Effective innovation management is an underrated component of modern corporate innovation strategies.
It's not just about exploring future growth ideas submitted by internal team members or external partners.
It's about ensuring the right ideas are brought to the table (balancing quality and quantity) and given thoughtful consideration, then quickly assessing the merits of those opportunities and acting on the top ones.
As a trio of Vrije Universiteit Amsterdam’s School of Business and Economics professors recently wrote for MIT Sloan Management Review, the best innovation leaders at corporations today "identify, monitor, and adjust the mix of projects to ensure that the best ones go forward and remain aligned with the corporate mission."
These executives also ask themselves a number of questions when evaluating the merits of an innovation strategy:
- Is a proposed innovation initiative intended to help the business short term (e.g., improve existing products or services) or long term (i.e., make us more resilient)?
- Will the innovation ideas pitched help the core business (e.g., speed up time to market for product launches) or help us explore entirely new business models?
- Do we think this work will help the company cultivate a more innovative culture?
Arguably the most important question they ask, though, is:
How can we best manage this innovation program to ensure a) we realize the desired ROI and b) we can replicate the formula for future programs?
This focus on structure dictates the success of an innovation management approach.
Strong collaboration, coordination, and communication among all innovation stakeholders — whether in a closed-innovation environment or an open-innovation approach — is what ultimately helps large enterprises move quickly on cutting-edge ideas and potentially transformative business models.
What is innovation management?
The innovation management process involves capturing ideas from internal stakeholders or generating ideas with outside partners, then developing coordinated initiatives to analyze, test, validate, and advance the 'best' ones.
The approach entails managing ideas tied to both core innovation, with the goal of strengthening existing offerings, and disruptive innovation, where the objective is to think outside the box (and away from the main business) to determine the viability of new markets to possibly enter or business models to consider.
Regardless of the flavor of innovation a company chooses to investigate, they need the right innovation management tools to implement a structured, systematic approach for assessing and acting on fresh and original ideas.
Only when that's the case can enterprises explore a large volume of innovation avenues — a necessity for modern innovation. (The more bets a corporation places, the greater their odds at least one will 'come through.')
"The most successful organizations have a programmatic approach to managing innovation and thought leadership, which helps them build organizational competency over time in both disciplines," Thinkers360 Founder Nicholas D. Evans recently wrote for CIO.
Principles of successful innovation management
Successful innovation management starts at the top of scaled enterprises. Alloy Partners CEO Elliott Parker wrote in "The Illusion of Innovation" that leaders who recognize the value of transformative innovation, not just incremental innovation, are the ones who build a strong culture of innovation.
"We need our institutions to be effective, dynamic, and willing to try new things because we have enormous problems to solve," Elliott wrote.
But if the organizational structures large corporations use to tackle big challenges are less effective today than they once were, Elliott noted, then new structures and ways of thinking are required to replace them, Elliott argues.
Another way to put it?
Scaled enterprises have the power to not only improve their bottom lines but also change and transform the world for the better. But to do so, they need structured, scalable, repeatable innovation frameworks.
The tenets of modern innovation management these organizations must abide by to succeed boil down to:
- Making sure decisive, forward-thinking leaders oversee all innovation initiatives.
- Crafting a culture that encourages employees to participate in innovation efforts.
- Developing a mechanism for collecting internal and external data and insights.
- Laddering all innovation activities up to the primary business vision and mission.
- Being highly adaptable and flexible to accommodate changing needs and goals.
- Similarly, knowing when to pivot and having agility to switch gears as needed.
- Conducting fast, cheap, and 'weird' innovation experiments on a continual basis.
Adhering to these principles empowers corporations to address unmet customer needs, enter adjacent markets or verticals, and even create their own companies from scratch. Equally as vital, though, it also helps them avoid engaging in innovation theater that only wastes their time, money, and resources.
Managing a diverse innovation portfolio
While corporate venture capital teams focus on portfolio management (i.e., finding promising early-stage startups to invest in), corporate innovation teams must focus on their portfolio of innovation approaches.
There are essentially three buckets a given innovation activity can fall under today.
1) Sustaining innovation: Improving on core products or services over time
As noted, incremental changes to core offerings (e.g., upgrading software, adding new tech integration partners, improving the UI of a platform) are commonplace at every corporation. As they should be.
Large enterprises must continually enhance their products and services to provide value to their customers.
"Sustaining innovations are wonderful," said Elliott. "Most of the innovations that make our world amazing are incremental improvements over what existed before." That said, he added companies can "only depend on sustaining innovations or efficiency improvements for so long," as "the luck and advantage eventually run out."
3) Efficiency innovation: Refining internal processes to work smarter
Increasing operational efficiency is a never-ending quest for corporations. From driving down operational costs, to streamlining team-specific workflows, enterprise C-suites constantly look for ways to innovate.
Efficiency initiatives are often focused on speed. For example, many enterprises want to accelerate their go-to-market efforts with new and improved products and services. Similarly, they aim to enable each business unit to execute with fewer constraints so they can finish tasks and projects more quickly.
The goal of efficiency innovation is "fast and efficient return on capital investment," Innosight Co-founder Clayton Christensen once said. The issue with trying to "[wring] bottom-line savings and additional profits out of our existing organizations," as Clayton put it, is it forces a focus on near-term ROI, not long-term progress.
2) Empowering innovation: Reshaping markets or trying new business models
This third innovation avenue involves "transforming products so radically that they create new classes of consumers, expand or create markets, and generate jobs for their originators and the economy," Elliott wrote in his book.
A common use case for empowering innovation is the desire to explore new business models. This approach is usually embraced when a corporation identifies market gaps and opportunities through research.
More to the point, the company discovers unmet customer needs (within their own customer base or potential customers in 'adjacent' markets) it could solve for with a separate, spin-off venture.
This could be a new, internal venture developed in-house and launched as a spin-out company or a bolt-on to the core business. Or, it could be a standalone startup built with an outside partner via an open innovation program.
Building your innovation management team
Regardless of the type of innovation endeavor your enterprise wants to undertake, you need a dedicated team of savvy innovators, each with a defined role to ensure your initiatives stay on track and deadline.
A common structure for an innovation management team includes:
- Orchestrators. These are your innovation program champions. They likely brought a proposed innovation project to executives and got the necessary buy-in and resources to execute on it.
- Experimenters. These are your analysts and researchers. These individuals comb over customer data and feedback, then use those insights to inform and mold their innovation program work.
- Reviewers. These are your innovation project managers. They keep programs on the rails by ensuring stage milestones are met on time to meet SLAs agreed to with their leadership team.
- Approvers. These are members of your executive staff. Often, this is your CEO and strategy leader who gave the green light for the initiative in question and need to review progress and results.
- Collaborators. These are external partners you work with. This can be existing partners, research universities, or advisory firms who can offer a fresh perspective on the opportunity being explored.
There is no one 'right' way to construct your innovation function. But having these types of team members can ensure your corporation doesn't engage in innovation theater and end up with nothing to show for your efforts.
