How innovative firms get twice as profitable

By Natalie Turner, Author, Yes You Can Innovate

It is said that innovative organisations — those that systematically create new sources of value from their products, services or processes — grow twice as fast, both in employment and sales, as firms that fail to innovate. What’s their secret?

What are they doing differently and what can be learnt from their experience? Research says that, among many other variables, they are particularly good at managing the innovation process and harnessing two unlikely bedfellows: Creativity and discipline.

When we think of innovation, we often think of the first bedfellow — creativity — but being creative, no matter how important, is only one part of being innovative. Being successful at taking an idea, retaining its novelty and creating value out of it requires discipline as well.

It is a complex raft of skills, capabilities and processes, not to mention a particular type of culture, that makes organisations successful at innovating. We may not like to speak of innovation and management in the same breath but, in fact, to be really successful at innovating, we need to be good at management: Innovation management.

TENACITY, COURAGE, LUCK REQUIRED

When I started working in this field many years ago, in organisations grappling with this complex raft of requirements, many of the tools and processes that I found were very technical in nature and developed mostly for R&D and technological product development. Others, particularly in consumer-facing organisations such as Unilever, Coca-Cola and Diageo, mirrored internal business planning with “stage-gates” for various decision-making processes.

However, when one distils the essence of different approaches, some common themes and ideas emerge. Most innovation management processes fall into three distinct phases: Idea generation (how we get new ideas), selection (how we choose ideas) and implementation (how we make ideas happen).

But innovation is not just a process and certainly not a linear one. If only it were so easy. Ideas rarely move in a straight line. Unlike other management processes, innovation is perhaps one of the most human. It requires ingenuity and imagination to even get off the ground.

It also requires tenacity, persuasion, the ability to be far-sighted and courageous, a good sense of timing as well as large doses of luck. After all, if there is something new being brought into the world, some degree of risk is going to be involved.

This touches on the importance of organisational culture as well as different types of skills and capabilities that are required to make new ideas fly.

This is why, I believe, we see a lot of disappointment, or even failure, when organisations start to try and manage innovation.

WHY ORGANISATIONS FAIL

In the first phase — idea generation — it is becoming increasingly popular for organisations to deploy processes to capture the ideas of their workforce through online technologies.

While these tools can be very powerful, if they are not set up properly and integrated into the organisation’s strategy, a lot of ideas captured may not be particularly novel or not address specific business or organisational challenges.

And if there isn’t a management culture in the second phase — idea selection — that is ready to sift through and take ideas into the implementation phase, these can get stuck or lost in a black hole, leading to further frustration and disappointment.

Dr John Bessant and Dr Joseph Tidd, in the fifth edition of their seminal work, Managing Innovation, emphasise just how difficult it really is. “Managing innovation is not easy or automatic. It requires skills and knowledge which are significantly different from the standard management toolkit and experience, because most management training and advice is aimed to maintain stability, hence the most sought after degree is an MBA — Master of Business Administration.

“As a result, most organisations either simply do not formally manage the innovation process, or manage it in an ad hoc way. Studies confirm that only around 12 per cent of organisations successfully manage innovation and only half of these organisations do so consistently across time.”

A MAP FOR JOURNEY OF INNOVATION

For an idea to create real, lasting value, it has to go through an unpredictable and often haphazard process.

I like to think of innovation more as a journey, rather than a process, and for every journey, it is useful to have a map. The map isn’t reality, but it offers signposts to guide and help us on our way: To spot new opportunities, create ideas and solutions, test ideas to see whether they will work, choose the best ones, bring them to life and see how more value can be created.

The dearth of models that include these softer yet much harder to manage aspects — such as culture, skills and mindsets — led me on my own journey of discovery and, through research with clients and psychologists, I invented an approach that took into account these more human and organisational issues.

A circular, rather than linear model, it mirrors the unpredictable and iterative journey that ideas take from their inception to the creation of something that is valuable. Now used in organisations globally, it helps to provide a consistent way of managing innovation, measure innovation capabilities and, through training and up-skilling staff, develop more innovative and productive working cultures.

In sum, getting better at innovating requires you to think through how you are going to manage it; not just generate ideas — the creative bedfellow — but select and implement the best ones — discipline. And, while you can learn from the experiences of others, it will require you to consider the nuances of your own culture and see what will work in your specific context.

But no matter what type of process or model you choose to create, use or deploy, you also need to think about the subtler, more complex issues around culture, skills and capabilities — elements that often make or break innovation efforts.

Is it worth the hassle? According to Dr Bessant and Dr Tidd, you are more likely to not only outperform your peers in terms of growth, financial performance and employment but have an even greater impact on and benefit society as a whole.

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This article was written by Natalie Turner and originally published in Today Online on December 18th, 2013