Innovation has become a buzz word in industry marketing and strategic rhetoric. But how do companies ensure that investments in time and resource for innovation give returns? Andy Dean, reach® Director at Pera Technology, discusses explains the management and practice approaches required.
Despite being regularly quoted as a competitive virtue in UK manufacturing companies,
innovation of often poorly managed and executed. This can lead to sub optimal and vague returns being recorded in innovation investments, potentially jeopardising a company’s competitive profile.
Management and ownership of strategic innovation
A common mistake is for the board to treat innovation a series of projects which are handed straight to a committee, a R&D person, or a middle manager and we quickly see a pattern emerging of few decisions really being made.
In this scenario, so called ‘innovation’ programmes will tend to fall into a habit of looking for incremental changes to current products rather than the step changes required for true innovation that produces impressive and tangible results.
“An Innovation Director or CEO shouldn’t be afraid to say ‘I want 25% of revenue from new ideas developed in the last 3 years’.”
When responsibility for innovation is bolted onto an existing role we also commonly see the creation of time, resource, and empowerment issues. Innovation needs to be driven into the organisation and adopted as a key cultural activity. For this reason it should owned by the board and consistently supported and measured from the top.
Companies are recognising the need to look outside their own four walls and take lessons from other industries and markets. So, not only should innovation be supported from the top-down, but appointing a ‘champion’ is essential.
In large organisations, such champions may have the freedom of being disconnected from additional operational responsibilities and the traditional reporting structure, enabling a more dedicated focus.
The role of the ‘Innovation Director’ is becoming more common as CEOs recognise that growth and sustainability must come from getting products to market faster whilst de-risking the process by backing the right product, or in other words guaranteeing market impact.
One of the greatest challenges for most companies, and yet something that must be done, is to ensure that dedicated time is set aside for innovation related activities.
A company may find that not everyone values this time, so setting goals such as firm KPIs on ROI from innovation related activities is a good idea. An Innovation Director or CEO shouldn’t be afraid to say “I want 25% of revenue from new ideas developed in the last 3 years.”
Centre for Defence Enterprise
The MOD recognises that it has been disconnected from the 1000s of SMEs that have ideas or technologies that it could benefit from, historically relying solely on larger primary contractors and tier one suppliers.
To bridge this gap an increase the innovation potential of the UK defence industry, MoD set up a range of programmes including the Centre for Defence Enterprise, to actively target SME and start-up businesses that are developing technologies, processes or innovations with defence applications.
By enabling smaller companies to connect to the defence sector and table their high risk, high gain, ideas and technologies directly, MoD ensures it has a healthy pipeline of innovative ideas, to meet both short and longer term operational requirements.
Both the MOD and the engaging companies stand to win from this approach. The MOD will have a greater quantity and quality of solutions than it could ever hope to receive through its prime contractors, and the companies that engage with it have the potential to secure new revenue streams through a sector they have previously not been confident or able to engage with.
Look out for more insight into technology and business strategy developments in TM’s October Defence Sector Focus.
Practicing structured and strategic innovation
A common problem for many companies is the actual conception and development of creative ideas. Most traditional industries will have never come across creative ideation techniques, let alone adopted them to regularly encourage innovation from team members.
It is important to make ideation techniques (such as SCAMPER or the ‘six thinking hats’) part of an innovation culture where they are used repeatedly and suggestions can be made freely.
The key to long-term business success is to continue working on the innovation agenda consistently; the last thing a company should do is sit on its laurels. Not only can disruptive technologies or industry game changers come along, but product life cycles continue to get shorter and have therefore become a key factor in company strategies.
Just think about how quickly a product such as the latest mobile phone can reach a million customers in today’s market, compared with the first black and white television. The journey to end-user or consumer might be slower in traditional industries but the pace has still picked up. Innovation and NPD therefore needs to focus on accelerating the process and maximising impact as efficiently and effectively as possible.
Even very traditional insular industries are embracing these new top driven ways of innovating and capitalising on the benefits of a more open approach. The Ministry of Defence, for example, has recently taken step to connect with SMEs in its supply chain, in order to broaden its appreciation of the scope for technology and market development in the industry. Previously it has only had visibility of the developments at a handful of large contractors and suppliers (see box).
For further information visit www.peratechnology.com
Inspiring Innovation in Manufacturing
Come and learn more about how to conduct structured, strategic innovation at TM’s Future Factory: Inspiring Innovation conference in London on October 16.