Demystifying Innovation MythsBy John J. Sviokla Print
Innovative companies gather and implement viable ideas. But management must be aware of common misconceptions about innovation.
Touted as the ultimate ingredient for growth across all sectors of the enterprise, “innovation” has become one of the hottest technology buzzwords. We are in the early stages of what promises to be the most innovative decade to date. But business leaders’ opinions often diverge about where innovation comes from and what drives it.
Contemporary innovation involves people both inside and outside the organization, and encompasses the continuous need to improve and reinvent products, processes, services and brands. According to PwC’s 14th Annual Global CEO Survey, 78 percent of CEOs polled believe innovation will generate “significant” new revenue and cost-reduction opportunities over the next three years.
Innovators create the structures and practices to gather viable ideas brewing throughout the organization and take them to implementation. But management must be aware of the following misconceptions that can arise:
1. Innovation can be delegated. Not so. The drive to innovate begins at the top. The CEO sets the tone that determines whether a culture of innovation can thrive. If the CEO doesn’t reward innovation, protect the process and change internal relationships to foster innovation, the effort will fail.
Operational excellence is necessary to run the business of today, but the CEO must also create the business of tomorrow. Businesses must seek innovations that will lead to competitive advantage in the right markets.
2. Senior and midlevel managers are the natural allies of
innovation. Managers may not be the enemies of innovation, but they’re not the
natural champions, either. Their focus on operational efficiency encourages
them to reject new ideas that detract from these improvements. Companies tend
to promote executives who successfully operate the largest parts of the
organization, but innovation often occurs at the periphery.
3. Innovative talent works for the money. Innovative people are motivated by the rewards that come with a successful launch. Pay packages alone won’t determine the outcome of an innovation effort, so measures to improve retention of innovative employees should also include nonmonetary rewards, such as recognition and a degree of autonomy. PwC’s CEO survey shows the top CEO response to addressing perceived talent shortages is to add more nonfinancial rewards, such as praise and recognition.
4. Innovation results from lucky accidents. Innovative people and companies follow a disciplined creative process, increasing the chance that some of their ideas will score. What they do differently is work in structures and apply practices designed to deliver innovations successfully and quickly. This increases the odds of success.
5. The more open the innovation process, the less
disciplined. Many organizations are adopting more open approaches to innovation
and reaching out to
customers, suppliers and partners in new ways. Accord-
ing to PwC research, nearly 40 percent of CEOs from across all regions expect their company’s innovations to be co-developed, with leaders tapping into a more open approach. An example is the automotive supply chain, where automakers rely on suppliers to continuously improve components ranging from seat belts to brakes.
6. Businesses know how much innovation they need. Business leaders should ask: How much growth do we need from innovation? This involves considering how much growth will be driven by existing products and services, and how much will be required from new offerings, business models, processes, distribution and marketing strategies.
Leaders must also calculate how much inorganic growth the company needs, since most companies focused on developed markets expect low-single-digit organic growth without innovation. Innovation is the engine that must fill the gap.
7. Innovation can’t be measured. Innovation can and should be measured. Leaders should identify some ROII (return on innovation investment) measures to establish support. Innovation should face the same rigor applied in other areas, even though high levels of uncertainty and risk exist in the early phases.
Manage innovation as you would other capital investments: Allocate resources; set milestones. More robust, broad measurement allows a firm to see how it’s doing to better manage and discipline the innovation process. It identifies gaps in performance that it can close by applying practices to drive improvement.
In the end, the best talent will migrate to enterprises that offer inspiring goals, along with the processes, culture, incentives and investments that provide innovation-driven growth opportunities. Firms that attract talent into a superior innovation culture can expect to flourish. John J. Sviokla, business leader strategy and innovation in PwC’s U.S. Advisory Services, works with a variety of clients on strategy and marketing. He has consulted for firms around the world.
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