The Eight Essentials of Innovation – Large companies find innovation hard, they are usually much better at executing strategy than they are at innovating. Which is why many large organisations fail to achieve growth through creativity and instead focus on optimising existing businesses.
Innovation and Creativity
Innovation is a complex endeavour it requires practices and processes to structure, organise and encourage it. McKinsey have identified eight essential aspects and codify this into an operating system.
The first four Aspire, Choose, Discover, and Evolve are strategic and creative in nature. The second four; Accelerate, Scale, Extend and Mobilise deal with how to deliver and establish an innovation cadence in the operating model.
A far reaching vision can be a compelling catalyst, provided it is realistic enough to stimulate action today. Establishing an aspiration target for innovation is not enough, the specific values need to be apportioned to relevant business owners and cascaded throughout the organisation as direct performance targets and timelines.
When fresh creative ideas are invaluable, most organisations have a problem not in finding the ideas but prioritising and selecting. “Innovation is inherently risky and getting the most form a portfolio fo innovation initiatives is more about managing risk than eliminating it.”
Companies need to ensure that there is transparency of resourcing applied to innovation with a a clear governance process that constantly assesses the expected value, timing and risk of initiatives in the portfolio.
“Most established companies err on the side of overloading their innovation pipelines with relatively safe, short-term, and incremental projects that have little chance of realizing their growth targets or staying within their risk parameters”
The insight discovery process is on of scrutinising three areas 1) a valuable problem to solve. 2) a technology that enables a solution. 3) a business model that generates revenue.
Discovery is iterative and extending beyond your organisations boundaries to create ‘insight generating partnerships’ is the lifeblood of innovation.
Business model innovations change the economics of the value chain, it can diversify the profit streams or modify the delivery processes.
The challenge is most successful companies do not want to touch a successful and profitable business model until it is clearly under threat. By that stage it may well be to late to respond.
Companies that excel in evolving business models constantly reevaluate their role in the value chain, seek to constantly identify new business models that might deliver value to priority customer groups and stress test emerging value propositions and models against counter moves by competitors.
There are many parts of an organisational bureaucracy that undermine or slow innovation. Cautious governance, complex processes in Finance, IT, Legal, Marketing or any slow stage gated approval process. Companies seem to find ways to just slow things down, even to halt progress through a slow approval process.
Joint success targets (KPIs) and cross functional teams ensure the best chance to drive through the glue. Innovation leaders need to be well connected to take charge of the projects and break through silo walls.
Knowing if, when and how to scale is critical to the business. For some businesses that are addressing niche markets the scale issue is small. For others however when demand takes off, being able to scale with ruthless efficiency will be the difference to remaining sustainable.
Smart innovation collaboration takes advantage external partners to go beyond sourcing new ideas and into sharing costs, finding faster routes to market, reducing costs and creating new channels.
“Companies that make the most of external networks have a good idea of what’s most useful at which stages of the innovation process”
Embedding an innovation culture requires the organisation to encourage, stimulate, support and reward innovation. It needs to promote collaboration, learning and experimentation. Companies need to encourage people to freely share knowledge and ideas, collaborating to ensure that lessons of success and failure are all captured and assimilated into the collective knowledge.
A company with a strong culture around innovation knowledge sharing is on the right step to mobilising to innovation opportunities.
- McKinsey articles always bring a wealth of information this article only summarises the key points, if you find this topic interesting I suggest you read the original
- Culture change is hard, embedding innovation into culture is harder. It needs to start at the top and have a reward and metric structure that aligns all parts of the business.
Synopsis of an article from McKinsey Quarterly The eight essentials of innovation by Marc de Jong, Nathan Marston, and Erik Roth Published: 1st April 2015 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-eight-essentials-of-innovation