Sunday, July 24, 2016

“CIO Master” Book Tuning XXXXXXIII: Managing Innovation in a Structural Way

The best point of view is to see innovation as a system, capable of taking a stepwise path in scaling up and delivering organization-wide capability.

Digital is the age of innovation. And innovation is what leads to differentiation. There are many ways to differentiate and, therefore, there are many ways to pursue innovation. For many organizations getting stuck at the lower level of maturity, innovation is still a serendipity, with a very low success rate, often the ROI is not proportional to the investment they pour in, and lack of a balanced portfolio to both managing incremental innovations and embracing disruptive innovations. Is there a magic formula to build a highly innovative company and how to manage innovation as a core business capability in a structural way?

Innovation needs to be an integrated component of the corporate strategy: Innovation must be included in a strategy; otherwise, the company will fail in the long term. Because a solid innovation strategy would help the business to embed innovation in an organization as a strategic movement, make a significant boost in building a culture of innovation, also help to build differentiated competency because “VUCA” new normal of the digital era would make many slow-to-change companies under the threat of becoming extinct. Statistically, the company lifespan is significantly shortened in the last couple of decades due to the fierce competitions and an increasing speed of changes. The high-performing digital organizations today already embrace innovation at the heart of everything they do and would run it throughout the overall business strategy.

A company needs to be multidimensional in innovation management: Though not all changes are innovation, but innovation is change, thus, you need all pillars of successful change management. Innovation and execution should also run in a synchronous way, to thrive in a highly competitively world where product and service life cycles are getting rapidly shortened. Ideas help in innovation, innovation helps in creating product and market, planning gives a roadmap for execution, also giving clear warnings where can the problem come, and then the strategy practitioners execute and go to market, the market gives feedback, the feedback helps in generating ideas. It is a healthy business life cycle. The “push and pull” approaches are both needed in Innovation Management. Innovation comes with the increased knowledge and understanding of facts. You never know how innovative you might be in some areas. Looking uphill can help to identify the real problems that matter, and on a scale that can make a difference. Looking deeply into the future can have a profound effect on where we go, and how we get there. Bottom-up practice is helpful to collect feedback and sow the seed of innovative culture because today most of the innovative ideas come from the front line, not at the top. Innovation management means to transform novel ideas to achieve business values via creating a need for or finding a need for a 'pull.' To build that bridge requires enthusiasm, belief, determination and commitment as well as a good business case. Innovation should be a structural management discipline, however, there is no magic formula or prescribed solution. Although you need to have processes in place, more a responsive way of working in general and be agile to adapt to changes. Looking at innovation management from the perspective of developing business-wide innovation capabilities. This requires an effective 'innovation ecosystem' that is capable of supporting both widespread incremental innovation in products/services and ways of working as well as the rarer breakthrough innovation in products/services, working methodology, business model, and market positioning.

Setting guidelines for developing a customized suite of innovation metrics: There is no best innovation practice solution which fits all cases. Select the few (3-5) KPIs, to keep the measures simple and understandable. There are good reasons to focus on top line growth vs bottom line efficiency. Normally organizations look for KPIs measuring business results generated by innovation efforts. You choose the KPIs by deciding which are seen as critical to making progress on in order to deliver more innovations. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders. The innovation metrics in the context of business impact include such as, % of revenue from new products introduced. You could also change the variables and create something like % of the profit from new ideas implemented. But it takes quite some time for a new innovation drive to produce those measures. One of the solutions is to define process KPIs, which demonstrate the growing capability of the organization to deliver more innovation with business impact in the future.

Innovation has three phases: discovery of a problem or new idea, designing a prototype solution and the ultimate delivery of a commercially astute outcome. At the enterprise scope, innovation management should focus on building a healthy innovation portfolio to establish business competency. And the best point of view is to see innovation as a system, capable of taking a stepwise approach to scaling up and delivering organization-wide capability in reaping the business benefit for the long term.


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