Take Action To Change Innovation Culture: Part 2

Here’s a proposition – a company will never succeed with innovation unless the culture is supportive. It’s best encapsulated in the phrase “culture eats strategy for breakfast”, attributed to Peter Drucker, the noted management guru.

This is the second of four articles focused on creating a culture of innovation. You can find a link to the first article here.  I propose that action is what changes culture, and there is a specific sequence to be followed.

1. Decide what you want – what’s the output?
2. How to do it – design the management system.
3. Fill the pipeline – stimulate the input.

This article looks at how to decide the output.

My preferred definition of innovation is “the introduction of new products or services that add value to your business”.  Increasingly, I would include new business models.  The key point is that there must be an output; something must be produced that adds value.  Even though invention and creativity are crucial to innovation, in the end they are inputs to what will eventually create value for the enterprise.  It’s much better to launch a mediocre idea than to sit and admire a brilliant one that doesn’t see the light of day.  So any journey towards culture change must first focus on the desired outcome.

In this model I’m putting forward a very simple proposition – the desired output of innovation must be defined before plans and resources are put in place to deliver it; you need to know where the destination is before starting the journey.

So key to defining output is the alignment of innovation with corporate strategy.  Any mismatch creates confusion, inhibits risk taking and introduces inefficiency and inappropriate resource allocation.  Very few companies develop strategy de novo from a standing start.  Usually, strategic reviews are about a change in direction, to a greater or lesser extent.  Innovation should be explicit, defined in broad terms and, importantly, quantified.

The desired output and associated targets can also signal the type of culture change needed.  For example, when A G Lafley of Procter & Gamble set the target of 50% of ideas coming from outside the company, it was with the intention of opening up the closed “NIH” culture.  P&G have had a strong innovation output since then and at the same time halved the investment in R&D when expressed as a percentage of sales.

The financial contribution expected from innovation over the lifetime of the strategic plan should be clear.  Don’t forget that innovation will need to contribute to the protection and growth of the existing business as well as the creation of new offerings.  In that context, the definition of innovation output should distinguish between growth from incremental innovation, and that expected to arise from breakthrough projects, hopefully in a 3 Horizons format.

The result will be a strategically aligned project portfolio.  It’s unlikely to be optimal at the start, and will need several iterations, taking account of market developments, as well as the ongoing development of stronger innovation competence.

Do you want to create a completely new business to complement what you already have?  Depending on the overlap with the profile of the existing business, and the eventual intention to integrate or not, it may be realized without changing the existing culture.  Nestlé created Nespresso in this way, by keeping the new business separate, developing its own culture.

It is very difficult, indeed inadvisable, for companies to expect to innovate in all business units and countries with the same intensity.  Therefore the definition of innovation output in the strategy should be explicit about the business and category priorities.  In addition, many companies will work in industries where individual opportunities represent a significant proportion of expected growth.  These top priority projects should be clearly identified.

Finally, once all this good work has been done, targets should be set.  I’m a fan of the SMARTS acronym for targets – Specific, Measurable, Achievable, Realistic, Time-defined and Stretching.  The same principle should be applied to innovation targets.

The key point about starting with innovation output in any program of culture change is that people in the company need to know what’s expected of them.  They need to have sight of a tangible destination, something to aim for.

In the next article, I’ll move on to Management Systems.

image credit: polifilm.co.uk

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  Kevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.