David leads our Client Innovation team globally. He has more than 20 years experience helping clients bring to market new products, services and business models.
Cost cutting and efficiency have preoccupied UK bosses in recent years but attention is now turning to the future. Our survey of over 1000 CEOs worldwide finds around half (48%) UK bosses in the UK believe product and service innovation is the best way to grow their business over the next 12 months, ‘ahead of increasing share of existing markets’ and ‘mergers and acquisitions’. This is a big jump from last year and represents a significant change of mind set.
Encouraging as this may be for growth orientated business people, the management teams I’ve spoken to recently about this (and we’re seeing a sharp increase in these discussions) freely admit their businesses are not best set up to bring new ideas rapidly to market and want to know how to address this. Here are a few pointers.
First of all, any organisation needs a strategy to innovate successfully. It’s important to say the innovation strategy is not the same as the business strategy. The business strategy defines markets, products, revenues, profits etc, while an innovation focuses on the how the company will develop or acquire the new products, services and offerings it needs to deliver future revenues and profits.
A constructive starting point is identify the kinds of the things - drugs, devices, specific services - that will lead to profit in the future, then work out how to get there. There are different routes: research and development investment being one. Ventures with third parties, consumers or parts of the supply chain are another way. Acquisition of the skills and talents needed is a third option. Companies may choose to stimulate internal innovation through staff ideas jams, new business units and incubators, then work out how they are going to create new revenues from these.
If it sounds straightforward, it’s not. Companies of all shapes and sizes struggle with the dual task of taking care of business today while preparing for the challenges of tomorrow. Here are some popular miscalculations that can lead to everything from frustration to corporate oblivion.
Driving blindly down the same track is the most obvious mistake. Corporate history is littered with examples of business strategies that have killed previously successful companies by doing more of the same, when they needed to do something substantially different.
Another folly is when companies bring in new ideas (often from staff and other stakeholders) but don’t have the ability to bring them to scale to monetise them. The majority of innovation in the world is stuck at this point. These companies have misunderstood something very important: the object of innovation is not ideas themselves, but profitable businesses.
Of course, there are companies that are particularly good at innovation and have fully industrialised what is a difficult and complex process. Look at IBM’s emerging business unit which has consistently created significant new value. Or Cisco and Microsoft, whose commitment to innovation extends to creating whole innovation parks and infrastructure for third parties, so they can back or acquire the new ideas they need for their own futures. Clearly, not all companies need to go as far as an innovation park. But any company seeking to focus on growth needs to remember it’s the corporate infrastructure around ideas, not the ideas themselves, that makes them a reality.