Innovation that counts

19 Aug 2013

Spending big on research and development doesn’t guarantee innovation or growth, but governance that supports collaborative innovation can help big companies innovate like start ups, says Jean-Christophe Saunière

Even in times of crisis, innovation remains a top priority. In PwC’s annual CEO survey, 25% of business leaders identified developing new products and services as the main opportunity for business growth in the next 12 months. A further 17% expect growth to come from new alliances or businesses and 8% from new operations in foreign markets. This means that half of the 1,330 business leaders surveyed are relying on some form of innovation to develop their company.

The problem is, internal resources are no longer adequate to create this innovation. Research and development (R&D) budgets are strained in times of crisis, and at any rate, observation suggests that pouring money into R&D isn’t the answer – boosting funding isn’t directly correlated with boosting either ideas or profit.

So how do you increase innovation without spending on R&D? The answer lies in decompartmentalisation – or collaborative behaviour. Don’t assign innovation to a special group, draw on all the functions within the company and customers, suppliers and others externally. The traditional hierarchy in organisations is evolving towards a network-based structure that calls for more intelligent, flatter distribution of roles and responsibilities. These changes completely remodel work habits and interpersonal relationships.

Flattening the hierarchy and encouraging collaboration doesn’t mean setting your strategy adrift, or destabilising the company by taking huge risks and challenging structures beyond their capacity – but it’s essential that governance plays a conducive and controlling role for innovation to be both successful and safe.

Governance for innovation

Companies can’t just decide to innovate – they have to create the right climate and structures to bring about development. At times of economic difficulty, innovation does not come naturally, so preparing the organisation for collaboration is key. Some of the most important corporate governance strategies to support innovation are:

  1. Align strategy. Ensure that the innovation strategy is in line with the global development strategy – particularly if the global strategy involves external partners. Sharing core business strategy as part of innovation may be too risky in terms of both control and intellectual property (IP). Awareness of IP concerns should be developed in parallel with the application of open innovation strategies.
  2. Senior sponsorship. Guarantee that innovation is ‘sponsored’ at the highest levels of the organisation. It shouldn’t be the purpose of a specific function, but should occur across all departments, led by an innovation ‘champion’.
  3. Clear process. Put in place a well-defined process for innovation. The journey from idea to fruition should be subject to a structured process. This means that mistakes – which true innovation goes hand-in-hand with – are limited to preliminary development phases.
  4. Link to performance and reward. Define individual and collective performance indicators to promote the type of behaviour that fosters innovation. Make the benefits of collaborating specific and openly value risk-taking.

Prepare to innovate

So how do you innovate like a start-up organisation? You can create the right conditions in large organisations by:

  • Encouraging controlled risk-taking
  • Supporting outside ideas
  • Providing tools to enable collaboration
  • Aligning individual appraisal criteria with innovation targets

Many companies regard innovation as a way of developing their market and setting themselves apart from the competition. Collaborative innovation is an important and growing trend – a response to increased budget constraints and ‘time to market’ pressures in a global economy.

Companies can no longer rely on their own resources to stay ahead of their competitors. Habits and relationships within companies have to transform to foster collaborative innovation. You may not be able to just ‘decide’ that innovation will happen – but you can prepare for it and increase the chances of new ideas creating tangible value.