Is your organization ready for innovation?
- Posted on February 12, 2020
- Estimated reading time 4 minutes
Many organizations actively seek to use innovation to beat the competition. But how much you spend on innovation may not be as important as how well you spend your money on that investment, according to research from the MIT Center for Information Systems Research. At Avanade, we’ve seen three factors that often spell the difference between success and failure with an innovation strategy. To maximize your own chances for success with a strategy based on innovation, consider these key components:
Innovation requires governance
Every initiative requires a well-defined and broadly communicated governing framework, and innovation is no exception. Frameworks should surround your enduring innovation program and assist your decision-making regarding investment strategies, staffing decisions, innovation focus, commercialization and more.
Creating your own governing framework should include a few key elements. Organizations should consider where innovation will be internally or externally facing. Are you innovating to satisfy a new or emerging customer need or are you improving internal operations or processes? Regardless of your innovation focus, is there a requirement to demonstrate a return for the investment and/or within a specific period -- for example, a 2X ROI within 18 months. Finally, what artifacts are required to demonstrate how the innovation fits into the company? For product innovation, are prototypes required? Do you need economic models to demonstrate cost take out or revenue improvements?
Your governing framework should be specific. It should include factors that structure innovation, such as a governing body (e.g. innovation council), key roles & responsibilities, and target innovation use cases. It’s crucial that the governing structure reflect the culture and decision processes that work for the company; don’t attempt to surreptitiously inject cultural changes into the process, such as democratized decision-making within a historically command-and-control organization.
Innovation requires an operating model
Thomas Edison said “[o]pportunity is missed by most people because it is dressed in overalls and looks like work.” Innovation represents real and actual work. Incorporating any innovation, whether it’s a new or updated product or a material change to operations, requires effort and resources. As a result, companies that want to implement an innovation program should carefully consider developing an operating model. In other words, define an appropriate organizational structure (aka innovation team) and operations charter.
The team represents the people and the charter represents how those people operate within the organization. The operating model makes innovation meaningful and impactful. It will reinforce the reality that innovation is an intentional endeavor by clearly defining roles and responsibilities. It also should incorporate what happens when innovation is realized.
The operating model effectively defines how those new processes or products are incorporated into the firm. This is a critical factor in successfully introducing an innovation program – making innovation real. Think of it like this: the operating model is to the tactical implementation as the governance framework is to the strategic definition. For more on creating a foundational innovation operating model, check out this excellent primer by my colleague Julian Tomison.
Innovation needs to be measured
Once your organization establishes an innovation governing and operating model, it’s critical that you measure its success. Most organizations will include some measurements in either their governing framework or operating model, including factors like business cost takeout, new product sales, and process improvement (measured by effort reduction or steps removed). These measures are also usually tied to a business case or justification for developing an innovation program.
However, metrics established to evaluate broad progress may not be sufficient. Many core metrics, like cost takeout, are generally related to the business case that launched the program. These kinds of measures are important, though there are other factors that could be just as compelling and potentially more insightful. For example, Avanade has developed a proprietary research method called Project X, which uses internal and external data sources combined with machine learning models to produce both Customer Experience and Employee Experience indices. Along with influencing factors (those conditions that positively or negatively adjust each index), we can use Project X to measure the impact of an innovation program. Further, the impact is economically quantifiable.
Tying all together
It’s likely difficult to find company executives that exclude innovation from their strategies. However, many organizations ignore or simply neglect key success principles to support those strategies. Many executives pursue innovation agendas without a clear vision, a practical operating model, and/or governance framework. Unfortunately, an undisciplined approach rarely yields success.
Avanade has built both a culture and a targeted innovation organization to help our clients succeed. We offer support through innovation offerings and accelerators to help companies realize innovation benefits.
Not sure how to start with your own effort to boost your success with innovation? Here are some resources to help: