All companies strive for innovation and strategic foresight.
Often companies commit signficant amounts of capital to establish an own innovation unit. What remains challenging though is to make this innovation unit successful.
Working on innovation with large corporates, SMEs and start-ups in various geographical regions and industries for the past 12 years, I notice that companies run into the same problems again and again:
Top management support is insufficient
Impact and results are hard to measure
Expectations are not well aligned
Wrong people doing innovation
Interfaces not well defined and articulated
It seems that often times the value of an innovation unit is not apparent to the main organization which perhaps explains why according to this study, 90% of innovation units fail.
Most often these innovation units have not found a good answer to the following five key considerations which every corporate innovation practioner should think about early on.
Purpose - Know what the end goal is
As outline in this article, you need to figure out what the right to exist is for your innovation unit.
Generally speaking, there are three different innovation scopes: improve the core (digital transformation, process optimization with digital means), extend the core (increased traffic/leads, focus on adjacencies as a natural evolution) and new business (new revenue, new customers).
A lot of times, people want to do all three scopes without understanding that for each scope a different type of operating mode and different kind of talents are required.
Often times also, people don’t make the scope and purpose of the innovation unit explicit enough to management (or even to themselves). Especially for organizations that are just starting out with innovation, it is crucial that you educate the main organization and like in a start-up, sell your innovation unit’s value proposition to whomever isn’t quick enough to get out of your earshot.
Ask yourself:
What is top management intention to fund an innovation unit? Is it for marketing purposes or is there a genuine interest in building new services, products and businesses?
How far can YOU take the unit? Is it to inspire and educate the organization on what’s out there, or can you bind capital for multiple years in ie even a corporate ventur capital set up?
What is your OWN appetite and vision for the innovation unit and how do you need to shape the expectations of others?
People - Find the appropriate talent inside AND outside
Once you have a better understanding of what the end goal is you can then drill down to understand what kind of set-up you need.
Are you going to run an accelerator/incubator model and get start-ups to be the innovators and idea generators?
Are you going to run your own in-house innovation team and generate and implement ideas yourself?
Are you going to invest into companies that will extend your business?
For any high performing set-up, the right mix of talent is necessary. I often find that corporates just simply move over corporate people into the innovation unit. I mean what do you expect? They will run the innovation unit like any business unit and how they are used to doing business.
However, innovation is inherently about doing something differently. And as you move further away from the core with your innovation unit, the more likely you should hire outside talent (community managers, investors, entrepreneurs in residence etc.).
Ask yourself:
Do YOU have the right skills and experience to run the kind of innovation unit you are set out to build?
How can you compliment your gaps and avoid the corporate business-as-usual fallacy?
How can you strike a balance between having the right talents while at the same maintaining the right level of “interface glue” to the corporate?
What is the kind of innovation model you want to operate and can you find a good market benchmark to assess what the right talents are you should be looking out for?
Passion - Establish a politics-free zone and culture
Probably one of the biggest make-or-breaks is whether you have the right culture in place. While this is shaped by the people you hire, it is equally important to pay attention to the little intacit things that matter in order to foster innovation such as rituals, behaviors and values.
No matter what purpose your innovation unit has, by default, you need to make sure that your unit is a politics-free zone. Corporate rules should not apply here.
While I think many agree with why innovation needs an environment that removes barriers and fear of failure and that fosters a spirit of explorers and trial-and-error, a lot of people forget to set the expectations right with top management.
Formal corporate rules are designed to de-risk and standardize. Informal political dynamics are there to position yourself and excude power.
In your innovation nucleus, both would be detrimental to the morale of your people and you should make a point to make the innovation unit a creative zone of fun, ownership and transparency.
Ask yourself:
How can you provide an environment where people can assume ownership and freedom and explore ideas in a risk-free manner?
What are the kind of shields YOU can pull up to protect your innovation unit from adhering to corporate norms?
Processes - Know that interfaces matter a lot a lot a lot!!!
While it is important to leave the political battles outside of your innovation unit, it is indeed important to think about and tend to the interfaces with the corporate.
I have seen innovation units that figured out pretty well the first three P’s, but then failed to actually bring back the value of innovation to the corporate. It could be, because these innovation practioners didn’t have the right kind of authority, network or trust within the corporate or because they didn’t actively establish crucial interfaces for the company to absorb innovation.
Ask yourself:
Does the innovation unit sit sufficiently high up in the hierarchy to matter?
Who are the early adopters (=open-minded and receptive to innovation) and promoters (=who think what you do is really great) in the organization?
How do you funnel in ideas or start-up contacts? Should the process be more formal and have a regular cadence? If so, who would be the right people to get into that meeting?
With whom from the corporate should your team be in regular contact with?
Whose perception on what the innovation unit needs to deliver do you need to shape?
How can you broadcast the work of your innovation louder, more clearly and more impactfully into the organization?
Profit - Define what value means in your unit
Innovation labs and units typically are cost centers. Like a strategy unit, they are seen as enablers and strategic asset to ensure the sustainability and longevity of a company.
While this is good, from time to time, management will ask questions about impact. Was the investment worth it? What impact did the innovation unit create? Did it really help me, as the top management, to position myself for the future?
In my opinion, it is good to nonetheless adopt a value-driven mindset to your innovation unit. Profit here really is meant as generating (future) value and making this measurable by tracking underlying KPIs.
While it is good to measure the number of engagements with start-ups, the number of "joint projects” you have done in a year, I sincerely believe that the best measurement is to put a EURO or DOLLAR sign behind each and every initiative you start.
Ask yourself:
What is the potential value this new project can have? By when?
What are the second and third order effects?
What could be real revenue streams to your innovation unit?
How can you measure intellectual ROI?
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