Innovating Innovation

Innovation is a topic we hear a lot about these days. How about innovating innovation management? Dr. Sorin Cohn gave a presentation packed with information on innovation management and innovating innovation management a few weeks ago at a TIM (Technology Innovation Management) lecture.  According to Dr. Cohn, the keys to innovation are culture, marketing, metrics, and bridging the gap between innovators and investors.

Innovation management is now a science with methodologies, tools and metrics. Interestingly organizations that spend a lot of time on innovation but don’t manage innovation have poor performance – almost as bad as those that don’t innovate much.

Culture:

Dr. Cohn noted that the heart of innovation is culture. Culture is more important than R&D.  However, only 44% of US organizations have culture and goals aligning.

Culture can take quite a long time to change. Instilling an entrepreneurial culture helps along with building a culture of working together to create solutions.

Investors:

An issue around innovation in Canada is that innovators don’t talk the same language as investors. This is a huge issue for finding financing of innovations to carry them through to market success. Only 14% of innovation is R&D innovation. A big reason why Canadian companies don’t commercialize is insufficient funds. Having adequate financing is essential to creating ideas and turning them into successful innovations in the market.  Dr. Cohn sighted that part of the solution to increasing understanding between investors and innovators is to identifying the right metrics to use as innovations are developing and taken to market.

In a survey conducted by Dr. Cohn and his team, they found that Canadian businesses note that their challenges to Innovation are:

1)      Lack funding for innovation

  1. Cash flow
  2. Lack of innovation metrics to show value

2)      Belief that their firm is too small

Canadian companies need more help with finances and marketing.  There is a Business / Commerce Gap. The solution to this is:

  • Business culture
  • Customer focus
  • Market and sales skills
  • Global connectivity

Most innovation in Canada is customer experience oriented. The survey also sighted the sources of innovation in Canadian firms:

  • Executive management
  • Internal R&D
  • Customers
  • Production/operations
  • Marketing and sales

Marketing:

Issues with Canadian industry in particular are lack of financial strengths and weak channels to market.

Innovation time for Canadian companies is on average 22 months. Commercialization time to break even is on average 34 months. This means that in Canada it take 1.5 times longer to commercialize than to innovate. It also means that to get to break even earlier organization should be looking at commercializing as they are in the R&D phase of development.

Take to Market Strategy: Using lead customers and anchor companies increases commercialization success rate. Canada has weak use of anchor companies. An anchor company is a large company with a cluster of smaller companies who take advantage of its commercialization and technical capabilities.  A good example of this within Ottawa is Mitel where there are a number of smaller companies that create products and services for the company and its customers. Not that long ago in the high tech industry in Ottawa Newbridge, before being bought out by Alcatel, also played the role of anchor company, with companies like CrossKeys creating network monitoring solutions to ride on top of Newbridge products.   In Canada only 20% of organizations use anchor companies. And only 44% use lead customers.

Metrics:

Metrics drive behavior. What to measure, how, when, how to react, learn and adjust. Dr. Cohn noted that those that spend a lot of time on innovation but don’t manage innovation have poor performance – almost as bad as those that don’t innovate much. Companies that don’t manage innovation and have no formal process in place have lower than average CAGR (Compound Annual Growth Rate).

Innovation time intensity is a better measure of innovation then R&D.  61.4% of companies spend 10% or higher percentage of time on innovation.

In terms of how many metrics to use, 6 to 10 metrics is a sweet spot for number of innovation metrics, said Dr. Cohn. These can and some should be a combination of measurements as well. Look at combination of metrics such as strategy, financial and market domains.

Innovating Innovation Tips:

1)      Continually learn and adjust.

2)      Innovation management vs risk management. Risk management is core to innovation…not in contrast. Risk Management when applied properly can act as an innovation accelerator.

3)      A balanced spread of top down and bottom up decision making creates the best performance (relative to other decision making modules).

4)      Selecting strategic innovation targets. Relying on customers isn’t adequate.

When you use what the customer is asking the average performance is negative relative to others in the industry (-13% CAGR 5 year)

5)      Executive involvement in Innovation:  #1 executive intensity involvement. Executive involvement has a 39.4% performance effect.

6)      Fail fast = early closure

7)      Instill stronger culture of entrepreneurship!!!! Culture change takes a long time…looking at years.

 

The take away for the audience was to start thinking about investors and marketing early on. In order to bridge the gap between R&D and investors look at metrics early on in the process. And spend time working on your organizations culture. Ensure culture and corporate goals align.