Innovation Series, Part 2: The key success factors of effective innovation
Whilst innovation is often thought of as a creative and entrepreneurial process, an analysis of successful innovation in a corporate environment shows some clear common trends.
In this second blog in a series of three, we explore five key success factors that distinguish high-functioning suites of innovation discovery tools from less effective ones:
- Close strategic alignment with the company and relevant business unit
- True partnership between newer innovation tools and corporate R&D, M&A, and individual business units
- Strong company backing in good times and bad
- Effective organisation design
- Effective leadership and the right mix of personnel
1. Strategic alignment
If the company is seeking outside innovation close to the core over the medium term, venture investments are probably the most suitable tool. If it seeks a specific product or technology that is still under development, an incubator (using the tight-focus model) is likely the best tool for the job. If it’s looking to take the pulse of the entrepreneurial sector, an accelerator can provide a relatively rapid overview. And if it needs to roll out a specific product or service within a narrow window of opportunity (whether to harness a potentially disruptive force or to recover ground lost to rivals), partnerships are the most suitable tool.
Companies should also assess which innovation support capabilities they should build up in-house and which they should “rent”—for example, by partnering with an existing accelerator program. The further the innovation is from the corporate core, the more carefully the company needs to consider whether its capabilities and culture can successfully support activities that require a significant investment in expertise, management time, and oversight.
2. True partnership between internal and external innovation centres
A culture of cooperation, rather than rivalry, should characterize relations among the R&D department, business units, and external innovation centres. Companies should foster regular communication and close cooperation among units and put in place incentives that encourage collaboration. Managing the interfaces between various departments and making individual managers accountable for each start-up relationship will be critical to success.
3. Strong company backing
Leading innovators recognise the importance of providing their innovation-focused units with robust backing. They are quick to offer marketing assistance, scaling expertise, management skills, sourcing advantages, and physical infrastructure to the start-ups they are nurturing, viewing the deployment of these resources as vital investments in the development of new business models. Support comes straight from the top—CEOs make it a key topic, modelling the behaviour they expect from the rest of the organization and structuring innovation support activities to reflect their importance.
4. Effective organisation design
In our research and experience with innovation efforts, we have found that a company’s strategy or innovation unit is often the most logical home for its innovation-support activities. At the same time, though, we find no correlation between any one specific organization setup and successful innovation. Organisation design should be customised to suit the company’s particular innovation needs and capabilities and each department’s readiness to take on innovation support tasks.
5. Effective leadership
Companies should assemble their innovation-leadership team carefully, choosing executives who combine an entrepreneurial mind-set with a deep understanding of the company’s culture and structure. Their ability to operate comfortably and productively in both the start-up’s and the sponsoring company’s environments enables them to serve as an effective conduit between the company, its investment targets, and the wider world of start-ups and early-stage ventures.
This is the second in a series of three blogs that takes its inspiration from a report by the The Boston Consulting Group (BCG) called “How Leading Companies Search for Their Next Big Thing”. You can read the entire report here