Tuesday, December 14, 2010

Innovation and Strategic Alignment

In a new study on innovation just released by CapGemini, one chart in particular caught my eye.  The chart is a stacked bar chart reflecting how aligned the executives believe their innovation work is with their strategic goals.  You can register for the report at www.capgemini.com.

The background material on the study indicates that CapGemini received 189 responses from companies in 15 countries, and that most of the respondents were board-level and senior executives, as well as middle managers closely aligned to innovation roles.  So these folks should understand their corporate strategies and how closely innovation is linked, or should be linked, to strategy.

What caught my eye is that across four major industry divisions - auto/aerospace/defense, Industrial Products, High Tech and Consumer Packaged goods and Retail - anywhere from 23% to 50% said they felt innovation was "somewhat aligned" or not aligned.  As you'd expect CPG was the "best" of the group at 23% somewhat or not aligned, and Auto/Aerospace/Defense was the worst at 50% somewhat or not aligned.

This report should be given to all the CEOs and C-level officers of the firms that responded, and should then cause innovation efforts in many of those firms to come to a screeching halt.  If anywhere from 25% to 50% of your company's time and effort is being spent - in any initiative - on tasks that don't fully align with the corporate strategies, you should be concerned.  When significant innovation initiatives don't align to corporate strategies, you should be, in the immortal phase from Network "mad as hell and not going to take it".

What was even more shocking was that in most industries 10% or less of the executives responded that innovation was "completely" aligned to corporate strategy.  In what other business effort or function could you achieve any success only 10% aligned to corporate goals?  What on earth are these innovators doing?  There are really only a few possibilities:

  1. Corporate strategy isn't well communicated or is unclear.  Believe it or not this is more prevalent than you'd want to think
  2. Innovators are "off the reservation" chasing ideas that don't align to corporate strategies.  These teams need to be corralled and directed to important corporate goals
  3. Corporate strategy is clear but the goals and outcomes expected from innovation aren't clear.  Yes, we want new products - but should those products be incremental or disruptive?  Should we rely on internal innovation capabilities or extend our innovation externally?
  4. Innovation is intentionally disruptive and appears to run counter to corporate strategy.  All companies should have some innovation that either considers cannibalization of existing products or entry into new markets or spaces, and that may seem to run counter to corporate strategy but in effect is actually very tightly aligned.
Only the last reason is even close to acceptable if innovation efforts and strategic goals aren't in close alignment.  The first three are symptomatic of bigger problems not necessarily related to innovation, but to management, strategic thinking, culture and communication.

How long will it take before senior executives recognize they have an important role to play in setting expectations and goals for innovation, and ensuring those efforts are "on track"?
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posted by Jeffrey Phillips at 11:22 AM


Blogger Landon Wood said...

Hi Jeff, enjoyed the post. I went to www.capgemini.com and searched for the report you referenced and produced 700 results. Would you mind providing a title for that report?


8:32 PM  
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Anonymous Anonymous said...

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Seriously alignment between innovation and strategy is the big elephant in the room. Cheers

7:52 AM  

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