Innovation is the core of any business development. The Austrian-American economist Josef Schumpeter (1883-1950) described innovation as a new combination of production factors. According to Schumpeter, the so-called innovator has to come up with a new combination (innovation). The economical success then leads to imitations by copycats. Prices are driven down as a result of supply and demand, so that the entrepreneur has to search for new combinations. And so on.
Creativity between monitoring and letting go
Managing innovation is a core issue for companies in general. If you google the term, you will receive about 457 million results. A lot of important books with theories have been published regarding this topic. I would like to focus more on the practical issues, which work in the day-to-day business.
Innovation is linked to creativity. The common understanding is that innovation goes along with a low level of rules and that the flow of thoughts is not disrupted by any process regulations. But even if these circumstances are set, you cannot force creativity. Within this process, humans are the key factor in creating new innovation. Therefore it is important to create an environment within the company which supports innovation processes. The process itself cannot be controlled but can be managed in such a way that the result is more innovation driven than invention oriented.
Invention vs. Innovation
Joseph Schumpeter created different terms regarding concept (invention) on one side and renewal (innovation) on the other. Inventions contain all sorts of concepts and fantasy driven ideas, whereas innovation describes potential products, processes and services which can be sold. Of what avail is it to fund the most creative ideas if you are not able to sell them later on? Therefore it is crucial to have a guiding structure, supporting transparency for all participants and focusing as early as possible on selling perspectives. Transparency is important to get a common understanding and agreement regarding the process itself and how the innovation will be evaluated later on. This is the first step in managing innovations.
Requirements to manage innovations successfully
Based on my experience, there are a few and elementary requirements to manage innovations successfully:
- The company has to perceive itself as a learning organization. It is easy to talk about it, but it is very difficult to create such a culture. Especially since under other circumstances, we, the management, often talk about Six Sigma or similar programs. It is essential to allow mistakes and even to force the organization to allow mistakes in order to learn.
- The creative process must have a common but simple guiding process. The structure to review project ideas must be simple (!) as really nobody likes administrative burdens and it would destroy the creative process before it starts. The review process should be common in order to understand the logic and – in case of success – ensure that it can be repeated.
- To get a clear commitment of sales is like trying to hit a moving target or nailing jelly to the wall. But anyhow it is important to integrate the sales department as early as possible. To listen to the customers’ voice and to review the market’s needs is crucial.
Following these premises means building a good foundation. A common review process avoids increasing complexity by over-engineering later on as well. Each project should be shown on one page only. If the complexity does not allow it, please review the project again. The main parameters for a project review are 1) clear responsibility, 2) source data for prior decision and 3) latest evaluated update of these data regarding: a) cost and resources, b) time schedule and c) market potential including potential cannibalization. To understand the process during development it is important to review the lessons learned for the next one.
All in all the systematical innovation process helps significantly when it comes to identifying innovative products and processes.