte Innovation in Europe report, which surveyed 760 European companies across 16 countries and 20 business sectors, confirms that innovation is a strategic priority for executives, with 88% of respondents increasing their innovation budget over the next two years.

This increased need for innovation is driven mainly by new technologies (92%), new customer expectations (86%), the need for cost efficiency (86%), and the emergence of new business models (83%).

These triggers are often intertwined: Technology and new business models are driving customer expectations, while also empowering companies to better understand customer behaviour, decrease cost and seize emerging opportunities through reinventing their own business model. Executives across Europe agree: innovation is needed to future-proof existing businesses while designing and launching new ones.

… many have not figured out how to do it well.

Despite the strategic importance of innovation and the considerable investment in it, many executives are not satisfied with the performance of their innovation efforts. A McKinsey study found that only 6% of CEOs are satisfied with innovation performance in their organizations. Our research identified the main barriers as being lack of knowledge on new technologies, lack of innovation capabilities, culture resistance, lack of leadership and management skills, and uncertain demand for new products and services.

By now, many organizations have realized that investing in startups, organizing hackathons, or putting armies of employees through intrapreneurship programs is nothing more than innovation theatre, with no or little impact on business results.

How to increase your innovation performance.

Solving the corporate innovation challenge requires you to take action along four dimensions.

#1 - Define your ambitions and set your innovation strategy

First, you need to take a strategic approach to innovation. This means defining why innovation is important and how you expect it to contribute to your strategy and business objectives. Some examples of typical innovation objectives our clients express are:

• Find and seize opportunities for new non-core growth from new customers by launching new value propositions, business models, and ventures
• Generate revenues from existing offerings by strengthening the core and enhancing existing products, services, and customer experiences
• Improve operational effectiveness and productivity, and reduce costs for existing products, services, and processes by reinventing and transforming the core

The most successful innovators pay attention to go beyond innovating products and services only to also include customer experiences, channels, business models, revenue models, and their ecosystem. Keep this in mind when defining your objectives.

You also need to differentiate and define where in your business, what type and level of innovation is needed.

While some business units or departments require disruptive business model innovation, others might need continuous operational innovation. It is simply unrealistic, and not functional, to expect your entire staff to be disruptive innovators.

Defining focus areas and expectations is vital for your organization to understand why it should care about innovation and where to put its efforts.

#2 - Accelerate innovation projects and initiatives

Next, you should quickly build innovation capabilities by supporting teams working on real business challenges.

Depending on your objectives, you will need different approaches. While continuous innovation can be expected from every employee, creating new growth ventures is not something to be done as a side job and requires a team, which can concentrate on the task.

It is important to work with the appropriate methodologies and practices and to show impact quickly – with a Design & Innovation Sprint for example – rather than wasting too much time on planning your approach.

Just do it. Even if initial results might not be the breakthrough innovations you had hoped for, done is better than perfect, and doing allows your organization to learn how to do it better next time. If you spend six months debating the ideal approach, your results will not be that much better. That is a promise.

Instead, define what is “safe to try” and get moving. Work fast, create actionable outputs, get feedback, and iterate often.

#3 - Build your innovation operating system

While it might be tempting to get everything in place before starting; don’t. This often leads to endless debates on how to steer innovation, what KPIs to use, how to fund, etc. and before you know it, you have wasted 6 – 12 months with no results to show. Make sure the single initiatives you accelerate have what they need to go from idea to launch, and while that happens, invest the time to design your innovation operating system in parallel.

Designing your innovation operating system requires you to make decisions on:

• Governance: How do you want to manage and steer your innovation efforts
• Organization: How do you want to organize your innovation efforts?
• Processes and Practices: What is your innovation playbook? Which methodologies, frameworks, and tools to use?
• Capabilities and Infrastructure: What skills, support infrastructure, and tools do you need to put in place?
• Activation and Enablement: How are you going to spread the innovation bug throughout the company?

When designing your innovation operating system, it is important to remember that one size does not fit all. Your operating system needs to be aligned with your ambitions.

Consider the organizational structure for example - If your ambitions are continuous innovation, an “innovation from everybody” approach works well, supported by a core team of experts to facilitate the process.

If on the other hand, your ambitions are to create new non-core growth, a dedicated team is necessary. Figure 2 outlines a possible organizational structure catering to various needs.

1. CROSS-FUNCTIONAL INNOVATION STEERING COMMITTEE: Steering committee composed of key representatives from businesses and functions accountable for innovation. Defines innovation ambition and focus areas.
2. CORPORATE INNOVATION FUNCTION: Centre of Competence defines innovation operating system, methodologies, processes, provides tools,…Works on mid-/long-term breakthrough and transformational innovation agenda.
3. INNOVATION ROLES THROUGH-OUT THE ORGANIZATION: Act as a liaison to Corporate Innovation. Coordination of local innovation efforts, focusing on continuous innovation in line with the overall innovation strategy. Local innovation experts providing support, methodology, ... for local innovation projects.
4. ORCHESTRATED INNOVATION ECOSYSTEM: Engagement of and collaboration with external partners, exploitation of existing solutions for innovation challenges, inspiration, expertise,… managed by dedicated resources coming from Corporate Innovation.

#4 - Activate innovation capabilities throughout your organization

Finally, you will want to make continuous innovation an organizational capability to create a culture of innovation, intrapreneurship, participatory, and self-organized transformation. This requires you to work on creating:

• Leaders who can foster a culture of innovation and remove roadblocks
• Systems to attract, develop and deploy innovation expertise
• Mechanisms to reward innovation behaviours and hold people accountable to the innovation strategy
• Connections to internal and external resources and partnerships that can augment and amplify initiatives
• A company-wide understanding on the why, what, and how of innovation
• Communication, enablement, and coaching tools across the company

Having set a clear innovation strategy, successfully launched innovation through the above-described acceleration practices, and put your innovation operating system in place, should give you all the means necessary to achieve this.

Instead of launching a large transformation program, apply the same principles as with your innovation projects: Start small with “safe to try” experiments, see what works and what does not, stay adaptable and open to iteration, and remember that what works well in one area of your organization might not be successful in another.

Conclusion

Corporate innovation can be hard. Yet, as competitive advantages erode quicker and quicker, it is increasingly vital. Making your company successful at innovation and establishing innovation capabilities in your DNA, will enable you to launch new propositions, ventures, business models and even re-invent the way our work, allowing you to be successful today and to adapt to whatever may come tomorrow.

Dr. Marc Sniukas is Director Innovation and Head of The Garage at Deloitte's Luxembourg office.

This article was first published at Deloitte InS!DENOW. #DeloitteInsideNOW