Quality and business process reengineering no longer provide the competitive advantage they once did. Competitors are catching up with information technology, and cost cutting is not sustainable. Businesses have therefore been focusing primarily on innovation to create competitive advantage. However, while innovation does deliver business results, senior managers are often not satisfied with their innovation programs.1
Five major innovation killers include:
1. Fuzzy business strategy. A good strategy should be differentiated and help the organization make good decisions and tradeoffs.
2. Unlinked innovation strategy. Functional innovation projects tend to be in separate portfolios. Over time, linkage with business strategy becomes weak.
3. Ineffective innovation processes. Many processes are slow and cumbersome.
4. Unaligned functions. Different functions have their own separate agendas and incentives.
5. Risk-averse culture. Senior managers are more comfortable with incremental improvements.
Many businesses take a piecemeal approach by tackling only one or two of these killers, and are usually disappointed. A new methodology* offers a holistic approach that can help to assess, and then eliminate, these major innovation killers. The methodology helps to develop a differentiated and tightly linked innovation strategy. It provides tools to manage the innovation portfolio and speedily execute projects. It also recommends practices to ensure good alignment and the right culture.
Business and Innovation Strategy
If you band different groups of customers together, you will create solutions that don’t appeal to any of them. A good innovation strategy integrates initiatives that support business strategy, keep foundational technologies strong and healthy, and improve manufacturing processes. Often, these groups of projects are managed separately; this leads to confusion and poor alignment.
It is important to develop a differentiated business strategy by segmenting your customers and identifying unmet needs. Then concentrate your resources by pruning this integrated project list. These activities will help ensure tight linkage with business strategy by periodically rebalancing the portfolio.
Unless you have discovered unspoken market needs, you could be in a race to be the first to market whether you realize it or not. Unfortunately, most project management processes seem to be designed to “not fail” rather than to succeed. Project scoping helps to quickly screen new opportunities. A “fast track” helps accelerate low-resource projects, and only resource-intensive projects are given to senior managers. A simple, logical business-case template gives decision makers the critical information they need. Finally, “stage” deliverables and “gate” reviews are designed for speed, but balanced with diligence.
Organizational design should first be aligned with strategy. This dictates whether you should have a functional or business unit organization, etc. Second, functions need to be aligned―by using cross-functional teams, proper incentive programs, etc. Third, senior managers need to be fully aligned and engaged in setting segment strategy and managing the innovation portfolio.
Importance of Culture
Peter Drucker said, “Culture eats strategy for breakfast.” Lots of companies use disciplined processes, but why are there only a few consistently successful innovators? Recent studies2 indicate that culture is the major factor that differentiates top innovators from the rest. How a company manages risk, reacts to failure, and rewards innovation are all key aspects of culture.
Innovation is the best means to create lasting competitive advantage. However, it is not easy, as evidenced by its high failure rate and the huge volume of books on the subject that are published every year. A systematic, holistic approach will dramatically increase the success rate. ASI
1. Almquist, et al, “Taking the Measure of Your Innovation Performance,” Bain & Co., 2013.
2. Gerald Tillis, “Unrelenting Innovation,” John Wiley & Sons, 2013.