Most business leaders recognise they need to innovate – or risk being disrupted themselves. But for many companies, relentlessly searching for the next killer idea could be doing more harm than good. The secret? Do your own (new) thing…
Management guru Gary Hamel wrote more than ten years ago, “You can wait for a competitor to stumble upon the next great management breakthrough, or you can become a management innovator right now. In a world swarming with new challenges, you need to be even more inventive and less tradition-bound than all those management pioneers who came before you.”
So what’s the recipe for innovation today, when ‘disruption’ has become the norm? There’s no easy answer. Each business must tailor its innovation process to the problems it can see within itself – and its markets.
Even for large companies, applying macro-metrics is not that useful. According to PwC’s Strategy& report of the top 1,000 most innovative companies (a 12-year study), there is no clear relationship between R&D spending and sustained financial performance. For smaller businesses, applying a crude measure like that is even worse.
A better approach is to help innovation by empowering – and, crucially, rewarding – staff for new ways of working that will incrementally and constantly change a business for the better.
New processes or tweaks to service arrangements, say, can both address costs and generate growth. Any business should set goals to shape innovative thinking – such as automating processes, reducing transaction costs, speeding up customer interactions or improving net promoter score. Larger organisations can also build an innovation management group to nurture and optimise ideas.
How do you know whether all this works? When the Balanced Scorecard Institute looked at measuring innovation, it stressed businesses must “define the intended results for your own organisation’s innovation-based strategic objective.” That might be more patents. Or it could be new internal processes for the business. These are the ‘activity’ metrics.
Then what’s the overall strategy innovation supports? Is it revenue growth? To what level? How about customer engagement? Or the value of intellectual property assets? It could even be administrative costs. These the ‘impact’ metrics.
Some of these are highly scientific. McKinsey likes two core metrics: R&D-to-product (RDP) conversion and new-products-to-margin (NPM) conversion. These work well within high-spending corporates – but they might be less useful to smaller organisations.
Either way, hard data is a critical factor. Understanding how the business is really working, where the pain points are and what the market opportunity might be – in core markets, or complementary businesses to defend against disruption – gives the team focus.
Take Rivigo, the company revolutionising the Indian trucking industry with more accurate journey predictions, new levels of efficiency and automation. It’s a great example of a business that’s analysed its unique position and innovated appropriately.
It’s found data-driven efficiencies and better forecasting, delivered by telematics and enterprise analytics – it has 40 engineers specialising in AI and big data to do that. But it also created an innovative concept of ‘pit stops’ to allow truck drivers to return home every night. It saw that the pain points in the business were partly about data, but also about employee experience. It was a unique blend of problems demanding a tailor-made solution.
Intelligence from connected enterprise systems is hugely valuable, of course. Connecting individuals and teams can yield surprising cross-fertilisation of ideas – something Oracle itself has been benefiting from with its Industry Innovation Advisors team powered by Oracle Cloud.
But whether it’s looking to innovate processes in the finance function or build a new product, the other factor unique to each organisation is vision. If leaders become obsessed with measuring innovation, this can be neglected. Large or small, organisations that have a culture of empowerment – where ideas can be quickly put into practice and connections made across geographic and functional silos – will do better… however they measure it.
But deciding which to prioritise can only be done based on insights about each business – and the strategic objectives of its leaders.
Check out which approaches other business leaders are taking to innovation and using it to drive growth.