By: Laszlo Gyorffy
To gauge the innovation capabilities of an enterprise, it is helpful to apply a systematic method for assessing the quality of, and the relationship between the various and distinct dimensions that drive all functions of the enterprise. As with a sports team, simply having talent does not ensure success. It is the quality of the team work which ultimately elevates or hinders the level of their play.
“Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn’t matter whether you’re the lion or a gazelle-when the sun comes up, you’d better be running.”
In today’s fast paced hyper-competitive environment, many companies find themselves running for their lives, while other more fit organizations are able to survive, and even thrive, by running out in front of the pack. These leaders are characterized by their ability to quickly adapt to the market or disrupt it. They are able to adjust their strategies and harness the power of their innovation capabilities to produce significant competitive advantage: greater returns from new products and services, significant market share increases, successful entry into new markets and greater effectiveness with in-house improvement initiatives.
To build and maintain this level of peak performance requires understanding your current innovation eco-system and how best to leverage it. If you want to improve your innovation efforts to optimize speed and creative output, it helps to measure and understand the strengths and weaknesses of your organization’s capabilities (people, processes, practices, etc.). With the right metrics and analysis, you can manage these strengths and align them around market strategies that drive new value creation.
Without a sense of your collective capabilities and a plan to get your organization innovating at startup speed, you run the risk of becoming an out-of-shape bureaucracy that is unfit to compete for the future.
Measuring what matters
Based on our work with pioneering enterprises around the world (e.g., BBC, Panera Bread, IBM, Toyota, Swisscom, Phillips, Stanford University, Kaiser Permanente), we have learned a great deal about what makes innovation successful. It is clear that measurement is foundational to building innovation fitness. The question becomes, what should be measured when it comes to innovation. Most organizations track business KPIs (Key Performance Indicators) and can tell if a given percentage of their revenue comes from products and services developed over the past 3 years. Many others introduce innovation spaces, create skunk works teams, hold innovation competitions and track participation levels and output. Some conduct corporate culture assessments to get a feel for the emotional health of the workforce and their enthusiasm for innovation. Such insights are important, but not sufficient. They add clarity and texture to the story, but none provides a comprehensive picture of the organization’s innovation capabilities.
STEP – A measurement for all dimensions of innovation of the enterprise
To gauge the sum total of the innovation capabilities of an enterprise, it is helpful to apply a systematic method for assessing the quality of, and the relationship between the various and distinct dimensions that drive all functions of the enterprise. As with a sports team, simply having talent does not ensure success. It is the quality of the team work which ultimately elevates or hinders the level of their play.
STEP stands for Structure, Task, Environments (both internal and external), and People. The model articulates the fundamentals of a working enterprise system: the tasks (products and services) of a business are supported by structures that allow people to work in service of external (market) demands while being guided by the mission and values advocated in the internal environment.
These fundamental elements act as an interconnected system where a change in one element will impact all others. For example, if the task of your innovation effort expands from internal improvement initiatives to external venturing, you may decide to create an outpost structure with investment funds, which attracts people with startup scouting skills, and bridges their entrepreneurial spirit with an internal environment focused on operational excellence. You can measure the performance of this new capability and see how it is impacting the rest of the organization. If adjustments are not made, the system will soon be out of alignment and begin to underperform.
If not measured and properly aligned within the realities of the overall enterprise system, innovation initiatives may offer a temporary boost, but are generally not sustainable. Innovation becomes an add-on that is not woven into the collective mindset, skills and fabric of the company’s culture. Ideally, unimpeded by structural obstacles and instead fully supported by a well-integrated innovation system, everyone, everywhere, will be able to take responsibility for innovation everyday – whether as an idea generator, mentor, sponsor, facilitator or team member.
A STEP Assessment
A STEP assessments measures the efficacy of each element of the enterprise system as well as the flow across all elements, and in this way can also track the quality of innovation within the system, top down, bottom up, outside in and inside out. Innovation practices are evaluated as well as the experience employees and stakeholders are having using them. The assessment highlights innovation effectiveness related to:
Environment (External): Understanding of customer needs, market trends, and disruptive technologies.
Task: Methods (i.e., common concepts, practices, and tools) for enhancing the core business, and creating new or improved products, services and lines of business.
Structure: All functions, i.e. finance, information technology, human resources, legal, facilities, etc. and the extent to which they are organized to support innovation efforts.
For example: many innovators view their legal department as the group that tells them why they can’t try something new, when in fact, legal departments can add a great deal of value for innovators. Legal advisors can help to create agreements with partners, suppliers, or external funders that enable groups to innovate across boundaries. They can guide innovators through the process of checking patents or trademarks, and to secure intellectual property rights created. Legal teams can also provide the basic agreements needed in large open innovation networks or communities that help these groups create ownership or reward arrangements that work for all involved.
People: The expertise and passion needed to identify opportunities, and successfully generate and champion high potential ideas.
The People section of the assessment also provides insights into employee engagement, which has a direct impact on innovation and other organizational performance outcomes. Studies have shown the relationship between employee engagement and outcomes such as voluntary turnover, employee productivity, and customer satisfaction–all of which can ultimately affect the bottom line.
Environment (Internal): The quality and values of the culture, i.e. one that promotes courage, creativity, and collaboration and a willingness to experiment and adopt new ideas.
Having a systematic evaluation of the fitness of all critical dimensions of an enterprise provides innovation leaders with an understanding of the strengths, weaknesses, and misalignments that are impacting their company’s performance. Our Innovation Fitness Survey allows leaders to:
- Understand what is required to achieve maximum innovation fitness in their enterprise, e.g. specific areas of focus for improving the speed, quantity, and quality of innovation,
- Create targeted plans for enhancing existing innovation capabilities,
- Generate buy-in for innovation and unlock employee enthusiasm and imagination,
- Track progress and ensure that goals are attained.
Innovation fitness = financial performance
Remembering the words of Arthur Jones, if you are not innovating at the level you desire, it may be because your organization is not built to innovate.
“All organizations are perfectly designed to get the results they get.”
— Arthur Jones
If you want to lead an enterprise whose strategy and systems work in harmony, where people are empowered to think differently, decide quickly, and collaborate effectively, you might want to consider establishing a discipline in which you regularly measure, refine, and align the company’s innovation capabilities to meet the demands of the market. Such innovation workouts will keep your organization “fit for purpose” and ready to compete. We all know, only the fittest survive.
By Laszlo Gyorffy
About the author
Laszlo Gyorffy, M.S. is President of the Enterprise Development Group. For over 20 years, Laszlo has worked with organizations around the globe to expand the possible; helping them refocus, redesign, and reenergize their business strategies and innovation practices to succeed in an increasingly dynamic and demanding market place. Laszlo is an accomplished speaker and author of Creating Value with CO-STAR: An Innovation Tool for Perfecting and Pitching your Brilliant Idea as well an opening chapter on innovation leadership in the textbook The Global Innovation Science Handbook. He is a certified instructional designer and trainer and has delivered transformational programs like the Innovation Advantage and the Secrets of Silicon Valley. Laszlo recently developed the One Hour Innovator, a cloud-based toolkit that helps people innovate better, faster, and smarter. The methods used in these trainings and tools have created business solutions worth millions of dollars in new revenue and cost efficiencies. You can reach Laszlo at [email protected].