The 3 Pillars for Successful Innovation Inside an Enterprise
Over the next 5-10 years companies will transform themselves as part of the Digital Revolution. Innovation will be at the heart of companies, old and not so old, as they compete with the dizzying and relentless speed of technology advances across all industries. A large number of companies already have Chief Innovation Officers, Innovation Labs or Emerging Technology teams. Those that have not yet established an innovation organization are creating one to help lead the shift to Digital Transformation and the Internet of Things (IoT).
The motivation for creating an innovation organization is to keep pace with the changing landscape. To be successful, an innovation organization must create value that can be measured (e.g. as better customer engagement, increased revenue, improved operational efficiency), and do this in quickly enough to ensure ongoing support by the company.
There are three pillars that will ensure the success of an innovation organization inside a corporation.
- People and culture. It seems cliche, but it requires careful curation of internal and external resources.
- Focus and execution. Identifying new customer experiences, products or business models requires as much energy and focus as the core business.
- The funding model. It is the most critical component for success and yet is what holds most innovation organizations back.
Below are additional thoughts on each of these pillars and an approach to creating a successful innovation organization.
People and Culture
The goal of any innovation organization is to identify new opportunities for transforming customer experience, business models, and business processes.
Identifying the right people internally and externally is the first hurdle. You want to find people from within the company who like change, and yet know the company processes. Their role is to help figure out what processes can be worked around, changed, or just need to be followed. Internal team members need to be confident of executive support for identifying and executingneeded changes.
Team members hired from outside the company should have backgrounds that complement the internal team member skills. It is invaluable if you can find individuals who have worked in both a startup environment and large companies. Look for individuals who understand the potential roadblocks and challenges, but know how to get things done quickly.
Beyond passion and technology skills, the ability to collaborate is critical, and its importance cannot be underestimated. An innovation organization does not have a lot of time to earn credibility, so does not have the luxury of learning to collaborate before executing. An innovation organizations’ credibility comes from people and culture as much as execution.
Focus and Execution
An innovation organization must show it can have a near term impact on the business. According to Merriam-Webster dictionary, innovation is “the act or process of introducing new ideas, devices, or methods”—fast time to market and immediate value. It is not research, which connotes lengthy study and evaluation. Focus and execution are the next pillar to a successful innovation organization. A new idea or technology is not a success for an innovation organization in a corporation.
For example, drones, while interesting technology, could be an area for research but are not an outcome from an innovation organization. On the other hand, implementing a same-day delivery service, would be a valuable business outcome. It is important to identify and focus on innovations that address tangible, outcome based, business opportunities. Exploring new technologies can be fun and interesting, but unless the investment is addressing a critical business problem, gaining support from the business will be challenging. Focus is required. Create selection criteriabased on targeted outcomes---nothing complicated but something to prioritize the projects.
Success will be measuredby the percentage of projects turned into products. This means execution; product management is crucial for success. The innovation organization may not own implementation, so there will be a handoff of any prototype from the innovation organization to the product owners/ development teams who take the product to market. Documentation of architecture, requirements, assumptions, revenue or business model, and the draft of an overall business case all help execution. Borrow best practices from the startup ecosystem: successful startups still have a business plans and capture requirements. The traditional Product Requirement Document (PRD) is overkill, however, the User Story model from Agile Development are a simple way to capture requirements. Documentation is important to create the alignment with the business, and to prevent rework at handoff to the product owners and delivery teams.
Funding
Delivering on the promise of innovation projects is the “Crossing the Chasm” moment. Getting value from an innovation organization requires a combination of business readiness and investment.
Funding the implementation is the Achilles Heel of innovation inside an enterprise; it is more challenging than entrepreneurs looking for a round of venture funding. It is important to have in-year budget available to begin execution on the successful projects; the productization. The traditional capital planning process allocates the budget to specific projects at the beginning of the year and does not take into account “innovation activity.” The innovation team can create a successful prototype, but if the product owners do not have current funding for implementation, the work of the innovation organization will die after handoff. This decreases the innovation organizations credibility with the business owners, and diminishes the usefulness of the organization.
Successful ways to address funding the productization of innovation projects range from dedicated centralized innovation budgets, to department- level engineering tax and co-development funding with industry partners. Communicating to the business how and when successful innovation projects will be funded through production will determine the organization’s overall success.
Conclusion
Innovation is not just about new products (or business models), it is about changing behavior. Behavior changes start at the top. Innovation organizations in an enterprise requires executive support. The executive leaderships role will be to reduce the overhead that comes with a large, shareholder-based business. The support ranges from helping to drive changes needed to internal processes such as funding models, to the need for legal support and expedited decision making. Innovation organizations require the same foundational elements of your core business: people, execution, and funding. Without multi-year support and commitment from executive leadership, the Digital Revolution will pass you by.
CC: David True - thank you for the conversation and the assistance in capturing the essence of this interesting topic.