Lost in Innovation?

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”[1]. 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%[2].

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[3]. 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.[4] 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[5] 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
6. Go-To-Market
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.

Authors’ note

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.

[1] „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.

[2] Tony Ulwick, Two Prere­qui­sites for a Successful Innovation Management Strategy, https://strategyn.com/wp-content/uploads/2013/11/innovation-management-strategy.jpg

[3] https://innovationleaders.org/media/Innovation-Leaders-Book-2008.pdf

[4] See „Succeed at New Product Develo­pment the P&G way”, pp. 9 – 13.

[5] 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