Tuesday, January 22, 2019
How to Close Your Innovation Gap

How to Close Your Innovation Gap

Innovation is about survival and widely recognised as an important driver of economic growth. But believing in innovation is not enough. Neither is using antiquated innovation techniques effective in today’s world of rapid change, digital technologies and ever increasing variables.

Companies that lack commitment to innovation and have no innovation competence, unsurprisingly have limited innovation capability. Innovation requires capability so that the process can be actively managed, but many leaders seem content with a widening gap between where their innovation capability is now, and where it needs to be. Others are not even aware that a gap might exist, or believe that antiquated innovation methods are still effective.

Luddites and Laggards

Like the 19th century Luddites who protested against newly developed machinery, how many companies are today being silently led by the 21st century equivalent who believe they can gain and retain competitive advantage without innovation that involves digital technologies?
How many leaders are expecting the innovation techniques of the 80s and 90s to achieve what they need? And how many leaders are not even asking the questions; “do we understand our innovation gap?” and “what are we doing to fill it?”

The answer is; “too many”. So how, for the good of themselves and their companies, can these leaders change, and avoid being the luddites and laggards of the digital age? How can they get up to speed with new trends in innovation and digital enablers, and avoid eroding the value of the very companies they have been entrusted with?

Innovation Generations

It’s important to recognise that innovation techniques that were relied upon in previous generations, will no longer set the world on fire today. R&D investment and capital expenditure are not obsolete, but neither are they the cutting edge innovation techniques relied upon by masters of innovation. Successfulinnovation has become more collaborative, unpredictable and frequent than ever before.

The Art of Innovation with Guy Kawasaki

 

“Don’t allow your success on yesterday’s innovation curve to cause you not to appreciate the next curve.”

Innovation Management Gaps

So how can leaders generate new ideas, bring them to life and leverage them in a way that adds value? Unless a company’s innovation capability is at an adequate level of maturity, any hope of being truly innovative will be stifled from the start. Imagine the high-performing car with one flat tyre. As much as it might be a top of the range piece of kit, it won’t get far into the future when one tyre is flat.

How can a leader assess, then improve the maturity of their company’s innovation capability? One way is to reference the Digital Capability Framework and the BTM² transformation framework (from the Business Transformation Academy). Each of the nine management disciplines below form the basis of BTM², and the questions are what leaders can ask themselves and their teams.

Meta Management Capability
Do we have a risk-averse culture and a leadership team that is very set in its ways? – or do we recognise the value of innovation, and allow ourselves to really change?

Strategy Management Capability
Do we exclude innovation and the business model from our vision and goals? – or do we include the ecosystem as part of our business model and continuously executive innovation initiatives?

Value Management Capability
Do we ignore the need to explain, plan and realise value derived through innovation initiatives? – or do we use KPIs and a benefits management process to measure both the quantitative and qualitative benefits of innovation initiatives?

Risk Management Capability
Do we have lack a formal process to manage the risks associated with our innovation initiatives? – or do we safeguard ourselves with a formal strategic risk management approach across our ecosystem?

Programme and Project Management Capability
Do we not address governance, risk and portfolio management for innovation related initiatives? – or do we treat innovation management as a dedicated business function where the innovation portfolio is assessed, planned and managed on an ongoing basis?

Business Process Management Capability
Do we have little or no governance, methods, tools and KPIs to compromise business processes? – or do we leverage proven methodologies and KPIs to manage processes related to innovation initiatives?

Transformational IT Management Capability
Does our innovation approach fail to align with our IT strategy and discount mobile, social, data and cloud technologies? – or do we utilise IT strategically and creatively?

Organisational Change Management Capability
Do our innovation initiatives omit the need to define, plan and manage the change process? – or do we consistently demonstrate and act upon a deep understanding of the change impacts across the entire ecosystem?

Competence and Training Management
Do our innovation initiatives lack an understanding of the training and knowledge transfer required for innovation-related initiatives? – or do we understand the competencies required by building innovation capabilities into our workforce and third-parties?

Innovation Capability Maturity Model

As part of the Digital Capability Framework (DCF) the Innovation Capability Maturity Model is used to measure each of the nine management disciplines above, to assess where an organisation is now, and where it needs to be. Only then can a structured approach to closing the innovation gap be established, planned and executed.

Leaders who understand that these gaps will not automatically close themselves, will invest the time and money required to close them. An excellent example has been set by Thomson Reuters, which has established a “catalyst fund” as a pool of money that internal innovation teams can use for doing rapid proof of concept on new ideas. Read this HBR article about it.

If leaders know they need to be innovative, and at the same time recognise that their innovation capability is low on the maturity scale, what hope is there if they fail to invest in, and be committed to, closing that gap?

Innovation Process

Once a company has achieved an adequate level of innovation capability, it’s time to draw upon an innovation process. The innovation process model from Joe Tidd and John Bessant is a good place to start and this is illustrated below.

Even during the innovation process itself, digital technologies themselves can be very useful at every phase of the process. Mobile, Big Data, Social Media and Cloud are digital technologies that can each play a part in every innovation phase, and there are many digital use cases available to demonstrate this.

For example: in the “Search” phase of innovation, where we look for opportunities to innovate, trending discussions and dialogue with customers across “Social Media” could be leveraged. Similarly in the “Capture” phase of innovation, where we evaluate the benefits realised from the innovation, “Big Data” could enable the real-time analysis of customer sentiment and behaviour. The list goes on.

Everyone’s Slogan – “Innovation”

Take a look at this five minute video by John Bessant and his colleagues, as they take a sideways look at innovation and launch into a song about the need for “Dynamic Capability”. The point made here is that “talking” about innovation is one thing (and most companies are doing it), but innovating using methods that are effective in today’s world, and managing it well is quite another thing.

The History Books

While leaders at Kodak and Motorola missed innovative shifts in their respective industries until it was too late, Kmart failed to build a supply chain management system that could support an increase in customers. Are these and other examples enough to encourage a mindset-shift among the leaders that are uncomfortable at the prospect of a innovation in a digital age? Or will it take more to bring about some fundamental change?

Be Prepared to Innovate

Before you order a new stock of Post-it Notes and call upon your teams to rally around a collection of white-boards, plan ahead and understand how you will manage innovation by:

  1. Assessing the maturity of your current level of innovation capability;
  2. Understanding where the maturity of your innovation capability needs to be, in order to transform the enterprise;
  3. Establishing how you will fill the gaps between as-is and to-be maturity of innovation capability;
  4. Agreeing upon an innovation process model so that everyone is singing from the same song-sheet (not everyone sings hymns);
  5. Taking advantage of use cases that demonstrate how digital technologies can help during every phase of the innovation process.

Innovation – Just The Start of Transformation

Innovation is becoming more distributed in the digital economy with value and industry being frequently shaken up by outsiders, and even by start-ups. However, even the most impressive innovation is of little use (particularly in larger organisations) if it cannot be followed through with effective business transformation. The Transformation and Innovation Framework below shows how innovation and transformation go hand in hand, along with four different innovation methods that can be leveraged.

Source: 360° Business Transformation Journal – Issue 12 – Dec 2014 (pg. 38-49)

Innovation capability alone will not be sufficient to transform an organisation into a highly competitive digital enterprise that can fend off the unknown start-ups and more obvious competition. But the very fact that a company’s leadership is open to learn how to manage innovation in today’s world, is a good sign that the leadership is also open to undertaking their business transformation using a proven holistic and integrated method.

References and recommended reading

360° Business Transformation Journal article by Axel Uhl and Christoph Steiger

Digital Enterprise Transformation book by Axel Uhl and Lars Gollenia

Innovation and Entrepreneurship book by John Bessant and Joe Tidd

 

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Rob Llewellyn is a trusted advisor to the C-suite and one of the few certified and independent Global Business Transformation Masters in the world. Having provided professional services to some of the world's largest companies across Europe, Australia and the Middle East since the 1990s, Rob helps executives take an holistic and integrated approach to transformation using the Digital Capability Framework, BTM², and other management tools that lead organisations to achieving value-driven competitive advantages. Contact Rob via LinkedIn or www.cxo-transform.com or Twitter@robertllewellyn