Innovation challenges at big companies was the topic of today’s CxO roundtable discussion at Web Summit. As we are transitioning rapidly to the Digital Economy, Innovation has never been more important and big companies are investing heavily.
Our group had senior leadership from startups through some of the largest companies in the world. We discussed some of the challenges Innovation leaders at big companies are struggling with today. We discussed four challenges and brainstormed solutions.
The first challenge we tackled was the natural defenses companies have in place to protect the status quo. Larger companies have often gotten large by being extremely efficient at producing and delivering their products and services. Innovation most often does not occur in a linear manner, which can trigger the protection defenses of efficient production and delivery. The most common solution was to separate the innovation resources from their production responsibilities. This was seen as the best way to protect the continued production and delivery. We did agree that production resources be able to transition in and out of innovation projects since they would bring unique experience to an innovation project team.
The second challenge we discussed is determining how to prioritize your Innovation investment. We settled on the analogy of a mutual fund manager managing a portfolio of stocks, and bonds based on the defined risk of the fund. A company’s innovation investment needs to be managed similarly. This assumes your company understands its risk tolerance and is honest with its expected return and success rate. As with financial investments high-risk projects most likely have a higher payback but lower success rates. The opposite is true as well, lower risk projects typically have lower payback and higher success rates. It is critical to understand the risk-reward of your innovation portfolio to set expectations with the business leaders that invest in your portfolio. Establishing a trusted relationship with your Innovation investors is critical to long term success and continued investment.
The third challenge we discussed is managing innovation projects. Innovation projects tend not to progress like other business projects. We used this taxonomy for our discussion.
For projects in leveraging existing technology and familiar customer markets quadrant those projects should be expected to progress predictably. For projects in the quadrants further out to the right those projects will need to be managed differently and they will not likely progress as predictably. These far out to the right projects tends to be the most challenging for a business to support. Having an appropriate mix of projects across all four quadrants is critical to the long-term success of the business. It is critical the business understand your Innovation project portfolio and specifically those golden egg projects that will need support from outside your traditional business lines.
The forth challenge discussed was inspiring innovation ideation in a large company. You do we encourage the hundreds and thousands of our employee’s to bring forth new idea’s. We agreed there were three key components that need to exist:
- Time and resources to explore and develop idea’s
- Belief the best idea’s would be incubated and developed into projects
- Reward & Recognition
Many organizations say they encourage employee’s to dedicate time and provide resources to develop ideas. Many companies reference the Google 20% of time for innovation policy but it was clear from our discussion the culture of the company was more critical and management plays a key role in encouraging this investment. Rewarding employees not just for the successes but the failed attempts that often lead to the future successes.
These are not the only innovation challenges leaders at big companies are dealing with today but these are critical for successful innovation: incubation, managing expectations, efficient management of a spectrum of projects, and engaging all the companies employee’s to fill the ideation funnel are critical.