I have worked many years with corporate innovation. In my early career days as a product engineer, later from the commercial side (sales and marketing) and finally on strategy and consultancy. Throughout all these years I have accumulated enough empirical evidence that shows that most of the failures in applying an innovation strategy through the establishment of autonomous innovation departments, specially those focused on on diversification and new business models.
With that in mind I have developed what I believe is a simple yet powerful guide in order to avoid all these potential pitfalls. I have visualized this guide in the shape of a triangel, which I have called “The magical triangle of corporate innovation”.
I have started using it with real examples and real clients and the results have been very positive. It is based on the necessary but usually overlooked balance between core operations, the stakeholders and the innovation team at the New Business unit.
Indeed, none of them can work isolated if the goal is to create value out of diversifying innovation.
First of all, there are the stakeholders, They may be many of them, and I have pictured only the most evident ones.: The top management, owners, strategic partners, customers and, last but not least, the state or regulatory bodies,
If the leader of the new business team wants corporate innovation to succeed, he or she has to understand what those stakeholders want and expect. Here I am not talking about what they expect from the new business team (in the beginning, it usually is too small to care about anyway), but from the company they see as a whole.
Who are their names and what is their mandate? What are they measured on and rewarded for? Do they have some core issues they are specially interested in? Which trends are they following or are they hearing about all the time? Are they experiencing some kind of pain in their jobs? How high is their risk appetite – not the one they say they have, but the one they really have. Don’t listen to what they say, look at what they do and have done previously.
As you probably have noticed, I am not talking about their functions or their roles, I am talking about the individuals filing the roles of leaders, partners, regulators and so on. The manager of a New Business group should take time talking to them in order to understand these issues.
Then it is paramount to understand how the rest of the operations in the company work. What are the projects already in the pipeline? What do they indicate around the priorities of the organization? How much resources of the company will they absorb? Will the people involved in those projects have time to dedicate to non-core projects, as innovation projects in many cases are? Will they be rewarded for getting involved at all? I can already tell you that they probably won’t. There are cues, deadlines, legacy products, systems, and challenging demands that may be or may not be know. The manager of the New Business group will have to fight and convince top leaders to introduce new incentive schemes if innovation is supposed to succeed.
Finally, there is the New Business team, the direct responsibility of the New Business manager, In some organizations, this role is embodied in the Chief Digital Officer. He or she has a tough job and their personalities must be tough and demanding too, both towards their boss and towards their team. We are talking about survival, and I am not joking.
It is imperative that the mandate is clear and firm. It has to have a deadline and it has to be synchronized with the general strategy of the company. If not, someone, some time will pose the most unsettling question an innovation manager may hear: «Why are we doing this?» If you don’t have a straight, clear and contextually logic answer, I promise that your fate is sealed, and not in a good way.
Incentives have to be clarified both for the New Business team and for the people from core operations that may end up transferred, temporally or definitely, to a diversification project. Remember that incentives are usually linked to specific corporate KPIs. Managers are measured on and rewarded upon those KPIs. The New Business project should deliver on the same KPIs or at least KPIs that are related and are easily understandable for owners, managers and even analysts, If you don’t like how this sounds, don’t do corporate innovation, move on to M&A (where rules somehow seem to be much more loose) create your own startup or be prepared to answer «Why are we doing this?» with a doomed tremolo in your voice.
The New Business team has to accumulate the right competence. These competences revolve around the right technologies – look again towards the general strategy of the company and seriously talk to the R&I department. You cannot build excellent technology competence in a vacuum.
Make sure that the members of the New Business team have a powerful professional network that they can lean on for technology, commercial, regulatory and organizational issues. This network may be internal resources if we are talking of a big enough company. In such case, make sure the right incentives are on place and formalized or those employees may leave you alone at a call of their current boss.
Finally, the New Business team must have a critical number of individuals and clear policies to follow. I have been in situations where projects that didn’t respond to the mandate of the team got a pass to the next phase because there were no more ideas left to fill the pipeline with. Again, if policies are not clear, consistent and are strictly followed, at some point someone will ask why the team is working with that project. And, again, the outcome will not be pretty.
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