3 Choices You Must Make For Successful Innovation Work
- Mar 12, 2021
- 4 min read
Written by: Kristian Elmefall, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
Automation, globalization, and increased transparency lead to reduced margins for almost all companies, does that also apply to your company? Then you need to get more out of your innovation work! It is no longer enough to mainly work with efficiencies to become more competitive. With today's global competition and rapid development, all companies must work with innovation to survive.
But innovation is difficult. Statistics show that if you are a small or medium-sized company and consider that 5-10 times the money back on your best innovation project is enough as a growth engine, an average of 15-20 projects is required to get such a project. If you are a large company and want a real growth engine that makes a difference, so you want a project that gives 50 times the money invested back, an average of 250 projects is required to get such a project, according to the statistics. We have now established that everyone needs innovation and that innovation is difficult, so it cannot be left to chance.
But the statistics above are the average, and there is no reason for you to be average or worse than average. This article is the first in a series of articles where I will go through three choices that each company must make for successful innovation work.
How much resources should go to innovation, and how much goes to day-to-day operations?
How and where does the transformation of working methods respectively innovation work take place?
How many resources will be used to develop the existing business, and how much will be used to innovate new future opportunities?
Execute or search
A traditional company is organized and has incentive models to execute its business model as efficiently as possible. Common instruments are budgets and deadlines. For innovation work, this is not a suitable way to organize. Budgets and deadlines are based on the assumption that it is possible to calculate the result that will be created in advance. For innovation, it is just the opposite. Innovation means that it is something new, which makes the approach and the result unknown.
Innovation: Something new and value-creating
Instead, a searching approach is required to work successfully with innovation, where observations are made to gain insights. That these insights are correct is ensured through a hypothesis-based approach.
A hypothesis is an assumption about reality. If the idea is to develop an app that you can use to pay for parking and the idea is that everyone should be able to use it. A hypothesis is that everyone who wants to park has a mobile phone that can install the app. It is important to see the hypothesis as an assumption until there is evidence that the assumption is correct.
Executing the existing business model is, of course, important because it is the company's business and what makes the company make money right now. It also provides the opportunity to invest in innovation and the future. Here, a choice must be made for when and where executing respectively searching work is done and how much resources are allocated to each of the working methods?
By introducing portfolio management on their innovation work, it is possible to gain control of the work, how much resources are to be set aside for innovation work, and in which areas innovations are to be developed. At LEAPS, we create innovation portfolios by first creating an innovation thesis that is linked to the company's strategy. The innovation thesis describes in which areas the organization should invest in innovation and why the organization should invest in precisely these areas. It also describes in which areas the organization should not invest in innovation and what the reason for it is. The innovation thesis thus functions as a tool for those responsible for the projects in the innovation portfolio. We then build the innovation portfolio on the McKinsey model's three horizons where resources are distributed over projects that are to be implemented and create cash flow now, projects that have unproven hypotheses and which must therefore be worked on to obtain evidence that it is a good idea and finally exploratory projects in areas that we believe could be of interest to the organization in the future.
Kristian Elmefall, Executive Contributor Brainz Magazine
Kristian is a Swedish serial entrepreneur and senior management consultant, with a double degree in Executive MBA and computer science. Kristian has gathered experience in innovation and business from a large number of industries and companies of all sizes over the last 20 years. As co-founder of the consultant firm LEAPS, is he now helping customers to understand how the industries that the customers are operating in is evolving, how to stay relevant and competitive under those circumstances, and how to set up an innovation process to secure reoccurring innovations in line with the company’s strategy.
