How Do You Define Innovation and Make It Practical and Saleable to Senior Management?

By: Chuck Frey

The first major issue to be tackled by our distinguished panel of innovation practitioners is innovation itself. How do you define innovation? And how can you make it understandable and saleable to your organization’s senior management team? As expected, our panelists shared some keen insights and practical strategies that you can benefit from.

1. How do you define innovation?

The actions required to create new ideas, processes or products which when implemented lead to positive effective change. While invention requires the creation of new ideas, processes or products, innovation moves one step further and requires implementation of the inventive act. Innovation also implies a value system which seeks to derive a positive outcome from the inventive act. For example, actions which lead to a negative performance metric would not be considered innovative, even if they met the requirements of novelty and enabling actions.

— Marc Chason, Motorola Labs

Innovation is creating new value and/or capturing value in a new way. Value is the key word, stressing the difference between innovation and invention. The definition is simple, easy to memorize and also good enough to encompass innovation in all the value chain.

— Victor Fernandes, Natura

Innovation is something new to your business that fills an untapped customer need. Ideally, the innovation builds a new market.

— Jonathan Rowe, Gene Express Inc.

An innovation is an idea that has been transformed into practical reality. For a business, this is a product, process, or business concept, or combinations that have been activated in the marketplace and produce new profits and growth for the organization. I differentiate radical and disruptive innovation from the incremental kind, since the latter can happen if the company is simply great at what it already does. True innovation is far more than an extension of what is done normally, and while being different, uses capabilities that exist in a company or are augmented by strategic alliances. Therefore, something is an innovation not simply because it is new to that company, but because it is simply new.

— Dr. Makarand “Chips” Chipalkatti, Osram Slyvania

Innovation is a process to bring new ideas, new methods or new products to an organization. Unfortunately, in the past, in America, innovation has been limited to looking for a “big” idea to advance an organization’s competitive position. Management seems to be always looking for the “silver bullet,” a new “I Phone, etc.,” while true innovation is involving every single employee to look around their work area to identify small problems around them and to be empowered and responsible to solve them. The average Japanese company receives 24 ideas per worker per year and saves $4,000 per employee. From this process of involving all employees in continuous improvement will come daily improvements in quality and productivity and miraculously great commercial ideas will also “pop” out.

— Norman Bodek, PCS Inc.

Innovation is relative. I often hear the question asked, “Is that innovative? Because I think this other company has done it before.” However, I define innovation as anything new – or different – that changes the game for YOUR company. Leveraging what someone else has done is a perfectly legitimate innovation strategy. We need to always keep the end-game in mind and that’s competitive advantage. Don’t rule it out because you think it does or doesn’t qualify as innovative. Just ask yourself, “Will it make a positive difference?” If the answer is, “yes,” then go with it.

— David Silverstein. Breakthrough Management Group

Having a view of the future landscape of consumer wants and needs – whether known or unarticulated – and developing solutions that grow your business while fulfilling or altering the lifestyle and behavior of your target consumers.

— Troy Geesaman, Laga

I have found it most helpful to define “business innovation” (as distinct from general innovation) as the “creation and capture of new value in new ways.” This definition has made innovation more actionable and measurable in business terms and makes it inclusive of “new” offerings and value propositions (new services or products), “new” methods (new technology applications or business processes), and “new” business models (new channels, partners and financial models for capturing value from innovation investments.

— Ron Jonash, Monitor Group

Our Analysis At first glance, the responses from our experts about the definition of innovation appear different and divergent. A closer review show that they are in violent agreement but just stated in different ways. It makes sense why the definition of innovation is still misunderstood. All the experts pointed out that innovation must (a) deliver some positive outcome whether it is tangible value, creation of a new market or a competitive advantage and (b) that the actions required to deliver this value must be new to the company. Some experts mentioned that innovation applied to stakeholders across the value chain, while a few focused on end customers and markets. What is clear to us is that these narrower boundaries are more defined by the work experience of our experts. Since all our experts are working in the innovation space, we combined the responses to say that innovation does apply across the value chain. Perhaps, the simplest definition of innovation is creating new value and/or capturing value in a new ways. — Hitendra Patel/Chuck Frey

2. How do you make innovation practical and saleable to senior management?

This is indeed non trivial. Of course, it is necessary to make the financial case first of all, particularly in mature, well established companies. It is also necessary to show strategic alignment, an aspect often overlooked in companies excelling at managing the status quo. An additional complication in large companies, is that the innovation is unlikely to make a significant dent in the financials of the company, often bearing fruit only beyond the time horizon of senior management. The greatest complicating factor for innovations that take the company into adjacent and new areas, is that there is no penalty for doing nothing, particularly in periods of financial success.

There is no simple prescription. It is a composite of many steps resulting in cultural change within the organization. There has to be a leader who is determined to take the organization to new heights. The metrics that apply to senior management need to include new top-line growth, and not just bottom-line calculations. Risk tolerance and failure tolerance has to be encouraged. Finally, the rank and file must be given a voice, must be heard, and rewarded for their initiatives – even “failed” ones. It is only by empowering employees from top to bottom, by a disciplined cultivation of entrepreneurial initiatives which are aligned with corporate strategic goals, will true innovation emerge.

— Dr. Makarand “Chips” Chipalkatti, Osram Slyvania

Saleability to senior management is related to an innovation definition clearly linked to value. To make innovation practical to senior management, it is important to show them that innovation is a manageable inside any organization, linked to strategy, process, resources, organization and culture. Innovation capability can be built inside any organization, in any business, in any part of the value chain; it is not linked only to invention, technology or R&D, but is clearly linked to new value creation and capture of value in a new way.

— Victor Fernandes, Natura

There’s a saying I once heard that went something like this, “Your processes are perfectly designed to give you the results you are getting right now.” More often than not, an organization’s present state is not where that organization wants to be. On top of that, cost cutting and Lean Six Sigma can only help you with what you are currently doing, and add no value to the customer.

I have found it useful to take a Balanced Scorecard (BSC) and Strategy Map approach to visualizing the present state, future state and desired state. By using a strategy map and a BSC, a one page document can be created to show where the organization needs to go, why the current state won’t get you there, and why innovation is needed to move more value to the customer.

A Strategy Map and BSC typically have four perspectives on your business; Financial, Customer, Process and Learning/Growth of the employees. These are mapped with measures and metrics into each other to show what you need to give your employees for them to be able to deliver flawless processes, to thrill your customer, and lead to strong financial growth. When the current state of an organization is placed into this strategy structure, the vulnerabilities are seen and the growth potential is typically flat. I would then create an Innovation BSC (there is literature from PalladiumES on this) to show the process possibilities, the impact on the current state and impact on Financials. By doing this, senior management only needs to see 1-2 pages (have backup information if necessary).

Before presenting to senior management, practice this pitch with supporters of your idea as well as the unconvinced. Make sure it is easy to understand and obvious why the change is needed. Allow some buzz to be created so you have supporters and various levels.

When creating an innovation BSC, you may find that some of the processes and customer deliverables that are imbedded in your organization are of no value to the future state (think IBM and hardware in the late ’80s early ’90s). This is the difficult challenge, as there is likely a VP in charge of this work area (and likely s/he sits on the leadership team). Don’t be shy about first bringing this fact to that VP. If you can convert that person to a champion of change before sharing the new state with the leadership team, it may make that person look like an unselfish team player.

Innovation can happen in a large corporation. The challenge is to overcome the processes that have been in place. By creating convincing strategy maps with positive customer experiences and strong financial endpoints, a convincing argument for innovation can be made.

— Jonathan Rowe, Gene Express Inc.

The key here is to visualize the gaps. Numbers and data can support a story, but in most cases an illustration will have the impact needed to influence senior management. Leverage your internal resources or external agency partners who are gifted at design and visualization to make your story compelling. Success will prove the investment worthwhile.

— Troy Geesaman, Laga

I have found that making innovation saleable and practical starts with the definition above and then requires a clear connection to explicit strategic objectives and targets and a clear and measurable connection to individual and team metrics. It almost always requires that senior management (or the board of directors) must have an investment mindset about preparing for what’s next and a clear vested interest in benefitting from increases in company growth and value. It also requires simple processes for making these connections and building on systems and processes that are often considered to be the enemy of innovation (e.g., stage gate or Six Sigma). It also requires at least a willingness to think and act differently to create and drive new platforms and engines for value creation and capture. We have found it most saleable when tied to an explicit growth gap that there is a mandate to close.

— Ron Jonash, Monitor Group

Our Analysis The tone taken by each of our panelist around this question confirms that this is not an easy task. One expert even suggested that it may require replacing senior management. However, we did extract three themes that could be valuable for all the readers: Create or confirm a case for change (e.g., a burning platform or growth gap) Talk about innovation in terms of tangible results to help create a better future Provide a step-wise approach to getting to these results and make the journey credible through anecdotes, past successes and even visualizing the story. The good news is that more and more strategy departments and CEOs have already selected innovation as one of their strategic pillars for growth. The bad news is that there are other pillars that are easier to implement and the innovation pillar is being neglected. — Hitendra Patel/Chuck Frey

In the next interview:

How do you source and manage ideas to come up with the best innovation opportunities for your company?

Feedback?

Please share your comments below, where we hope to create a lively discussion about the ideas and strategies outlined in this “virtual roundtable” interview.

Published by Chuck Frey, InnovationTools, and Hitendra Patel, The Center for Innovation Excellence & Leadership, Hult International School of Business

Photo by Skye Studios on Unsplash