In the second of this two-part series we look at how companies can imbed innovation through implementing a system for fostering innovation 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.
In Part 1 we looked at Innovation and creating a culture of innovation in an organisation. 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 that an informal IMS works best in your culture.
Anybody who has implemented a quality management system such as ISO 9001 or an environmental management system such as ISO 14001 will have experienced the difficulty of getting buy-in from management and staff for all the documentation and paperwork requirements and the nuisance factor of internal and external audits.
Many see them as box-ticking exercises and carry on as normal until the next external audit. An IMS has the advantage in that it lends itself readily to a reward and recognition policy which further reinforces the adoption of the system.
While ISO 56002 has many of the features of 9001/14001 in terms of policy, roles and responsibilities, risk analysis, internal audit and management review etc, it is a guidance document only.
An IMS has two essential sides – the intrapreneurial side and the venture side. The intrapreneurial side is responsible for the discovery, validation and development of new innovations and the venture side is responsible for managing a portfolio of these innovations using investment metrics and metered funding. For an effective IMS, both sides must operate in tandem.
Before we explore these two sides in detail let’s visit the story of two of the most famous innovation engineers of the 20th century – Thomas Edison and Nikola Tesla.
While Tesla was by far the greater intellect and innovator (even Einstein said, when asked what it was like to be the smartest man alive – “I don’t know, you’ll have to ask Nikola Tesla”), Edison’s ability to win backers, collaborators and attention for his ideas was much greater.
When Edison developed a commercially viable lightbulb, he was able to convince JP Morgan to advance him $30,000 to set up the Edison Electric Light Company.
He had built up enough innovation capital (discussed in Part 1) that he had no problem getting backers for his ideas. He was ruthless to the point of publicly electrocuting an elephant in order to rebuff Tesla’s AC distribution system.
Tesla had hundreds of patents and in particular, his AC distribution system proved far superior to Edison’s DC system. However, he was very much an altruistic innovator and lacked the commercial capabilities of Edison. He ended up being cheated out of many of the spoils of his inventions and died penniless.
Though he never profited from it, the entire mass communication systems we use today are based on Tesla’s ground-breaking system of wireless communication.
I use the story of Edison and Tesla to illustrate the importance of the two sides of an IMS. Both are crucial elements in innovation success.
The intrapreneurial side may comprise a dedicated team of intrapreneurs, a section of a project department or a loose combination of permanent and seconded staff as circumstances dictate.
Their function is to generate new ideas, research their validity and present in-depth proposals for consideration by the venture side.
It is important to have a proactive system of generating innovation ideas and this can be in the form of brainstorming sessions, hackathons and so on.
At MBA Global, we have developed an Innovation Source Map, a grid of 28 innovation trigger points across the four major innovation categories – ideas, methods/procedures, products/services and markets. It is designed to be the basis of a monthly brainstorming session.
It was recognising this that led us, at MBA Global, to develop the Business Model Actualisation Platform (the BMAP©). This is an innovation-focused three-step commercial validation and development process that involves situation analysis, challenge analysis and solution proposal.
Using a combination of established and new business tools such as SWOT, PESTEL, Five Forces and the more recent Business Model Canvas, it takes a systematic approach to analysing proposals, testing and validating the market viability, building essential RoadMaps as a detailed guide to actions required for the next 18 months.
Finally, it involves preparing financial projections and evidence-based business planning.
The BMAP© is supported by the book Countdown to Launch, which demonstrates the principles used in this approach. In this case the context is for a startup venture, however, the BMAP© is applicable to any commercial development environment for businesses of any size.
The upshot from this stage is a portfolio of project proposals for consideration and implementation by the venture side of the IMS.
There are two key teams on the venture side of the IMS – the growth board and the implementation team. A growth board (US terminology) is essentially a steering committee comprising senior managers who meet regularly to review, fund or kill off new innovation projects.
The board acts like venture capitalists by allocating funding in tranches on a milestone achievement basis (called metered funding). Traditional project finance usually involves full proposals being approved with contingency funds to ensure project completion.
Innovation projects require a different allocation of capital that benefits rapidly successful ideas and quickly kills off ventures that are failing to gain traction.
By dealing with a portfolio of ventures, the growth board quickly learns which types of projects and teams are more likely to succeed and how to spot potential failures early.
At early stages, the board is looking for indications that the team is on the right track while later stage milestones may include hard, quantitative metrics.
The implementation team may be internal or external to the company. Ideally it is internal and may form part of the project department. However, some may be outsourced due to capability restrictions internally.
The size of your company determines the team sizes in an IMS. The larger the company the easier it is to justify permanent allocation of intrapreneurial staff to the IMS.
SMEs have to be more circumspect and creative in structuring their IMS and this may involve a small core team complemented by other staff contributing on an as-needed basis.
Regardless of size, the important thing is to have an Innovation Management System in some manifestation, whether formal or informal.
Author: Liam Fennelly, pictured right, 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: email@example.com
He is delivering a one-day workshop on Innovation and Intrapreneurship at Engineers Ireland on March 30, 2020.