Welcome to the first in a series of blog posts in which I’ll be looking at how a company’s approach to innovation can be the difference between success and failure. Or the difference between sustainable growth and declining sales. So what is innovation and why does it matter? And how do businesses that truly understand its importance achieve success? Not just once, but again and again. Accenture research has shown that innovation is about doing the right thing and doing the things right. In other words, what you do is important, but how you do it is even more important.
Innovation has quite rightly become a byword for success in the business world. Most companies recognize that innovation is the lifeblood of long-term sustainable growth. And yet far too many still find themselves caught up in something we call the ‘innovation death spiral’. This happens when a company launches a new product – developed at great expense and with high hopes of success – that fails to live up to expectations. Meanwhile, this new product is soaking up valuable resources. This in turn restricts the company’s ability to invest in other initiatives that could very well prove far more successful, including the bold, truly game-changing innovations that can provide sustainable competitive advantage and fuel future profitable growth.
And innovation is even more important right now, as we begin to emerge from the economic downturn. We believe that those companies that take innovation seriously – and get it right – will be the main beneficiaries of the expected upturn. A survey Accenture conducted among leading U.S. and U.K. companies revealed that the majority have indeed increased their innovation budgets. Sadly, most fail to realize that how they manage innovation is just as important as funding, if not more so. At Accenture, we believe that innovation has to be taken as seriously as any other critical business process, and managed accordingly. Again, innovation is doing the right thing and doing the thing right. Innovation itself is not enough; you have to innovate the right way.
At Accenture we differentiate three main types of innovation: incremental, platform, and breakthrough. Each type delivers different levels of reward, but also carries different levels of risk. This is why you need to maintain a balance across these types. Basically, you cannot risk putting all your eggs in one basket. High reward projects carry high risks, so you need to spread risk by working on enough incremental innovations to secure your current competitive position in the short term. The pursuit of breakthrough innovations also means you have acquire or develop breakthrough-specific capabilities and requires a significant strategic commitment. But not just to the in-house development of innovations. Open innovation, something I’ll be discussing in a later post, can be a remarkably effective way to keep your company ahead of the competition. A company open to innovative ideas from outside can, quite literally, increase its innovative resources tenfold or more.
Getting it right is the goal, but what happens if you get it wrong? Is it possible to escape the innovation death spiral once your company has begun the descent? At Accenture, we think it is, although it does require a radical rethink of how you manage your company, and how you approach the issue of innovation. In a later post, I’ll be taking a look at what one major corporation is doing to reverse this downward spiral and make innovation an integral part of how it manages its many businesses. I’ll also be looking at what we call the Accenture Innovation Process Model, which covers the end-to-end innovation chain and addresses the frequency, speed, and consistency of innovation results. We see this as a model to help companies escape the innovation death spiral or make the radical operational changes needed to get back on the right track. To book truly sustainable and profitable growth, a company has to get it right at every stage of their innovation process.
In my next post I’ll be discussing the need for fewer, bigger and better ideas. To wrap up this week’s post, however, I’d like to leave you with a couple of questions on innovation and your company.
1. Is your company a successful innovator?
2. If not, what is your company doing to reverse the downward spiral?
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Dear Bafpalbir Singh, thanks much for your comments and question. In Accenture’s view, the only sustainable way to escape the Innovation Death Spiral is to structurally develop bigger and better innovation ideas. Uncertainty and risk are inherent characteristics of innovations. Companies should recognize this fact and address this through a systematic innovation approach.
We believe companies can increase their innovation success rate and predictability by systemizing the idea generation process to come up with fewer, but bigger and better ideas. The front end of the innovation process, (Discovery as we call it) should ensure a thorough insight into the market, technology, competitive, and regulatory trends that define the attractiveness and potential of the market. Discovering and connecting to the real and yet unmet consumer needs with a superior value proposition will reduce risk and increase the chances of success.
My next blogpost ‘The need for fewer, bigger, better ideas – doing the right things‘, goes deeper into this matter. Your thoughts and feedback are much appreciated.
I agree with the assessment of how companies can get caught up in an ‘innovation death spiral’, by allocating all their resources in to one or a few products that are being developed which prevents them from investing in – possibly more game-changing – innovations.
This is due I think in large part to the way in which larger companies are organized, i.e. more layered, hierarchical and departmental than smaller, younger, entrepreneurial companies are. So typically in these types of companies there is one department or division which is exclusively responsible for innovations. Oftentimes this role is allocated solely to an R&D or Product Development department. The more vertical the structure of a company is, the more difficult it becomes to align the initiatives of such a department is with the other departments who will be made responsible for building, marketing and selling the product. And also this centralization of ideas may result in tunnel thinking, whilst decentralizing may encourage a company culture of innovation, and more lateral thinking which is more likely to result in game-changing innovations instead of incremental innovations.
I have recently been reading Steven Johnson’s great new book, Where Good Ideas Come From, and he argues, there are 7 patterns to the development of good ideas: There are seven patterns to the development of good ideas, (1) The adjacent possible; (2) liquid networks; (3) the slow hunch; (4) serendipity; (5) error; (6) exaptation (adapting an existing feature or technology for a different purpose); and (7) platforms.
With the fear that I am taking on the philosophy of the author whose book I read last, one could argue that one of the central roles for companies to avoid being sucked into a death spiral is in the facilitation of liquid networks and more lateral, cross-departmental innovation thinking, instead of trying to centralize such a critical element as innovation. As Johnson tried to demonstrate, many commercial applications have their roots in decentralized networks of academics. In science, it is often where different sciences or fields of study interconnect, that the most innovative industry-changing or new industry-creating applications are created. Would you agree that the same holds for innovations in businesses (or governments)?
(Full disclosure: I work at Accenture)
Mr. Koetzier , indeed nicely written, but my concern is how the companies can reverse the spiraling effect , when innovation goes wrong. That is such a bottleneck situation and every company goes deep into it if not have financial muscles. Innovation at the end of the day is an innovation. But we have seen aftermath of innovation going wrong. kindly Share your views on right v/s wrong innovation and how companies can be prepared for worst
Taking the lead on innovation thinking will be valuable to the whole practice of innovation. I look forward to reading more from you Mr Koetzer on taking this forward.
Interesting, I’d like to see more focus on the marriage between innovation and entrepreneurship. Most innovations fail to properly diffuse organizations because they’re burnt with the management lenses of the past instead of enlightened by visions of the future.
1. Yes, it’s a breakthrough because we are not selling a product but give support and create personal alternatives for our clients (professional coach, trainer and managers). An approach from the WHY leads to inspiration and involvement, work is more than work, it’s a way of living.