Understanding different specifics before structuring an innovation program helps us understand their respective strengths and weaknesses.
To do so, we will break down critical characteristics around innovation strategies.
Approaching Innovation Problem-by-Problem
Applying the problem-based approach to innovation tends to be the far more widespread model; after all, an ad hoc approach requires no specific organizational changes, just an order, usually from the top. Innovating on a specified problem also tends to provide more explicit success and impact metrics than a fully integrated approach. In terms of cost and ROI, innovating on a few important problems as they arise can limit spending to a research and development branch. Ultimately, companies tend to find it far easier to start innovating on specific challenges (such as a sprint) than integrating a full innovation strategy and culture.
Structuring Ongoing Innovation Approaches
On the other hand, ongoing innovation is a process-based approach for engaging in ideation and innovation activities. Instead of starting innovation any time a suitable problem statement is found, innovation occurs as part of a designated process, with ideation and collaboration included at key steps. This incorporated strategy enables incremental changes, the gradual evolution of activities, operations, and creations. This approach is more of a process than a solution, enabling incremental innovation to be developed directly into product development cycles.
When building internal innovation capabilities, it has historically been the case to silo those efforts in a “skunkworks” or R&D lab-type environment. A traditional siloed model is to build a team, give the team a certain amount of funding, then wait to see what results they come up with. A siloed approach can be easier to launch within an organization, as it only requires a few dedicated team members and some funding to start. It also enables a group outside of the core day-to-day work to provide a fresh perspective on problems or opportunities. However, this approach can overlook many of the main benefits of a more integrated approach.
When day-to-day employees aren’t engaged with innovation, the organization misses out on having valuable insights and ideas spread across the organization. It blocks lower-level or non-technical employees—who may be more familiar with the products or services—from getting oxygen to their most influential or innovative sparks. Additionally, a lack of leadership integration, increased organizational barriers, and communication issues can make getting buy-in on innovative initiatives more difficult, reducing their overall impact.
An integrated innovation approach starts with employee engagement. Incorporating employees into innovation processes increase engagement, productivity, and overall satisfaction in their job. These effects reduce turnover rate and directly improved talent acquisition as a beneficial side effect. In implementing the company-integrated approach, organizations can incorporate incremental and sustaining innovation into teams’ natural workflows.
Adding a few minutes in daily standups to discuss potential improvements or creating bi-weekly meetings for feature proposals can enable a group to incorporate flavors of innovation at almost no cost. Finally, tasking an entire organization with innovation means having an interdisciplinary pool of individuals conceptualizing and contributing to new solutions. This means that the range of creativity and innovation far outreaches that of a typical R&D group.
There are even more benefits to an integrated innovative company culture that we will discuss around recommended methodology. Many companies today still use an isolated R&D group as their main claim to innovation. The benefits of having a separate isolated group analyzing your products and thinking of improvements can be greatly amplified by working with external innovation partners.
Internal vs. External Approach
When should innovation be led in-house, and when does working with external partners add value? There are many benefits to building an internal innovation engine while cultivating external innovation partners.
The benefits of an external innovation partner boil down to three main parameters: unbiased perspective, diversified thinking, and risk management. Money spent on innovation is an investment in a company’s future success. By partnering with external innovation firms, which have established frameworks to scale innovation, companies can test innovation hypotheses with far less risk than developing and testing the same ideas internally.
External partners also bring unbiased perspective. Moving away from known and proven business models and approaches can be politically difficult. Hierarchies and middle management can stifle voices nearer the ground truth of a problem. Innovation challenges frequently surface with employees who would like to share ideas but refrain after seeing a superior sharing an idea counter to their thinking.
An external innovation group can uncover insights otherwise lost due to internal biases. On top of the incentives to share information, the external perspectives from individuals who haven’t been close to the day-to-day development can provide new value. Simply getting fresh eyes on a problem, product or idea can yield all sorts of fascinating insights.
Effective innovation partners can secure talent, drive faster experimentation cycles, and provide overall capability and infrastructure. Depending on the innovation methodology of an organization, differing approaches can be utilized. A project-based innovation program will need partners who can assist when called upon in one-off projects. A more integrated innovation strategy requires a continuous partner, which can lend constant support.
When developing a partnership, it is important to be thinking about mutual benefits. A symbiotic relationship creates motivation for both parties to succeed. KPMG’s On the road to corporate-startup collaboration explores this mutual benefit. The report cites access to the market as the top reason startups want to collaborate with corporates, showing 65% of startups consider it important. Raising capital (54%) and taking advantage of economies of scale (54%) also ranked high among their concerns. Considering the needs of a potential partner helps one devise a deal or strategy that can be mutually beneficial.
Balancing Innovation Approaches
Overall, understanding and designing the specifics of an innovation implementation program are important. They define the very nature of an organization’s innovation engine. In general, steering away from ad-hoc, problem-by-problem work towards a concerted, systems-wide approach to innovation will generate stronger and more diverse ideas.
In addition, uniting a robust internal process with external innovation partners leads to more sustainable innovation programs. Identifying an organization’s internal strength, and using partners to shore up innovation weaknesses is core to good business, innovation or otherwise.