Buyers beware: Creativity alone does not ensure innovation.
The World Database of Innovation initiative shows that more than half of the world’s 7,000+ innovation consultancies provide a creative process or “Invention Methodology”. Because of this and some very good PR for processes like Design Thinking, the world has begun to equate the creative process with Innovation Management. And while the creative process is very important, the initiative has found that it is only one piece of the puzzle; only one part of what it takes for a company to innovate.
To make innovation or “future top-line growth” repeatable and reliable large companies must build a complete Innovation Management System that supports bringing new things through their organization and to the world.
Before we get into this, let’s make sure we are on the same page with our preferred definitions:
- Innovation: a thing that has already changed human behavior on a wide scale. Usually, an innovation has added to a company’s top line, or has changed a societies belief. It is distinct from and “Invention”.
- Innovation Management: a complete system that builds a path through a human organization so that it can repeatedly create innovations and do so more reliably.
- Why we care about innovation: Companies care about innovation management for two reasons: 1) Survival – it should allow you to simply keep up with competition 2) The more inspiring goal: it creates an ability to create one’s future and reliably grow.
The World Database of Innovation (the "initiative") began 7 years ago with the mission to uncover an evidence base (statistics) to support or disprove the world’s many innovation practices. The initiative studied thousands of the highest performing companies and found that they share a handful of processes, structures, people management approaches, belief systems, and cultures. For companies that are facing growth/innovation problems, or for public organizations that want to more reliably create societal change, below is a overview of five pieces of the Innovation Management puzzle you will need to address to achieve repeatable market successes.
The initiative found the highest correlations in this category: companies that had good innovation management structures had some of the highest top line growth.
First, the innovation function reported to the CEO directly and the CEO was found to truly own innovation, not just simply to be on board or bought in.
Second, the innovation had dedicated (untouchable) funding. Just as one invests money in funds and typically waits for the investments to mature, a company must invest in longer-term things and wait for maturity or pay the penalty (in several ways). This is a hard one for public companies who give and rip away budgets sometimes on a quarterly basis. The vast majority of an average company’s overhead goes into supporting old products, so the most important thing here is to choose what portion of revenue you’re going to invest to create your company’s future.
Third, the most reliable innovators also treat innovation as a risk management exercise. These firms tend to build regimented portfolio and pipeline structures than spanned from the birth to the death of market offerings. The pipeline usually included some sort of stage gate approach with distinct on and off ramps for new and expiring products. Fourth, we observed that when high performers consider new market opportunities, the first asked whether acquiring or building the solution was the best approach.
Fifth, few firms have a system to at indirect competition but 84% of history’s market upsets came from industry outsiders. This related closely to arrogance that we talk about below but can be taken care of with a team or service that has a smart way of combing the world for indirect competitors.
Belief Systems are perhaps the most interesting part of the puzzle and the correlations found were quite strong.
Amongst fast growing companies, a high percentage shared the believe that the future is not something set in stone; that is something that can be shaped. Society primarily things the opposite is true. Companies like General Electric, and Google who actively work on describing the future scenario they want to exist, and then set in place a plan and structure to create it are actually the most successful.
There is also a surprising commonality amongst growth leaders in their definition of innovation. Their definitions all shared three things: 1) something about changing human behavior on a wide scale, 2) innovation was defined as transformative, and 3) it was stated that innovation does not include incremental improvement. The study also found that many companies had a higher purpose stated in their innovation definition as well as their mission.
In relation to this last point, there is also strong data to show that companies with a noble mission and those that know themselves very well are the highest performers. See our piece on Patagonia and look at Medtronic’s performance through the 1990’s and early 2000’s.
And finally, Arrogance: we found loose but very interesting correlations between arrogance of leadership and company failure. This is hard to identify objectively but there are many many documented cases of publicly displayed arrogance of leadership leading to blindness leading to partial or complete failure of companies.
As we stated at the beginning: the creative process is an important part of the puzzle. It is not everything and with out the support structures mentioned throughout, runs the risk of being a pointless investment. But the things that have been invented have come to be by some surprising common steps and “Invention Methods” as the initiative calls the 152 distinct processes discovered to date. There are also countless brands of each of these 152 processes that help create market successes more often that unstructured brainstorming.
Talent and People
There are many aspects of recruiting, managing, resourcing, training, and enabling people that we found at high growth companies but they all seemed to boil down to one thing: get out of people’s way. And the opposite side of this same coin: enable people. Study upon study has shown that people are inherently innovative. Sometimes we just need a teachable skill, money, time, or the right reward/recognition to express it.
The initiative found that culture is an important enabler or deterrent for innovation. But, there was no common culture amongst high growth companies. This piece of the puzzle is truly a menu ranging from tough cut throat cultures that force innovators towards excellence, to kind, accepting, well resourced innovation teams that cultivate and help inventors throughout the company. The most interesting commonality is the level of connectedness of employees and division, and knowledge management or we could say “connectedness to the past”.
In conclusion, reliable innovation takes an entire system. Companies must select and adapt the pieces above to create an Innovation Management System that helps them discover opportunities, invest in a set of potential solutions, test and improve and filter these solutions, socialize the chosen solution, bring it to market, and kill the old solution.
And to repeatedly control the market you're already in, to invent new markets, and to change human behavior on a wide scale also requires choosing how to tie theses pieces together into an aligned system: an innovation engine that hums.
The best of innovation engines do a few things for companies: mitigate risk on of a company’s investments in new things, greatly decrease the cost of innovation, increase the speed, and increase the success rate. But most importantly for all of the LOHAS brands, they secure and help you shape your future so that you can continue to be there to improve our world.