Hackathons, internal innovation programs, open innovation, technology acquisitions…these days it seems like everyone is jumping onto the innovation bandwagon. However the popularity of business innovation techniques is equalled by the confusion surrounding them. How is innovation best performed? Can guidelines for innovation be created?
Recently, Gartner released a presentation, “The 5 Most Effective, Least Used Digital Innovation Hacks”1 outlining the results of a survey performed, asking CIOs regarding their best practices for innovation and came back with some surprising results. The survey presented five key innovation practices which delivered the highest improvements in performance. Interestingly, the executives interviews also indicated these practices were employed the least. Here is a brief look at these key techniques.
Once upon a time innovation was a technique practiced by lone inventors. In the 1950s corporate R&D departments began to take over this role. Today innovation talent pools are growing even larger. Companies are realizing that all their personnel can help contribute to the ideation process – not just a designated few. Other companies are going even further afield and turning to their customers or the general public to help them solve problems and create new products.
Companies are well-coordinated environments geared towards amassing and managing highly specialized knowledge in order to address issues and create opportunities. However, using a loose, decentralized crowd presents the issue to a wide range of diverse individuals who possess varied skills, experiences, and perspectives. This brings much more weight to bear on a given issue. A crowd can function at scales that exceed even those of the largest and most complex global corporations.
The CIO’s interviewed by Garther say that you can start testing out the crowdsourcing technique internally with a few non-essential ideas. Once you feel more comfortable, move on to more meaningful problems. Then once you feel you’ve got the knack of it, try looking for solutions outside the company by posting a (specific) problem or request on your website or social media. You will be surprised by the response.
Dedicated Funding Models
Experimentation takes time and requires leeway. But traditional funding models are focused on the bottom line, which may not properly reflect long term ROI. For example, one company saw they were making most of their sales from their traditional products, so they focused on that. A short while later they were pushed out of the market by companies that had innovated and created new products.
So innovation often requires its own unique funding model, which is clear even without the Gartner research. Today there are two main kinds – those of corporate labs and venture capital-backed start-ups. Professor of Investment Banking at Harvard Business School, Josh Lerner, says both have very real strengths, but also serious limitations. Corporate labs have plenty of steady funding, but too often concentrate on what’s worked in the past, rather than looking at the needs of the future. Start-ups, meanwhile, are intensely focused on upcoming needs, but are beholden to the impatience and boom-and-bust cycles of the venture capital industry, which often expects quick returns. In his new book, The Architecture of Innovation: The Economics of Creative Organizations, Lerner says the key to success lies in adopting a hybrid model that combines aspects of both.
Funding innovation requires a mindset that encourages disciplined experimentation with a portfolio approach. Before changing existing funding processes, try creating a small “slush” fund for digital innovation projects. Next explain to management that not exploring digital opportunities may prove riskier than taking on uncertain-but-important experiments.
Metrics are critical for gaining insight into what works and what doesn’t in any given process. But for many, a practice as spontaneous and creative as innovation may seem something incapable of being measured. After years of experiment, however, successful innovators have shown that not only can innovation be measured successfully, it already is by hundreds of different organizations.
This is one of the more important insights gleaned from the Gartner research: The first rule of innovation metrics is to focus on more than just ROI. A few years ago the most popular innovation metrics were output metrics: number of new registered patents, number of new products/services less than three years old, percentage of revenue from new products, ROI from innovation spending. But these provide little insight into the process itself and what works best.
If you focus only on the bottom line, you will lose out one of innovation’s most precious rewards – deeper understanding and new ways of approaching problems. Innovation therefore requires an entirely new set of metrics just for itself. You should therefore add input metrics – those variables which set the preconditions for successful innovation. These could include: percentage of staff trained in business innovation techniques, leadership time spent on innovation vs. regular operations, and percentage of budget that is invested in innovation projects.
Perhaps most importantly, you should also add process metrics: Average time from idea generation to first revenue, number of ideas submitted by employees/month, number of opportunities moving on to the next stage, types of innovation tried (internal, external, hackathons, etc.).
An alternative approach to generating new innovative ideas is to search for external ideas that have already been development – ideas which have evolved into technologies, products, strategies and even companies. This is what many large organizations do. In fact, the 2014 GE Global Innovation Barometer survey reports that 85% of corporations said that collaboration with start-ups and entrepreneurs will drive success for their organization in the future.
Businesses today must continuously reinvent themselves in order to adapt to increasingly complex and dynamic market realities. Standardization makes it difficult for companies to differentiate themselves from competitors. So buying innovation externally is a smart option.
While buying a start-up is obviously a costly enterprise, it provides many unique benefits. One of the greatest is the assimilation of disruptive technologies. In recent years, many established market leaders have been eliminated almost overnight by new entrants with disruptive innovations that do new things in ways that the existing market did not expect. By buying out the competition, they eliminate this threat.
Another major reason is the urgent need for growth. Many major corporations today have gone through an extended period of cost reduction and now have tons of cash on hand. Buying successful companies with innovative products is an easy way to generate quick growth.
Start-up acquisitions also provide companies with numerous additional benefits that internal innovation efforts can’t deliver. They get to market faster by acquiring ready-made and tested products. Along with the product they usually acquire a talent pool of professionals highly qualified in a number of relevant fields. They prevent their competitors from acquiring the technology and using it to steal away their market share. If the start-up has customers you usually acquire them as well – which is a good leverage for future growth. In addition, their products and technologies can often enhance your products, boosting sales in existing markets.
Formalized Innovation Management
If “Dedicated Metrics” was one of the most important insights to arise from the interviews Gartner held with the CIO’s, this is THE most important insight: Once you’ve got the knack of the above and other successful techniques, build a program that drives repeatable, productive innovation practices. This will help overcome fear of risk and company group think which are common obstacles. Create a special area just for innovating – a place where the most outlandish ideas can be discussed without being ridiculed. Install an innovation platform which can record, distribute and serve as a discussion platform for new ideas. Encourage innovative thinking by rewarding innovative thought. Hold creativity workshops or hackathons, run a rapid prototyping exercise, or introduce a “creativity moment” into your staff meetings. Do all of the above, but most of all formalize the process so that it becomes ingrained and entrenched. Then you will begin to see “new’ things really happen.
Make These Techniques Work For You
As we mentioned above, the most surprising thing all of these business innovation techniques have in common is that they are used very infrequently. In order to change that, it helps to have a system which can help implement all of the above techniques into your company’s innovation processes, as well as adding numerous other tools to streamline your business innovation flow and your idea management.
Qmarkets’ Idea Management system allows users to share ideas with people located in widely different geographic locations. The best environment for helping innovation thrive is a collaborative environment, one where ideas are shared, helping to inspire others. Qmarkets’ system provides dedicated models both for funding and for measuring returns, ensuring that you are able to keep track of your financial situation and how it meshes with your innovation processes. Qmarkets’ Q-scout tech scouting platform is ideal for start-up acquisitions, as well as mergers and partnership deals. In addition, Qmarkets’ cutting-edge sonar visualization tool makes it easy to monitor all activities that take place on the platform, forecast trends and lucrative opportunities, as well as resolve workflow bottlenecks.
Qmarkets provides an all-inclusive, all-encompassing platform to formalize your innovation management, idea management and all of your innovation processes.
Contact Qmarkets to consult with our experts and discover how your enterprise can implement powerful business innovation techniques!