Building an Innovation Based Organization

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Building an Innovation Based OrganizationEverybody talks about innovation and how to develop ways to tap into creativity.  As Gary Hamel and Nancy Tennant of the Harvard Business Review put it, “by now, your company probably has a new busi­ness incubator, an idea wiki, a disciplined process for mining customer insights, an awards program for successful innovators, and maybe even an outpost in Silicon Valley—all fine ideas—and yet most companies still struggle with how to grow with new ideas that thrill customers.” According to a McKinsey study in 2015, 94% of managers surveyed were not happy with their innovation programs.

Companies have shown real abilities to cut costs, increase efficiencies and streamline supply chains but little luck at developing truly unique innovations. According to Hamel and Tennant,  “successful  innovation requires skills, tools, met­rics, processes, platforms, incentives, roles, and values all have to come together in one supercharged, all-wheel-drive, race-winning innovation machine.” And it takes time, trial and error and corporate perseverance to put it all together.

When the authors drilled down into innovative companies such as Amazon logistics and Four Seasons’ famous service, they came up with a list of five key considerations.

1. Employees who’ve been taught to think like innovators

But how does one develop those talents? Innovators have an inclination and a capacity to examine what others often leave unexamined, no matter how crazy an idea might seem. To help develop that ability, individuals need to be taught four things:

  • Challenge invisible orthodoxies. Most specialties develop a dogma that all in direct contact know and understand. Individuals need to learn how to challenge those underlying elements that makeup dogma and see where it leads
  • Harness underappreciated trends. Innovators learn to recognize little changes that are gathering momentum. Trend tracking and figuring ways to leverage those leads to “progressive innovation.”
  • Leverage embedded competencies and assets. Companies need to understand what they know not just what they do. Innovators look at ways skills and other assets can be re-combined into new products or services.
  • Address “unarticulated” needs. Asking customers what they want is usually not very productive as they have their own orthodox requirements. However, innovators will observe customers and analyze what they see. Learn to ask where things can be improved to help improve the customer experience and by making things easier.

2. Have a clear definition of innovation. Coming up with a definition of innovation usually involves something unique and compelling for the consumer. A true innovation creates competitive advantages and has the ability to provide more value than anything else in the market.

3. Comprehensive innovation metrics. Traditional benchmarks may not properly measure innovation performance. To provide a comprehensive dashboard of metrics, it should track:

  • Inputs: Investment dollar and employee time devoted to the innovation along with surveys from customers, suppliers and other outsiders
  • Throughputs: The number of quality ideas that enter the screening pipeline.
  • Outputs: The number of innovations that reach the market in a given period and percentage of revenue derived from new products and services.
  • Leadership: Percentage of executive time devoted to innovation projects and a 360 degree survey results that reveal the extent to which executives are pro innovation.
  • Competence: the percentage of employees what have been trained as business innovators and qualified as “black-belt” innovators.
  • Climate: The extent of how much management helps to facilitate innovation and encourage new ideas.
  • Efficiency: Improvement in time between innovation inputs and outputs.
  • Balance: The mix of different types of innovation and different time horizons for development.

4. Accountable and capable innovation leaders

What percentage of executives, project managers and employees are formally accountable for innovation? What percentage have innovation related targets that can affect their compensation? Ideally, it should be 100% to create an atmosphere of innovation expectations.

Innovation leaders need to be trained and coached on innovation:

  • Be adept at using innovation tools
  • Creating frequent opportunities for “blue sky” thinking.
  • Avoiding premature judgments
  • Demonstrate an appetite for unconventional ideas.
  • Recognize and celebrate “smart failures”
  • Mentor innovation teams
  • Free up time and money for innovation
  • Hiring and promoting creativity
  • Work to eliminate bureaucratic impediments to innovation
  • Understand how to develop rapid prototyping and low cost experimentation.

Through selection, training, and feedback, companies must work hard to create a cadre of leaders who are as adept at fostering innovation as they are at running the business.

5. Innovation-friendly management processes-a systematic view

Make sure that the various steps in the innovation process are aligned with the company goals and mission. It requires an understanding of how innovation can affect budgets and other departments.

The entire C-Suite (and the board) needs to be onboard about the need to develop a more innovative company and accept that many things may change in the process. However, the CEO or his appointee should assume the role of “innovation architect.” They act as a project manager and oversee the design and installation of the initiative. As Hamel and Tennant put it, “an innovation initiative should be ‘built’ and not ‘bolted on’.”


Additional Reading

What is Innovation?

Review Your Product Re-Use Strategy to Allow Innovation


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