Monday, August 04, 2008

How does innovation fit into your plan?

We all know that CEOs want innovation. Every press release, every annual statement talks about the importance of innovation to just about every firm. Yet there is a disconnect that exists between the executive level demands and expectations for innovation and what happens six to nine months later. You see, most people within a business would love to be more innovative, but they've got the pressure to deliver on quarterly and annual goals and promises to Wall Street, investors and shareholders. So, while the advocacy of innovation from the senior suite is interesting, what gets done is what gets measured. And our current yardstick is stock price, profits and revenue growth.

To move beyond merely advocating innovation, the executive team needs to set a solid expectation about the delivery of innovation. The best way to do that is to require each line of business, each product group, each business function, to incorporate innovation into their annual plans and be able to demonstrate what achievements were accomplished. This might look like a 3M sort of goal, where you want to drive X% of your revenue from products created in the last few years, or the creation of Y new markets that did not exist for the firm a year before.

Requiring the product groups and business functions to incorporate innovation in their annual plans, and then reviewing the results and assessing how well the goals were achieved is a simple first step, and one that is not often taken. The next approach to incorporating and achieving innovation is to establish a pool of funds specifically for innovation, and have the lines of business or product groups request money from that pool, which is dedicated to innovation. Jeff Immelt at GE has taken this step - to challenge each line of business to create imagination breakthroughs with funding available from the office of the CEO. When the CEO asks for innovation and offers to fund it, and reviews the significant ideas, don't you think that conveys how important innovation is to GE?

What would happen in your organization if the CEO asked for an annual plan from a line of business, and also asked for a plan that included 30% of revenue generated from products that did not exist, or asked the line of business to create a plan that spent $5M in innovation funds to create new products and services? Would that change the way your firm thought about innovation and the urgency and importance it assigns to innovation? You bet it would.

CEOs who truly want innovation in their organizations need to invest not just their words, but their time and their funding to demonstrate how important innovation is to the business.
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posted by Jeffrey Phillips at 7:31 AM

2 Comments:

Anonymous alat ternak said...

thanks for the sharing

7:36 PM  
Blogger felicity said...

Fascinating article- I must say. So nice to find somebody with some original thoughts on this subject.
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7:38 PM  

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