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Innovation is a process of constant reinvention that comes with specific responsibilities for the leaders overseeing it. Seven, to be exact.
Despite good intentions – and widespread acknowledgement of the importance of innovation – efforts to innovate at large companies often lack a clear mission and framework, and as a result, they go off the rails.
Without realizing it, even well-managed businesses versed in modern practices can generate an environment that is hostile to innovation. At one big European energy company we studied, no less than four separate corporate functions were supposed to be working on innovation – yet none was supporting the firm's critical needs at the Business Unit (BU) level. To make matters worse, the various functions involved were competing internally for space and resources, while duplicating each other's work.
For all of these reasons, large companies need to have a distinct Innovation Unit headed up by a senior executive who reports to the CEO. In this article we will provide a framework for designing the mission and scope for an in-house Innovation Unit.
One Role, Seven Tasks
In our work at the European Center for Strategic Innovation (ECSI), we have extensively researched the role of successful innovation executives across industries. Drawing on our findings, we have developed a framework that breaks this role into seven distinct tasks.
Role 1: Scan For and Support Best Practices.
Boosting the organization's overall innovation performance is a top priority for every innovation executive. Working alongside these individuals, we have seen the importance they place on the discovery and adoption of best practices and methods. This process does not happen by chance; nor is it left to decentralized and informal efforts. It is the result of a continuous and wide-ranging search for best practices – both within and outside of the organization's walls.
In 1998, Samsung launched its Value Innovation Program (VIP) centre in Suwon, South Korea. To reach the centre's goal of supporting and accelerating highly strategic and innovative projects, Samsung set up a core VIP team to scout external methodologies. Fascinated by INSEAD Professor W. Chan Kim's Theory of Value Innovation, the VIP centre played a pivotal role in standardizing and disseminating this theory across the company. Over time, the team has scouted and adopted other innovative methodologies, including customer exploration tools.
Rather than reflexively importing best practices and methodologies, it is crucial to screen them for potential by running some experiments, and then carefully tailoring them to your context and needs. This is easier said than done, and as a result, most companies fail in this regard. Instead, they often take a best practice 'off the shelf' and transfer it – in its original form – to their firm. This approach rarely guarantees widespread adoption or effective results.
To grasp the importance of best-practice adaptation and standardization, consider the case of BASF, the German-based chemical company. On the occasion of its 150th anniversary, BASF embarked on a massive innovation capability-building journey. After an initial scouting effort, it identified a few innovative methodologies to inspire and fulfill the front end of the innovation process – ranging from idea-generation platforms like co-creation and 'jamming', to strategic innovation methods such as business solution design. Each platform targeted different groups: the company's120,000-plus employees, customers, partners, suppliers, as well as external scientists and the public at large.
BASF experimented with all of the selected methodologies through pilot projects and worked on standardizing them by producing a set of easy to read and understand 'practice handbooks'. To enable rapid diffusion, a series of live, interactive webinars was offered to all employees globally. The result: the new set of methodologies and tools spread virally throughout the organization.
Role 2: Develop Employees' Skills.
Companies like BASF understand the importance of a scalable approach for spreading best practices throughout the organization. Although in theory, every leader knows that having some 'innovation muscle' is critical for success, in practice, leaders often struggle with exercising it. Following is a closer look at two sophisticated innovators who have invested regularly in learning on a massive scale.
A pioneer in innovation-skills development, Procter & Gamble established an Innovation College with a suite of training courses, with topics ranging from Harvard Professor Clay Christensen 's Disruptive Innovation Theory to The Principles of Design Thinking. In addition to traditional in-class training and workshops, P&G produced process manuals in the form of step-by-step guides, which included overarching principles, detailed procedures, and templates to help teams apply selected methodologies and tools.
Likewise, General Electric launched a Leadership, Innovation and Growth (LIG) program as part of the innovation curriculum offered at Crotonville, the company's official learning centre. With the adoption of a team-based learning approach, about 2,500 senior leaders went through the program between 2006 and 2008. Grouped into 260 teams, participants learned innovative methods in a classroom setting and then applied them to solve real business issues. Today, LIG is still running and is delivered in multiple locations globally.
What lies at the heart of P&G and GE's successes? First of all, each offered a customized 'innovation curriculum' to meet the company's specific needs and innovation goals. Secondly, these organizations are clearly committed to training vast numbers of their employees on innovative methodologies and best practices. Unfortunately, most companies believe that the generation of innovative insights is the responsibility of just a few, highly-qualified people.
Role 3: Support Your Business Units (BUs).
How can you build an innovative methodology or best practice into the DNA of your organization? First, by moving from talking about it to doing it. This is the reason why companies need a team of 'innovation guides' or coaches, who are available to help people throughout the company. To ensure that new best practices diffuse quickly and are applied correctly across BUs, these innovation guides should act like facilitators providing methodological expertise. When tough issues arise, they can offer moral support to make sure teams are not discouraged early, as well as acting as 'guardians' of innovative aspirations.
An initiator of this approach, Intuit has a crew of 200-plus Innovation Catalysts, who spend up to 10 per cent of their time facilitating and coaching teams on Design Thinking and other tools of innovation. Anyone can ask for assistance from a Catalyst, and they will quickly receive help for thinking outside of the box, gaining deeper insights into a particular problem, and experimenting with new ideas or concepts.
Similarly, Corning, the leader in specialty glass and ceramics, created Innovation Black Belts, a group of specialists responsible for the deployment of innovative methods and tools across the company. These qualified experts facilitate innovation teams working on the most critical projects, and tailor the new processes and tools to meet their specific needs. Acting like a corporate 'guiding hand', Black Belts have helped Corning managers raise the bar of innovation and excellence.
Innovation leaders at Corning and Intuit have successfully accelerated the pace at which their entire organization innovates. Their corporate innovation units continually offer on-the-job support and sustained best-practice dissemination across the company.
Role 4: Identify New Market Spaces.
Of course, there is more to innovation than incrementally improving on your existing business model. Yet many organizations still struggle to understand why BUs fail to innovate beyond the core. The reason is simple: their primary task is to focus on the current, existing business, and their goals, metrics and rewards enforce this mindset. Questioning business-as-usual assumptions goes against the nature of their own mandate: why should they search for discontinuous innovations that don't fit into their current boundaries? The problem is, looking into the future to create new business models is something that companies can't afford not to do; but if left to BUs, there will always be tensions between the needs of today and the potential benefits of tomorrow.
Luckily, there is a relatively simple solution: we have seen successful CIOs set up a 'hot-house' for future or emerging business areas. Supported by a team of motivated, forward-looking employees, they explore, evaluate and then pursue opportunities outside the scope of the current business. This approach offers an always-open 'window on the world': the team analyzes trends and promising market adjacencies and discontinuities in a quest for new, non-traditional business models. They search, select and develop them in the initial most critical stages, usually up to the proof of concept; then, they carefully design a transition process back to the BUs for future development and launch.
Consider Royal DSM, which created a team within its Corporate Innovation Unit to explore new and emerging opportunities. Projects that have significant growth potential over a period of one to three years are nurtured and protected until they 'graduate' into growth platforms – or what DSM calls Emerging Business Areas (EBAs). Organized as separate entities, EBAs have the agility and flexibility to accelerate the company's innovation journey.
Another example is P&G, which set up FutureWorks in 2000. An independent unit at the corporate level, FutureWorks included a multidisciplinary team dedicated to identifying, developing and seeding new growth platforms between and beyond the scope of P&G's core businesses. While being a separate organization from the business units, a BU sponsor is identified early on in the process to provide inputs and take care of the commercialization phase. The sponsorship is critical to ensure an organizational owner after the concept validation stage.
Role 5: Help People Generate Ideas.
Just about anyone can come up with ideas, anytime, anywhere; but does your organization have a process for scouting out the best ideas on an ongoing basis? Most firms approach idea generation as if it were a one-off, sideline activity, and as a result, they end up losing opportunities. Unlocking the ideation power of people in a systematic, continuous and effective way requires a disciplined, end-to-end process, dedicated resources and expertise. Successful organizations know this, and set up innovation platforms and Centres of Excellence to assist other units in sourcing ideas effectively.
After a few successful crowd-sourcing pilots with InnoCentive – an online marketplace that connects organizations with freelance problem solvers – NASA created a Centre of Excellence for Collaborative Innovation (CoECI) in 2011, with the goal of assisting other federal agencies in applying best practices for crowdsourcing and collaborative innovation. NASA's CoECI provides education and best practice sharing, as well as crowdsourcing design and implementation guidance and impact measurement.
Similarly, at GE, a dedicated corporate team has designed the ecomagination open-innovation program to reach beyond the company's four walls and address critical environmental challenges. Launched in 2005, the first phase of ecomagination aimed to find the best ideas for building the next-generation electric grid. The innovation challenge team was involved in the entire process: from the selection of the Web-based platform, to the definition of the problem statement, to the execution and evaluation phase. In just 10 weeks, they received nearly 4,000 ideas and created a community of 74,000 people across 150 countries. After nine years, GE has reaped $160-billion (U.S.) from this program. Its success lies primarily in its ability to set up a continuous and structured process and a skilled team to find the best ideas routinely, and transform them into profitable business models.
Role 6: Provide Funding.
Generating promising ideas is a springboard for innovation. But how can you give them a chance to grow legs before they encounter a 'no go' business decision? In a large organization's business units, ideas that break from the norm often fail to attract resources and talent. Why? The answer is simple: BUs are naturally unwilling to embrace uncertainty, and tend to avoid anything that might look risky. Even when they go after the most promising ideas, there is only so much uncertainty they can handle at once. That's why the executive in charge of innovation must nurture and protect ideas that are deemed too risky for business units – but show potential to reap big rewards if given the opportunity.
Since 2012, Cisco has been nurturing 'homeless' ideas inside the company with its Technology Fund, a multi-millions dollar innovation fund to explore ideas that are not on Cisco's current radar. The application process is as simple and fast as it should be: applicants–mainly Cisco engineers–submit a statement of their idea's uniqueness and potential, a request for resources (equipment and people) and cost estimates. Once funded, they begin working on their idea immediately. After an exploration phase – between six and 18 months – successful ideas are then integrated into existing business units or incubated in Cisco's Emerging Technologies unit.
Protecting 'homeless ideas' should never happen in complete isolation from the core business. At Intuit, the Innovation Lab is a dedicated unit that works on ideas that business units don't pursue because they are too risky, or simply fall outside of existing boundaries. In close cooperation with the business groups – such as marketing and product launch teams – they fund and explore ideas via iterative experiments before transitioning them back to the business units. Throughout the process, all lessons learned are captured and shared with the rest of the organization.
Role 7: Design 'Shelter' for Innovations.
No matter how well funded and protected ideas are in their early stages, those that grow into solid concepts will still face serious internal challenges from risk-averse 'innovation enemies'. Organizations often unconsciously create a hostile environment for innovation – particularly innovation of the most discontinuous kind. Part of the CIO's job is to neutralize these forces in order to protect potentially-disruptive projects. Acting much like on 'organizational architect', the CEO can use four levers to create an innovation-friendly environment: processes, metrics, people and culture.
Royal DSM appointed Rob van Lee as its first CIO in 2006. Since the early days, he has invested increasingly in all four levers to build a high-performing, innovative organization. For example, in terms of processes, he has designed a new differentiated stage-gate process to balance incremental and radical innovations. In less than a decade, he has been able to transform DSM into an intrinsically innovative company.
One tool that we have used successfully with clients is the Innovation Environment Roadmap, which describes the path of an organization towards a future state, along three main time phases: design and pilot; ramp up; and stabilization. The Roadmap captures all four aforementioned levers – metrics, processes, people and culture – and connects them to the right activities and milestones at the right time. The organizations we've worked with have found the Roadmap to be extremely helpful in designing systemic changes for an innovation – unfriendly environment.
Innovation is a fascinating yet challenging process of constant reinvention that is made even more complex by an increasingly global economy. In the end, it takes a powerful leader to create the conditions that enable innovation to occur repeatedly. Executive leaders of innovation need to think very carefully about what they do–and what they should be doing differently–to improve their organization's innovative performance. Our seven-task framework is a great place to start.
Alessandro Di Fiore is the founder and CEO of the European Centre for Strategic Innovation (ECSI) and ECSI Consulting, based in London. Elisa Farri is a senior consultant at ECSI Consulting in Milan.
Reprinted with permission from the Spring 2016 edition of Rotman Management, published by the University of Toronto's Rotman School of Management. rotmanmagazine.ca