Most of us want to be rich, thin, and beautiful. And most of us want to work for an innovative company. The problem is, most of us don’t. We work for companies that plod along, intermittently launching new products and services that aren’t particularly exciting, while one or two companies in our industry seem to be blazing the trail and having all the fun. Some people at those companies are also probably getting rich.
At ThirdSlice, our team has seen companies that fall everywhere on the innovation spectrum. And the good news is that the decision to be innovative is a choice, or more accurately the result of a number of choices. Maybe we all can’t be rich or beautiful (thin…well, probably if we really tried), but every company can be innovative if it chooses to be and plenty of companies have made the leap from laggard to leader. The problem that many companies face, however, is that they really don’t know where to begin their journey to innovation greatness, nor do they know very much about the path they should follow. Having helped companies at every stage of this journey with customer-driven research to support innovation initiatives, we have identified seven major activities that are fundamental to becoming an innovation leader.
Conduct An Innovation Audit – Begin by taking stock of your company’s actual innovation performance. The critical piece of data you need is the percentage of annual revenue coming from products launched within a defined timeframe, usually the last one to two years. There’s lots of other data that can be measured including profitability of new products / services, new product failure rate, time to develop a new product or service, patents obtained, spending on R&D as a percentage of new product revenues, and more. The goal is to develop a dataset that can be used to set a baseline, set goals, and measure progress. You’ll only know if you’ve improved if you know where you began.
Reassess The Risk of Innovation – We use the term reassess because many companies choose not to be particularly innovative , in part, because they have big misperceptions about the associated risks and have not really defined their appetite for risk. Of course there is risk in developing new products in the form of spending to develop products that do not succeed in the marketplace, damage to customers if new products perform poorly, and hits to morale when new products fail. (Note that there’s also significant risk in not innovating; eventually you will go out of business if you fall far enough behind your industry no matter how mature and slow moving it is). But when innovation is carefully managed – particularly through unwavering attention to customer needs – the risk of failure is greatly reduced. Pithy and daunting statements about 80% of all new products failing are suspect, and certainly not reflective of the success rate of products developed using today’s best practices in innovation management. Ultimately, innovation may be much less risky than senior management believes it to be, and the move to a more innovative seldom requiers that a conservative company suddenly become willing to bet the farm.
Define Your Hunting Grounds – If you ask a random person on the street for an idea, you’ve very unlikely to get anything back that would actually be useful to you. The same is true for innovation; you need to focus your innovation efforts in areas that you think are most likely to yield meaningful results. Defining these areas is a large and important undertaking that will take into account the competitive landscape, company capabilities, overall strategy, market outlook, and other factors. Once defined, your hunting grounds will frame all of your subsequent innovation efforts. Experience shows that innovation strategies with well defined boundaries are more successful than spray-and-pray efforts directed at a broad and amorphous landscape.
Get Serious About Ideation – Ideas are the fuel for innovation. No matter how good your company may be at every other aspect of new product development, if it doesn’t generate good ideas – and a lot of them – it’s not going to be particularly innovative. The universe of methods for generating ideas for new offerings is considerable, and idea generation should be an ongoing area of excellence within your innovation process. If you’re not doing extraordinary things to generate ideas you’re unlikely to generate ideas that are extraordinary. ThirdSlice is expert at helping companies with ideation, and our team has seen companies try every flavor of idea generation method on their own, including no methods at all. We’ll write a lot more about ideation in future posts, but suffice it to say that innovative companies are great at generating and managing ideas.
Think Beyond Products – New products can be extremely sexy and represent an obvious place to direct your innovation efforts. But innovation in many other parts of your business may be as or more beneficial, and the downside risk may be smaller. For example, innovations in the areas of service and support, product financing, distribution, upgrades, and pricing models can be fruitful areas for innovation that leave the core product unchanged, require little or no R&D investment, and can easily be piloted and/or reversed if they prove unsuccessful.
Put Someone In Charge – If you want to get serious about innovation, you need someone thinking about it 24×7. Making innovation part of the charter of someone in engineering, product management, or marketing, will never yield the same results as installing an innovation leader. Those people already have full time jobs, and likely do not have the specific expertise needed to bring innovation excellence into your company. Your innovation leader also needs real authority – in particular authority to manage the portfolio of projects – and a budget that is sufficient to support the use of innovation best practices. Among the uses of this budget are a staff to prosecute the innovation process you implement and to conduct a variety of types of research to thoroughly develop concepts based on actual customer feedback before product development begins.
Implement A Customer-Centric Innovation Process – And follow it. Once upon a time (and at this point, quite a long time ago) innovation was the domain of whacky free-thinkers stationed in offices in a basement somewhere, who worked on whatever they wanted, and came upstairs to use the bathroom. Today, every company that is serious about innovation needs a carefully implemented innovation process – and in many cases, multiple processes – that guides how all innovation happens and that includes active involvement of a wide variety of stakeholders. Whether based upon Stage-Gate, Agile development, Lean methods and/or a proprietary approach, innovation happens best when it is a) process driven, and b) customer centric. Customer centric innovation processes explicitly acknowledge that the only way to be assured that you are developing products that customers will buy is to solicit their feedback early and often throughout the development process. As with ideation, obtaining customer feedback for clients to guide their product development efforts is ThirdSlice’s core area of expertise, and will be the subject of many future posts.
Choosing to be innovative by following the seven steps above is something every company should consider, particularly those that have been gun-shy as result of misperceptions about the risks of innovation. We’re not telling you it will be easy to become more innovative. We’re just telling you it will be worth it.