Organizations are struggling to forge a new path in innovation function and design that captures opportunities fast and also exploits the increasing need of being adaptive and flexible.

Organizations are looking at structures for their innovation activity that are taking a more agile and focused approach, wanting to push for constantly accelerating the process. New practices are emerging.

This is demanding more radical redesigns of the function, processes and structures around innovation. Innovators are being more challenged.

Against this need for new, more radical designs there still lies that underlying concern, often at the top of our organizations, on how to manage innovation risk without significant organisational disruption.

There is this lingering fear that pushing for more radical innovation can create significant upheaval within the organization. Innovation is being challenged by the view of “we want predictable innovation but radical enough to make sure we grow.”

Innovation has to manage within this conflicting message. It is through the well-designed system, processes and function that this can happen but this needs redesigning fairly radically to adjust to today’s world of wanting innovation faster than ever.

This is the sixth post centred on the executive innovation work mat

Within this post I focus upon the function, design, structure and processes needed for successful and sustaining innovation within organizations. In a recent series of articles I have looked at the seven components to raise questions, to probe and prompt the necessary thinking that needs to be made in organizations around building innovation that sustains and delivers to the strategic need.

The lexicon of today’s existing management of innovation needs rebuilding.
You can read an incredible variety of advice on designing the innovation process.

These can include managing through idea management system software to reverting to simple ‘pen and paper’ brainstorming environments and spreadsheets.

Simply having in place some structured processes is essential to managing innovation. These can become very complex that go from idea all the way to final execution.

Then we get into the approaches to designing a portfolio to balance your innovation activity, the use of stage-gates to manage this, the whole product life-cycle process, the need for robust pipelines and well-designed platforms all enter the lexicon of managing innovation. It has become part of the lexicon of the innovator but not yet the common language we speak of, that a whole organization can talk and gather around.

Many of these systems we have become comfortable with, by working with them every day but I believe there is the need of some radical challenging and redesign needing to take place around these. Much within the innovation system needs designing out.

We need to rebuild a new common language surrounding innovation that is broader and more inclusive to all within our organizations. We need to recognize the changes taking place in competition, the need for a sense of urgency for growth and a ‘breaking out’ of the incremental mindset, that is still prevailing in many organizations.

There is a new chase for growth and even more through purposeful design.

This end choice is not which system or process has the best functions, the sexiest piece of software or the coolest design for its platform.

The choice is about going back and asking the basic of basic questions to the organizations top leadership: “what do you want innovation to achieve?”
You will get the simple answer: “growth” and also “innovation delivery needs to speed up in new products and services”.

You will also get “we need to outperform or at least keep us competitive in the market place” and then perhaps “innovation is expected to deliver what the market wants”.

These statements are all helpful but quite simply not enough. To deliver on innovations ‘promise’ you need to go deeper. Besides having a clearer strategic vision, for innovation, there needs this greater alignment to the strategic aspirations. For that, innovation needs explicit links and all of these points back to the strategic needs, goals and visions. The innovation work mat aids this exploration.

Achieving a well-designed design, function, structure and process is utterly dependent on the organization to translate the innovation needs and aims, define the workflow that ‘this will follow and how and where this will take place. Then it needs fully supporting and resourcing.

Today we need to think innovation outcomes differently.

The higher demand from innovation requires the system to respond far quicker to breaking opportunities.
Innovation needs to have a system that is constantly adaptive and flexible. Most of the rigidity needs to be designed out.

Organizations are requiring structures and processes that are far more agile, nimble, constantly recognizing speed as the essence of today’s competitive worlds.

The challenges that need to be addressed are replacing a linear system with a spiral one, where you constantly loop back to refit your innovation understanding back into the idea-to-launch system from the new knowledge you are gaining.

The system needs resetting around shorter bursts of high intense activity that factor in risk-based contingency, are encouraged to keep exploring and adapting.

The criteria to measure innovation passing through development, needs to become more open-ended. This can allow greater discovery periods to go where it is needed and not what the system is forcing it squeeze through a gate. The ‘go/kill’ criteria needs to change.

The system becomes a learning process to reduce uncertainty but keeps advancing on improving insights and physical demonstration that what is being investigated. This is through constant prototyping exploring and meeting customer or market needs with these stakeholders involved. As innovation discovery advances, the outcomes become more tangible, risks reduce.

We need to reduce where Innovation often sits waiting.

We need to challenge the constant waiting within the development processes for innovation.

This can be achieved through better designed systems of management perhaps a more value-stream analysis, accelerating by overlapping stages, encouraging concurrent activities, ensuring dedicated teams are assigned to properly resource projects.

We need to challenge and reduce the built-in slack within the innovation development system, wherever we can.

Today the emphasis is to maximize speed, working really hard on scoping the front end in greater detail really helps, and asking key questions on where the right track is and what this needs in resource, time and development and committing dedicated teams to the tasks.

We need to find better ways to incorporate lean principles, even six sigma into reducing the non-added value out of our innovation system. We need to provide succinct deliverable packages that tell the ‘advancement’ and learning story as the innovation concept moves along its development path.

Changing the milestone dependencies by using canvas techniques has exciting potential
We need to reduce the dependencies on financial milestones and make these more physical, with constantly evolving and functioning prototypes that demonstrate new value, so stakeholders can understand and provide even greater inputs on ‘seeing’ new value creation.

The principles that are being built up around the Business Model canvas within our business organizations offers much to be re-evaluated within our development life-cycle.

The introduction of new thinking such as the value of starting with a complete blank canvas or allowing the radical reworking of existing canvases of innovation concepts can offer new concepts to begin to be tested and evolve for products, and services as well as new business propositions.

The physical activities of testing, validating, and clarifying a more integrated design across all the parts do allow for exploring the uncertainties and risks in potentially imaginative ways. Taking a different design thinking to the development process can challenge old assumptions and processes.

We can constantly determine the critical but evolving assumptions and then work at delivering updates that can advance the development process through a dashboard approach of informing when critical assumptions or learning change.

We can take a more imaginative approach to the business model canvas to adopt many of its emerging tools and methods but this calls for a completely different mind-set in larger organizations in my opinion to their whole development process.

We are in real need to reinvigorate our innovation systems.

As I have stated in past posts, our legacy systems are holding us back today. We need to challenge our innovation functions, our existing design of the structure and processes to bring innovation into the core design of the organization, to align its value to present business conditions, where growth is required.

These do need to be more agile, adaptive and accelerated to meet the challenges and uncertainties organizations are facing. Innovation needs to step up to the plate and respond differently than in the past.

Innovation must be applied as a must to rethink and challenge what we have

Our processes and structures to manage innovation have become too linear, too rigid and far too planned, grinding through the innovation system.

Rethinking our innovation in function and designs calls for a more integrated approach offered in the Executive Innovation Work Mat.

Each of the seven components needs carefully designed to bring innovation far more into the core design of the organization and fully understood by all.

The post Are you evolving the innovation function and design first appeared on Building Your Innovation & Ecosystem Intelligence.

It is always pleasing to sometimes be on the same track as the Big Consultants, for working on and moving beyond the trends they are spotting and highlighting, into some clear tangible solutions, to help resolve these. Recently McKinsey Quarterly conducted an on-line survey of just under 3,000 executives on issues surrounding innovation.

The report is entitled “Making innovation structures work”- see the link below. They confirm much that I have seen or gained through my research and point very specifically to the key difficulties organizations are presently having around innovation.
This report feeds directly into the solution work I’m undertaking
The results feed directly into the work I have been undertaking on the leadership gap and the suggested framework of the integrated executive innovation work mat that has been discussed in considerable details in the past few weeks.

These have been on this blog site of mine, as well as ovo innovation’s  my collaborating partners, and also on  innovation excellence’s web site, where we had a whole week of featured articles, discussing the work mat component parts, or as we entitled it, the essential seven domains of innovation that make up this work mat.

So what stands out in the McKinsey report?

The innovation structure is evolving; organizations rely on exploring various organizational models to ‘house’ and execute innovation. They work with multiple structural models to drive innovation efforts and often have separate innovation functions, located in multiple locations. It seems there has been an insurgence of structures in the last three years that are currently being worked through.

 Presently there is no uniformed view on innovation organizational design

According to the report, the innovation’s function has shifted in the functions location, in its financing and ownership and increasingly reporting into a C-Level, or even directly into the CEO.

The designs involved include innovation centres, a dedicated new-business development function, emerging business opportunities and technologies groups (often separate) and having advanced technologies institutes as part of the mix.

It still seems where it ‘sits’ partly depends on the time the innovation function was set up. The older structures, set up more than ten years ago 46% of those surveyed report that innovation “sits” at corporate headquarters compared with 65% at the organizations with younger functions. Younger functions also focus more on profit but presently have fewer market successes as they have had less time.

What is the innovation they are working upon?

These are with functional focus on identifying new business opportunities, such as blue-sky innovation and developing potentially disruptive technologies and those report directly into the CEO at around 44% of the functions at present. That maybe the wrong side of the 50% mark I’d like but we seem to be making progress of linking innovation directly to the leadership of our organizations, or are we? Read on.

The factors of success

This is the area of most interest to me. Although it is prefaced by a matter of maturity (whatever that means) there is a ongoing debate on how separate or aligned with corporate strategy an organizations approach to innovation should be.

To quote from the report “What is affirmed that strategy (particularly one that is focused, clearly articulated and integrated) is key to successful outcomes. At companies where innovation is fully integrated into strategy, executives are SIX times as likely as those without an integrated strategy to say their separate functions meet their financial objectives effectively, actually very effectively or extremely effectively”

Equally where there is a successful integration there is a sharing of the organizational elements across the portfolio. This includes sharing strategic priorities and focus, knowledge and insights, research insights and analysis, leadership teams and approach to governance with lastly a good talent flow and exchange.

The challenge for innovation is still around strategy though

Only one-third of the executives report innovation is fully integrated in corporate-level strategies,  and nearly half say integrating the separate function’s strategic objectives with those of their core businesses is one of their functions most significant challenges.

Those that achieve effective outcomes have clear leadership support

Fifty-six per cent of all the executives surveyed identify C-level and leadership support as a driver of success (second only to strategic focus). There is a more than interesting effective outcome split within the report (exhibit 4) that the level of interact frequency with the C-level team makes a real difference.

Surprisingly but fitting with my own observations and research, is the frequency of interactions between the separate innovation functions and C-level leadership. From this report those deemed as “very frequent” is only at 40%.

Can you image the wealth creation, new growth potential that innovation provides yet C-level engagement is only at 40% for very or extremely frequent in discussions? So is innovation that important to the C-level really?  Something is wrong here, badly wrong.  “Somewhat frequently” comes in at 17% and “rarely or not at all” is 22%.

This is the leadership gap we have suggested needs addressing, urgently. Clearly innovation “sounds good, a good sound bite” but is not top of mind for C-level as they would like us to believe, it seems.

Then McKinsey outlines the involvement with separate innovation functions at the C-level as actively involved in the innovation process, from idea generation to commercialization, is only 38%. Those involved in the evaluation and feedback on major innovation decisions, about strategic decisions and priorities of investment makes up another 35%, yet only 26% serve on an innovation council or committee and 14% report that their leadership is not involved with innovation functions at all.

So we are still badly lacking that deep C-level engagement, although the line into them is improving. The need is to get the C-level strategically engaged at least and convince them to provide the innovation framework for others we are proposing, so they do become fully involved and those responsible to work within innovation can conduct their work through the framework we are suggesting to strengthen the C-level engagement and cohesiveness of strategy with innovation activity.

Divergence and philosophical tension in innovation

So the McKinsey report is more than helpful (and timely) on providing a snapshot of practices, successes and challenges but they do suggest there is a divergence and reflection on the struggle and philosophical tensions surrounding innovation. For instance, equal shares of those surveyed, state their function exist to turn a profit, or have no financial targets at all.

Equally there are large splits on measuring individual performance with only 30% having the same performance metrics as the rest of the organization, while 32% have innovation-specific metrics and some (23%) seem to straddle the middle of the two. The lack of leaning to one form of measurement or the other needs resolution or is it evenly split due to the nature of the innovation activity the function is working upon?

The one aspect within the report I find really shocks and disappoints me

The concern lies in the number of dedicated employees on innovation, 35% of executives (out of 2,927) have ten or fewer full-time equivalents working within their function and 30% saying at least 51 full-time equivalents dedicated and working on innovation.

That is staggering low in my opinion for the area that is reportedly consistently within the top three priorities of the CEO. No wonder we have the slow innovation cycles, the poor success rates and the lack-lustre performances from innovation if these are the dedicated numbers working on innovation.

This is appalling. I just wonder how many efficiency and effectiveness people are employed across some sizeable organizations yet innovation seems grossly undeserved by these results. Putting your future into too few hands, to work on breakthroughs, those new disruptive areas means you must be forced to end up with incremental innovation for maintaining performance, and we all are seeing that clearly emerging time and time again, from most organizations not balancing their innovation activity in a well- structured and thoughtful way.

Risk, poor incentive, under-resourcing innovation and fear still dominate. When will stakeholders start asking more direct innovation questions to the boards of organizations?

The last part of the report deals with the difficulties aligning innovation.

The significant challenges in meeting strategic objectives are hampered by a range of difficulties, the highest as a % of respondents was 53% on the competition coming with short-term priorities from other parts of the business, 42% for difficulties in integrating functions strategic objective with those of the core business, 29% in difficulties in defining the functions business case or value proposition to company leaders, with 19% seeing the challenge of being separated from the rest of the company.

The conclusions  drawn from the report.

The report concludes many of these issues are cross-cutting and perennial challenges not just for innovation but for the organizations as a whole.
It reaffirms the absolute need for strategy to precede structure when organizations decide to create new innovation functions and the enabling effect an engaged C-level support brings in driving innovation success. Also it suggests that a real care to tailor the function to existing organization objectives and culture are important.

The report recommends the following:
1)      Organizations should not rely on a single innovation function, it must integrate with the entire organization
2)      There must be first a well-established and clear strategic focus
3)      A clear garnering-in from top management
4)      That C-level support is a key factor for innovation success
5)      The measures should focus more on the performance and success on the functions role in the innovation value chain, not necessarily financial targets as these can be an unreliable measure or guarantee of success.

This report is timely

After the last few weeks in laying out the business case for having an integrated framework for innovation through our executive innovation work mat, this McKinsey report reinforces that we are on the right track.

I feel even more confident that this framework we offer to bridge the innovation leadership gap can make a solid, maybe significant, contribution to reducing some of the issues and challenges that have been raised within this McKinsey report.

The McKinsey report can be found through this link.

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