Why do some firms grow and prosper while others deteriorate and decline?
I have had many interesting conversations with numerous business leaders, with very differing opinions. My belief is that successful companies practice innovation as an ongoing process. They are consciously and repeatably evaluating their processes, products and business model. Others believe that innovation is a chance occurrence or the domain of lucky creative people. I certainly don't believe that!
Take Apple for instance, what makes them special? Design and software engineering skills can be found at thousands of technology companies around the world. At Apple those same skills are deployed in a way to generate products that change how people use technology products (Apple has transformed the music, telephone and computer industries!)
I think that one of the keys to success in business is to have a deliberate innovation process that is a continuous and repeatable business practice. So how does one get started? Here are my thoughts on introducing innovation practices into your business.
Establish a culture of Innovation
Creating the mindset and right environment for innovation to flourish begins at the top of the organisation. Innovation and creativity has no geography and it’s the leader’s job to get it right and delegate it widely at every level throughout the organisation (do not restrict to a small band of specialists).
I would further encourage the following:
- Listen and stay open - ideas don’t always come from experts and sometimes come from internal and external novices and backroom thinkers.
- Collaborate - collaborate with outside groups such as customer forums, universities, government agencies, and other think tanks as this will bring new perspectives and ideas to the innovation process.
- Dedicate time to innovation.
- Empower employees and allow them to show initiative.
- Embrace failure - innovative thinking does involve risk taking (prudent and calculated risk taking, but nevertheless risk taking). There will be failures, learn from them!
Develop an Innovation System
You will need to recognise early on that you need two management systems. Let me explain why? One system to run the existing business and the second to run the future business. Still not sure?
Your current system is dedicated to the management of current products, current customers, and current markets. Your management and reporting systems are likely to be focused on negative deviations and underperformance. If this is the case, management will generally be presented with problems, and see their role as resolvers of problems. If so, the chances are that the organisation, will never be very innovative.
The second system should be dedicated to the development of concepts for future products, future customers, and future markets. Management has to be focused on opportunity creation, selection, and pursuit and must be supported by formal structures and systems.
Innovative thinking needs to breed proactive behaviour. Management meetings, therefore, should have separate agendas that focus on opportunities as well as problems.
The most important thing is to keep the measures simple and focused on what is important to measure. Set up targets and dashboards and incorporate into a balanced innovation scorecard. The list below could be a good starting point for your innovation journey and metrics.
- Percentage of sales from “new” products
- Percentage of sales from “new” channels
- Percentage of sales from “new” markets
- Innovation magnitude (financial contribution divided by successful ideas)
- Investment efficiency (ideas explored divided by total capital and operational investment)
- Number of new customers
- Number of new markets
- New processes added
- Process enhanced
- New products/services
- Product improvements
- Number of 'innovation' workshop sessions held
- Number of ideas per month from all of your employees
- Number of ideas evaluated
- Innovation success rate (successful ideas divided by total ideas explored)
Reward and Compensate Innovation
Simply put, if your people are not rewarded and compensated for their innovation efforts, these efforts will not occur. Therefore, a visible system of rewards and compensation needs to be put in place. You will need to ensure that the compensation system of the company encourages innovation that supports the strategy of your business.
Make Innovation a Reflex
It is the processes that management puts into place in the organisation that will get people to behave in a certain manner. As these processes are adopted and institutionalised to become a repeatable business practice, they will in time become a reflex.