Wednesday, March 23, 2016

The gulf between innovation goals and execution

Accenture has recently published an innovation survey of 500 executives in the US.  I'm particularly partial to portions of this survey because the authors identify a real and growing problem - the gap between what executives want from innovation, and the organization's ability to deliver.

By now everyone knows that innovation is a top three priority for executives.  That's not news.  You'd have to be a monopolist or simply crazy to suggest as a senior executive that innovation isn't one of your priorities.  But saying that innovation is important doesn't mean it will get funded, get prioritized and get done.  The Accenture article goes to great lengths to note that "US executives are unrealistic in believing they have the capabilities they need to achieve their bold innovation goals".  Ouch.

The authors go on to suggest that "a significant gap exists between what companies want to do in the area of innovation and what they are able to do".  Again, the idea of a distinction between desire and capability.  This isn't new.  There's always been a gulf between desire for innovation and capability.  It's just rare to see a well-known and respected analyst or practitioner admit that the gulf exists, and with their data acknowledge that the problem is actually getting worse, not better.

Even Accenture pulls its punches a little.  In the first figure of the research they note that 84% of executives surveyed know they are dependent on innovation.  But Accenture doesn't ask the commitment question - how many of these executives who admit knowing that innovation is important are actively investing in innovation, building skills, resetting corporate cultures, building bigger visions?  I think this was a miss on the part of the survey.

From the data presented it's clear that "innovation" is still defined very narrowly, as improvements to existing products and services.  While "disruption" is bandied around, few companies have plans to attempt more radical or disruptive innovation, or regularly stray from product innovation into other outcomes like business model innovation, service innovation, channel innovation and so forth.  In other words, most of these executives and their teams are just scratching the surface, when right underneath the surface a range of innovation options and outcomes is just waiting to explode.

Rather than count results and outcomes, the survey is forced to count inputs, so we get the usual stories:  74% say they have established formal innovation processes.  We at OVO have seen some of these "established" processes, which often aren't complete, and no one has been trained to follow.  As I like to say, just because I have a hammer, that doesn't make me a carpenter.  One of my favorite quotes from the survey is about executive engagement.  If you want to know how important innovation is to a company, let's track the time and engagement of the senior executives.  To quote the survey:  superior innovation performance requires more than c-level oversight.  It demands engagement from all levels of the organization.  But I don't see any measures or metrics of increased involvement.  There are all kinds of statistics about how many firms have digital systems such as project management platforms to manage innovation process (85%) or how many are doing virtual prototyping (84%).  If these numbers are to be believed, there are only a couple of conclusions that can be drawn:  either these are highly ineffective (assuming they are being used) because the results don't equate to the investment, or they aren't being used at all.

But my favorite quote in the survey was this one:  Companies' confidence in their innovation performance is not justified.  Wow.  Like a teen-aged driver convinced he's king of the road, executives are convinced that their teams are all well-above average when it comes to innovation.  In this Lake Woebegone environment, where everyone and every firm is well above average, 83% of companies surveyed said their companies were the same or stronger than their closest competitor when it came to the outcomes of innovation.  Clearly, we are awash in great innovation talent, we just haven't seen the new products, services and business models that are on the cusp of delivery to stores and channels near you.

It's not until page 10 that we get this dinger:  67% (two-thirds!) of respondents believe that their organizations are more risk averse than before.  So we are supposed to believe that more companies are doing more innovation, while risk aversion is growing?  And, worse, 82% of respondents do not distinguish between incremental and radical disruption.  They are using the same tools, methods, thinking and decision making criteria for incremental and disruptive innovation, and wondering why all the ideas seem so bland. 

Accenture's recommendation, the two engine solution, is appropriate but not new.  Their suggestion is to define a path for incremental ideas, and a separate methodology and philosophy for radical or disruptive ideas.  In this manner the ideas would be treated differently.  What's missing is a portfolio approach, which would indicate how many ideas of each type are valuable or necessary.  OVO has set up systems with clients that track incremental or continuous improvement ideas, and a separate track for disruptive ideas. But until there's clear sponsorship for disruptive ideas, funding and risk tolerance for those ideas and clear metrics and measurements, all ideas will eventually become incremental.

I applaud Accenture for its honest assessment of the state of innovation.  At a time when innovation is in high demand, far too many companies are paying it lip service, then are astonished when new entrants and startups completely disrupt the industry or market.  That disruption is simply going to increase as the pace of change increases.  Large corporations can't afford to pay lip service to innovation or treat it as an interesting experiment.  They need to embrace innovation and make it a core strategic philosophy, well funded and with plenty of resources.  Otherwise they'll play defense and wake up to discover their markets or products have been disrupted.
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posted by Jeffrey Phillips at 5:05 AM


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