3Sep/130

Improving Innovation: How Coaches Can Help Companies Turn Ideas into Profits, by Kim Benz and Heidi L. Smith, PhD

Posted by Heidi L. Smith

Innovation needs renovation!

In a recent Boston Consulting Group survey of 940 executives from 68 countries, 90% of respondents agreed that generating growth through innovation is essential to success in their industries, and 74% plan to increase spending on innovation this year. Yet fewer than half the respondents are satisfied with the financial results of their innovation efforts. The survey represented all major industries, including energy, consumer and industrial goods, financial services, technology, telecommunications, and healthcare.

This paradox—plans to increase spending despite growing dissatisfaction—was evident in responses worldwide. While executives from North America were most strongly represented (53% of the sample) executives from Europe (27%), Asia (14%), and Australia/New Zealand (5%) agreed that fierce competition, coupled with a need to demonstrate potential growth to investors, compels them to increase their investment in innovation despite high risk and low rates of return.

In these trying times, intense pressure to generate profit through increasingly fast-paced innovation cycles will likely lead some executives to seek expert assistance. Business coaches can help companies improve the innovation process by understanding where this complex process most often stalls or breaks down completely. Opportunities abound for business coaches to improve innovation worldwide in small and large, product- and service-oriented companies from every industry.

First, coaches must understand that innovation is more than creativity. While creativity involves the production of new and valuable ideas, innovation is turning ideas into profits—innovation impacts the financial bottom line. A simple diagram describing the innovation process is provided below.

At each stage of the process, creativity must be directed towards the tasks that are appropriate to that particular stage. Coaches can assist in this effort by more explicitly defining each stage, suitably aligning the team to facilitate the process, and assessing progress and results.

Innovation begins with idea generation. At this stage, coaches can help direct creativity toward the generation of a volume of novel and diverse ideas, including helping companies identify and cultivate both internal and external sources of ideas. While small companies may be focused on internally generated ideas, they may benefit from systematically tapping into external sources, such as market trends, customer needs, and supplier-identified innovations. Larger companies may be focused on their competitors and customers, and may benefit from building a process for employee involvement at this stage.

Often, companies have more than enough new ideas, but struggle with transforming those ideas into profits. They may have difficulty evaluating and selecting ideas for further development. When executives have difficulty deciding which ideas to pursue, they may pursue all ideas simultaneously. This "shotgun approach" decreases time and resources allocated to development of any one idea which, in turn, decreases the chance that the project will be successful. In this high-risk, low-return environment, coaches may help companies identify criteria and adopt decision-making strategies to determine which projects are pursued and how they are resourced.

Once a company decides to develop an idea, concept variations must be iteratively refined and tested until the innovation is ready to be introduced in the marketplace. At this stage, coaches can help direct creativity towards solving problems in development or execution—moving from a focus on divergent thinking to a focus on convergent thinking. Truly creative minds can figure out how to solve extremely challenging executional problems, thus keeping the innovation process from breaking down.

In small companies, parts of the development, testing, or marketing process may require outsourcing if internal expertise is lacking. Large companies may leverage business allies to outsource tasks such as statistical analysis of consumer data or parts manufacturing and assembly. Identifying necessary expertise is crucial, and business coaches may facilitate critical business-to-business connections. While companies may be most comfortable keeping innovation "in-house," outsourcing only after initial testing and development, companies that outsource earlier and smarter may benefit tremendously by reducing time to market and slashing costs.

Regardless of company size, coaches can help define and manage the stages of the idea-to-cash process to facilitate efficiency and effectiveness. There is no "one-size fits all" innovation process. Rather, the process depends on the type of innovation (industry/product vs. service vs. application) and the functional organization of the people involved.

Aligning people around the innovation process is critical. Regardless of the company's structure (flat, matrixed or hierarchical), communication is key to successful innovation. Conscious effort to increase communication quality and timeliness is especially important in organizations with complex structures and complicated functional relations. Coaches can help companies build cross-functional project teams or strategies for sharing and evaluating project progress across functions (e.g., supply chain, R&D, customer service, marketing, and operations). Successful innovation requires interaction, and coaches can facilitate connections and exchange of information.

Ultimately, executives' dissatisfaction with innovation may stem from inadequate assessment. In fact, fewer than half the executives surveyed carefully track return on innovation efforts. Assumptions about the causes of process derailment may be inaccurate. It is difficult to identify problems without good measurements, and meaningful metrics are hard to find.

Although companies can measure time-to-initial-sales, number of new product launches, development costs, and overall revenue increases, they have difficulty tracking specific costs of innovation and tying them to resulting profits. When projects start and stop, costs are shared across functional units with separate budgets and different executive leadership. The time frame for measuring financial success is not obvious, so metrics are hard to come by. Smaller companies may have an advantage here; the relationship between innovation expenses and profits may be easier to evaluate when efforts are focused around only one or a few projects and a simpler organizational structure facilitates information flow.

Few creative ideas make it from concept to marketplace, and fewer still produce significant, sustainable, bottom-line results. Companies must continually re-evaluate the expected project returns to decide wisely whether to continue development, effect a product launch, or abandon a project and shift resources to more promising projects. Business coaches may assist executives by building skills needed to identify important sources of information, articulate decision-making criteria, and deal with inherent uncertainty.

Even expert coaching will not eliminate the anxiety and frustration associated with trying to predict the next big breakthrough and get it to market faster and more cheaply than the competition. However, innovation offers opportunities for business coaches to make significant contributions to business people and business profits.
Source:

Andrew, James P. "Innovation 2005." March 25, 2005. Boston Consulting Group. Available at http://www.bcg.com/publications/publications_search_results.jsp?PUBID=1312.

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