How to audit your business culture to target flexibilities.
By Christopher W. Miller, Ph.D. & Gary C. Graziano, AIA
Successful innovation is elusive and rare. It challenges both big and small companies alike.
Statistics show why successful innovation is so elusive. Historically, it takes an incredible amount of hope, faith, time, and energy — plus about 3,000 ideas to generate a dozen projects that result in a few launches and eventually, a single market success. New products are risky. And even successful innovation can sting, because new products, like bumblebees, are notorious for flying lower to the ground in terms of profit than their bigger-winged relatives.
So, if pursuing innovation seems like trying to fly with too small wings — innovation can’t be for you — or any other rational being, right? Maybe not. Innovation is an organizational bumblebee. And, like the intrepid insect, when studied rationally, it shouldn’t fly. Yet, against all odds, it does!
Although natural science hasn’t figured out how bumblebees fly, business science has discovered how to help even ordinary companies take flight and innovate successfully.
Today, nearly one-third of the workforce belongs to the “creative class” of scientists, engineers, designers, and other innovators — while new product innovations comprise 50% of the sales and 40% of the profits of America’s most admired companies. Yet, only a few short years ago, back in ’94, before the Internet revolution, new products represented only 33% and 22% of sales and profits, respectively.
Even more incredibly, over the next five years, America’s most admired companies expect to increase their rate of innovation by 21%. Now, flash back to 1958 when we were a three channel world; private telephones were a rarity and the creative class was much smaller. A that time, a scant 15% of sales among best-in-class companies came from products introduced in the preceding five years.
As a further example of how central innovation is to business success, the Journal of Product and Innovation Management, launched only 22 years ago, has grown to be the eighth most cited academic business journal. Clearly, the most admired companies are managing innovation to win — consistently. They’ve learned to manage the generation of 3,000 ideas to yield a single market success. They’ve learned that organizational efficiency is critical, but that no organization can continuously cost-reduce its way to success. They’ve learned that focus is important. And, they have learned that bumblebees can fly.
Now, you can manage innovation — just as many of the most admired companies do — by taking these three simple steps:
- Determine that you want to be an innovation leader in something.
- Diagnose your company, your competitors and your market; decide what kind of innovation the market will support, what kind of leader you want to be — and can be.
- Charter and support an innovation team.
No company has to be the innovation leader at everything. In fact, a singular innovation focus is critical to success. Studies show that you can succeed if you are at parity with your competition on most things and are the innovation leader in just one area. In touring bikes, for example, BMW is widely regarded as the technology leader, yet Harley leads in providing the intangible customer experience. Both are well-admired. And, both are successful.
To select your innovation focus you can use The Vitality Assessment Inventory™ (VAI). The VAI outlines eight generally accepted ways to be the innovation leader in your industry or market niche. Take the short version that follows to see how you rate and to identify where you might focus, or increase your focus. (Hint: unless you are a conglomerate, you should not lead in all eight areas, one or two is very good.)
Let’s see how you did. If you’re like most people, you’re pretty tough on yourself. The good news is that your opinion doesn’t matter. What matters is what your customers think. Are they looking for you to demonstrate innovation leadership? Probably. Chances are they already see some of this in you and that‘s why they chose to be your customer.
If you want to get serious about innovation, use the VAI to select a product area where you want to lead — and can make money. For instance, you can focus on an area that will help you serve existing customers better, or an area that will help you attract the kind of new customers that you want. Then, when you’ve identified your leadership area, you can create a focused innovation team to take on the product leadership challenge. This is a very important step.
Your company leadership is responsible for determining the direction of innovation and expressing it to the team in the form of an innovation charter. A charter describes what the challenge is, what success looks like, when it should be achieved, and why it’s important to the company. It also sets guidelines for the resources the team can access: time, expertise, spare capacity, money, and top leadership champions.
Top leadership champions are essential for successful innovation. Leaders of companies seeking innovation must be great coaches, eager to provide direction, encouragement, advice, and cover for the low flying bumblebee.
So, is innovation right for you? If you have an innovation focus, are at parity with your industry’s standards on seven out of eight areas in the VAI, and are willing to charter an innovation team and support it from the top, then the answers is YES! If you’re not at parity in one or more areas on the VAI, then mobilize your innovation team to bring your scores in line with your competitors. Then, if you focus on innovation, you will fly.
