Thursday, November 22, 2012

Is Innovation Serendipitous?

Serendipity is a capability that can be cultivated.

Serendipity has been voted one of the most popular words in the English language. It is also one of the hardest to translate. Conversationally, it is used as tantamount to luck, providence or chance.

Innovation is the light every business pursues now, however, very few organizations have full set of innovation capabilities, Booz’s Innovation 1000 report, has consistently shown over the past eight years, there is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance, only a quarter of all respondents indicated that their organizations were highly effective at both generating idea and transform idea into products development projects. Is innovation serendipitous?

1. Serendipity is a capability that can be cultivated

 Serendipity will always play some part in the innovation effort, and there are plenty of stories over the years about great ideas evolving out of chance meetings, sudden flashes of insight, and sheer luck. Large companies, however, simply can’t depend on happenstance, and the most successful ones understand that clearly.

A far more critical factor is how well they follow their chosen innovation strategy. The report concludes what matters are how companies use that money and other resources, as well as the quality of their talent, processes, and decision making. Those are the things that determine their ability to execute their innovation agendas

The research also showed that nearly every company follows one of three fundamental innovation strategies, each of which has its own distinct way of managing the innovation process and its relationship to customers and markets. Thus, the report categorized companies as

  • Need Seekers: make a point of engaging customers directly to generate new ideas. They develop new products and services based on superior end-user understanding.
  • Market Readers, generate ideas by closely monitoring their markets, customers, and competitors, focusing largely on creating value through incremental innovations to their products, a more cautious approach.
  • Technology Drivers: It depends heavily on their internal technological capabilities to develop new products and services. They leverage their R&D investments to drive both breakthrough innovation and incremental change, take a generally more self-reliant, inward-looking approach

2. Socializing Matters for Serendipity 

From the report, when asked what internal mechanisms their company used, most respondents pointed to “innovation champions” — people assigned to coordinate the capture, development, and internal promotion of new ideas — followed by “cross-functional collaboration” among different business units.

  • Need Seekers: reliance on mechanisms that can provide deep insights into the end-users of their products goes beyond their willingness to observe customers directly; they also depend more on customer focus groups and “idea workout” sessions; Need Seekers also make avid use of internal networks — especially those involving innovation champions, Cross-unit staffing, formal idea conferences, and communities of practice are also popular among them; in fact, companies classified as Need Seekers use all these internal network structures at higher rates and view them as more effective as well.
  • Market Readers: The only external mechanism that many “Market Reader” companies report using is “leading customer reviews,” in which top customers are given an early glimpse into the development pipeline. This tool is most popular among Market Readers
  • Technology Driver: These companies depend to a greater extent on internal mechanisms such as regular meetings of their own experts, communities of practice across company business units, and technology road mapping, to develop far-reaching ideas that go beyond anything the market could suggest.
However, less than 15 percent of all companies ranked mining social media for ideas and using open innovation as important. Companies in more consumer-oriented industries are twice as likely to employ social media in their search for new ideas than other sectors. 

3. Insight matters for Serendipity 

Only 57 percent of survey respondents say their company is just marginally effective at idea generation, and a similar proportion say their company’s culture does not support efforts to come up with new ideas, it is clear that many companies have much to learn about the best processes for generating ideas.

  • Need Seekers: Their goal is to seek out both articulated and unarticulated customer needs, and then to try to get their new products to market first.  Need Seekers strategy, although difficult, offers the greatest potential for superior performance in the long term; idea-generation and idea-conversion phases, they rely more heavily on customer observation.
  • Market Readers: They are the most likely of the three to rely on traditional market research to understand better what is already working in their markets. Thus, history matters for innovation. It may find themselves with a new-product portfolio heavily weighted toward incremental improvements — a strategy that can work although it depends greatly on the company’s ability to carry it out as efficiently as possible, This feedback loop between sales and R&D is critical for Market Readers.

  • Technology Driver: They leverage their R&D investments to drive both breakthrough innovation and incremental change, take a generally more self-reliant, inward-looking approach, the perceive innovation via the technological lens. The risk for Technology Drivers is that their ideas and products, which reflect a highly technological imperative, may not be fully attuned to markets and customers.
Overall, 43 percent of survey respondents said their company converted fewer than 20 percent of its ideas to development projects, and just 12 percent reported moving more than 60 percent into development. For cracking serendipity code, the key to the success of innovation effort is to have the right people in place to manage the process, using experience, insight and judgment to rigorously make the needed decisions, cultivate the culture of innovation and well integrate innovation strategy into business strategy. 


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