Best practices of successful innovation (1)

Why are some companies better at innovation than others? In this article I describe 8 steps that lead to more successful innovation. Most people know that a lot of product or service introductions fail. A PDMA investigation[1] shows that only 61% of the products actually launched were successful. However, if we use the outperformers Comparing with the rest, we see that these best companies have an average success rate of 82% versus 53% for the rest.

In a PwC Survey[2] innovation is cited as the most important driver of growth. Perhaps surprisingly, 74% of CEOs consider innovation as important to the success of their business as operational effectiveness. PwC shows that the most innovative 20% grew no less than 16% faster than the least innovative companies over a period of 3 years.

 

So, what lessons can we learn from this outperformers? What are the best practices? If you want to get better at innovation, these are the steps to take.

  1. Determine a clear innovation strategy

  2. Check whether the corporate culture is in line with this strategy

  3. Provide ideas… lots of ideas

  4. Choose the best ideas

  5. Test it with your customers

  6. Use a custom product development process

  7. Don't forget the launch plan

  8. Learn from your mistakes

In this blog I will guide you through steps 1 to 4, in the next part steps 5 to 8 are discussed.

 1. Determine a clear innovation strategy

How would your company be if you didn't have strategic goals you want to achieve? The same goes for innovation. The best companies have established a clear innovation strategy (79% vs 47%), which forms a congruent whole with the overarching strategy.

These companies know how to answer the following questions:

How much innovation do we need?

Depending on the type of business involved, is the goal to be the first to market, or are you more of a fast follower? The best companies often aim to be first on the market. A much larger part of their turnover comes from new products and services (48.5% vs 25.0%).

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Level of innovation 2012, PDMA

Source1

What kinds of innovation do we need?

There are three types of innovation: incremental innovation, semi-radical innovation and radical innovation. The most innovative form is radical innovation, as shown in the table below. Leading innovators have a higher objective for the part of semi-radical and radical innovation, especially around products, services, technology and business models.

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From: Making Innovation Work: How to Manage It, Measure It, and Profit from It, Marc J. Epstein, Tony Davila, Robert Shelton (2005)

The best performing companies use Portfolio Management to manage their portfolio of innovation projects. They are also aware that this type of innovation requires a separate fund that does not have to compete with operational financing needs.

WWhat do we focus on?

Focus is always important, especially in innovation it is important to establish frameworks. Then everyone knows how large the possible playing field is.

 2. Check whether the corporate culture is in line with this strategy

Maybe you want to become the latest Google, but whether that's realistic? The Resources (personnel, resources, financing, etc.) must be sufficient to achieve the ambition. Of course you can take significant steps here, but not everything is possible. Finding and retaining innovative talent is a challenge for most companies and the financing of projects is not unlimited.

But… you can try to structure the corporate culture towards innovation. For example, by stimulating cooperation across the organization. Cross-functional teams are already the norm in the field of product development.

In addition, the best companies distinguish themselves on the following factors:

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Source: 1, * is significant difference

3. Provide ideas… lots of ideas

The first thing you need to be able to innovate is good ideas. But where can you find these? You can of course hope that the digital suggestion box will yield the golden idea ... A better way to bring out the diverse knowledge that is present within and outside your company is by organizing challenges. There are also many other techniques. Do not forget to include external stakeholders, such as customers and suppliers, in such sessions. These external parties are more likely to come up with out-of-the-box input.

The best companies spend more time on the fuzzy front end of innovation. They try to understand the customer's needs. They use discussion forums, ratings, reviews, blogs, social networks, innovation hubs and wikis substantially more than other companies.

Source: 1, * is significant difference

4. Choose the best ideas

Now that we have a lot of ideas, it is time to forget most of them. Only the best ideas can survive. Most companies use a formal process to select the best ideas. The best companies use a process where the best ideas also have a budget immediately available to take them a step further (43.3% versus 30.7%).

The best companies are also good at selecting the best ideas. They start with 4,5 ideas per product success compared to 11,4 for the other companies. Later in the product development process it may turn out that the idea is not that good after all. Stop immediately, because the longer you work on it, the more Resources not available for other projects.

Go to part 2 of Best practices of successful innovation

[1] Journal of Product Innovation Management, 2013:30(3):408-429

[2] Breakthrough innovation and growth, PWC, 2013

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