Six Levers For Solving The Corporate Innovation Problem – Part 3

By: Frank Mattes / Rob Munro

This is the third part of a three-part article series. We are investigating why – despite all the investments made into the early phase of innovation – innovation results remain disappointing. We call this the “corporate innovation problem”. In the first part we illustrated that companies are investing heavily into the early phase of innovation. In the second part, we provided some metrics on the corporate innovation problem and found that the corporate innovation problem actually consists of a “complexity” problem” and a “system problem”. In this article, we show six levers to change the “system problem” and think this is the way to solve the corporate innovation problem – and ultimately to increase innovation performance.

Six levers to solve the corporate innovation problem

Looking at the “system problem” of corporate innovation, we think that there are six levers for improvement. These are outlined below.

We think that all of these levers need to be pushed since there are interdependencies between the components of the “innovation system” that these levers are addressing. So, for instance, just aligning the management system – in particular KPIs – without empowering the culture and strengthening the innovation skill set will only have limited impact. The same is also true in the opposite direction.

Actually, although this is not the focus of this article, one will find that some of these levers also help solve the “complexity problem” that we identified to be the second root cause of the corporate innovation problem.

So for instance, modern enterprise-grade systems supporting innovation work are able to connect real-time the “innovation footprints” of ideas and experts. Once these systems are combined with electronic lab journals (recording innovation footprints of ideas and experts), chances are high that the number of re-invented wheels goes down because people in the global organization know about innovation topics, the outcomes from tests done – and most of all, who else is working on these things.

Lever one: Advance the culture

At the end of the day, innovation is a people business. It is people who discover insights, generate ideas, prototype potential solutions, validate technical feasibility / commercial viability / customer desirability, implement the concepts and bring them to market.

Innovation culture is what makes the people tick. Practitioners define innovation culture by “the way we innovate around here” or by “what happens when the boss is not around.” It manifests among others in styles of thinking, deciding and co-operation, in underlying values and beliefs and in artefacts, e.g. how offices and spaces for co-operation are designed. Innovation culture does not exist in an empty space: it is shaped by factors like leadership style, governance structures, KPIs etc. Actually, as we find often, “wrong” KPIs are a massive driver for “wrong” innovation behaviors.

Innovation by itself is not a linear, waterfall-type of process. It has by its very nature diverging and converging process steps and iterative loops that come into play when things do not work as planned or when new insights come on the table. Consequently, a lot has been written about needing an open atmosphere that allows for trial and error (after proper thinking) and learning from “mistakes”. It has been argued that companies deemed to be innovation leaders have a “fail fast, fail forward” innovation culture. We do not need to elaborate on that.

What should Executives focus on in culture change?

The point that we would like to bring into the spotlight is what Executives need to do in order to change an existing, sub-optimal innovation culture into a more innovative one. From our experience, we recommend to think along these lines:

• You need to know your starting point and the target culture you seek (and how it manifests in leadership, behaviors, decision making, …) in order to lead the change
• You will have a tough time trying to change people or culture by fighting the existing reality. To change people or culture you need to build a new mental model that makes the old one obsolete
• To implement these new mental models, you have to establish new behaviors and conversations. This is done much easier and much more effective by “Act your way into thinking” than by “Think your way into acting” (Extensive training programs are not effective anymore in today’s fast-paced business life)
• “Act your way into thinking” is done most effectively by applying the intended culture in real-life business situations, which are reflected upon afterwards by asking “What worked, what didn’t? What is too much, what is missing?”
• Use easy yet effective tools for plotting the starting point, describing the change and measuring progress on your culture change voyage

Lever two: Get people into the field

It is quite surprising how few people that in some degree work on innovations have direct customer contact. In many companies, you find people working in innovation-relevant activities who never had a single customer contact in their whole career.

Getting people out in the field provides a basis for “walking in the customer’s shoes” and to connect the internal operations with the ultimate aim of innovation: Providing a solution for unmet customer needs that the customer is willing to pay for.

The results one gets when people are sent out into the field are quite astonishing. One observes not only an energized atmosphere but also tangible results.

So for instance, an engineer from a chemical company was surprised to find that the customer’s production yield changed by more than 10 percentage points even though the company’s product was well within the specified quality parameters. This made him think about how an improved, cross-value chain QM could be established using cloud-based IT solutions.

In another case, the production manager of a metals company was surprised to see that the customers developed their own fixings because their “job to be done” was not being fully satisfied. She spotted the business opportunity and suggested doing this in-house which created a new source of revenue.

Lever three: Enterprise-grade, modern platforms connecting ideas and experts

As illustrated in the first part of this article series, nearly all of the large companies have IT systems in place that allow for sharing of ideas. The problem with many of these systems is that they were developed in the mid-2000s, which in IT terms is ancient history. From a technical point, these systems build on a structured database model and staff has to “feed the system” in order to get some meaningful things out. Unfortunately, today people are so busy that they hardly find the time to do so.

Modern IT systems: The innovator’s best friend.

• Modern systems work the way people want them to and become a true digital assistant – you might call it “The innovator’s new best friend”. Modern systems address the realities of innovation management in the mid-2010s and …
• are fully integrated into people’s IT work desks and hence allow for a seamless switch between “operation” and “ideation”
• capture via “Big Data Analytics” the noise in the business environment and elicit meaningful insights from markets, technology developments and Intellectual Property intelligence
• present new innovation ideas via an inspiring multimedia environments and hence stimulate enriching these ideas
• automatically connect new ideas with existing ones and with relevant experts
• use the “wisdom of the internal crowd” to select the best ideas
• are available on desktop and on mobile platforms so that ideation is supported wherever it may happen (e.g. when a sales rep of a FMCG company visits a retailer and sees something interesting, he takes a photo with his smartphone and publishes the idea with the push of a button)
• support concept writing and testing
• help to solve tough technical challenges by finding the right experts from inside the company any from beyond
• are – from an IT systems perspective – seamlessly integrated with other FFE systems (e.g. R&D lab journals), with corporate collaboration platforms, with portfolio management systems and with innovation execution systems (e.g. Product Lifecycle Management and Engineering Change Management)

Lever four: A network of innovation catalysts / coaches

Innovation is often linked to the development of a new technical solution, the deployment of a new business model or to new service offerings. The corresponding cross-company processes need to run smoothly in order to create a superior technical solution and/or a convincing user experience. This position cannot be reached without addressing and challenging the processes and policies in the domains of Human Resources, Finance, Procurement, Production, Information Systems, etc. – and this cannot be achieved without involving people.

Think about them as the local “agents of innovation change”.

For this reason, innovation catalysts (some companies call them “coaches”) need to be appointed and empowered in all functions with a strong link to the corporate innovation team. Think about them as the local “agents of innovation change”. Typically, their responsibilities comprise:

• Communication of innovation ambitions and priorities but also practical information such as events, benchmarks etc.
• Support individual innovators with methodology and for preparation of presentations before decision gates
• Motivating people to come up with their ideas, organizing idea generation campaigns, performing the first level of screening, managing the portfolio, etc.
• Escalation of proposals necessitating corporate innovation intervention

Innovation catalysts play a key role. Corporate Innovation and the catalysts should meet regularly for meetings and workshops. These events should be used to train the catalysts in new methods, to pass the messages on the priorities for the company and to exchange best practices. But also to work collaboratively on new innovation frontiers such as e.g. how digital technologies (Big Data analytics, Cloud, Internet of Things, etc.) may be used for innovations.

Lever five: Grow the innovation skills base

It seems so puzzling: If innovation has a top spot on the Management Agenda, then why are so few companies putting the development of innovation skillsets and mindsets into a similarly important spot on the competency agenda?

Taking innovation skillset and mindset development seriously would mean to come up with a list of soft and hard skills that the will be included in the different human resources development programs such as leadership programs, e-learning courses or in-depth, specific training and development planning for the corporate innovation team and the innovation catalysts.

Four elements make up the innovation skill set.

We have found that innovation skillset and mindset base needs to have at least four components:

• Design Thinking
• Business Thinking (Finding and detailing profitable and viable business models)
• Systems Thinking (Identifying and understanding dependencies and the wider ecosystem of problems and solutions, focusing on the right leverage point)
• Innovation leadership (Applying the right innovation methods and tools, executing a well-crafted work plan with the right resources, facilitating collaborative approaches)

Lever six: Ensure sustained Top Management support and align the system

We hesitate to state that solving the corporate innovation problem requires Top Management attention. It is almost a no-brainer – but the reality looks different.

To be a little provocative, Top Managers use the I-word often in their presentations. In many cases, the term “innovation” may even be overused. So for example, upon learning that “Peanut Butter Pop Tart” was one of the most important innovations of a USD 15B food company, the Wall Street Journal remarked: “Some CEOs spray the word ‘innovation’ as if it were an air freshener“.

But we are not talking about paying lip service. We are talking about Top Management …

• being visible where innovation is really happening – Not only being seen at the innovation shop-floor, but much more ensuring that words and actions are completely aligned
• driving operationalization of innovation ambitions and strategy – Statements like “We want to be innovation leader” do not help in making engineering decisions
• drive the culture change to a “fail fast, fail forward” culture, as outlined above
• make sure that failures and mistakes are seen from the learning perspective and that incentives allow for and encourage the Innovator to go that extra step.

Aligning the management system is key.

Maybe the most important point where sustained Top Management support is needed is to align the management system behind innovation, in particular KPIs and resources with respect to time and budgets. This is because disappointing innovation often comes from an internal business environment that produces thinking, deciding and acting patterns that do not support innovation.

• In many companies KPIs are geared towards operational excellence, zero defects, 100% asset utilization, etc. Innovation itself is a disturbing factor and the more radical the innovation is, the higher is the disturbance. Because management asks the staff to perform their activities and to make their decisions in a way that KPI targets are met, breakthrough innovations create a massive target conflict. In one example we know, an interesting business model innovation did not fly because success required cross-silo processes – but the functional KPIs clearly stood against this.
• People often feel they do not have the time and budgets to fully embrace the potential of a breakthrough innovation idea. Many companies today are so lean that demand requirements from operations can just be met. In other words, in many companies one hardly finds “innovation capacity” beyond the capacity planned for routine operations.

Summary

Despite all of their efforts, many companies are not satisfied with the returns they get on their innovation investments. In this article series, we have stated that this “corporate innovation problem” has two root causes: A “complexity problem” and a “systems” problem.

We have zeroed in on the second one and have laid out that there six main levers for solving the “system problem” and hence contribute to solving the corporate innovation problem.

As a result, any company that moves these six levers can expect:

• More and better ideas that are more likely to translate into business results and peer leadership since a greater proportion of staff buys into the innovation cause.
• Shorter implementation times, since people from the innovation execution organization identify with the innovation ideas flowing in from the FFE and the overall innovation mission of the business.
• Higher implementation quality, since people understand the importance of radical innovation ideas to company performance and renewal and are willing to change the existing business system in a timely way.
• Higher transparency on the state of the corporate innovation pipeline.

By Rob Munro & Frank Mattes

Image creditÑ Man moving up graphic with help of lever from Shutterstock.com