What is innovation?
Innovation can mean different things to different people, but simply put:
Innovation is the process of generating and implementing new ideas to create value.
But how do we incorporate innovation into business without losing the plot?
A commonly held view is that innovation occurs by inspiration and that having a great idea means it will be guaranteed to succeed in the marketplace. Others believe that innovation is something manufactured, and only evolved through precious methodology and processes. The truth is both and everything in between.
As business leaders, we are constantly driven to be agile, embrace change, to make innovation part of our business setup, be part of the new world of business or be left behind. Those challenges and arguments are valid in a world that now expects change and innovation to be part of their environment. But as a leader and manager, how do you get the mixture right;
- When looking at the timeframes for innovation processes and time to market?
- Staying financially viable while incorporating major innovation and business model change?
- While finding out how innovation can best adapt and be structured into the culture of the business?
- Ensuring staff feel part of the innovation process and still secure in the organisation especially in times of change?
Although innovation needs to be embedded into business, there has been a major push for businesses to adapt to innovation and change their business models by extreme measures to accommodate innovation. How about we look at this challenge differently and adapt and integrate innovation to our business needs, culture and the marketplace?
Firstly, let’s discuss two academic schools of thought regarding the management of the life cycle of innovation. One perspective instructs management to hire the right people and get out of their way, letting innovation occur organically. The other end of the spectrum argues that innovation is just another organisational function that should be proactively managed and included alongside other core business activities.
Great theories, but for innovation and the process of change to be successful and add to the business goals, innovation and its proponents need to better understand the obligations. How it can benefit the organisation both short and long term? How it can complement building a stronger culture and the overall costs vs. benefits of innovation? At Protiviti, our commitment to the adaptation of innovation into our business model is shown through our global innovation challenge which promotes idea creation but just as importantly the process of innovation.
It’s useful to identify the types of innovation models available. Innovation thought leader Greg Satell argues that innovation is about problem solving, and his Innovation Matrix1 (Figure 1 below) is a widely accepted model that helps us to identify the types of innovation and how the differing models can be incorporated into the organisation. This is about looking at the organisation and all its structures and culture, then defining a model that bests suits the direction of the organisation.
Figure 1: Satell's Innovation Matrix
Satell argues that if your innovation strategy is struggling or failing, you should change to an innovation strategy or model that best fits the organisation.
- Sustaining Innovation — This type of innovation is common in lean and agile but well governed organisations, because it’s often the case that they are looking to become better at things they already do. These organisations know what their goals and objectives are and usually know what skills are needed to solve them. Again, the organisation that best suits Sustaining Innovation is overseen by an aligned strategy, proper resourcing and executive sponsorship that is committed to innovation being part of the business of the organisation.
- Breakthrough Innovation — Sometimes the problems are properly identified but can’t be solved. In times like these, Breakthrough Innovation (BI) seeks to succeed by breaking down traditional structures and looking to the skills or perspectives outside of our usual domains e.g. diverse skilled or cross functional teams. BI works optimally when a business is trying to change its business model, is looking for new products to new or existing markets and needs to think differently to succeed. BI doesn’t operate well in highly structured or bureaucratic organisations that haven’t yet found the desire to change.
- Disruptive Innovation — In essence, when the basis of competition changes because of technological shifts or other changes in the marketplace, companies can find themselves getting better at things people want less of.When that happens, innovating your products won’t help — you have to innovate your business model2 to adapt to the new marketplace. This form of innovation is best placed in a lean oragile organisation or an organisation that can’t see a viable future with their current product base. Protiviti worked with a superannuation fund to help low paid workers (its customers) boost their super funds. By undertaking the innovation process members were able to get a percentage of everyday purchases deposited into their super accounts by retailers whom the members bought from. Success was gauged on higher contributions and the feedback from members (great results).
- Basic Research — This form of innovation comes through traditional ways of research, academic papers and/or evolution of current products or services. Don’t underestimate the value and amount of ideas that can be generated and crossed over to other markets. Again, don’t underestimate the power of this area; it can be the starting place or seed that starts innovation in organisations grappling with the concept of innovation.
So where does innovation come from?
The famous writer and philosopher Peter Drucker3 argues that although innovation can spring from a flash of genius, most innovation results from a conscious search for opportunities. He states that these opportunities can be found in the following seven situations. Situations one to four are those found inside organisations or industries, with five to seven found in the broader social environment.
- Unexpected Occurrences — Basically building up an innovation library, often an innovation product was not successful and gets forgotten as we move onto the next innovation. The key is to focus on the opportunity of an unexpected occurrence. For example, the inventor of Novocaine (first non-opioid pain relief) targeted it to be used by surgeons, they didn’t like it and it was rejected. However, dentists liked it and it became the market standard for dental surgery and became hugely successful in the right market (find the market for the innovation).
- Incongruities — A part of a system that is out of step with the bigger picture can present an opportunity to innovate. Protiviti helped a banking customer with major time backlogs on anti-money laundering processes that increased customer frustrations. By identifying the pain points and manual error problems, we were able to find time reductions of over 50% with automation solutions and a 30% reduction in resources.
- Process Needs — This involves the identification of a weakness or need in a process of operations and then redesigning or adding a new element to the process to mitigate that weakness. The marketplace is changing with the embracing of block chain, big data and AI technologies. Protiviti has become a major leader in aligning and evolving these technologies to current and future challenges for businesses and government.
- Industry and Market Needs — Changes in industry structure and market needs can create significant opportunity for innovation. Why? Because people grow tired of expensive and poorly serviced markets that don’t align with customer expectations (the market need changed, but the service provider didn’t). Protiviti has worked with many diverse small to medium and large companies in creating ideas and solutions that could align to emerging and current markets. Our well-developed systems allow for a wide range of ideas to be created then expanded to strong business cases for innovative and market leading products.
- Demographic Needs — Innovation opportunities are presented by changes in the age distribution, education, occupations, and geographic locations of people. For example, the rise of high-quality nursing homes for baby boomers, or how block chain will change transactions between organisations and the integrity and ethics associated with those changes.
- Changes in perception — Looking at an issue or problem from a different perspective can present opportunities to innovate. For example,we have never had a longer and healthier lifespan. However, rather than enjoying our health, we are bombarded with advertising that tells us all our aliments. This perception drives growth and innovation in the medical industry for services and products.
- New Knowledge — New ideas, and the convergence of knowledge provides some of the most exciting opportunities for innovation. This type of opportunity can lead to major disruptions of innovation that have significant effects on markets. For example, the computer, nanotechnology, the smartphone, block chain and AI.
How do we manage innovation?
Creativity is thinking of something new. Innovation is the implementation of something new.
Innovation is about the implementation of something new, something that will add value to the organisation and the people it interacts with, something that drives people to broaden skill bases and the enthusiasm for change.
Creativity is the idea. Innovation is the process, structure and governance to get that idea or an extension of that idea to the market, or into business as usual. It is about people finding solutions for embracing the change and using it as a strength of the organisation that makes it a business a leader in the marketplace. In order to manage innovation, the business must get the following things right:
- Culture — Having a good understanding of the organisation’s culture, what is its risk appetite? Highly structured and bureaucratic organisations will need to change if they are willing to include failure and higher risk profiles into their innovation appetite. But those changes don’t happen overnight or maybe less ground breaking innovation is better suited. This avenue doesn’t mean failure in innovation, just a more conservative view of its place in the business and evolving as the organisation evolves.
- Executive Sponsorship — Our leaders must back innovation in its successes and failures and provide clear direction on how innovation aligns to the strategic aims of the organisation. But as an executive group there has be an agreement as to its appetite, structure, reporting and its governance within the organisation to ensure the greatest effectiveness and creating efficiency to meeting its goals.
- People — An organisation starting to change its appetite for innovation must assess its current appetite for innovation. Once that baseline is established, then options can be designed to encourage that change. If the appetite is good, then maybe a functional or structural change is best, but if the timeline for cultural change is too long, then maybe acquisition or recruitment options need to be examined.
- Developing opportunities — How does the organisation establish an environment, governance structure and processes for innovation to take the creative ideas and process them into products and services to the market? So, either as a standalone function outside business structures or another stream of business, how do you incorporate innovation processes into the organisation’s way of doing business?
All organisations are doing innovation, it is just that we haven’t fully understood the entirety of the innovation process and how to best lead that momentum.
Innovation has for many years held a major mystic that only certain people or organisations can be innovative or be idea creators, but one goal of this article is to put that myth to sleep. Yes, an organisation must incorporate innovation into their business, but based on the information provided we are already all doing it, it is just that some organisations are doing it with a greater focus and effectiveness than others.
At Protiviti, we are aligned to helping your organisation face the future with confidence, rather than just talking the mantra of innovation and leaving it there. We are here to help you understand innovation and its benefits, but most importantly accompanying you on the journey that helps find the best types and models of innovation for your business that leads to long term success.