COMPANY INNOVATION – BEST PRACTICES

COMPANY INNOVATION – BEST PRACTICES

Best practices for idea generation require the involvement of all employees, as well as leveraging information from current customers about existing and emerging needs. In addition, when it comes to product creation, getting input from suppliers can be an invaluable practice. To implement these ideas different structures can be adopted, from decentralized ones to the creation of separate innovation units, with communication and smart resource allocation as the keys to a successful implementation process.

Best Practices for Overall Idea Generation

1. Everyone Must Be Included

  • While having a dedicated team is a good practice, it is important that all employees can participate in the innovation process.
  • Employees are the ones that know best the inner workings of the company, and they can provide insightful information about problems or issues that could be improved upon.
  • Often, the marketing team or the research and development team is expected to come up with all the ideas; however, involving more employees allows for an exponential expansion of the idea pool.
  • Furthermore, a 2018 research study found that interactions with employees that were not part of the development or innovation team could be a best practice for companies aiming to innovate.
  • Interestingly, both formal and informal activities can be conducted to promote idea generation by employees. These go from creating online platforms where employees can communicate their ideas to establishing monthly workshops in which everyone is included.
  • One example of a company that implemented this practice was the Wenzel Group. The company organized a competition among 300 of its employees and asked them for ideas on creating new processes.
  • As a result, over 100 ideas were collected and many of them were implemented.

2. Market Research and Customer Needs Are Key

  • Performing market research is instrumental to come up with new ideas, and this can be finessed by engaging in customer research, which is considered a gold mine for idea generation.
  • This best practice consists of leveraging consumer feedback, be it from reviews, testimonials, surveys as well as reports from customer service employees who are constantly in touch with them.
  • Similarly, looking at what competitors are doing can inspire new ideas, which can improve upon what is already out there.
  • According to Deloitte, it is important to have a good understanding of the customer base to be able to do this successfully. This way, the company can be certain that the ideas leveraged come from customers that accurately represent its market.
  • Strategies to gather customer feedback can be passive or active. An example of this is social media, in which companies can actively request feedback or they can simply monitor their social media platforms for customer comments to identify what they like and what they do not.
  • An example of a company that implemented this practice effectively is BMW.
  • The company created the Virtual Innovation Agency (VIA), which provides a website where costumers can share their ideas and even enter online discussions about innovations the company could develop.

3. A Question or Goal Must Be Identified

  • A good way to focus the innovation quest is to identify a question or a goal. The prior best practices can be useful to identify a specific challenge, which can range from a customer need to an emergent new technology in the market.

Innovation Process

  • This best practice allows for the refinement of the ideas, as it allows the development team to focus and expand on a given topic, providing solutions to a specific problem.
  • It is important that information about the goal, challenge, or opportunity is gathered, as this will allow for better brainstorming sessions, with all involved well-informed on the magnitude and characteristics of the issue.
  • Furthermore, when it comes to goals, understanding the goal of the company can motivate and encourage employees to provide ideas. Transparency when it comes to company goals can be key for successful innovation.
  • An organization implementing this best practice is the Royal Bank of Canada.
  • The innovation team leverages information obtained from employees across multiple areas of the bank to identify problems and use their resources to provide innovative solutions.

Best Practices for Product and Services Idea Generation

1. Current Product Issues Should Be Evaluated

  • Existing products can have issues or improvement potential. Identifying these opportunities can be a good source of ideas for either new features for existing products, or ideas for creating entirely new ones.
  • Another component of this best practice is being able to identify when a product is obsolete, as companies often need to eliminate one of their products and offer a new one that better adapts to customer needs.
  • Additionally, past ideas that have not succeeded can also be reconsidered to determine if these can be repurposed for another goal.
  • This best practice is important because in some cases, the performance of the existing product can also provide information on how a similar product might perform.
  • An example of a company innovating on an existing product is Gorilla Glass.
  • This company already provided what was considered a great product, which was a screen protector that did not shatter even after being dropped from heights of over 5 feet.
  • Gorilla Glass decided to innovate on its existing product by changing the chemistry of its material to be resistant not to drops from great heights but to multiple drops from lower heights.
  • The company integrated this product-specific best practice with the general best practice of gathering feedback from customers, which was what allowed it to identify what its customers truly needed.

2. Experimentation Is Key

  • A best practice for generating product ideas is to be willing to test them as soon as possible. For this practice to be effective, employees need to know that mistakes are encouraged, as not all testing will prove to be successful.
  • This can be done cost-effectively by allocating minimum resources. This serves the dual purposes of minimizing testing expenses but also setting the product to be as inexpensive to manufacture as possible from the beginning.
  • Another reason why this is a best practice is because in cases in which the idea did not come directly from identified customer needs, the need for this product can then be validated through soft testing in the market.
  • A way to implement this best practice is by having an advisory group comprised of key customers who can provide an accurate idea of how the product or service will be received.
  • One example of a company that has implemented this best practice is Intuit.
  • Scott Cook, one of the co-founders at Intuit, stated about employees and testing ideas that “we put in a system to make it easy and fast and cheap for them to run an experiment.”
  • Cook acknowledges this practice of launching experiments early on while investing few resources as the key to their success.

3. External Sources Should Be Considered

  • Suppliers are in contact with the products of a company, but also with the rest of the industry thanks to their relationships with other companies. Therefore, conversations with suppliers can yield new and exciting product ideas.
  • Although this best practice can be hindered by the fact that suppliers also work with competitors, the key rests in how this conversation is approached.
  • Large companies have reported that approaching suppliers with specifics about certain issues or problems they want to solve for a certain product is more productive than just asking for ideas.
  • This is especially true when results from these conversations are seen and executed as a partnership between the supplier and the company.
  • In this case, the company takes the place of a customer expressing its needs and the supplier can then be the one that provides material for new ideas.
  • One example of a company that has implemented this best practice is Johnson & Johnson.
  • The chief purchaser talks with suppliers and presents them with the needs the company might have regarding a new product, which encourages them to provide ideas.
  • According to this chief purchaser, even suppliers who were initially slow to provide ideas started to create products with the company.
  • Another company that does this is L’Oreal.
  • The company uses conference calls to discuss industry trends as well as future needs of the company with its suppliers, which can be a great opportunity for the generation of new product ideas.

Structures to Promote Company Innovation

1. Decentralized Structure

  • The decentralized structure refers to organizing the company by groups or divisions, allowing them to take responsibility and initiative while maintaining a certain degree of supervision.
  • In large companies, the creation of divisions that have their own management team can be the best approach, especially when divisions have entirely different needs.
  • This structure encourages the participation of all employees, which has been highlighted as a best practice.
  • According to the findings of a 2019 study, the decentralized model promotes employee innovation, opening new opportunities for businesses.
  • That said, this structure must be supervised, with supervisors being active and aiding employees with their innovation goals. Additionally, supervisors or managers can develop a stronger connection to their market through this structure.
  • Another benefit seen in decentralized innovation structures is the emergence of more and better ideas. As more employees participate in the process, their closer contact with company pain points can aid in addressing significant issues.
  • In addition, the risk profile is lower, as experimenting with ideas in a localized way can minimize negative consequences if the idea does not work out.
  • Deciding which model is best for a company might depend on the culture and the needs of the company. A diagram has been proposed to determine which structure fits best.

Deciding the Best Structure

  • It has been proposed that increased responsiveness is the main result to be expected from a decentralized structure.
  • Responsiveness and immediacy are extremely important in the current climate, as innovation is at the forefront of every company, creating a hectic competitive landscape. A decentralized innovation structure can provide a competitive advantage to a company.

2. Centralized Unit Structure

  • Another structure that can be implemented is the creation of a separate innovation center, also called One Innovation Center.
  • This comprises a much more centralized approach, in which instead of incorporating the majority of employees in the process, a separate unit is created, with the sole purpose of brainstorming and experimenting with new ideas.
  • Although very different from a decentralized structure, this model can have numerous benefits. One of these is the stronger focus on generating new ideas as well as the involvement of genuinely curious people.
  • This unit can be formed by people from different departments of the company, which allows for better representation.
  • It has been shown that companies that are considered strong innovators incorporate these elements into their practice.

Strong vs Weak Innovators

  • This has also been proposed as an effective way to separate the creatives from the executioners, which can be advantageous for a company as every employee is doing what they are best at.
  • A result that can be expected from this type of structure is the faster development of new ideas.
  • Similarly, given that employees are working in the areas that are best-suited to them, another result can be improved performance.
  • In addition, this structure is in sync with one of the identified best practices, as it allows for faster testing of new product ideas.

3. Flatarchy Structure

  • This is a hybrid organization structure in which an innovation program is created within the company and employees from all divisions can feel free to provide ideas and even develop them.
  • This often leads to the creation of a small temporary separate team, called a flat team, which has more autonomy and is less constrained by bureaucracy.

Flatarchies

  • The benefit of this structure is that once again, all employees can be involved in the innovation process. Importantly, this involvement is optional and the creation of these flat teams is temporary
  • In addition, this structure is more dynamic, allowing for fresh ideas to emerge; however, a hierarchy continues to exist in other areas of the company.
  • Another benefit is that external innovators might feel attracted to this culture of innovation, which can place the company at an advantageous place competitively.
  • Results that can be expected from this model include higher employee engagement and the generation of a wide number of ideas.
  • One caveat with this model is that, as more ideas emerge, not all of these will be successful. Therefore, a company must be prepared to confront numerous failures to get to that one successful idea.

Best Practices for Innovative Structure Implementation

1. Smart Resource Allocation

  • This best practice refers to two important principles, which are providing incentives to employees and allocating the necessary resources to implement the structure in question.
  • Starting small can be instrumental in implementing an innovation structure. It is necessary to have an understanding of the budget available for this and what expenses will be necessary, which can include technology upgrades or external consultations.
  • Regarding incentives to employees, it has been observed that a good way to promote employee engagement is by providing additional compensation based on project success.
  • This last item is highlighted as a best practice because it promotes interest in innovation, and it can also have an impact on company culture. Employees will be more interested in performance than in office politics when incentives come from innovation results instead of vertical promotions.
  • Another way to incentivize employees to adopt a new innovation structure is by recognizing successful ideas publicly. This can encourage other employees to be more innovative and it requires minimal resources.
  • An example of a company that allocates its resources in a smart and structured way is Google.
  • Its famous 70-20-10 model means that the company allocates 70% of its resources to developing and improving its core business, 20% is allocated to innovating its adjacent business, and 10% is directed to transformational innovative ideas.
  • While innovation takes place in all three areas, the company identified how to allocate its resources cost-effectively.
  • An example of a company that provides incentives is Rockwell Automation.
  • The company presents problems on a website accessed by its employees around the world. These employees can form teams to try to find solutions for these problems, and when successful, they are rewarded for it.

2. Creation of a Clear Strategy

  • Expectations and goals related to the implementation of an innovation structure need to be clearly set up and communicated to the members of the company.
  • Preferably, a roadmap can be created to better illustrate where the company currently is and where it expects to be thanks to the implementation of this structure.
  • A clear sense of direction allows everyone to focus on the goals and can direct their innovative ideas towards said purpose; furthermore, this can also be a source of motivation.
  • Setting milestones and making the plan as visible as possible will help everyone know how the company is progressing in the process of implementing an innovation structure and the results that have been obtained from it.
  • This also sets up the scenario for tracking, which is instrumental to identify how the process is going and if the goals are being met.

McKinsey From Me to We

  • A company that implements transparency at multiple levels is Box.
  • The company shares not only its goals, but it also has implemented a platform that allows everyone to see performance metrics and whether goals are being achieved or not.
  • Not only does this allow employees to know where the company is headed, but it also provides opportunities for reconfiguration of the goals when necessary.

3. Consistent Leadership and Communication

  • Management needs to be involved in the process, providing guidance and being responsible for resource allocation.
  • Even when adopting structures such as a flatarchy or a decentralized model, it is important for employees to feel supported and for management to be able to refine and lead the process of implementing an innovation structure.
  • As structural changes are implemented, problems might arise, and the leader or leaders of the company need to be able to own up to any missteps.
  • Another important role of the leaders of the company is to maintain and promote open channels of communication.
  • As management shares information with employees, they should also encourage employees to do the same. Feedback on how the process of implementing a new structure is taking place can be invaluable for the success of this endeavor.
  • In addition, promoting communication between teams can also have a strong impact on the success of an innovation structure.
  • An example of a company that used communication to innovate is Southwest Airlines.
  • The company was open about the issues it was facing regarding high fuel costs and engaged with the pilots, who provided ideas to safely reduce fuel expenses.
  • A more recent example can be seen in the actions of Royal London.
  • To actively leverage feedback from its employees and management teams, the company issued surveys, in which everyone could provide feedback. One result of this was increased engagement across all company levels.

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