Wednesday, April 15, 2009

Innovation 2009 - the BCG Yearly Survey

Each year James Andrew and his team at BCG publish an insightful survey on the state of innovation. This year, as always, they've created an insightful report on innovation in larger organizations across the globe. They have the usual statistics - 64% of CEOs still rank innovation as a top three priority, and so forth. The BCG authors rightly point out that innovation being de-emphasized or refocused in some firms due to the state of the economy. All in all this is a good snapshot of the state of innovation. I suggest you seek out the report.

What I wanted to drill down into was a chart on page 11 of the report, entitled "What are the biggest obstacles you face when it comes to generating a return on your investments in innovation?" The usual suspects are here - risk averse culture, lengthy development times, a lack of good ideas. Since this is a survey, these factors are necessarily discrete and somewhat overlapping. What I'd like to do is combine or aggregate these factors in a way that makes sense to me, and hopefuly for you.

First, recognize that most of the people who responded to this survey are "C" level officers who think about innovation from a strategic standpoint and who see only the most significant issues or challenges, so to them these may appear as distinct issues which are not connected or integrated. With that in mind, let's consolidate the list of challenges:

  • Cultural issues - "Risk averse culture", "lack of coordination", "insufficient support from leadership"
  • Communication issues - "Lack of coordination", "ineffective marketing and communications", "insufficient support from leadership"
  • Compensation issues - "compensation not tied to innovation results"
We like to think of these concepts as the foundational building blocks for innovation. If the management team is not actively engaged and squarely behind innovation efforts, constantly communicating the importance of the activity and aligning compensation to the innovation activities and goals, it won't matter how good your ideas are, or how strong your execution capability is. Innovation won't happen often and won't produce the results you expect.

  • Leadership issues - "difficulty selecting the right ideas to commercialize"
This issue we split out separately, because successful innovation requires the team to work on what is important to the organization. To do so, the organization needs to understand the strategic goals, direction and intent of the organization. If the innovation teams don't understand the strategic goals or strategic intent, or that is intentionally vague or poorly communicated, then any idea appears to be a good idea, and prioritization and selection are exceptionally difficult.

  • Inputs - "not enough customer insight", "not enough great ideas"
If innovation is a process, then customer insights or understanding of customer needs and the generation of new ideas are the inputs. Again, having a good understanding of the strategic direction and intent is very helpful. Most companies don't have good customer insight, since they lack the ability or capability to perform scenario planning, voice of the customer or ethnography. None of this work is difficult, it's just very soft and qualitative and not aligned to existing cultures.

  • Execution - "lengthy development times", "inability to adequately measure performance"
This is a little like the boy who killed his parents crying because he is an orphan. To blame difficulties in innovation on the inability to design and build a new product or service is a bit disingenuous. After years of operational excellence, one would hope that at least the product or service design and development capabilities are optimized!

What the BCG research points out is that the groundwork for successful innovation - including active, involved leadership, cultural attitudes and compensation aligned to innovation activities - hasn't happened in many firms. Without these environmental conditions, innovation will struggle to succeed.
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posted by Jeffrey Phillips at 9:38 AM


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