Innovation. It’s a word you hear on many executives’ lips. Sure, it’s reassuring rhetoric for investors, as it means a company is not resting on its laurels. But what does it mean, exactly? The answer, for all too many companies, even some large corporations, is either not a lot or sometimes too much.
“The people who run these big companies are not very familiar with innovation,” said George Young, principal of Ohio-based consultancy Kalypso. With the overall emphasis in the executive suite in North American corporations on the finance side of the coin, all too often these executives are good at running companies but not so good at fostering innovation within them. And the task gets harder and harder as the companies grow.
“They have a concept of management techniques that work on the financial side that does not work on the innovation side,” Young told his audience at the recent Food Innovation Summit held in Phoenix.
State your strategy and stick to it
Among the key failings of innovation programs at companies is that they lack overall direction, Young said. He said that over and over in his consulting practice he sees companies that have no defined innovation goals. When he asked conference attendees how many of their companies had state goals in place, about a third raised their hands.
“Only 42% of 260 innovation execs (we interviewed) said their companies had an explicit innovation strategy. You have to know what you want to accomplish. Do you want to be a leader in new innovations? Do you want to a quick follower?
“How are we going to be strategically successful if we don’t have that vision?” he asked.
Couple goals with a road map
A vision for strategic targets sets the tone for the whole innovation team, Young said. Working with measurable parameters can give a team a sense of accomplishment, and can give team leaders progress waypoints to sell back to management.
“The workers in product development and R&D get really enthusiastic when they know what the targets are,” Young said. “They need an innovation plan or road map.”
Having such a roadmap can also help match dreams and realities. Manpower can be a fundamental weakness of innovation programs. Many companies can only afford a single digit R&D spend as a percentage of top line revenue, yet in many cases the company’s future depends on that effort. Having a stated strategy for what those people are supposed to accomplish coupled with a road map for how they’re supposed to get there can help prevent frittering their effort away on projects of lesser import.
“Senior managers on the resource side of things tend to believe that (innovation) resources are infinite. They don’t apply the same king of reasoning they would use on a supply chain to an innovation engine. Senior management is comprised of people from the performance engine,” Young said.
Get some help
Another way to leverage the innovation process is to open it up, said Stuart Stein, the director of open innovation of Mondelez Global LLC, a food company that was spun off in 2012 from Kraft, where Stein worked in a similar capacity. Stein was another speaker at the summit, which was put on by Next Level Summits.
Many executives are familiar with the funnel-shaped innovation model, with many ideas jostling into the big end and far fewer getting through the various checkpoints in the narrowing path to commercialization to emerge as actual future products or services. The approach is tried and true, but can be seen as too restrictive, Stein said. Too often ideas fall by the wayside not because they wouldn’t ultimately be a good thing to take to market, but because resources are lacking or the realization of the ideas might require technologies or expertise that are outside of the company’s core competency.
“This is an assessment of what you are good at doing and how hard it is going to be to do it. If it’s not your core competency and it’s going to be really hard, maybe it makes sense to find someone to help you do it,” Stein said.
But changing an insular model, especially at a large company, is no mean feat, Stein said, especially when it comes time to pass out the rewards of success.
“Partnering with an outside firm, sharing those rewards, that’s tough. How do you change that culture?” he said.
Nevertheless, it can be imperative, especially at a company like Kraft that was long on line extensions and marketing, but short on innovation.
“Kraft owed 1% of the IP in the food industry. With only 1% of that IP, how far can you take it?” Stein said.
And it's also hard, but just as necessary, to change the we win—you lose model, especially when talking about otherwise trusted partners, Stein said. The rewards of innovation have to be shared out for the open model to work or the pipeline dries up quickly, he said.
“The partners you know, they are the best sources of opportunities for innovation, but not if you screw them. Unfortunately, Kraft had a reputation for doing that. We are trying at Mondelez to rebuild a reputation of innovation with suppliers,” Stein said.
For more on Next Level Summits’ upcoming events click here.