Establishing a pipeline of breakthrough innovation27 March, 2015 / Articles
Innovation is key not only for starting a business but also staying ahead on the pack: so what steps can you put in place to optimise yours?
It is increasingly important for companies to be able to deliver a pipeline of breakthrough (or radical) innovations in order to respond to emerging competition, disruptions to core business, and increasing customer power. Yet despite this, nearly all companies are unsatisfied with their efforts to date. Arthur D. Little (ADL) conducted a survey of over 80 large organisations to explore best practices in this area.
Breakthrough innovation: high hopes – low satisfaction
The surveyed companies expected the revenue contribution from breakthrough products and services launched over the last three years to double in the next five years, from 8% to 15%. They also believed the expected contribution from incremental innovation would rise much more slowly. (See Figure 1.) Surprisingly, ADL’s survey revealed that 88% of companies were unsatisfied with their current breakthrough innovation performances, with none reporting being very satisfied.
The importance of having clear expectations
Although nearly 90% of companies recognized the importance of defining specific strategic objectives for breakthrough innovation, only about half reported currently doing so. Those that did define specific breakthrough objectives and goals, were on average, nearly four times more satisfied with the results than those that did not, and the more explicit the goals were, the higher the success rate. We also found that companies with more experience of working with breakthrough innovation in a structured way had more explicit breakthrough innovation objectives than others, and that the more successful companies had specific target allocations for the resources they expected to dedicate.
This raises fundamental questions about why 40% of firms are not explicit about their ambitions and targets for Breakthrough Innovation. The most obvious takeaway from our analysis is that firming up specific expectations and targets for Breakthrough Innovation could make a significant difference to the impact delivered.
Half of the participating companies regarded their breakthrough innovation leadership and governance structures as ineffective or very ineffective, including both experienced and less experienced practitioners. The top-quoted challenges were inability to commit to a cause and allowing short-term objectives to cannibalize breakthrough efforts.
Breakthrough teams and organisational models
Having a dedicated breakthrough team is considered the most effective basic approach and yields 15% higher satisfaction than no dedicated organisation. Crucial to any dedicated team’s success, however, is that it is implemented in a way that suits the nature of the issue at hand. (See Figure 2). The complexity and novelty of the technology, product or service for the company can provide some guidance on the best way to organize breakthrough teams.
ADL identified four generic organisational models to guide companies in their choices: business unit/division R&D breakthrough teams, corporate R&D breakthrough teams, internal dedicated breakthrough teams with multifunctional membership, and “breakthrough factories” (which focus on development of a pipeline of “grand-challenge”-led, radical or game-changing innovations that push the boundaries of science).
The survey also revealed a number of key success factors for making the chosen model work effectively: cross-functional staffing (to allow different disciplines to enrich projects), ring-fenced funding (to protect against short term cost cutting), and “intrapreneurs” (to facilitate change). Trend monitoring and business intelligence were rated as the most important and widely used practices to achieve breakthrough results.
Management of breakthrough efforts
Successful breakthrough teams apply agile processes, drawing on approaches used effectively by start-ups. In practice, this means firstly being clear about the goal and the technical challenges that must be overcome. Rigorous quantitative analysis is often required to do this. Secondly, planning should be light and agile, involving several iterations with fast and purposeful meetings (e.g. scrum approaches). Thirdly, where possible, teams should adopt rapid prototyping and try to engage customers early with fast repetition (“build-measure-learn”). Progress is best assessed by tracking iterations to see how they are converging on goals, revealing dead ends, uncovering scientific advances, etc.
Individuals involved in breakthrough efforts are encouraged to stretch themselves beyond their comfort zones in environments that allow failure. Our findings confirm that a culture that does not accept failure is one of the most significant barriers to achieving breakthrough innovation.
Active management of external networks and partners was very important for successful breakthrough innovation, yet, on average, most were either partially satisfied or unsatisfied with their efforts. The best performers in this area have developed clear strategies for innovation ecosystem management and its contribution. They recognize that working within the ecosystem is a two-way process. They work to develop a shared vision within the ecosystem, and they agree transparent IP arrangements and frameworks, while being open to sharing information once these are in place. They look to lead and influence the ecosystem in the most business-critical areas, and they use the right “enablers” to develop and manage the network.