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Cracking The Code of Effective Innovation
Cracking The Code of Effective Innovation
Turn innovation
Turninto
innovation
action into action
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futurethink article:
Cracking the Code of
Effective Innovation
Executive Summary
Innovation: A Buzzword that’s Broken
There seem to be two different and contradictory facets in the world of innovation today. On one hand,
innovation has become the latest buzzword in corporate circles. Business publications scream about the
latest innovation in their headlines, the calendar is chock-full of conferences that showcase “best prac-
tices,” and a plethora of gurus litter the speaking circuit singing its praises.
There is, however, a darker side to innovation. Just turn to the vast majority of organizations that are
struggling to make innovation work. Listen to frontline managers who are being asked to innovate by their
bosses and have no idea where to start. Just drop in at an organization where there’s palpable fatigue
after numerous brainstorms have gone nowhere. The reality is that innovation efforts are impotent in most
organizations.
We present the five key findings from our survey on the next page.
Key Findings
Innovation Scores
25
20 20
15
10 8.3
5 Average
0 Maximum Possible
CHART 1
This low score underlines the reason why organizations are fundamentally struggling with innovation
today. They simply are not doing all they should be in order to unleash innovation within their four walls.
The upside is that there is significant room for improvement. If organizations better understand where
they’re currently failing, they’ll be able to create more effective innovation programs.
2.20
2.15
2.10
2.05
2.00
1.95
1.90
1.85
Can be run bottom-up (driven by frontline Need to be driven with the commitment
employees, practitioners, or managers) of senior leadership
Fun and creative solutions (via IDEAS and CLIMATE efforts) to “get innovative juices flowing” can certainly
add value and kickstart innovation in the short-term. However, focusing on just these aspects is not going
to be sustainable in the long-term. Think about what happens if an organization has a weak innovation
STRATEGY and PROCESS:
• Without a clear innovation strategy, efforts lack direction. STRATEGY addresses fundamental
issues of how you chart organizational direction for innovation: How do you define it? Who owns
it? How do you measure it? What will innovation achieve for the business?
• Without an innovation process in place, ideas aren’t well managed. PROCESS provides the ba-
sic infrastructure for moving ideas and projects through the pipeline: Who is coordinating project
management? How are you evaluating ideas? How do you catalog and define your pipeline?
So, a word of advice for our readers—don’t underestimate what it takes to effectively innovate. Building
an innovation competency is not an easy or simple task. What’s critical is that you must tackle the “more
serious” and long-term aspects of innovation in order to be successful.
0 – 500
500 – 1,000
1,000 – 5,000
average
5,000 – 10,000
10,000 – 50,000
50,000 +
0 1 2 3 4 5 6 7 8 9 10
CHART 3
Size Matters
It’s not surprising to see that the smallest organizations are the most innovative. They tend to be entre-
preneurial, and their size necessitates innovation. If they do not innovate, they won’t survive. However,
the innovation scores of the giants are not what one would traditionally expect. Many of us think that the
large behemoths are the last places to expect innovation. They’re perceived as places where rules trump
risk-taking, and bureaucracy is stronger than bravura. However, one look at conglomerates like General
Electric, Whirlpool, and P&G, and you can see that they can certainly be shining examples of innovation.
The reason is that large companies have the resources and scale required to innovate successfully.
The curious finding, of course, is that mid-sized companies’ innovation scores fell below the average.
This is, at first glance, a surprising piece of information. One would expect these organizations to have
the “best of both worlds”—a potent combination of entrepreneurship and resource-availability. However,
our research indicates that mid-sized companies are instead awkwardly “stuck in the middle.” Why is
this so?
Our hypothesis is that a mid-sized company is at a tricky stage in its growth. It has to contend with a num-
ber of issues that pertain to deciding between a small company mentality versus that of a larger one:
Simply put, there comes a time for a mid-sized company to make a difficult decision about the kind of
organization it wants to be when it grows up. And as it vacillates between two opposite models, innovation
efforts suffer. The smallest and largest organizations do not have such a problem—they generally know
what they’re good at, and can rely on their distinctive strengths.
1 Dilworth, Dianna. DMNews. “JetBlue Asks CEO Neeleman to Step Down.” (May 11, 2007).
The breakdown of the STRATEGY and CLIMATE scores [Chart 4] show the same pattern as that of overall
innovation scores, with the smallest and largest organizations faring better than the mid-sized ones:
0 – 500
500 – 1,000
1,000 – 5,000
5,000 – 10,000
10,000 – 50,000
50,000 +
0 0.5 1.0 1.5 2.0 2.5
0 – 500
500 – 1,000
1,000 – 5,000
5,000 – 10,000
10,000 – 50,000
50,000 +
0 0.5 1.0 1.5 2.0 2.5
CHART 4
So, is there any difference between the innovation profiles of small and large companies? A look at the
other capabilities shows that they both have unique strengths and remarkably different ways of innovating.
Let’s take a look at how the IDEAS capability scores differ by size [Chart 5]. You will see that this capabil-
ity erodes as an organization gets bigger. The smallest organizations are distinctive in the sense that they
are much more creative and generate better ideas. They are more in tune with their customer needs, hold
brainstorms with clear objectives that result in a pool of interesting ideas, and are constantly encouraged
to explore perspectives outside their industry.
0 – 500
500 – 1,000
1,000 – 5,000
5,000 – 10,000
10,000 – 50,000
50,000 +
1.8 1.9 2.0 2.1 2.2 2.3
CHART 5
So, if large organizations are so lackluster when it comes to IDEAS, how do they have above-average inno-
vation scores? The answer lies in their PROCESS capabilities [Chart 6]. Clearly, the giants in the industry
catch up with the smallest firms in terms of having systematic methods/pipelines to track their ideas,
objective evaluation tools to kill “bad” projects, and a funnel-approach to manage their portfolio of innova-
tion projects.
0 – 500
500 – 1,000
1,000 – 5,000
5,000 – 10,000
10,000 – 50,000
50,000 +
0 0.5 1.0 1.5 2.0 2.5
CHART 6
Turn innovation into action
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futurethink article:
Cracking the Code of 11
Effective Innovation
2 Bourgeault, Gary. Alphamarketer. “Microsoft’s Ballmer Calls Google’s Hiring Pace ‘Insane.’” (March 15, 2007).
Education
Government
Industrial Products
Automotive
Healthcare low-performers
Financial Services
Computers, Electronics
Technology
0 1 2 3 4 5 6 7 8 9 10
average
CHART 7
A closer look at Chart 7 will show you a surprising list of higher and lower performing sectors. For exam-
ple, Computers, Electronics, & Technology, Consumer Packaged Goods, and Healthcare all fell below the
average. These are sectors that one would expect to be high-performing. On the other hand, sectors like
Education, Government, and Industrial Products performed better in our survey than the average. These
sectors aren’t what one would naturally consider innovative.
In Conclusion
This report doesn’t contain all the answers you need to make innovation a discipline—but, it certainly
asks the right questions to help you uncover the right way to progress.
At futurethink, we’re always focused on the “how-to” of innovation. So, if you’re struggling with your
innovation efforts, here are three key things you should consider doing right away:
Diagnose your innovation efforts. Take a step back and see where your innovation
efforts are strong and weak.
Our innovation diagnostic at www.getfuturethink.com/innovation/diagnosis.php
can provide a helpful beginning. It will help you understand where you currently
stand, and where you need to set priorities.
Research five similar-sized firms. Go completely outside of your industry and look for
successful innovators that are the same size as your organization. What are they doing
successfully that you can adopt into your practices?
Get a meeting with those that matter. Flailing around with too many random brain-
storms? Begin talking about “STRATEGY” and “PROCESS” with the relevant people
in your organization. Ownership must finally come from the top, but the conversation
about the important things in innovation can start from anywhere.
We’re certain this report will provide readers with a number of practical learnings to make innovation
more effective within organizations. We also wish to thank all the respondents who took our sur-
vey—the truth is sometimes bitter, but it’s the best way to begin an authentic and powerful innovation
program.
This White Paper is part of futurethink’s ongoing research effort to help organizations stay on top
of the sometimes puzzling, often times frustrating, and ultimately rewarding world of innovation.
For more information about our comprehensive suite of research offerings, please visit
www.getfuturethink.com.
APPENDIX
Four Capabilities For Effective Innovation
Over the past four years, we have studied successful innovators across a variety of sectors and organiza-
tional structures. This has led us to develop a framework that lays out four key capabilities that organiza-
tions need to effectively innovate. Our survey touched upon the following capabilities:
ideas 1. IDEAS. The best innovators develop a stream of diverse and original ideas that are based on
their business objectives. Organizations that demonstrate high IDEAS capabilities do so in the
following ways:
1. Think Forward. They look to the future to leverage larger trends.
2. Enhance. They make meaningful improvements to existing solutions.
3. Discern. They identify unmet needs of customers.
4. Break the Rules. They go beyond industry paradigms.
5. Partner. They collaborate with third parties for fresh ideas.
strategy 2. STRATEGY. Successful innovators lay a clear foundation that sets common innovation objec-
tives. Organizations with high STRATEGY capabilities are comprised of the following elements:
process 3. PROCESS. Successful organizations know how to move their best ideas forward. They effec-
tively allocate resources towards select ideas and focus their energies to move them quickly
towards launch. An organization with high PROCESS capabilities incorporates these elements:
climate 4. CLIMATE. The best organizations make innovation efforts sustainable and organic for the
long-term. They do this by cultivating a nourishing work environment that supports innovative
behavior across all levels within the organization. Organizations with high CLIMATE capabilities
ensure that they do the following:
1. Lead by Example. They get senior management to play an active role in innovation.
2. Experiment. They cultivate a climate of smart risk-taking.
3. Share. They create comfort around works-in-progress.
4. Fuel Thinking. They encourage new and alternative perspectives.
5. Energize. They discover meaningful ways to hire, train, reward and recognize
their workforce.
Survey Methodology
futurethink’s innovation capability questionnaire is available at
www.getfuturethink.com/innovation/diagnosis.php.
It lists all the questions, scoring methodology, sector and size selections.
The data from this survey represents 248 respondents who took the questionnaire from 8/16/2006 to
4/30/2007. As part of the analysis, duplicates and extreme scores (all 5s or all 0s) were deleted from the
record set.
0 – 500 119
500 – 1,000 32
1,000 – 5,000 48
5,000 – 10,000 19
10,000 – 50,000 16
50,000 + 12
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