Top Management’s role in solving the Corporate Innovation Problem

frankmattes Thought Leadership

Are you a Top Manager asking … ‘What do I need to do so that innovation thrives and we achieve best-in-class Return On Innovation?’

Then this article is for you.

Many companies are heavily investing in their innovation activities but are dissatisfied with the results. We call this the Corporate Innovation Problem™ (Note: For easier reading, we skip the TM-sign in the rest of this article). This article describes how Top Management could help in solving it.

In our blog series that started HERE we found that there are three root causes (see HERE). To solve one of the root causes, the ‘systems’ problem, we have developed a unique model. The foundations of this model are academic research initiated at MIT and Best Practices in what the researchers did not cover (see more on the foundation of our model HERE).

Our model goes by the acronym ENGAGE, where every letter stands for one of the six key components. So one could say: Solve the Corporate Innovation Problem – ENGAGE the organization.

In this post we look at the first component.

Ensure sustained Top Management support

The first ingredient in the success recipe for solving the Corporate Innovation Problem is to Ensure sustained Top Management support.

Being a Top Manager who is concerned about the company’s innovation results is not easy. These people are perfectly aware that innovation will be at least one of the top three drivers of company growth. But many of them find that sustaining innovation to create real value at scale — the only kind of innovation that has a significant financial impact — is hard.

And it is getting harder almost by the day.

Leading strategy thinkers demand a lot. From servitizing traditional products to innovations in the value chain and in business models. Plus, innovating the function of management itself. Not to mention the Digital agenda…

Launching another corporate initiative to shift corporate innovation behavior would be time-consuming, daunting and probably fail.

And given the fast pace of business, limited time and means as well as the short-term performance pressures that Top Managers constantly face, often isn’t an option.

So in this cornerstone of the ENGAGE model, we have identified six interventions that have a high impact and with targeted resource.

Since Top Managers almost unanimously agree that people and culture are the key drivers of innovation, these six focal areas address people management and the governance / management system that the people operate within.

These six focal areas are:

  1. Setting the expectation and the tone for innovation behavior
  2. Crafting the innovation strategy and making sure it is operational
  3. Being less the decision maker, more the ‘Chief Experimenter’
  4. Being visible where the innovation action takes place and being consistent
  5. Aligning the governance system so that it fosters innovation
  6. Supporting the advancement of culture

(Note: Due to its importance, we have made ‘Advancement of the culture’ a separate cornerstone of the ENGAGE model – More on this in a later post)

1. Setting the expectation and the tone for innovation behavior

Many companies include ‘innovation’ or ‘being innovative’ in their corporate values.

However, few detail explicitly what this means practically, in terms of attitudes (e.g. how openness, appropriate risk-taking and entrepreneurship are valued and supported) or interactions (e.g. genuine collaboration across the organization’s silos).

Paying lip service to the innovation theme but doing nothing about it is a strong inhibitor of innovation and likely to greatly turn back the cause of innovation the next time improvement is attempted. Because, as with any corporate top-of-the-agenda issue, staff will watch closely how Top Management walks the talk.  Being consistent need both words and actions to be seen to be aligned by the people.

So Top Management needs to specifically describe which values, attitudes and behavior would be supporting the intended innovation – and be a role-model in this respect.

2. Craft the innovation strategy and make sure that is operational

Many companies work on written innovation strategies. However, in practice one finds that many of these strategies are too general in nature – perhaps finding that innovation strategies end with statements like ‘we want to be innovation leader’ or with defining ‘investment buckets’.

In other words, many innovations strategies are not operational. And this causes many problems down the road since there is no reference framework for decisions.

What do we mean with operational?

Firstly, it is about incorporating innovation in the strategy implementation process. While almost all Top Managers see innovation as a top priority, few of them explicitly manage it. According to McKinsey, one third of leadership teams manage innovation on an ad hoc basis; another third as just one of many points on the agenda. In very few cases, Top Managers regularly review the implementation of the innovation values they want to promote.

Secondly, it is about the perspective of the actual innovators, e.g. the engineers devising smart products for the ‘Internet Of Things’. Generic innovation strategies like the ones mentioned above do not help in making engineering decisions. Top Management who want to foster an energetic innovation environment need to make sure that general statements are operationalized to a level that the innovation teams can use as framework for their decision-making.

And how can something be a top priority if it isn’t managed by the leadership team with the same attention as sales and costs for example?

Top Management needs to make sure that the innovation strategy – which includes its content as well as the values, attitudes and behavior – is operationalized and tracked.

3. Be less the decision maker, more the ‘Chief Experimenter’

Top Management is usually operating with a strong operating perspective under a strong operating pressure. However, innovation is inherently about uncertainty. Hence, in many cases Top Management cannot accurately decide which way to go when it comes to non-incremental innovations. Chances are high that if a Top Manager sees themselves the decision maker they may stumble in the busy daily agenda.

There is an alternative. Think about Amazon’s Jeff Bezos as the role model for this…

Top Managers should be asking for low cost experiments that test the most critical assumptions and then decide with the innovation team on the data generated by these experiments. In this sense, Top Managers are ‘Chief Experimenters’ by providing resources and pressure to move quickly and offer a haven for passionate inventors to complete their experiments.

4. Be visible where the innovation action takes place

It’s not enough for Top Management to make innovation a personal goal and to attend meetings on innovation now and then. They need to make sure that they are role modeling innovation behavior and by their presence on the ‘innovation shop floor’ engage middle management and inspire staff. Here, Top Managers also learn about the real problems when the ‘innovation rubber meets the road’.

Studies have shown that this massively builds up trust among staff members that Top Management is really walking the talk when it comes to innovation.

5. Align the governance system so that it fosters innovation

Almost any company has made their choice about how to distribute the overall responsibility for innovation. Research by IMD has shown that there are nine generic organizational models that do this, including structures, processes and KPIs.

Usually however, there are factors in each of these dimensions that stifle innovation. So for instance, the responsibility structure is not clear enough – resulting in a constant stream of fire-fighting activities that drain innovation energy. Or processes are over-engineered so that innovation is stifled through excessive rules and regulations. Or KPIs are targeted at zero failures and focused only at process input, in-process and process output metrics alone – but do not consider information-sharing, openness, collaboration and learning.

Top Management who want to see an energetic innovation environment need to have a critical look at their company’s governance system – since it is a key driver for innovation attitude and behavior.

About innovation.support

innovation.support is an international agency focused on solving the ‘Corporate Innovation Problem™’. To achieve this, we provide consulting services based on proven, best-in-class methodology which in many cases is proprietary. The services are delivered by experienced innovation management specialists and by subject-matter experts.

Please get in touch with us if you want to improve the outcomes of innovation investments.