It’s no secret that innovation is tough to pull off. Even the “world’s most innovative” companies sometimes stumble. Just ask General Electric, which was recently delisted from the Dow Jones Index. Whirlpool’s tariff relief may give a boost to the beleaguered company, but American consumers appear to favor Korean brands and European styling. And former innovation powerhouse Proctor & Gamble (sinking to No. 47 on BCG’s “Most Innovative” list) has failed fast, despite great effort on the part of dedicated innovation leaders.
With even these stalwarts struggling, does systematic innovation really make any difference? And what does a sustainable and well-designed innovation program look like in the Age of Disruption?
Innovation Leader, the Boston-based community for large company innovation, strategy, and R&D executives, has just launched Benchmarking Innovation Impact 2018, an important new study that examines this question, based on input from 270 executives. They analyzed data from innovation programs that had been in place for several years, and were delivering tangible results.
The following shared traits stood out:
- Standout programs spend more time on transformational innovation, less on incremental.
Winning innovation teams set their sights on moving the growth needle. They help their companies anticipate and navigate disruption in their industry. And they spend more time on “transformational” innovation, which the report defines as “entirely new offerings or business models.” Many innovation groups within large companies spend as much as 50% of their time working on incremental improvements to today’s products and services; 30% on adjacent innovation opportunities; and only 20% on transformational innovation. But the more mature, successful, growth-driving programs allocate even more time and energy to transformational activities. For them, the mix looks like 40% incremental, 30% adjacent, and 30% transformational.
- They get the right people on the innovation bus.
In other words, they know who should be doing what, and they get people busy doing what they do best. Mature companies know who should be involved in the different “horizons” of innovation. They get their business units to carry more of the load in everyday incremental innovation. And this frees up their central innovation groups, R&D departments, and corporate VC teams to spend time exploring adjacent and transformational opportunities. 3. They create effective incentives to support innovation.
The report clarifies a failing that I commonly see in my work with larger companies. Surprisingly few of them offer any kind of incentive specifically geared at fostering more innovative behaviors among their employees. More than 35% of respondents in the Innovation Leader survey said that their company doesn’t have any kind of innovation-related incentives. But the story is dramatically different for the more innovation adept companies. Almost 80% of companies have an incentive program in place. Of those, incentives vary greatly and are always in flux. They can run the gamut from dedicated time or space for employees to work on their projects to spot awards for “above and beyond” dedication such as an all-expenses paid trip to a destination of choice. Successful programs know that recognition is the biggest incentive of all.
3. They allocate resources.
The more successful innovation company programs are more willing to put financial resources behind their innovation ambitions. Fully 60% of these companies are investing at least $5 million annually in innovation, and almost one quarter have annual budgets north of $50 million. Those bigger budgets come from demonstrating traction, internal and external impact, and wins in the market. (But that can be a tall order to do that when you may start with a tiny team and a budget that is a rounding error: About 23% of the respondents said their budgets were under $1 million annually.)
4. They make innovation a part of the organizational DNA.
Because innovation is part of the DNA at these more sophisticated companies, many different individuals across business units, functions, and departments are involved with innovation initiatives — even if they don’t have “innovation” in their formal titles. Still, there is often a good-sized central team to coordinate this work or provide additional resources; 47% of these more mature companies say they have 25 or more employees assigned to a central innovation or R&D team.
5. They bring investment groups into the mix.
Rather than isolating themselves, mature innovation groups team up with the corporate venture and corporate development arms to achieve their adjacent and transformational innovation objectives. These mash-ups often involve collaborating with, funding, or buying smaller companies and startups that corporate VC groups initially scout or incubate.
6. They get funded from multiple sources and stay flexible.
Mature innovation teams are not married to the annual budget process. Instead, they need the flexibility to move fast, so they run separately-governed innovation investment processes. Having the means to get funding outside of the annual corporate process gives mature teams the agility to attack new opportunities and trends without waiting around for the next fiscal cycle.
7. They avoid politics and turf wars whenever possible.
The biggest obstacle to innovation, according to Innovation Leader’s data, is politics and turf wars. More than half of all respondents – mature or not – admitted this was a problem standing in the way of innovation progress. But fewer of the more mature companies cited politics and turf wars as an issue. The reason? Mature companies are more likely to have created alignment on their strategy, put the right people on the right projects with the right incentives, and created clear duties and responsibilities about who is expected to be moving innovation forward. That means they experience fewer internal conflicts that can get in the way of launching or experimenting with new lines of business.
8. They are aligned with the organization’s overall strategy.
Another important hallmark of a mature innovation program is that the internal teams are all gathered around the same campfire. Mature companies have a unified strategy and vision that the entire company is aware of. That means employees can spend less time fighting for support or budget, and more time delivering real results.
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Robert B. Tucker is one of the most in-demand innovation speakers and workshop leaders in the world today. A former adjunct professor at UCLA, Tucker is president of The Innovation Resource, a consulting firm specializing in helping leaders and their organizations invent higher growth futures. The author of seven books, his international bestseller Driving Growth Through Innovation: How Leading Firms are Transforming Their Futures was translated into 17 languages. As a thought leader in the growing Innovation Movement, Tucker is a frequent contributor to publications such as the Journal of Business Strategy, Harvard Management Update, Strategy & Leadership, and Innovation Excellence. He has appeared on PBS, Bloomberg, CBS News, and was a featured expert on the CNBC series The Business of Innovation, hosted by Maria Bartiromo. Details: www.innovationresource.com or contact (805) 682-1012.