A Complete Guide to Innovation Management
Innovation is an omnibus of change agents. The basic objective of innovation is to introduce change to a process – a change that is favorable, attainable and lucrative. Innovation can be applied to any field – an idea, product or a service.
Innovation principally necessitates imaginative thinking, combined with the collection of relevant information and an initiative to obtain greater benefits from available resources. Innovation has more to do with the adaptability that it has with inventing. Successful innovation mandates that the process embraces any changes in the environment and changes itself so that it can deliver better results. The process of innovation invariably includes the component of risk, as newer paths are discovered, and uncharted territory is explored. Risk-taking is an irreplaceable element of innovation.
In this article, we explore 1) the basics of innovation management, 2) innovation management: strategy and implementation, 3) steps to profitable innovation management, and 4) common mistakes of innovation management.
BASICS OF INNOVATION MANAGEMENT
What is innovation management?
Innovation management is the process by which innovation is managed or dealt with by affecting certain decisions, practices and actions, as a response to a vision or an opportunity. These decisions, practices and actions are aimed at achieving a certain target – to generate an idea, product or a service that is of sizeable business value.
The innovation management process necessitates the use of certain management tools that assist in bringing both managers and other entities on a common platform and get them to move towards a common goal. These innovation management tools can be anything from a simple brainstorming session to something more complex like planning and prototyping.
Innovation management is a continuous closed process. It cycles between the following five stages:
Stage #1: Evaluating ideas. In this stage, ideas are evaluated for their contribution to the planned business model/product. A wide array of ideas may be considered. However, it is essential to maintain balance in the ideation process so that too many stray ideas do not overpower the core objective.
Stage #3: Demonstrating the plan. Once a concept is formulated, an all-encompassing plan is developed and demonstrated to the customer/end-user.
Stage #4: Validating value to the customer/end-user. Once the customers or end-users interact with the demonstrated plan, it becomes possible to ascertain how much value the product will deliver to the customer. This validation is vital for continuous improvement of the planned product.
Stage #5: Developing the product. In this stage, the actual development of the product takes place. The earmarked investment is utilized on planned lines in order to build the product, or to commercialize the already developed product.
Types of innovation
Innovation can be classified into several types, based on different classification models. However broadly classified, innovation can be cataloged into four main types:
- Operational Innovation: Operational innovation, in the simplest of terms, is just the adaptation of newer and better ways of functioning. Operational innovation is applicable to the core activities that any organization performs – they can be anything from product development, marketing or customer interaction, and service. Operational innovation is responsible for making processes more efficient and introducing technical improvements to the processes. Operational innovation is also responsible for introducing established best practices to the system like Six Sigma, Lean, etc.
- Management Innovation: Management innovation is the process by which innovative methods are laid down for the purpose of effecting better leadership, organizational techniques, coordination, and motivation. Management innovation brings about the much-needed element of discipline to the management process by introducing novel practices that eliminate management orthodoxy, identify future leaders, infuse autonomy and facilitate employee participation. Management innovation gets managers to augment their key responsibility areas to facilitate superior team performance. In this way, management innovation helps to push the envelope as far as organizational goals are concerned. Management innovation doesn’t deal with production improvement per se, rather it coordinates the functions of the organization so that it works at an optimum level of motivation, resource management and planning.
- Product and Service Innovation: Product innovation is all about strategies that are followed to ensure that the product or service delivered are of augmented value to the customer, so that they, in turn, return better value to the company. For an already established product or service, this will mean modifying the product or service to provide better results.
- Strategic Innovation: Strategic innovation is all about identifying key strategies to take care of the following:
- Develop a better business model.
- Explore newer markets and business opportunities.
- Assure better value to both the customer and the company.
Unlike management innovation, which takes care of all external factors and implications (e.g. impact on stakeholders), strategic innovation only has internal implications.
Why is innovation management needed?
Innovation management is necessary for a multitude of reasons. They are:
- To map the innovation process. Innovation management creates a bird’s eye view of the entire innovation process and enables the top management to identify areas of improvement. It also helps identify newer ideas and assess whether they are in sync with the big picture view of the company.
- To forecast market conditions better. Innovation management creates a foresight of the market. It helps forecast changes in the market, identifies newer market segments and monitors customer trends. It also detects competition on the existing business models and charts out measures to face it.
- To encourage effective communication, instill motivation and channel inquisitiveness and innovation. It is of utmost importance to the success of a project that the leadership is motivated, communicates well across all channels and harbors innovative thinking. Leaders should be open to new challenges and should be able and willing to change their customary strategies to cope with these new challenges.
- To ensure proper timing of market introduction and reduce risks of delayed innovation. Faulty timing of innovative steps is one of the main reasons for the failure of a project. When a product or service introduction is delayed, it loses its competitive edge over its competitors and is doomed to failure. The need of the hour is for both the top management and the staff to be in sync with changes in market forces and channel their innovation process to embrace all these changes.
- To strategize and govern the innovation process from a business perspective. Innovation governance dictates that all responsibilities of innovation are allocated to deserving individuals, and these responsibilities are clearly demarcated and documented. Different governance models have different approaches to strategy. While the centralized system roots for a central leadership to hold all innovation governance responsibilities, a decentralized system mandates that these responsibilities are shared among lower management. In either case, it is mandatory to review the innovation governance process at regular intervals.
- To build future leadership. One of the main goals of innovation management is to build future leaders in an organization. This future leadership goal starts from the practice of hiring talented staff members – people who display a strong inclination towards innovative thinking and are open to coaching on choosing the path of development within the organization. However, only having a strong and innovative leadership is not enough – it is also vital to have an effective system of innovation governance.
INNOVATION MANAGEMENT: STRATEGY AND IMPLEMENTATION
Innovation management is all about eliminating the obstacles to innovation. To formulate the perfect innovation management strategy is to identify a strategy that engages all stakeholders, and that accomplishes the desired results.
The innovation management strategy is nothing without proper implementation. Before an idea can be implemented, it needs to be tested. In many instances, testing an idea throws undesirable results, so it becomes necessary to reject the idea and start afresh. However, circumstances may arise where the results cannot be predicted. In those cases, it is best to develop a stronger communication channel with the stakeholders for the idea to be accepted.
Proper strategizing and implementation will ensure that the product or service is successful, and the company brings in profits.
The Three pillars of innovation
Innovation has three pillars – competency, strategy, and management.
Pillar 1: Competency
Every organization has a finite set of core competencies – its strengths. However, these core competencies may not always be in tune with market requirements. At this juncture, it is important to differentiate between employee competency and organizational competency. While employee competency is the skill sets that employees of an organization possess, organizational competency takes on a much broader meaning. Organizational competency is the capability of the organization as a whole to perform in core areas. Organizational competency takes into account the capability of the organization, not only to coordinate the activities of its various divisions and departments, but also to perform the following tasks:
- Coordinating work with external entities and stakeholders.
- Optimizing the use of the resources at hand.
- Setting long-term and short-term goals for itself.
- Strategizing policies to achieve set goals.
Pillar 2: Strategy
Organizational strategy is a set of accepted rules regarding how the organization should change over time in order to meet its new business objectives. The change can be either evolutionary or revolutionary. In either case, the focus should be to compare the present state of affairs with the desired outcome and the differences observed should be noted down. This should be followed up with a requirement analysis of the steps needed to be undertaken to effect the change.
The central focus of any organizational strategy should be to optimize resource allocation. At the same time, a balance must be achieved between modifying existing products and services, exploring adjacencies and exploring new horizons.
Pillar 3: Management
Managing innovation is central to any organization’s competence. Innovation management calls for meticulous problem-solving skills.
To solve a problem, two basic steps have to be taken:
- Defining the problem.
- Delegating the problem.
When we “define a problem”, we seek to visualize what we want in the end product or service. When Henry Ford designed the legendary Model T, he was effectively putting his vision into practice – a vision of a no-frills automobile accessible to the masses. Ford’s vision was revolutionary. In an age when the affordability of motor cars was limited to the highly affluent, Ford wanted to create a car for the common man. Effective innovation management resulted in a car that sold more than fifteen million units in its lifetime – a feat that was never accomplished before.
The efficient delegation is the other important step to solving a problem. It is not always possible for an organization to solve all its problems internally. It then becomes essential to approach another entity that is well-placed to solve that problem. A classic example is Dell Inc. The company is much different from its competitors in that it assembles computers instead of manufacturing them. As such, to mold itself into one of the major players in its segment over a short period of time, Dell has successfully forged strong business relationships with a wide array of reputed component manufacturers.
Theory of innovation management implementation
In the simplest of terms, innovation management implementation is the task of using the innovations in a regular, skilled, consistent and committed manner. Innovation management seeks to enhance the competitive position of the company through the implementation of innovation.
Innovation management can be implemented across several areas. These areas are strategy, portfolios, ventures, leadership roles, staff, stakeholders, organization, various processes, performance metrics, an external environment like markets, internal resources, knowledge and finally, technological prowess.
Key characteristics of an innovation leader
A successful innovation leader displays the following key characteristics:
- He/she excels in driving the development of the innovation strategy. This is done by influencing and motivating employees to deliver creative ideas and solutions. An innovation leader also partakes in supervisory encouragement and workgroup encouragement.
- He/she allocates a significant amount of time and resources to the innovation strategy. Time and resources are directly linked to the creativity process.
- He/she should be capable of carrying out transformational leadership responsibilities. He/she should have the aptitude to lead from the front whenever the need for identifying the necessary changes and creating a vision to instigate the changes arises.
STEPS TO PROFITABLE INNOVATION MANAGEMENT
There are five steps to profitable innovation management. They are:
Step 1. Setting high goals: The key to setting high goals is to aim to create newer markets, and in the process, interrupt existing markets. This is known as disruptive innovation. By way of disruptive innovation, newer products are created that cater to entirely new segments, thus attempting to create newer dimensions to cater to customer requirements. Disruptive innovation challenges existing markets and educates customers about newer problems, thus creating newer customer needs. The setback to disruptive innovation is that it is an extensive and expensive process with a high rate of failure. However, when implemented skilfully, it brings in rich rewards.
Step 2. Roping in customers into the process: Customer involvement is prime to the innovation process. It is a time-consuming process and also runs high costs, but the payoff is that the products developed this way are almost always successful.
Step 3. Optimizing the process: The innovation process needs to be optimized all through in order for it to be productive. The optimization procedure starts with choosing the best innovation model, along with setting realistic goals.
Step 4. Infusing innovation in your work culture: Innovation management will be successful only when the element of innovation is embraced by all employees and teams. It is important to involve all employees in the innovation process and give feedback to them regarding their performance. Once an innovation is infused into your work culture, your company, and your stakeholders are sure to reap benefits.
Step 5. Encouraging creativity: It is very important for both leaders and employees to think outside the box. If a company has to survive in a rapidly changing business environment, it is mandatory that it doesn’t totally rely on internal resources for ideas, but also scouts outside in the markets for newer sources. The new ideas obtained from the markets may be modified and developed in-house and integrated in the next new product.
COMMON MISTAKES OF INNOVATION MANAGEMENT
Many inaccuracies creep up in the innovation management process – it is not fool-proof and is prone to failure. However, a successful path can be charted if the following mistakes are avoided.
- Avoiding innovation because of achieving short-term profits: Due to a paucity of effective time management techniques in practice, it may so happen that innovation is ignored to make up time to address ongoing projects. While ongoing projects may ensure short-term profits, in a dynamically changing environment, it would be a fatal mistake to oversee the benefits of long-term innovation. Due to a lack of long-term innovation, many well-known organizations have withered away. A good example is the British motorcycle industry. Until the sixties, companies like Norton and BSA were the forefront of world motorcycling. However, their inability to innovate saw these companies succumb to stiff competition from the Japanese motorcycle manufacturers. The Norton and BSA products were unable to match the reliability and superior technology of brands like Honda and Yamaha.
- Adding, not transforming: Another big mistake companies make is to isolate innovation from the regular processes. In such instances, innovation gets reduced to being just an addition when it should have been the change agent equipped to transform the whole company’s work culture. These companies forget that change has to effected and not added. Without a total transformation centered on innovation, modernization is impossible.
- Introducing metrics and performance measurement to innovation too early: Notwithstanding the fact that measurements and metrics are vital to any innovation process, introducing them too early might prove to be catastrophic. In the early stages of innovation, it is very difficult to understand its business implications, so introducing performance metrics at that stage will derail the entire innovation process. Also, just measuring performance does not automatically make an organization competitive.
- Orienting the innovation of your company on a quick hit, rather than on a bigger target: Every company needs to have a big idea – the bigger, long-term picture. However, many companies place too much importance on quick hits and completely ignore the long-term picture. Although doing this may seem lucrative at the beginning, over the course of time, the small advantages of quick hit innovation will wear out.