Wednesday, March 11, 2015

Mobilizing and Fueling Forward Innovation

By: Dr. Philipp Wagner, Advisory Services, EY

Tell us what you believe to be the biggest misconception about mobilizing innovation?

Applying a process is everything
Innovation quite naturally follows a certain flow of steps from the identification of a need to idea development, through to implementation and launch. Many companies have very elaborate process models in place through which they pursue all their innovation activities. But, often, the results leave room for improvement and the usual approach of refining the process does not do the job. Innovation certainly needs structure and guidance, but also room for flexibility and spontaneity.

Focusing on the product is everything
The aim of innovation is to generate products (or services) that provide better value to customers and induce them to buy. However, when trying to decide what to do differently, companies often focus too much, if not exclusively, on their existing products and ask customers what could be done better, usually resulting in small changes rather than truly new offers. As a result, innovation and growth potential are rather limited.

What is needed is to shift the focus on to the problem that the customer is trying to solve, or the jobs they are trying to do, by using the products. They don’t specifically want to use an electric drill; they want a hole in the wall. And, actually, not even that, but to hang a picture on the wall or, even further, make their home a nicer place. So, leaving the product behind and focusing instead on the problems of customers opens a whole new perspective and greater innovation opportunities.

Speed of performance is everything
Performance is the ultimate goal of all corporate activities, and innovation activities are therefore required to stand the test of KPIs and performance measurement. And rightly so. Yet, all too often, a disproportionate focus on performance leads to the application of restrictive KPIs and the expectation that innovation can happen quickly, without risk  and without bigger investments, people and financial wise. As a result, innovation, usually very nascent and fragile, is suffocated. To do it right, innovation needs endurance and commitment of resources.

What is, or has been, the most important key for fueling forward the innovation engine, in your experience?

Managing the common innovation dilemma
Companies face the dilemma of allocating their scarce resources to two kinds of innovation: incremental development of existing offers and the development of truly new, radically different offers. Systems, such as existing processes and performance measurement, are built to facilitate the first, but we often see that the more radical innovative efforts are stifled by the innovation management system. Companies need to find ways to balance both, defining strategies, systems and processes to facilitate radical, as well as incremental, innovation.

Setting the strategic direction
As much as innovation needs creativity and flexibility, it also needs strategic focus. We often see that important fields of innovation do not appear on companies’ agendas. Increasingly, innovation is stirred by disruptive technologies and business models. As long as these are not understood from a strategic point of view and do not receive a prominent place in the innovation strategy, moving from a reactive response to a more proactive mode will remain difficult.

Increasing agility in innovation management
Many of the recent developments we have seen in technology and business model innovation are very different from those that established companies are familiar with and proficient at adopting. New technological competencies are needed, and new markets need to be understood. This is hard enough. But it seems that in addition, the existing ways of managing innovation are not appropriate for dealing with these new challenges. As companies often know very little about the new technologies or business model opportunities, there is much uncertainty and risk. Going through the sequential steps of the standard innovation process seems not to work here. Rather, more agile and experimental approaches, based on trial and error, are needed to find out what works and what doesn’t. Start-ups work like that, they apply agile innovation methods and happily experiment their way forward. As hard as this may be for larger companies, management teams will need to find ways to work more like start-ups. 

Disclaimer:

“This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this article.”

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