Innovation is a driving force behind any successful business. In fact, it may be the single most crucial factor in determining a business' long-term success: while all other functions can help with efficiency, only by innovating can a firm stay relevant and competitive. Despite its central importance, innovation is often overlooked due to its abstract nature and serendipitous perception. However, there are tangible steps an organisation can take to foster innovation within its walls: let's take a look at some of them.
A prerequisite of innovation is creativity. To create new and relevant solutions, employees need to be able to generate a sufficient number of good ideas to compensate for the small number of innovations that end up being successful. Amabile (1998) considers three elements to creativity: expertise, motivation, and creative thinking skills. Expertise helps discern what ideas are feasible, useful, and novel within a given field. While too much knowledge may inhibit creative thinking, generally speaking, a lack of expertise is usually much worse as the solutions produced are unlikely to be a good fit for the problem at hand. Motivation is vital in getting employees to carry through with their ideas: innovation being ridden with obstacles, a willingness to continue despite failures and setbacks is essential. Finally, creative thinking skills can help overcome automatic thinking and assumptions to allow a new perspective on a problem. This is essential for drawing novel insights and generating unconventional solutions, which are particularly important for radical innovation.
Considering the three elements behind creativity, organisations should seek individuals who have these three attributes. While motivation and expertise are time-consuming and challenging to build, creative thinking skills can be readily developed, through workshops and exercises that encourage non-linear thinking.
A significant challenge for any organisation is managing the innovative ideas that it receives. As we have seen, brainstorming tends to generate many ideas, but few of them are both feasible and a good fit for the company. While encouraging stakeholders – especially employees – to submit ideas is generally desirable, the time needed to sort through a large number of low-quality submissions may not be worth the cost. The number of ideas can be considerably reduced by defining clear problems that need to be tackled and asking for solutions. This approach, however, risks missing out on relevant ideas if they're solving other issues than the one at hand and can generally hurt motivation amongst stakeholders by making their input feel less valued.
Another way to harness creativity from outside the organisation is crowdsourcing. The format works for both specified and unspecified problems. For the former, a design contest can invite consumers to submit an idea to solve a clear problem, often with a reward if the concept is implemented. Businesses can also collect ideas on any issues which consumers hold important: this may lead to a few breakthrough initiatives, but the number of ideas will also be much more significant, posing the same evaluation challenges than internally. Crowdsourcing can be particularly useful for areas in which the business lacks expertise, though it requires an engaged customer base and can create intellectual property and remuneration conflicts.
Thankfully, firms nowadays can rely on online portals for submissions instead of the traditional suggestion box, and idea management software makes sorting easier. Ultimately, however, the evaluation of ideas relies on human judgment, making idea management a labour-intensive process.
The final challenge in the innovation process is developing promising ideas into market-ready products or services. While ideation requires flexibility, development usually benefits from a relatively rigid structure to control costs and manage uncertainty. While the structure depends greatly on the radicalness of the innovation, the stage-gate model is one of the most frequently used and versatile methods for bringing ideas to market. As the name implies, it consists of “stages” where development work happens according to a set of criteria and “gates”, where the concepts are evaluated against their criteria and decisions about the continuation of development made. The diagram below presents a sample stage-gate model; the number and content of each step vary by organisation.
Figure 1 – The stage-gate model
Such gradual processes allow for multi-stage decision making: as the project progresses, uncertainty decreases, meaning that more accurate evaluations about its costs and potential for profit are available. Instead of committing resources fully from the start, the project can be monitored, and, if needed, stopped. Having a clear structure also helps complete projects by setting a time-frame and dedicating resources to its development.
Radical and disruptive innovations
While the processes presented above are highly generalisable, they are best suited for incremental innovation. Radical or disruptive innovations, on the other hand, are often highly uncertain and thus need more freedom to be developed. Radical innovation, by definition, entails a fundamentally new approach to an existing product, or even the creation of a completely new product or service category. Because of its extreme novelty, considerable research and experimentation are needed to ensure the idea’s feasibility. Equally, frequent iterations might be required to take into account new knowledge about the product: flexible models that allow for reworks and smooth transition between stages might be better suited than a rigid stage-gate model.
Disruptive innovation is characterised by its diametrical opposition to the company’s existing product, which – initially at least – often performs worse on traditional attributes. A typical example is the rise of digital cameras compared to film photography: the former was initially more expensive and produced worse-quality images, leading major film camera manufacturers (infamously Kodak) to ignore them. Ultimately, digital cameras turned out to meet consumer needs better, and incumbents who stayed in their markets failed. Because of their fundamental contrast to the company’s business model, disruptive innovations are some of the hardest to notice and develop. Active scrutiny of the competitive environment, with particular attention paid to underperforming innovations, can help spot disruptions.
Innovation is a broad field, and we could only scratch the surface in this post. While we focused on product and service innovations, the area stretches much further, including process and business model innovations. Long gone are the days when innovation was confined to the R&D department: an agile organisation should seek innovative opportunities throughout its functions, and foster cooperation in development. Relentless innovation can set a company apart from its immediate competition and ensure a sustainable competitive advantage in the long run. An effective innovation strategy and its successful implementation are vital in guiding the company in that direction.
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This article was written by SEPEC Consults SAS.
Amabile, T.M. (1998) How to kill creativity, Harvard Business Review (Sept.-Oct.): 88-87.