In this two-part series, Liam Fennelly looks at how companies can create a culture of innovation and implement a system for fostering it within the organisation.
Almost everybody recognises that innovation is crucial to the long-term survival of businesses in the 21st century.
This new century has been characterised by technology-inspired disruption and rapid growth, products conceived and built anywhere, services transferable at an instant worldwide, the outsourcing of backroom functions and many more innovations.
There is a widespread misconception that innovation relates only to research and development. But innovation’s broader definition covers the introduction of new ideas, methods, products and services, or even new markets.
This broader definition forms the basis of our Innovation Source Map (see Part 2) – a 28-point grid of innovation trigger points – the starting point of an innovation process. Redesigning a process or procedure may introduce new efficiencies that create greater capacity or profit margins.
Jeffrey Immelt, former chairman and CEO of General Electric speaks at a US Climate Action Partnership event.
Similarly, rebranding your product for a new market can be a new source of growth. My favourite example of this is Lucozade – they rebranded an aging product and targeted the new sports drinks market with Lucozade Sport to enormous success.
Besides creating new products, services, efficiencies, markets etc, being recognised as an innovative company has many advantages.
To quote Jeff Immelt, former CEO of General Electric: “Nobody wants to work for an old-fashioned company. Nobody wants to buy products from an old-fashioned company. And nobody wants to invest in an old-fashioned company.”
Research by Compustat Financial Data indicates that companies with a reputation for innovation have a valuation multiplier of up to three times the book value of assets.
In his book, Innovation Capital, Curtis Lefrandt outlines how leaders can develop a reputation for innovation or innovation capital, that affords them scope and latitude to change the organisation, change the products or change whatever needs to be changed.
High-profile leaders with huge innovation capital include Jeff Bezos, Elon Musk, and Marc Benioff. This innovation capital gains them the respect of both employees and outside investors.
The Oxford Dictionary of English defines culture as “the ideas, customs and social behaviour” of a particular group. In business this can only be set by top management.
It is common in many companies that reach a certain size that they become more conservative, the leaders become less entrepreneurial and decisions are managed by consensus.
Employees, as a consequence, become less willing to take risks with new and innovative ideas. Companies can become complacent, resting on their laurels, just before they find themselves going out of business.
To avoid this scenario, leaders must set a vision, strategy and objectives for innovation within their organisations complemented by a culture that supports intrapreneurial activities.
Creating a culture starts at the top. Management must create an environment where employees feel psychologically safe in suggesting and testing new ideas, methods or products and services.
Employees should know that it is okay to spend part of their day experimenting with new ideas. They should know that failure is part of the learning process and that it is all right to make mistakes so long as something is learned and adds to the overall wisdom within the organisation.
In creating this culture, innovative leaders must be both 'forward thinkers' and 'multipliers'. Forward thinkers ask themselves two questions: 1./ What will people/customers want next, and 2./ What will new emerging technologies enable us to do? These are key questions for the innovative company.
A multiplier attracts talented people, creates an environment that requires their best thinking and work, defines opportunities that stretch, gives them ownership of results and invests in their success.
Once you understand your corporate culture and where it is going you can decide whether your organisation needs a formal (such as ISO 56002) innovation management system (IMS) or an informal IMS. We look at this in more detail in part 2.
Innovation should be recognised as a permanent function of a successful company. Therefore, companies need to create innovation careers rather than just innovation jobs.
The concept of an intrapreneur (in-company entrepreneur) as a genius who swoops in to save the day is a myth. Companies need to institutionalise innovation rather than expect it to simply flow from intrapreneurs operating within existing structures.
Innovation professionals need clearly defined roles, responsibilities and career paths that stretch beyond traditional R&D or new product development.
They need to carry out functions such as discovery, development, validation, roll out and scaling. All this works best within the context of an innovation management system.
Engineers are by nature curious people. They love understanding how things work and solving problems. Through their training they are highly analytical, and many adopt a project-management approach to planning – crucial to innovation management.
They are adept at turning analysis into actions. These are key skills for intrapreneurs, particularly in the areas of process efficiencies and product/service features.
The ideal intrapreneur has some or all of these traits:
1.) A leader – prepared to carry the burden of a new product, idea, method etc. and lead a team in pursuit of success.
2.) An innovator – always looking for innovations and innovative ideas.
3.) Visionary – can see the end result and how to get there.
4.) An optimist – they not only motivate their team but also use this optimism to learn from mistakes.
5.) Passionate self-starters – they set goals for themselves and are not afraid to take calculated risks or promote themselves. They may have side hustles or passion projects they are working on at home.
6.) Not strictly money-motivated – they value having the ability to implement their ideas with full management support.
7.) Thirst for knowledge – always learning new skills. The more employees learn the greater use they can put that knowledge to in your business.
8.) The ability to nurture and develop innovative ideas – able to back up their ideas with research and solid plans.
9.) Ready to pivot – not discouraged by failure and prepared to change course when circumstances dictate.
In Part 2 we will look at a systematic approach to innovation and Innovation Management Systems;why being creative alone is not enough, you need a system of delivery of new products or services to market; why Edison was more successful than Tesla; and the use of business management tools in assessing viability and mitigating risk.
Author: Liam Fennelly is a Chartered Engineer and UCD engineering graduate. He has worked for several multinationals both home and abroad. He holds an MBA from Warwick Business School and has been involved at founder/director level in seven startups. In a career spanning over 30 years, he has more recently been a mentor and business consultant and is co-author of Countdown To Launch, the widely recommended handbook for new venture start-ups based on the BMAP© process. He can be reached at: firstname.lastname@example.org
He is delivering a one-day workshop on Innovation and Intrapreneurship at Engineers Ireland on March 30, 2020.