External factors, such as technology, regulation, macroeconomic trends and demographic shifts, are increasing complexity and diversifying opportunity. Against such a backdrop, the challenge for organizations of all types is to maintain their relevance in a changing environment. Part of the solution is to capture a variety of ideas and different ways of thinking from as many different sources as possible in order to enrich the DNA of the organization – but this can only be achieved through the right leadership mindset.
Our research shows a widespread consensus that leadership mindset is one of the key enablers of strategic innovation. It is directly linked to an organizational culture that nurtures, guides and supports innovative thinking and practices. Only with the support of the business leader can hierarchical barriers be broken down, career risks be taken and important decisions accepted by those implementing change.
An innovation culture
Contributing to innovative thinking and strategic discussion no longer requires the right job title. Company leaders need to nurture an organizational culture that enables the sharing and combining of ideas across the organization. However, employees working on new products or services need to know that they have the backing of the organization when engaging in new forms of commercial risk. This involves evaluating and measuring return on investment in new ways, using different key performance indicators that reflect longer-term strategic objectives.
Organizational culture
Organizations at the forefront of innovation turn cultural differences to their advantage. Our research participants concentrate on seven key elements: social networks, cross-functional teams, organization and governance, people and skills, evaluation and measurement, communication, and continuity of funding.
1. Social networks
Most social networks are ideas broadcast channels and asking for solution environment. They give reward and recognition for those participating. It is all based on social capital idea: people forming relationships, sharing their thoughts and seeding for something new to grow. To make the most of social networks organizations should:
? Learn from experience;
? Collaborate with people from different backgrounds.
2. Cross-functional teams
Teams that comprise people from various departments are valued both locally and globally. For a better cross-functional representation in the local markets, headquarters delegate and empower their local teams. For example, based on cross-functional insights, the corporate development team evaluates the potential embedded in any local company for investment or acquisition by other part of the enterprise.
3. Organization and governance
These are key enablers to innovation. Companies should have processes and structure in place that will facilitate them the access to the right input, as well as:
? A governance that provides it with timely access to funding and support for change;
? A steering committees on talent; development;
? A portfolio strategy and go-to-market prescription.
4. People and skills
People and their know-how are the most important assets of every company. In their investing strategy companies should concentrate on hiring top experts in their relevant area. Only through these people, their skills and the network they bring with them, companies are really going to be successful.
5. Evaluation and measurement
The most innovative companies know that new ways of evaluating return on investment are essential to the long-term viability of the business.
To enable new products continuously to come into the market, be tested, improved and scaled for future growth, different structure and different measures within a corporate environment are needed. While financial incentives have a definite role to play, there are three main factors that energize and empower those engaging in innovation:
? Interesting work;
? Recognition;
? Influence on the outcome.
6. A fresh look at communication
Transformation is about people and communication. Communicating internally and with external audiences it is important. In the process there are two important elements involved:
? HR people;
? Communication team.
Real innovation happens when the lab, the data section, science, art, literature, sports, humanities and all different areas come together. Getting thought leaders in from different backgrounds to speak to employees once a week can trigger innovation effect and give birth to novel solutions.
7. Continuity in funding
For innovation to have success, funding is a major success factor.
The economic turbulence of the last few years has imposed continuity of funding as challenge, but is still a priority. Those companies that have to discontinue their funding of innovation projects often fail. Therefore, a commitment to investing in innovative ideas is critical. Irrespective of sales volume dropping during the economic crisis, companies should continue funding their innovation developments as it is a key to success.
To spend efficiently companies should put in measurements to make sure they don’t spend too much on innovation without adequate measures of return on investment by:
? Setting a benchmark level for how much financial investment can be made;
? Managing it carefully with the right leadership, the right concept and the right people.
What insights can we draw?
1. The leadership mindset is one of the key enablers of strategic innovation. A savvy business leader makes everyone part of the growth of the company, irrespective of job title or status.
2. Talk in terms of learning, not failure. Failure is part of the old linear process of development. The spiral approach to innovation allows for incremental learning that adds to the whole process of comprehending what works and what doesn’t.
3. Social networks are an important part of learning and internal collaboration. Live socialization is just as important as online engagement because it increases the value of diverse perspectives from different nationalities and cultures.
4. Traditional methods of assessing financial viability are one of the biggest barriers to innovation.
5. Reinventing your risk management approach is essential to achieve innovation.
Why is this relevant?
In today’s complex environment, it is more important than ever for organizations to achieve a cohesive sense of purpose. This not only breaks down functional and seniority silos. As corporate roles become more specialized, a cohesive sense of purpose enables the sharing of knowledge, expertise and the intuition that comes from being able to understand different perspectives. In order to understand new opportunities, we need to understand new forms of risk and measure the return in much broader ways. The model of quarterly reporting needs to accommodate return on investment in different time frames and allow for investment in unusual and unexpected developments emanating from technological, scientific or other breakthroughs.
Our recommendations:
• Change perceptions of innovation from a specialist activity to a mindset that permeates the whole organization.
• Nurture group dynamics and socializing and guide employees through a structured, collective ideation process.
• Use cross-functional teams to cluster diverse ideas into new solutions.
• Embed innovation by aligning it with HR function and develop genuine reward and recognition for employees participating in social networks to share and develop ideas.
• Embed innovation by aligning it with the corporate communications function so that developments are communicated in the context of corporate strategy and future goals.
• If necessary, set up a separate company within the enterprise to protect revenue flow in the core business and provide the right environment for innovation.
• Ensure continuity of funding, particularly in an economic downturn. In a tough commercial environment, there is no return
to how things were, only an acceptance of external change and therefore internal transformation.
• Explore how new risk management tools for innovation can be introduced to the core business.
