Some businesses are paying the price now for a lack of innovation before the pandemic. Liam Fennelly explains the importance of being systematic about innovation, for greater resilience, sustained growth and increased efficiency
No part of a business is immune from innovation. Innovation can equally be applied to cost reduction and process methods and efficiencies just as much as it can be applied to new products and services. The perception that innovation relates solely to R&D still persists, though, to the detriment of a myriad of opportunities in other areas of a business.
For innovation to be successful, it must be supported from top to bottom by systems and structures. The radical swooping in to solve all a company’s problems with a great innovation is a myth. No one individual can take a great idea all the way to market. And it’s not about betting the company on one big experiment.
A structured system of innovation
Innovation consist in generating hundreds of ideas, methodically validating them, and then funding the most probable successes in a competitive way.
Innovation is hard. As the saying goes: if it was easy, everyone would be doing it. And, originality is overrated – most innovations are variations of themes that already exist. While around 70% of impactful innovations come from within existing companies, the concept of the career intrapreneur has never really taken off.
The right culture needs to exist so that ideas are not routinely killed off through internal rivalries and jealousies. A recent Harvard Business Review survey of 10,000 managers showed that 76% of new ideas generated within their organisations were treated with scepticism or outright hostility. So, how do we generate all those ideas?
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Idea generation through structured brainstorming and the Innovation Source Map
Brainstorming has been around for years. Unstructured or poorly managed, it can be a huge waste of time. Successful innovation brainstorming requires three crucial things:
- A mindset that recognises both the range of new technologies enabling innovation and the range of changing environments that demand change.
- The right composition of participants: A facilitator and a diversity of thinkers.
- A source of trigger points for every aspect of the business.
New and emerging technologies include: artificial intelligence, augmented reality, big data, cloud computing, quantum computing, robotics and blockchain.
Changing environments include: climate change, the new middle class, polarising politics, global giants, ecosystems, remote working (WFH), and, of course, pandemics.
The greater the awareness of these trends the greater the number of innovative ideas that will emerge.
Having a leader/facilitator who maintains team focus is crucial to innovation idea generation. He/she ensures all ideas are recorded and assigned for further action and analysis. They also encourage diversity within the team. And diversity is not just about gender, race or religion. It’s about different thinking formed from different experiences.
Innovation’s broader definition covers the introduction of new ideas, methods, products and services, or even new markets. This broader definition forms the basis of our Innovation Source Map – a 28-point grid of innovation trigger points – the starting point of an innovation process.
The Innovation Source Map
How to use the Innovation Source Map
For each cell in the Innovation Source Map we ask two key questions:
- Bearing in mind a world of changing environments, “Why are we doing things this way?”
- In light of the emergence of new technologies, “Can we do it better?”
Regular brainstorming sessions with the innovation source map as its focus should generate the hundreds of ideas necessary for impactful innovations to emerge.
The map takes the focus of innovation away from pure Research and Development. For example, redesigning or automating a process or procedure may introduce new efficiencies that create greater capacity or profit margins. Similarly, rebranding your product for a new market can be a new source of growth.
The Hard Part
Generating ideas is just the beginning of the innovation process. The hard part is turning a good idea into an impactful reality. Companies committed to continuous innovation will adopt an Innovation Management System (IMS).
Whether this is formal (following ISO 56002 standards) or informal, it means that you have dedicated individuals who will generate, analyse and validate innovation ideas and draw up business cases or business plans with full cost-benefit analyses for the most promising ideas. It will then be up to a funding committee to fund these ideas in a competitive manner – the projects compete for funding on the basis of achieving milestones or traction.
Some ideas/projects may be ‘no-brainers’ – low cost, high impact, easy rollout – that require very little analysis and validation. The majority, however, will require more detailed analysis due to their cost, riskiness, or strain on the company’s existing capabilities. Here we enter the realm of entrepreneurship and a world not dissimilar to that of a startup.
We need to carry out functions such as discovery, development, cost analysis, validation, rollout and scaling. This is the job of the career entrepreneur within a company. At MBA Global we have consolidated this process into the Business Model Actualisation Platform (BMAP). This is a rigorous process of situation analysis, challenge analysis and solution proposal that takes an in-depth look at the risk, opportunity, and probability of success of an innovation.
Continuous Innovation, Disruptive Innovation and Open Innovation.
A business that continuously innovates is better prepared for shocks such as the current COVID-19 pandemic. Direct sales channels, print and TV advertising, high barriers to entry and slow, steady growth are all features of the last century. In the 21st century businesses can build products anywhere in the world, outsource back-room functions, employ a huge range of digital marketing platforms and sales distribution channels.
Those companies not keeping up with the times are destined to fall victim to unforeseen shocks that will inevitably arise. Such shocks may range from global pandemics to disruptive innovations that change existing markets forever (where a new value proposition completely exceeds that which currently exists).
Where a company considers it does not have the in-house capabilities to exploit innovative ideas it should look to developing partnerships with, or offering licences to, other companies, universities or even start-ups to bring ideas to fruition. This is known as Open Innovation.
Besides creating new products, services, efficiencies, markets etc, being recognised as an innovative company has many advantages. Research by Compustat Financial Data indicates that companies with a reputation for innovation have a valuation multiplier of up to three times the book value of assets.
This probably explains why Amazon is valued at three times that of Walmart despite both having similar assets, and Walmart having almost double the turnover of Amazon in 2019.
To quote Jeff Immelt, former CEO of General Electric:
“Nobody wants to work for an old-fashioned company. Nobody wants to buy products from an old-fashioned company. And nobody wants to invest in an old-fashioned company”.
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