Building Innovation Excellence
Innovation is like a jungle full of opportunities and promising market places but also of risks, complexity and highly agile predators. No wonder, many companies struggle to navigate this universe towards innovation success and sustainable future growth. In the following, the authors want to give an outline of a best practice-based ‘Innovation Architecture’ as an adaptable framework for an agile management of innovation. By Karl-Michael Schumann and Michael Riedemann.
Can we thrive in the jungle?
The approach described in this article is designed as an agile and flexible innovation management reference framework to provide orientation by identifying the positions and distinguishing the specific characters of ten different innovation elements as well as their relationships to each other. This “Innovation Architecture” should help you navigate innovation complexity, boost innovation productivity, and create real added value for you and your customers.
A.G. Lafley, former Chairman and Chief Executive of Procter & Gamble, has pointed out more than a decade ago: “Innovation is a prerequisite for sustainable growth. No other path to profitable growth can be sustained over time. Without continual innovation, markets stagnate, products become commodities, and margins shrink”. Today, and given the ever-accelerating developments driven by digitization and transformative change, it has almost become a commonplace that companies and organizations need to develop the capability to innovate permanently and predictably if they want to stay ahead of their competition, or even just survive in the future.
On one hand, many companies report difficulties in turning innovation investments into the expected return value. And, many of them deal with rather challenging periods of time-to-value. Success rates of innovation efforts for improving existing offerings are claimed to be just over 50%, and for creating new offerings on average even less than 5%.
On the other hand, it has long been known that the exceptional performance of innovation leaders in continually developing and profitable selling new offerings is no accident. It is the result of a disciplined, systematic approach based on current best and newly developed practices. At the root of innovation leaders’ success is, among others, an integrative and guiding framework to help focus on vital success factors. These are, for example, a well-founded innovation strategy, a solid idea-to-launch process, a highly focused portfolio management, and an agile, innovation-friendly cultural climate. Innovation success, as it seems, doesn’t happen by a “stroke of genius”. It is rather based on an elaborate, systematic and integrated innovation approach.
With that said, the difficulties in innovating continually and successfully seem to root in a lack of conceptual guidance, focused strategic approaches, and agile processes. We often observe enterprises using arbitrary, disconnected innovation processes and methods. Many of them deploy multiple, non-synergistic approaches of mastering the – perceived ‘fuzzy’ – Front-End of Innovation with ideation, idea incubation, selection, and execution. Furthermore, we see various incomplete or overly complex forms of stages and gates for managing the development of physical products or service offerings. Very few of those organizations use some forms of portfolio and road map management — quite often simply derived from innovation software tools.
In this context, questions arise such as: Is there a more general framework suitable for developing new business models, processes, and products in tomorrow’s digital world? Is there any approach going far beyond the task of developing new b2c or b2b products in yesterday’s analogue world? What would be the key elements of such a framework?
Meeting the unmet
Innovation processes are highly complex having high risks and uncertain outcomes. Global management surveys show the difficulties of companies to identify the true unmet needs of their customers, bridge innovation gaps and gain ROI from investment in innovative business models, products and technologies. Here, a systematic and holistic approach can turn out to be priceless, helping us develop and implement an agile and coherent Innovation Architecture. Order is no enemy of innovation and agility if the system consists of adaptable, well-matched modules, sub-modules, methods and tools that help to manage the most important aspects of innovation in an integrated way.
The modular architectural approach drives innovation based on business and corporate strategies. It is designed to further improve an enterprise’s existing innovation capabilities and strengths as well as to address existing innovation gaps and weaknesses. Due to its agility, adaptability and responsiveness to change, it allows commutative and iterative ways of operation. Organizations can focus resources on paramount and most pressing innovation issues and tasks at hand.
Experience often confirms that well organized, comprehensive, systematic innovation frameworks form strong backbones of agile organizations. They enable organizations to reliably adapt to changes, and significantly innovate on a permanent basis with a high rate of success.
Now let’s have a closer look at our proven and best practice-based Innovation Architecture. In general, it consist of ten modular key elements which are divided in three main categories:
|I “Strategic Decisions”||1. Innovation Strategy
2. Strategic Innovation Capabilities
3. Strategic Portfolios & Roadmaps
|II “Operational Processes”||4. Front-End of Innovation
5. Back-End of Innovation
7. Customer Integration
|III “Foundational Elements”||8. Innovation Culture
9. Organizational Structure
10. Individual Innovation Skills
The seven Elements of the first two categories – “Strategic Decisions” and “Operational Processes” – operate in concert like well-tuned clockworks. The three elements of the third category “Foundational Elements” are required “basics” to enable enterprises to run the seven-elements clockwork above in an effective and efficient manner.
Here, it is important to distinguish these ten elements carefully. Each one of them provides specific deliverables and is managed by a specific set of methods and tools. However, these ten key elements do not operate as isolated silos. On the contrary, all of them continually correspond with each other, providing mutual input and capitalizing on each other’s output. It is also important to understand, that the ten elements do not operate bureaucratically in a specific consecutive order. They typically work continuously in parallel, although with different degrees of intensity – depending on the innovation needs and capabilities of the enterprise at a given point in time.
On top of that, each one of these ten modular elements comprises a number of separate, integrated sub-modules. Together, these modules and sub-modules help to systematically manage innovation continually from end-to-end, as well as to facilitate agile leadership control, operational certainty, and organizational capability.
Reaping the fruits
Once implemented in companies or organizations, the framework of the Innovation Architecture shows immediate benefits for top leaders charged with managing innovation. In general, there are three major benefits:
First: Enhanced Agile Leadership Control
Many Executives for the first time get access to an integrated framework for effectively navigating and steering a multiplicity of business, product, service, and technology innovation initiatives. Our approach enables them to much better transform or advance their organizations’ innovation culture and behavior, based on a unified understanding of what is needed and desired. The framework provides them with a synergistic set of structures, processes, methodologies and tools that help them address innovation objectives and goals, and execute their innovation strategies and measures in an agile, and highly effective manner.
Second: Increased Operational Certainty
The core principles, concepts and procedures of the Innovation Architecture will foster organizational alignment. Such a common innovation framework and language throughout the enterprise will help eliminate or reduce friction and inefficiencies caused by multiple interpretations of goals and strategies. The framework provides guidance through signposts that make it easier for managers to set or change direction as needed during the course of innovation initiatives.
Third: Improved Organizational Capability
Every strategically relevant innovation portfolio and roadmap insight that results from the application of our Innovation Architecture will boost the enterprise’s innovation quality and deliver faster and more profitable growth. It will also help engage all business functions (beyond marketing, technology and product development) in the enterprise’s innovation activities, and provide stronger support to individuals who lead innovation initiatives.
“Make us more innovative!” – Proven track records
Can we prove what we say? Here is an example of how the Innovation Architecture presented here was used as a starting point for an enterprise-specific integrated innovation management system. From the very beginning, this activity was designed to help one of the authors’ client to overcome innovation barriers and expand their organizational capability. In this case, the New Business Development plans of a global supplier of key components to the FMCG (Fast Moving Consumer Goods) industry had suffered from misalignments and lack of collaboration between regions and functions after a series of acquisitions. Furthermore, the organization had figured out its Portfolio Management as well as its Back-End Innovation processes did not work effectively, leading to budget and resources inefficiencies. The task was now to enable them to move these critical business processes to a higher level of effectiveness on a global scale, as well as to further strengthen their competitive advantages and grow sales.
To achieve these goals, we worked with the company to first understand existing barriers to effective collaboration and innovation management. Once these were understood, we designed a 24-month development and implementation plan for a custom-made management approach, based on our integrated “Innovation Architecture”. It contained a …
- … new Innovation Strategy applying the OGSM principles (Objectives, Goals, Strategies and Measures)
- … novel framework for strategic and tactical Portfolio and Roadmap Management
- … Back-End and Technical Capability Development approaches. The specific choices here were highly efficient Stage-and-Gate and Fast-Track decision processes with strategic project kill-rates
- … new Front-End of Innovation (FEI) program to feed the Back-End with concepts of new offerings and with the related Project Charters.
All these choices were specific to the innovation needs and capabilities of the company. In other cases we might have designed more start-up-like processes, were Front-End, Back-End, and Go-to-Market processes are more tightly integrated.
As the program advanced, we delivered detailed templates for the key innovation system modules the client had chosen to implement. Only after 12 months of implementation, sales was growing twice as fast as the market, with doubled cash flow from operations.
This article should only provide a first introduction into how companies and organizations can overcome barriers to innovation by using a well-wrought and proven framework to enable sustainable future growth. Given the complexity of the matter and issues involved, it aims only to trigger further coöperation and discourse. For everyone interested in more details on this matter, the future_bizz network’s management team will provide a series of articles on each of these modules and sub-modules on the future_bizz web platform. The publications will give insights into how these key elements and aspects like a highly agile FEI work together creating value for companies and organizations. In the meantime, the authors look forward to receiving your feedback on the approach presented here. We would also be happy to discuss these issues with you in person. Please free to contact us any time at future_bizz.
 „Succeed at New Product Development the P&G way: A key element is using the „Innovation Diamond“, in: PDMA Visions, VOL. XXIX NO. 4, page 12.
 Tony Ulwick, Two Prerequisites for a Successful Innovation Management Strategy, https://strategyn.com/wp-content/uploads/2013/11/innovation-management-strategy.jpg
 See „Succeed at New Product Development the P&G way”, pp. 9 – 13.
 See e.g. Innovation and commercialization, 2010: McKinsey Global Survey results: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/innovation-and-commercialization-2010-mckinsey-global-survey-results