It’s no secret that innovation is tough to pull off, and even the “most innovative” companies, such as General Electric (#18 on Boston Consulting Groups’ most recent list) and Whirlpool (tariffs aside, consumers favor Korean and European styling and brands) and Proctor & Gamble (sinking to #47 on BCG’s list) can fall fast, despite great effort on the part of their innovation leaders. With even the stalwarts being disrupted, do innovation teams really matter? And if so, what does a sustainable and well-developed innovation program look like in the Age of Disruption?
Innovation Leader, the Boston-based community for large company innovation, strategy, and R&D executives, has just produced Benchmarking Innovation Impact 2018, an important new study that examines such questions, based on input from 270 participating executives. Researchers, under the direction of editor and co-founder Scott Kirsner, analyzed data from innovation programs that had been in place at least for several years, and were delivering tangible results. The following shared traits stood out:
1. Standout programs spend more time on transformational innovation, less on incremental.
Winning innovation teams set their sights on moving the growth needle. They help their companies anticipate and navigate disruption in their industry. And they spend more time on “transformational” innovation, which the report defines as “entirely new offerings or business models.” Many innovation groups within large companies spend as much as 50 percent of their time working on incremental improvements to today’s products and services; 30 percent on adjacent innovation opportunities; and only 20 percent on transformational innovation. But the more mature, successful, growth-driving programs allocate even more time and energy to transformational activities. For them, the mix looks like 40 incremental, 30 adjacent, and 30 percent transformational.
2. They get the right people on the innovation bus.
In other words, they know who should be doing what, and they get people busy doing what they do best. Mature companies know who should be involved in the different “horizons” of innovation. They get their business units to carry more of the load in everyday incremental innovation. And this frees up their central innovation groups, R&D departments, and corporate VC teams to spend time exploring adjacent and transformational opportunities.
3. They create effective incentives to support innovation.
The report clarifies a failing that I commonly see in corporate America. Surprisingly few companies offer any kind of incentive specifically geared at fostering more innovative behaviors among their employees. More than 35 percent of respondents in the Innovation Leader survey said that their company doesn’t have any kind of innovation-related incentives. But the story is dramatically different for the more innovation adept companies. Almost 80 percent of companies have an incentive program in place. Of those, incentives vary greatly and are always in flux. They can run the gamut from dedicated time or space for employees to work on their projects to spot awards for “above and beyond” dedication such as an all-expenses paid trip to a destination of choice. Successful programs know that recognition is the biggest incentive of all.
4. They put real dollars to work.
The more successful innovation company programs are more willing to put financial resources behind their innovation ambitions. Fully 60 percent of these companies are investing at least $5 million annually in innovation, and almost one quarter have annual budgets north of $50 million. Those bigger budgets come from demonstrating traction, internal and external impact, and wins in the market. (But that can be a tall order to do that when you may start with a tiny team and a budget that is a rounding error: About 23 percent of the respondents said their budgets were under $1 million annually.)
5. They make innovation a part of the organizational DNA.
Because innovation is part of the DNA at these more sophisticated companies, many different individuals across business units, functions, and departments are involved with innovation initiatives — even if they don’t have “innovation” in their formal titles. Still, there is often a good-sized central team to coordinate this work or provide additional resources; 47 percent of these more mature companies say they have 25 or more employees assigned to a central innovation or R&D team.
6. They bring investment groups into the mix.
Rather than isolating themselves, mature innovation groups team up with the corporate venture and corporate development arms to achieve their adjacent and transformational innovation objectives. These mash-ups often involve collaborating with, funding, or buying smaller companies and startups that corporate VC groups initially scout or incubate.
7. They get funded from multiple sources and stay flexible.
Mature innovation teams are not married to the annual budget process. Instead, they need the flexibility to move fast, so they run separately-governed innovation investment processes. Having the means to get funding outside of the annual corporate process gives mature teams the agility to attack new opportunities and trends without waiting around for the next fiscal cycle.
8. They avoid politics and turf wars by partnering effectively with the business units.
The biggest obstacle to innovation, according to Innovation Leader’s data, is politics and turf wars. More than half of all respondents – mature or not – admitted this was a problem standing in the way of innovation progress. But fewer of the more mature companies cited politics and turf wars as an issue. The reason? Mature companies are more likely to have created alignment on their strategy, put the right people on the right projects with the right incentives, and created clear duties and responsibilities about who is expected to be moving innovation forward. That means they experience fewer internal conflicts that can get in the way of launching or experimenting with new lines of business.
9. Standout programs are aligned with the overall strategy.
Another important hallmark of a mature innovation program is that the internal teams are all gathered around the same campfire. Mature companies have a unified strategy and vision that the entire company is aware of. That means employees can spend less time fighting for support or budget, and more time delivering real results.