Innovation management is a focal point for many businesses today. If it’s not a priority for your business, you risk stagnant product offerings and may succumb to the ever-present threat of disruption.
While every company may have great ideas, only those organizations with a strategy and effective leadership can turn those concepts into business growth and success.
In this article, we will discuss innovation management to understand the importance of managing new ideas. By the end, you’ll have the knowledge you need to not only map out your vision for strategic innovation but also to execute on that vision.
Let’s dive in.
What is Innovation Management?
Innovation management, or an innovation management system, is the process of managing new ideas, from ideation to taking action and making them become a reality. This approach has four distinct steps:
- Generating – Brainstorming and employee input to uncover hidden concepts.
- Capturing – Recording ideas in a way that is easily shareable with key stakeholders.
- Evaluating – Discussing and criticizing innovative ideas to see if they fit your needs.
- Prioritizing – Deciding which innovative ideas will be executed to maximize time and other resources in your company.
Innovation management informs—and is informed by—high-level business targets that generate significant value for your organization. Certain actions and practices will result from your innovation, just as your innovation will follow as a response to your business vision and problems that arise.
In order to implement effective innovation management processes, you need excellent communication between employees at all levels and a collaborative environment to uncover additional innovative ideas.
Why is Corporate Innovation Management More Important Than Ever?
Companies that don’t innovate will inevitably die, just like Blockbuster, Borders, Polaroid, and Kodak. Note that these aren’t mom-and-pop stores or early-stage startups—they are giant brands that had a wealth of resources, and they once dominated their industries.
If brands like these can die from a lack of innovation, then any company can. But innovation alone is not sufficient—it requires a collaborative culture that encourages employees to put forward great ideas and supports those with an entrepreneurial spirit.
Otherwise, these employees have little incentive to speak out and offer their insights whether they’re in the trenches or a higher-level management position. By managing and encouraging innovation, you can discover new products, reduce costs, and enhance your development process significantly.
Organizations that don’t embrace innovation management also risk bringing outdated solutions to their market. This limits your ability to stay ahead of the competition.
Blockbuster failed to promote innovation, instead of relying on their outdated model of in-store rentals and purchases for movies and video games. Netflix was able to disrupt Blockbuster by first offering DVDs shipped directly to your door. Soon after, Netflix pivoted once again by providing digital streaming for a large catalog of entertainment options.
By ignoring the industry’s inevitable evolution, Blockbuster dug its own grave despite having all the resources it needed to retain its dominant market position.
Key Pillars of Innovation Management
There are four key pillars to innovation management: Competency, Structure, Culture, and Strategy. As any new idea can be viewed as innovation, it helps to have these pillars in mind to stay organized.
Let’s take a closer look at each pillar:
Your core competencies are the things your company does best internally, as well as better than the competition. However, doing something well does not mean that it is important because your competencies may not always align with your market’s wants and needs.
In terms of innovation management, it’s helpful to distinguish your employees’ competencies from those of your organization at large. Your employees may have one-off competencies that apply in narrow contexts. In contrast, your organizational core competency revolves around its ability to direct and organize these capabilities around a market solution.
Therefore, for organizational competency, you should look for the following abilities:
- Working with external partners and stakeholders.
- Maximizing the value of your current resources.
- Setting concrete long-term and short-term goals.
- Strategic management systems to achieve goals and review progress.
It helps to have someone within your organization that already has experience with innovation management. However, with the right mindset and focus on improving your company’s competency in this area, you can turn it into a major strength.
Whereas competency has to do mainly with capability, structure refers to the systems and business processes present within the organization. Innovation control is essential, and the structure is what makes it possible.
The right structure is greater than the sum of its parts. It can empower your organization to operate more efficiently and produce more powerful ideas.
For instance, if management treats employee ideas as if the employees were proposing a significant, wholesale change all at once, the managers may be skeptical and dismissive. Such an attitude would mean many ideas may never be heard, or they will be rejected without a fair hearing.
The fewer barriers between an innovative idea and your core customers, the better. Innovators are, by definition, rule breakers—departing from the traditional ways your organization does things.
When it comes to managing innovation, your culture will either magnify your success or severely detract from it. The right culture attracts and maintains innovators, whereas the wrong culture turns them away.
The first key in promoting a pro-innovation culture is how you encourage specific behavior while discouraging other behavior. Behaviors and cultural aspects that aid innovation include:
- The Best Idea Wins – A culture that assures employees their ideas will be evaluated on a meritocratic basis will foster greater innovation. Instead of bottlenecks and hierarchies determining which ideas to embrace, anyone can move the organization forward if their proposal aligns with business goals.
- Speed to Market – In today’s world, it’s often the company that brings an idea to the market first that wins because you can capture market share before competition heats up. You can also iterate on products and services with a faster lifecycle.
- Ongoing Learning – Encourage employees to take their learning seriously. Teams who are always learning maintain sharp minds and can identify opportunities to innovate more readily.
- Failure as Part of the Process – One of the biggest barriers to sustainable progress is the idea that a proposed solution that didn’t work out was somehow “bad.” Not all ideas will be greenlighted, and that’s okay — but your team needs to know that (and hear it explicitly from your organization’s leaders).
In short, your strategy is the long-term planning you have in place for your organization to reach your financial and other goals.
With the right strategy, you can launch new ideas with confidence and select the right path forward from several options. Without a clear strategy, you risk running in circles or pursuing concepts or campaigns that don’t serve your company over the long run.
Strategy also involves resource allocation, and it should inform your innovation management process based on your available resources. This allocation may change over time as you shift more (or less) resources toward developing new ideas.
Different Types of Innovation Will Require Different Management Styles
There are various types of innovation, each with its unique benefits and disadvantages to your company. These innovation types also require different management styles to enact change effectively.
Open innovation is an approach that operates with the philosophy of keeping an open mind to ideas generated externally instead of just those that originate inside the company. This approach is the opposite of closed innovation, where the focus is only on internal ideas.
As you can see from the graph above, with open innovation, you are not limited to the ideas of your workforce. Instead, you can collaborate with external business partners, entrepreneurs, and new talent in other industries to contribute to strategic growth.
Intellectual property created between you and your vendors, outsourcing partners, and others in your network can ultimately be shared to benefit both parties.
Open innovation can present a sizable competitive advantage because you have access to a larger flow of ideas and also new experts and teams to evaluate and implement these concepts.
This approach requires a unique management style that can balance external partnerships with the input from your employees. At the same time, you must keep strategic outcomes in mind when selecting which concepts to invest your company resources and time in.
Incremental innovation provides a lower barrier to change by looking to existing tools, markets, and business processes for opportunities. For this reason, and because it allows greater innovation control, this method is a common way to begin the innovation journey for many companies.
Your company may already have an incremental innovation management system without realizing it, as many organizations often lack the systems to monitor, capture, and enhance naturally-occurring innovative ideas.
Therefore, incremental innovation is easy on the surface but requires astute leaders who understand the process and the importance of encouraging innovation. Moreover, these leaders must possess the discipline to put systems in place that evaluate new ideas as they relate to your strategic objectives for that department or the business as a whole.
Sustaining innovation seeks to improve current processes and avoid investing too many resources in “reinventing the wheel.”
This type of innovation jives well with managers who have an in-depth knowledge base of their market. They know what their customers’ problems are and how to solve them, the only question being how to do it most efficiently.
Disruptive innovation is a higher risk approach that involves using technologies or creating alternative solutions that are new to your company, and quite often, new to the market at large, as well.
An example of disruptive innovation is the iPhone. The first iPhone created an entirely new category — the touchscreen smartphone. It surprised other companies and the consumer market when released and gave Apple a significant head start.
However, disruptive innovation requires managers who have a high-risk tolerance and the ability to balance investment in innovations while maintaining current operations that are already proven to bring in revenue.
Architectural innovation is taking a process or innovation that already works in one area of your business and applying it across the “architecture” in different use cases.
For instance, you may have a backend technology that you could repurpose to create additional value for your consumer-facing applications. Since you have already proven that it works in one area, it is relatively low risk.
Typically, this innovation works well with management styles that focus on consumer needs and marketing, as the true challenge lies in getting your market to adopt it.
While similar to disruptive innovation, radical innovation goes one step further by creating entirely new industries and consumer habits. This field is sometimes known as category design.
It is high risk because you are performing business “backward” in a sense—creating a desire for something that no one knew they had. Think of the first airplane, phone, or television. Leaders who have huge visions and the ability to manage multiple departments are best suited to oversee this type of innovation.
Where Managers Can Source Innovation
Managers can drive innovation from a number of sources. The best option for your organization depends on your strategic objectives, resources, and organizational DNA (core competencies and culture).
Sources for innovation include:
Looking internally for innovation can provide a faster feedback loop and less friction to getting started. Popular innovation sources from within a company include structured innovation labs and R&D departments.
For instance, you can create a think tank within your organization. The employees in this group will be tasked with ideation and brainstorming. They can then hand off their ideas to your technical departments, who can perform testing to create a new product or business solution.
External innovation is another term for open innovation. As such, this refers to innovation opportunities sourced from outside your company, which may include promotional partners, supply chain partners, and sometimes even competitors.
For instance, if you run an ecommerce company, you may look to your manufacturers to help you innovate a new design mold that passes on lower costs to both you and your manufacturers. This results in greater profits for everyone involved as long as you have the right innovation management system in place.
Innovation partners are still third-party collaborators such as those in the external innovation process. However, they can provide additional insights because they specialize in or are expressly set up for producing groundbreaking solutions.
Examples of innovation partners are innovation accelerators and startups. Their focus is on creating an environment where new ideas and technologies are brought together to achieve a unique value proposition. Therefore, it is easier to hit the ground running with these partners.
Top Challenges in Innovation Management
Managing innovation is not easy, and you are bound to come across roadblocks both internally and externally in your journey. Let’s look at some of the more common challenges and how to navigate them.
Top-Down Management Frameworks
Old-school management frameworks such as “top-down” will create challenges for any company looking to innovate. The world is very different than it was just ten years ago, let alone several decades ago when many management systems were invented.
Instead of following the traditional route, it’s better to promote a “flat” company culture when it comes to progressive ideas. This allows communication to remain transparent so that great ideas don’t get squashed before they have a chance to provide value to your business.
Culture Lacks a Growth Mindset
There is a marked difference between company cultures that work with the view that “things are fine just the way they are” and cultures that possess a growth mindset. If you don’t have a growth mindset within your organization, it filters down to everything you do.
For instance, employees lack the motivation to work on themselves (continual learning) or your product offerings. And the same applies to your marketing team when looking at your target audience. Instead, make it clear that a growth mindset is required, not optional, within your organization.
You can give innovation all the lip service you want and claim that it is crucial to your company. However, without investing in the proper infrastructure to capture and test your new ideas, you will rarely implement innovative solutions.
While a top-down approach is unfavorable in some ways, the onus is still on the C-suite to provide their teams with the resources, technology, and opportunities that innovation demands.
If you don’t know where you’re trying to go, then most of your efforts will likely be wasted. A lack of strategy is a highway to mediocrity or even a failed business.
Innovation doesn’t happen in a vacuum—it needs guidance in the form of strong management and skilled team members who share the company’s vision.
With a strategy, teams have a much better chance of overcoming issues, as they can optimize their resources and direct their creativity to find solutions together. Everything should serve your higher business goals, or else the efforts are a waste of resources.
KPIs for Measuring Innovation
You can’t manage what you don’t measure. However, measuring progress is easier said than done when it comes to innovation. Here are some key performance indicators that allow you to organize and more effectively measure progress:
Regarding innovation management, input metrics are quantifiable aspects of your process—for instance, the percentage of your R&D budget for innovation.
However, just because you have input doesn’t mean you’re getting the outcomes you want from that innovation. Therefore, it is also essential to connect inputs with their associated outputs.
Output metrics are quantifiable metrics that have to do with actual results that you can see. For instance, the number of new products you bring to market over a certain period is an output metric.
Another example is the amount of new revenue generated from your innovation process. Likewise, cost savings by enhancing business processes are measurable and allow you to see if your efforts are moving you in the right direction.
In any organization, creative, game-changing ideas can come from anybody, whether it’s the senior executive or an intern in the customer service department. Whether those bright ideas go anywhere will come down to the practices and processes the company has in place for innovation management.
MassChallenge offers corporations a platform and a ready-made network of innovation partners, which they can collaborate with on groundbreaking ideas.
About the Author
Robbie Richards is an expert contributor to the MassChallenge blog for over two years. He writes on innovation approach, entrepreneur resources, and business and marketing research. He has been published in Forbes, Ahrefs, WordStream, and more.