What is Innovation Management?
“Innovation management” is the process of implementing changes in organizational processes and developing compatible skills in an organization to systematically achieve a better innovation rate. Finatlent’s Innovation management consultants describe it as changing an organization’s internal culture to foster creativity and innovation by enabling employees to contribute ideas, critique other people’s ideas, build on others’ ideas, and develop truly new innovations.
Many companies are investing in innovation because they need innovative solutions for their problems. As the world becomes more competitive and digital transformation accelerates, Fortune 500 companies are looking for ways to maintain their current market share or increase it by using innovative techniques instead of traditional methods. The term “digital transformation” describes this trend. Running an innovative organization is of strategic importance because, besides product innovation, innovations also take other forms, including business model innovation and process innovation.
Innovation management differs from traditional product development in that it focuses on the end user (the consumer) rather than the production environment or supplier base; it concentrates on the market only after a good idea has been developed; it bets heavily on creativity, imagination and flexibility and relies less on analysis. It is also different from new product development in that it acknowledges that startups are often more effective at launching new products than established companies.
The driving force for innovation management is the clear recognition in an organization that it is innovative behavior that determines whether it will succeed or fail. The overall goal of innovation management is to create a culture of innovation where everyone in the organization is willing and able to contribute ideas about how the business could be run differently and better.
Innovation management can also be understood as a form of organizational learning, since organizations learn from previous experiences both successes and failures, which may result in new insights that can be used for making improvements with respect to future innovations.
Enabling innovation models impact on all levels of an organization: from the formal structures to informal behaviors and even the technical projects, in particular those that constitute the organizational culture. In fact, innovations are often manifestations of major structural changes in an organization. A good example is the application of Toyota’s “3S” practice, which consists in “”S”” for speed (time), “”S”” for smoothness (workflow) and “”S”” for safety (processes). These three elements create an innovative environment and enable organizations to reach outstanding performance results.
Innovation management is a cross-functional process, since all functions in an organization (management, sales, marketing, IT) should contribute in some way to it. Also, innovation management depends on human resources. Therefore the development of innovative behaviors and definitions of innovative processes are an important part of innovation management. This kind of behavior change is usually guided by awareness programs (to create knowledge), by training programs (to develop skills) and by motivation programs (to ensure commitment). For example, before introducing any new product, a company must train all employees on the new product and its features in order to achieve a high level of employee commitment. The company must also promote a shared goal among all those who are involved in the project, as well as on how it will be implemented and what the benefits of implementing this project will be.
Innovation management asks that managers coordinate their activities with their peers to keep up with changing market needs, changing technology, increasing competition and other environments. Managers should use organizational resources for innovation management by making use of people who have expertise beyond their specific area of responsibility and are available in different functional areas (e.g. expert knowledge in marketing, product management and IT). This can be done in a number of ways: Innovation management is also focused on facilitating interaction among all those involved in innovation projects. Interaction can be achieved in many ways:
The first step for an organization to become more innovative is the identification of a problem that needs to be solved. Identifying the problem can be done by analyzing key performance indicators (KPIs) to determine the risks and opportunities facing your business. Problems may arise when executives consider a new product or service, or when they face increasing competition, customer demands or regulatory requirements. If a problem can be identified that can be solved by applying an innovative solution, the next step is to develop a creative idea or business model that solves that problem. This can be done in a variety of ways, including brainstorming and the use of outside experts. Once developed, this idea must then be researched to see if it is feasible and can actually solve the problem.
Organizations may face numerous challenges when attempting to innovate, including the lack of creativity, risk aversion and bureaucratic processes. Innovation managers must not only overcome these barriers to innovation but also manage organizational change, which innovation might bring with it. The lack of resources is the primary challenge organizations face when attempting to innovate. Resources include knowledge, skill and money.
Innovation management requires a certain amount of “innovation-friendly” culture throughout the organization, which helps create an environment that encourages innovation and supports innovation teams. In particular, managers should be open to ideas from different people in different functional areas. They should also be willing to change their minds and consider new ideas from anyone in the organization. Innovation management also requires adequate levels of accountability and commitment from employees across all levels of an organization in order for them to contribute their own ideas for solving problems and making improvements.
Innovation in organizations often results in innovation projects being created. However, these projects are not always executed successfully. Product development projects often suffer from one or more of the following problems:
Innovation management is also a discipline within business, as well as within management in general. In addition to improving marketing success rates (i.e., when an idea is developed and implemented in a company), it can be a highly important tool for building organizational culture that promotes innovation and creative thinking. As such, being a good innovator is an important component for leadership positions in the future (e.g., heads of product development, marketing).
Innovation management is also a key component in the realms of strategy, operations and finance. An effective approach to innovation management has the potential to significantly reduce costs while improving customer satisfaction levels. The result is a more profitable organization with increased revenue and reduced costs. A major problem with innovation management is that it is often associated with high budget numbers or gaudy staff numbers (i.e., an expense that needs to be funded either by one department or another). This can cause development and implementation of new products and services to be “put on the back burner” because resource allocation does not fall in line with the projected requirements for reaching development milestones (i.e. marketing/sales, finance, IT/product development).
Organizations without a clear vision of what an innovative organization is can be easily defeated by the competition. An innovative organization aims to provide products and services that meet the specific needs of customers in a cost effective manner. Innovation management requires that senior executives work with different functional areas to identify problems that are similar across all departments. These areas include marketing, sales and product development. They must also take responsibility for crafting innovative solutions that make their business competitive in the marketplace while not compromising competitive advantage.
In order to innovate successfully, organizations need to integrate the entire innovation process. Innovation planning and execution should both be done from the same perspective, with a full view of the entirety of the innovation process. This ensures that all ideas are brought forward and considered in both stages, so that potential issues can be identified and resolved before they become problems.
Finally, Innovation management requires an understanding of where business opportunities are coming from. Opportunities come in several different forms, including new products and services, new marketing tools such as direct mail campaigns or viral marketing programs, improved manufacturing processes and new business partnerships/contracts.