Companies have started doing innovation
Many companies have some form of innovation initiative in place, hoping these will lead to the next “big thing”. Some are pouring funding into R&D, others are training teams and setting up new innovation processes. But too many companies engage in an “innovation theatre” in the forms of massive company-wide calls for ideas, internal hackathons or a pilgrimage-like trips of executives to Silicon Valley.
Most companies still fail at innovation
However, such programmes often fall short and the failure rates of even well-funded corporate innovation projects are still above 80%. With all their resources, experience and talent too many companies have failed spectacularly in their attempts at innovation. Some have then given up and declared that they’ve given innovation a go, but it doesn’t work.
Reasons of failure
Researchers have identified several causes for the typical failures of corporate innovation attempts. For instance, companies are overly protective of and focussed on the core business, which doesn’t allow for keeping up with the pace of change. Internal innovation programmes fail not because of a lack of ideas, but because they’re often vague and haphazardly put together. Research shows a big gap between executives’ acknowledged need for innovation and the companies’ capabilities to actually do it. This gap has its root causes in the lack of proper: innovation strategy, innovation culture, and innovation structure.
Innovation strategy
In the past, companies made strategies of innovation, these days innovation is the strategy. Strategy formulation is all about innovation i.e., identifying new markets, bringing new products/services to market, and developing new business models. This means that innovation should not be the strategic objective in the strategy, but rather seen as the organisational mechanism and capability to drive business value and achieve company’s strategic objectives.
For an innovation strategy to succeed, proper innovation culture and structure are needed.
Innovation culture
Without a proper innovation culture, innovation strategy is useless, and nothing is going to happen, because innovation is all about people.
Innovation is risky, as it involves a lot of uncertainty and unknowns. This is why innovation needs a lot of experimentation and not all experiments will result in success, or more realistically, most will fail. This is why the cornerstone of innovation supportive corporate culture is tolerance of failure. In most companies, corporate culture is still anything but innovation supportive, which needs to change.
Cultural change starts at the top. In the best companies, CEOs have become innovation champions with an ambition to spark innovation processes leading to building new growth businesses for the companies. But culture change cannot end at the top, it has to encompass the whole organisation.
Innovation structure
Bureaucracy, so embedded in most sizeable organisations, has been identified as the “killer” of innovation. Also, traditional hierarchical corporate structure impedes free information flow across the organisation which is much needed for innovation to succeed. While a certain amount of bureaucracy is still necessary, companies with flatter organisational structure and team-based way of working have been observed as more successful at continuous innovation.
In many companies, their structure works against implementation of innovation strategy and needs to be changed. In today’s world of fast-paced change, one cannot manage organisational change using traditional theory and prescribed steps of unfreeze, change, and freeze (again). Instead, organisational change management should be about creating a flexible and “fluid” organisation, which is capable of continuous change and adaptation as the context, including the strategic objectives of the company, requires.
Way forward
Companies that are successful at innovation have a strong mandate for innovation, usually from the board of directors, and the CEO is their innovation champion. They have innovation embedded in their strategy and have in place the right culture and structure to enable innovation.
To move forward with innovation, executives should:
- Recognise that innovation isn’t about pushing the existing business aside but building on it and expanding it into the future.
- Understand that innovation can be managed, and innovation competence of employees can be developed.
- Take the reins of innovation, become innovation champions. If innovation is not fostered from the top, it’s not going to happen.
- Stop thinking of innovation as the outcome. Innovation should be seen as a capability of an organisation.
Visiting lecturer at Estonian Business School (Estonia), Business Innovation and Strategy microdegree lead
Visiting professor at Porto Business School (Portugal), programme co-director of the Executive Master of Business Innovation
For more info: mart.kikas@icloud.com
Photo: Disainikeskus.ee
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