5 insights to manage innovation in your company

Summary:

Companies need to be agile to deal with changes in innovation and technology.
Innovation should not be seen as an isolated process, but rather as part of the company's strategy.
Companies should be open to collaborating with startups and other companies to innovate.
Creating a culture of innovation is essential, with incentives and recognition for creative ideas.
Leadership is essential in promoting innovation and creating a clear and ambitious vision for the company.
Measuring results and continuous learning are crucial to the success of innovation.

In today's business environment, innovation is not only inevitable, it is necessary for companies to maintain a competitive advantage over their competitors.

However, the success of implementing a change - a new process, technology or adapting to a regulation - depends on how employees understand, engage and adopt the innovation suggested by management.

To manage innovation well, you need to have quality information. You need to compare your reality with other success stories and know the best practices in the market.

Aiming to fill this information gap, the Dutch consultancy KPMG launched the Benchmarking Innovation Impact 2020.

The report - produced in partnership with Innovation Leader and now in its second edition - brings together research results and analyses on what innovation leaders are (and are not) doing today.

It also includes perspectives and insights, based on KPMG's own reality, in the application of processes with its clients, in addition to a series of interviews with innovation leaders, who talk about the challenges they have faced.

You can download the full study at this link. Below, SENNO has compiled the most important information.

Greater confidence in innovation

The survey figures show that executives are more confident that innovation - and assertive innovation management - will bring good results to corporations in the long term.

Among the 200 interviewees, including leaders in the area or those responsible for the research and development sector, around 56% believe that their company will invest more in innovation in 2020, when compared to 2019. And 42% of them have increased their confidence that strategy and investment in innovation allow their company to remain competitive.

Of the organizations that participated in the survey, around half offer some type of recognition or award for participation in innovation activities. And the most common metric used for innovation programs is revenue generated, with 58% of respondents using this KPI to assess impact.

For 61% of respondents, the biggest challenge encountered in scaling innovation is prioritizing these initiatives over the organization's other projects. The second biggest challenge is changing an outdated company culture that is stuck in outdated processes, according to 59% of executives.

“A key to the longevity and impact of innovation teams in any industry is that they find ways to collaborate with other parts of the organization,” says Scott Kirsner, CEO and co-founder of Innovation Leader. “Creating allies and supporters is critical, because there is always internal conflict and debate over what resources you need to work on.”

Another striking finding is that organizations are increasingly integrating innovation efforts with strategy. Companies with more mature innovation processes were significantly more likely to have innovation activities integrated or collaborating with their strategy than the overall average (81% vs. 56%). This means that these companies have the opportunity to develop the right strategies and approaches to successfully scale innovation, aligning this process with other departments.

Learn what KPMG’s recommendations and predictions are. Also, recommend reading it to your colleagues and partners. The material contains data and success stories, and can be a source of inspiration for organizations that are starting their innovation strategy.

Create a basic strategy

The KPMG report follows a structure similar to the famous PDCA cycle. In other words, the old management methodology recommends Planning, Doing, Checking and Adjusting, in a very data-driven style.

Adapted to the context of innovation, Planning shows that it is necessary to integrate innovation initiatives with strategic planning. The consultancy shows that organizations are looking for ways to prove the strategic value of innovation in order to obtain adequate resources.

Another important fact is that investment in innovation is focused on adjacent and transformational innovation. And that companies are moving away from the most accepted proportion, which is to invest 70% of efforts in incremental innovation, 20% in adjacent and 10% in transformational.

Currently, around 52% of innovation initiatives are focused on adjacent and transformational activities. And this change increases to almost 60% for adjacent and transformational innovation in companies considered models. This indicates that these organizations are allocating resources to new, more ambitious business models and services.

Fund innovation adequately

According to KPMG, most innovation efforts are still timid. Most companies are still creating efforts and initiatives such as innovation labs, venture capital programs or creating open ecosystems, when innovation is generated in partnership with external collaborators.

The survey brings interesting numbers. Around 43% of innovation-related programs have less than ten full-time employees.

And almost 60% of executives said that the creation of the program itself is seen as an evolution. One of them said that creating a structure to organize the chaos is the only thing we did that had any impact.

In other words, one recommendation from KPMG is to create instruments to finance innovation, providing resources, tools and personnel so that this investment makes sense.

These projects can have their own cost center, contain direct funds from the company's annual budget or even a hybrid financing model. In this case, project funding is specific to the innovation team, but operational costs are part of the overall budget.

About 40% of respondents cite lack of budget as an obstacle to the success of their innovation programs.

In this sense, CFOs must help create strategies that go beyond traditional financial measures, including the creation of an innovation portfolio. This way, it is possible to balance current business needs with long-term investments.

Pay attention to the company's culture

Internal and cultural conflicts can be the main enemies of innovation. Therefore, the company must align its internal audience well on the strategic importance of innovation.

So much so that the KPMG report mentions that politics, games of interest and a corporate culture averse to innovation were the main obstacles cited in 2019. These reasons were also at the top of the list in the survey carried out in 2018.

One of the ways for teams involved in innovation to overcome this problem and show their value, according to the report, is to embrace agile processes and create ways to test their ideas cheaply and quickly.

“Innovation teams will be able to prove their value by developing the ability to experiment and capture learnings more quickly at the lowest possible cost. The ability to test, learn and iterate was mentioned as one of the key factors for the success of innovation in their companies”, states the KPMG report.

Among companies considered models, the learning and insights generated are the main non-financial metrics included in their impact reports. In these cases, when testing the validity of an idea, it is possible to capture data that will help attract more funding and support from the organization.

However, according to benchmark, analyzing market trends and generating insights may not be enough. It is necessary to react quickly to changes in the market that can affect your growth and profitability in the long term.

The survey shows that only 15% of companies are able to “capture signs of change” relevant to their business. Meanwhile, 42% of executives say they are unable to create actions - even if specific - to respond to the signals.

Measure the impact and success of innovation

The master of management Peter Drucker once said that no one can manage what they cannot measure.

In other words, the path to success is to execute a strategy perfectly and still control how activities are carried out. This maxim applies to all departments, but it is a more than special message for innovation teams. But it seems that these teams still haven't gotten the message.

“Metrics are a must. A quarter of respondents do not track any financial metrics; this number drops, however, as companies move to a more sophisticated stage of innovation.”

Another piece of data that corroborates this issue is that only 33% of model companies are tracking the internal rate of return of the project. And overall, 85% of companies are tracking the financial value that the company is bringing through its innovative efforts, but they are unable to link this money to a specific project.

Finally, an interesting tip from KPMG. “For innovation teams that expect to achieve great results, it is worth considering new types of incentives, including rewards.” Of the companies interviewed, 51.2% offer some type of incentive such as time off to work on a project, financing or equity participation, while 34.3% have not yet adopted these practices.

Conclusion

At the end of the post, it is possible to summarize KPMG's recommendations. It is necessary to have a clear innovation strategy, provide adequate support and funding for these projects, and also measure your innovation efforts appropriately. And this without forgetting to have the right people. Around 41% of respondents are having difficulty recruiting talent with the desired qualifications.

But in this volatile and unstable environment, the biggest challenge is probably to maintain innovation activity and stable investment so that it produces results. KPMG Chairman and CEO Lynne Doughtie signs a letter at the end of the paper reinforcing the importance of completing an innovation cycle.

“We live in a world where having an innovation agenda is fundamental to success. But innovation must be more than a cliché. To have meaning and be translated into action, it needs structure and process. Innovation is about anticipating the future. As innovation leaders, we are scanning the horizon for trends and ideas that will shape tomorrow's world. From time to time, however, it is useful to look inward, to evaluate where we have been and what we have learned on our innovation journey”, concludes the executive.

If you need help with innovation management, you can count on SENNO. Download the free SENNO method whitepaper now, where we explain how to carry out an innovation journey assertively. Contact us and check out more about our portfolio of solutions.

And if you liked this article, read more posts on our blog.

Also read the KPMG Benchmarking Innovation Impact 2020 study.