Most companies acknowledge the importance of innovation as the driver of future business success but still fail to make innovation happen. Researchers have identified the three most typical causes of failures of corporate innovation attempts, being lack of innovation strategy, innovation culture, and innovation structure.
In the past, companies made strategies of innovation, these days “innovation is the strategy”. Strategy formulation is all about innovation i.e., identifying new markets, bringing new products/services to market, and developing new business models. This means that innovation should not be a strategic objective in the strategy, but rather seen as the organisational mechanism and capability to drive business value and achieve the company’s strategic objectives.
For an innovation strategy to succeed, proper innovation culture and innovation structure are needed.
Without a proper innovation culture, innovation strategy is useless, and nothing is going to happen, because innovation is all about people.
Innovation is risky, as it involves a lot of uncertainty and unknowns. This is why innovation needs a lot of experimentation and not all experiments will result in success, or more realistically, most will fail. This is why the cornerstone of innovation-supportive corporate culture is tolerance of failure. In most companies, corporate culture is still anything but innovation-supportive, which needs to change.
Cultural change starts at the top. In the best companies, CEO’s have become innovation champions with the ambition to spark innovation processes leading to building new growth businesses for the companies. But culture change cannot end at the top, it has to encompass the whole organisation.
Bureaucracy, so embedded in most sizeable organisations, has been identified as the “killer” of innovation. Also, traditional hierarchical corporate structure impedes free information flow across the organisation which is much needed for innovation to succeed. While a certain amount of bureaucracy is still necessary, companies with flatter structure and team-based ways of working have been observed as more successful at continuous innovation.
In many companies, their structure works against the implementation of innovation strategy and needs to be changed. In today’s world of fast-paced change, one cannot manage organisational change using traditional theory and prescribed steps of “unfreeze, change, and freeze (again)”. Instead, organisational change management should be about creating a flexible and “fluid” organisation, which is capable of continuous change and adaptation as the context, including the strategic objectives of the company, requires.
To “employ” innovation as the driver of future business success of their companies, the CEO’s need to truly understand the meaning of “innovation is the strategy”, and then get their act together regarding innovation culture and innovation structure in their organisations.
Article by Mart Kikas, codirector of the Executive Master in Business Innovation