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Is My Company Mature Enough to Innovate? (Part IV)

Strategy MattersHOW DOES YOUR company stack up to the competition when it comes to innovation? Does everyone involved know what to do and how to do it when acting on ideas?

Disinterested Competition Judge Reading Newspaper
Disinterested Competition Judge Reading Newspaper

In this segment on creative thinking, further attention is placed on the organization and its ability to plan, organize, and execute activities around innovation. Introduced is an industry framework model to interpret a company’s competency in innovation. Argument is made for the proper deployment of strategy, people, processes, and tools, and how it is possible to measure innovation maturity based on industry best practices.

Here’s a recap of the takeaway points on creative thinking from Part I, Part II, & Part III:

Part IV recap JPEGProblem Statement

Saying and doing can be two entirely different matters when it comes to innovating. For instance, Elon Musk not only said but proved that his SpaceX company could successfully launch a rocket into space and re-land it onto a floating barge for future missions. Clearly that feat involved much skill and cutting-edge technology to pull off. His competitor – let’s call it Company X so no one takes offense – could fake it by saying that it too could accomplish similar achievements but, as time passes, show little to no evidence to support the claim. Why is it that only a small percentage of companies are able to build on their innovation success and accomplish even bolder outcomes through innovation as a core competency?

“ALL companies struggle in varying degrees when innovating. “

The nature of innovation deals with new ways of thinking, internal resistance to change, and coping with uncertainty. Without a guiding framework in place, it can be very challenging to solve the right problem areas with creative ideas, and then transform a fuzzy concept into a tangible outcome with value. It gets even more challenging for a company to sustain this ability over time as a core function. Many leaders do not know where to start; they fail to fully understand the requisites needed to explore and capitalize on creative ideas. When making a case for innovation, many of you have likely encountered pushback like:

  • We can’t afford the risk of new ventures: we need to focus on operational improvements
  • We can’t start risking new ideas when we’re dealing with reduced margins and revenue
  • We tried some new initiatives but they flopped. We can’t afford that kind of failure at the moment.

To counter this line of reasoning, the consulting firm PwC forecasted that innovative companies should grow at an average rate of 62.2% over the next five years, as compared to a much smaller 21% rate among the other companies analyzed. This claim comes from PwC’s 2015 Global Innovation Survey. Reading into the survey, the risk of not innovating can be greater than attempting to innovate with mixed results, especially when acknowledging how existing product lines lose their competitive edge over time. Smart companies are able to do both – improve operational performance AND invest in new products / market areas through innovation. Less capable companies may flounder and ultimately go out of business as the competition catches up and steals customers. This begs the question: How can companies expect to grow without a viable business strategy tied to innovation, where customer needs, industry trends, and emerging technologies are factored into go-to-market tactics?

Maturity Models

Management guru W. Edwards Deming is claimed to have said, “If you can’t measure it, you can’t manage it.” Applying this quote to a company’s ability to innovate, clearly the activities performed need to be measured in order to manage outcome.

Businessman walking on edge of ruler supported by large finger
Businessman walking on edge of ruler supported by large finger

Drawing a parallel to the discipline of project management, Carnegie Mellon University and its Software Engineering Institute (SEI) created a Capability Maturity Model (CMM) in 1989 as a means to assess a company’s ability to execute based on established best practices. Maturity levels in project management range from 1 (ad hoc) to 5 (firmly established). Leaders are able to measure their organization’s maturity level (ML) while identifying gaps between current performance and what is considered best practices.

Similarly, this same type of approach applies to innovation, where a company’s maturity level can be assessed against corresponding best practices. Applying a tailored CMM approach to innovation –where process, roles, and tools are defined to varying levels of maturity – leaders are able to more objectively: (1) understand their organization’s strengths and weaknesses, (2) identify gaps against established best practices, and (3) highlight where they may want to invest additional resources. Listed below are a couple of models that use different maturity levels to measure an organization’s competency.

Part IV_Innovation Maturity Model - 2Business Innovation Maturity Model, Created by Praveen Gupta, Accelper Consulting, 2010

As portrayed in the first column, I-Sporadic Innovations through V-Sustained Profitable Growth are the two extreme maturity levels. The third column describes the type of activities found in organizations according to their maturity level. What is particularly revealing are the organizational characteristics listed in the fourth column. Here one can see a sharp contrast across the maturity levels. Clearly a company whose profile is closer to ML 5 than ML 1 is more proficient at being able to discover need, act on creative ideas, and launch innovative products that generate meaningful value.

The reader is encouraged to think about their own company within the context of this CMM model. As you quickly do a preliminary assessment in your head, think which of the five maturity levels best fits your organization. Is innovation embedded in your company’s culture with a supporting organization, well-defined processes, and formalized tools? Or is there just a general awareness of the need to innovate without much supporting structure to guide efforts? Perhaps your company is somewhere in the middle, where uncertainty exists as to whether further investment in innovation capabilities makes sense within the context of strategic goal attainment.

It is interesting to note that ML 3 (Managed Innovations) and ML 2 (Idea Management) were acknowledged as the two most prevalent ratings among 38% and 32% of the respondents, respectively, in  a study conducted among 700 product development executives and managers revealed, ML 3 (Managed Innovations) and ML 2 (Idea Management) were acknowledged as the two most prevalent ratings at 38% and 32% of the respondents. Though just one study, this finding suggests that many companies within the population sample fall short in what is needed to innovate with confidence.

The second model listed below offers a slightly more involved maturity model for assessing a company’s ability to innovate. A line is drawn to portray how a sample organization might be assessed against established best practices.

Part IV_Innovation Maturity Model - 1Innovation Maturity Model. Adapted from Deloitte, 2012

The Y (vertical) axis includes four ways by which innovation is performed, whereby:

  • Ad hoc refers to a lack of established, repeatable methods
  • Decentralized in that methods to innovation exist but vary across the company
  • Organization refers to how innovation is done consistently throughout the company
  • Network in that the means exist to innovate with an extended scope of business partners and customers, in addition to employees within the context of working together to act on change.

Across the X (horizontal) axis are the various management disciplines to innovation. The last three criteria are rolled up into the Innovation Process to define how ideas get identified, developed, and launched to market. While additional detail outside the scope of this article exists to describe the model, it is possible to objectively measure a company’s maturity level and identify gaps where additional improvement may be warranted.

As depicted by the drawn line, above, the ability to discover and identify good ideas is qualified as an immature process area. The evidence evaluated indicates that the company does not have a consistent means to innovate, as the results suggest a decentralized approach. Overall, it implies that the organization in question lacks a common way to drive innovation with the right people, processes, and tools. In this case, senior leadership needs to interpret and apply the findings (low ML) to being able to retain and attract new customers. Loyalty is not what it used to be, and customers nowadays will go to companies that can best meet their ongoing needs.

Discussion

Both examples shown above are representative of other models available that measure a company’s maturity level to innovate. These models tend to share a common emphasis on the following four building blocks of innovation:

Screen Shot 2016-06-26 at 2.42.03 PMEvidence from recent efforts to innovate can be used to substantiate the organization’s maturity level among these four building blocks. Examples of evidence to look for are listed in the second column.

A construct like this provides a target for the leadership team to plan for when seeking to strengthen their company’s ability to innovate. Assigning an executive sponsor with authority and respect to implement change can accelerate efforts to improve. This initiative should be transparent to the organization, widely communicated, and include a tailored training segment for executives, management, and staff.

Training

“The concept of innovation can mean different things to different people.”

Agreeing on terminology, approach, and success criteria requires consistency throughout the company, hence the need for training. Suggested topics include:

Screen Shot 2016-06-24 at 6.22.19 PM Closing Comments

The extent that companies become more mature in innovation is a function of the resources available and leadership priorities. For some organizations, being assessed at ML 4 (out of 5) is good enough. The previously mentioned study among 700+ product development executives and managers revealed that a plurality (32%) of those surveyed aimed for ML 4 as the desired end goal, followed by ML 5 at 26%. Clearly a tradeoff exists between the resource investment and expected value in return when contemplating between ML 5 and ML 4, for instance.

Key takeaway points from this article include:

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  • How innovation is essential for survival. Leadership needs to invest in their company’s ability to innovate as a basis to sustain new product offerings for long-term growth.
  • Why innovation requires a framework to define and guide activities. This article references two CMM models to demonstrate how organizations can be assessed. Evaluation criteria provide a basis to evaluate strategy alignment, people, processes, and tools against best practices.
  • How innovation is about people. While processes and tools are important, it is the people aspect to innovation that truly drives progress. This can include employees, leadership, customers, business partners, consultants, and academia.
  • How innovation requires process. Knowing what to do, how to do it, and when to do it are the means to innovate. Those involved need to know how to perform their tasks and work with others in a coordinated manner.
  • How innovation is a skill – it can be learned. Recall in Part III how the appliance maker Whirlpool taught innovation to 15,000 of its employees. This investment in people helped prepare the organization in knowing how to discover need and innovate new offerings.[/message][su_spacer]

“One can easily argue that the need to innovate has never been greater than now.”

The rapid pace of technological change, shifting customer needs, and rival competition requires that companies sustain a pipeline of new ideas to fuel innovation. Leadership should be aware of “innovator’s dilemma,” where too much emphasis is placed on customers’ current needs while failing to adopt new technology or business models intended to meet unstated or future needs. Two vivid examples are Eastman Kodak and Blockbuster Video; both companies ultimately went out of business due in part to the innovator’s dilemma.

Bolder, more creative types of innovations tend to be increasingly complex as the need for fresh ideas emerges. Innovators should look beyond internal boundaries to tap into more diverse insights from customers, business partners, industry consultants, and academia. They need to borrow and repurpose ideas used in other settings to generate additional value. As noted in Part III, innovators should engage in divergent thinking, breakthrough thinking, and brainstorm activities as a means to stimulate creativity. The more minds the better when it comes to formulating fresh ideas, including experts outside the company with unique insights. Employees and business partners most familiar with customer frustrations and potential solutions can be extremely valuable during the ideation phase.

At the organizational level, being able to pull it all together to achieve a high ML can lead to a competitive advantage. More output delivery, greater creativity in fulfilling customer need, and the ability to differentiate from the competition are three compelling reasons to move up the ML ladder. The CMM models summarized above can enable leaders to measure their organization’s strengths and weaknesses, and highlight where it falls short in being able to innovate with competence.

Clearly more detail is needed to substantiate the best practices associated with innovation. The intent of this article was to outline the high-level constructs among different maturity levels and introduce two CMM models as examples. Specialized consultants in this field can offer their own CMM model with well-documented best practices as a basis to assess the organization’s maturity level in innovation.

“One thing is clear, however; innovation maturity does not naturally happen.”

Leaders and employees alike need to establish two-way trust while engaged in cross-functional project teams, where an established framework of people, process, and tools converge to push great ideas forward. How the willingness to think and act differently is embedded into the organizational culture. Organizations that can sustain a pipeline of creative ideas to known and anticipated problem areas will have a leg up on the competition when it comes to innovating creative products that attract /retain customers.

It is a pleasure to share these ideas on creative thinking, and hope that it is of value to you and your organization. I welcome all likes and comments on the article.

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Other Related Readings on Strategy & Innovation:

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Dr. Robert Bornhofenhttp://bornhofen.weebly.com/
Dr. Robert Bornhofen is a scholar-practitioner with over 25 years of experience. As a scholar, he currently teaches strategy at Cornell University and the University of Maryland Global Campus. As a practitioner, his corporate career includes a variety of leadership roles at Fortune 500 companies IBM, Delta Air Lines, & Citibank. Dr. Bornhofen earned his Doctorate degree at the University of Maryland, a Master of Science degree from Colorado State University, and a Bachelor of Science degree from the University of Minnesota. He also holds a certificate in International Business from the Thunderbird School of International Management in Scottsdale Arizona. As a conference speaker, Dr. Bornhofen presents at industry forums, most recently at the Emerging Innovation Summit in Melbourne, Australia (2019), Strategy & Innovation Conference in Riyadh, Saudi Arabia (2017); International Open and User Innovation Conference at the NYU Stern School of Business (2018), and the Texas Open Innovation Conference (2017 & 2018). As a researcher and author, Dr. Bornhofen published over 20 papers on topics related to innovation strategy. Passionate about change, Dr. Bornhofen embraces the creative spirit that goes into problem-solving, where smart people come together to transform great ideas into extraordinary outcomes. His articles reflect this passion and desire for continuous learning.

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