Corporate innovation: 10 key lessons

In today’s market context, corporate innovation is essential to compete and not to die. Innovation goes beyond continuous improvement and adoption of new technologies such as the Cloud, robotics, the Internet of Things or artificial intelligence. Innovation is all about developing disruptive products and services, new business models and changing the rules of the markets.

However, creating a "well-oiled" corporate innovation engine means having a clear strategic intent, an adequate budget, and deploying models, both organizational and process, modern and agile.

Here we share some of the lessons learned that we believe are crucial to the success of business innovation. These come from the experience of top innovation managers from some sectors in constant evolution. With those we have been working for years and  organized a round table a few weeks ago.

1. Corporate innovation vs Strategy

Corporate innovation has to be aligned with the strategy, and strategy in turn will be aligned with other goals, for example, sustainability. Innovation is a means of achieving the objectives set by the strategy.

Business innovation managers should establish scenarios based on new emerging technologies and related solutions, and share them with strategic teams. And according to strategies, decided upon with knowledge and information, see where innovation resources are invested, decide where to focus your efforts.

There are often discussions between the innovation team and the strategy team, since trying to visualize and anticipate the future is not easy. However, many organizations are feeling lagging behind by disruptions in their business.

2. A separate Innovation organization

Experience shows that the short and medium term need to be clearly separated, encapsulating the risk associated with innovations (or innovative projects). It is not possible that the "incendiaries" of the business as usual (those that look for new technologies and solutions) are simultaneously the "firefighters" who extinguish these fires.

At the same time, it is difficult to obtain a certain degree of freedom in relation to daily business. You always have to be available in the workplace and sometimes this can make the short-term the first priority.

Large companies build global organizational structures for corporate innovation (for example, in utilities: generation, distribution, marketing, trade) and regional (by markets, because the regulation is by country). These structures can therefore be vertical or cross-cutting, or both and their innovative work could lead to new business units and spinoff.

Each company area must have its own innovation team, as it must be related to the business. For example, in Health the innovative solutions unit (which is not the one doing basic research, but trying to successfully bring new products out of it) focuses on preparing the market for new innovative products.

3. Creative team, but very close to the business

The people who make up the corporate innovation team in companies are fundamental, and they must have a special profile: motivation, patience and resilience.

At the same time it is necessary to combine different profiles within the team, as the area of innovation should be considered more as a "new business unit" with its salespeople, engineers, economists, etc. A good mix of these could consider for example:

  • Stay grounded, for instance with plant engineers in the innovation team.
  • Maintain customer focus, for example by involving former business development executives
  • Imagine how to apply new technologies, including to technologists or people who can invent crazy solutions ...

But for everything to work, leadership among them must be balanced, to avoid going to extremes.

4. Identify and focus on business challenges

Business challenges or needs are usually the trigger to start innovation projects in a company. Focusing on challenges ensures that the chances of impacting the bottom line are very high, because it is something well defined and helps focus everyone's efforts; also ensures greater support from the organization. Once the challenge is established, there is a screening for the best technology or innovation which makes it work, a solution is developed and delivered to the company.

There are different methods to help identify business challenges and opportunities, which will require adopting new technologies and innovative solutions. In a fast changing environment, such as today, challenge identification is increasingly important, since they highlight possible to-be business scenarios.

One effective method is organizing workshops with business leaders, suppliers, or even better, with customers, to understand their needs.

You can also go and conduct individual interviews and then meet those employees with good business acumen and future vision. Meetings might are usually executed by a third party to collect diverse information.

Workshops and meetings can help to gather a broad list of challenges and opportunities. A good classification and screening (e.g. selecting challenges well aligned with the company strategy) will provide a clear focus for driving the innovation.

In short, it is a question of establishing a formal and structured procedure to identify opportunities and disruptive ideas inside the organization. The key is to discover those "Steve Jobs", the visionary people that exist in every organization.

Differentiating between technologies and solutions is a good practice. Someone who works in a big tech company like Apple only thinks about customers, not technologies (somehow they’re tech-agnostic). Once a to-be solution is defined, teams will look for and develop the best technology to make it work. This approach does not mean that innovation teams should not be aware of different technological innovations.

5. Focus and rigor

You have to work with focus. It is better to focus your team on a project, although you might need to explore different paths to solve the challenges, but without losing focus; Testing as quickly (and cheap) as possible, to achieve early tangible results. This approach makes it possible to quickly deliver the results of the project on the bottom line, and to multiply and scale the results multiple times in the company. On the contrary, if we choose to open several projects with no clearly defined goal, our resources will be diluted and will not yield too many results.

Adopting a corporate innovation methodology is also a good practice, although it works well to keep some balance between rigor and in-depth analysis. Rigor is needed to build trust in the rest of the organization and, with support from senior management, to avoid barriers to innovation.

The methodology should consider different requirements depending on the nature of the innovation project under consideration. For example:

  • New product market introduction: Such a project must take into account all product variables to generate sufficient revenues and perform well once on the market. To do this, one has to be strict and look at price, market size, product reliability...
  • Improvement in a manufacturing process: An incremental innovation is expected and, therefore, the number of requirements to be taken into account is reduced.

6. relying on external ecosystems

Open innovation today is a common practice in many companies. Embracing open innovation means accepting a philosophy, changing culture. In order to solve the company's challenges, it is necessary to rely on the so-called innovation ecosystem, where the company's employees are included.

However, the efforts of internal versus external resources may vary from one business to another. Some companies prefer to focus on in-house innovation, in particular on "core" themes. Others do not mind opening up challenges to external looking for agility in some projects.

There is no way to know everything; in fact, it is generally counterproductive and ineffective to try, and it is almost a must to rely on external innovation ecosystems. Large businesses do, and small businesses should, with more reason. Naturally, there are also points of balance between these two views.

In our opinion, open innovation must always be the first priority, at least because of a simple economy of resources.

7. Adapt to go open

Embracing open innovation means adapting the way we work to collaborate with freelancers, startups and SMEs. For example, contracts or collaboration agreements should be simple, and avoid much of the requirements for new suppliers. Otherwise it will be almost impossible for these types of companies or individuals to work with you.

Supporting other business activities is very important to the innovation leads. For example, for digital projects, projects require support from the IT department and its teams. In this sense, the innovation leads must focus its efforts and have the capacity to mobilize and co-ordinate all those who need to collaborate on a project. All this regardless of whether the decision-making falls to the innovation department.

8. Use of virtual knowledge communities

Another tool that works very well are the virtual knowledge communities, with experts and users of technologies that are supposed to be of the future, such as blockchain, drones, etc.

Through these communities we know the state of the art of new technologies and applications and we also know who are the subject matter experts when needed.

People in these communities also enjoy what they do and in some cases it is a hobby for them.

9. Hand-over to the business

If there is a critical moment when you have to be very careful for the continuity of innovation projects, it is the moment when the project is transferred to the business. That is why it is important to see when you "release the baby" (the project), and who takes care of it, because it is easy to die at that time.

A good practice is to transfer when there is a firm order from a customer. At that time the business will have interest and will need to take care of the project.

One way to measure the success of innovation when you work with startups is to look at the % of those that have become suppliers. Industry average is about 1 out of 4.

10. Always add value to the customer

Providing customer value is a clear criteria for selecting innovation projects. When you receive value you are willing to pay for it and then the innovation will return the investment made.

A good example can be found in Health, a sector which is being disrupted. Challenges come from the huge budgets in European countries. The state funding limit is being reached, and it is not possible to devote more resources to health, especially in increasingly indebted states. So there are two possibilities:

  • Optimizing health resources, that is, achieving the same or better level of patient service with equal or lower expenditure per patient; or
  • Companies in the sector are no longer increasing investment in research, as they will not be able to recover it.

In the second case, health would become different for those that could afford paying an extra cost and those who cannot.

One of the best practices being adopted in this sector is to move from "artist" drugs (those individually recommended by each doctor) to comprehensive solutions. A good example can be found in dialysis:

  • With dialysis, if a correct and complete monitoring and follow-up of each patient is made by the pharmaceutical company, the patient's entry into dialysis might be delayed about 2 years later. approach would generate a saving of €42,000 per patient per year, which multiplied by the hundreds of patients in each hospital would save millions of euros.
  • A quarter of this savings can be used to finance this follow-up, leaving three quarters available to the hospital for other purposes, in addition to improving the quality of life of patients for two years.