What is innovation? - Deepstash
What is innovation?

What is innovation?

Curated from: mckinsey.com

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Innovation in a business context

Innovation in a business context

Innovation is the systematic practice of developing and marketing new products, services, processes, and business models for customers.

Successful innovation increases value and drives growth. However, getting innovation right can be challenging.  Over 80 percent of executives surveyed say that innovation is one of their top three priorities, yet less than 10 percent are satisfied with their innovation performance.

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The importance of innovation in business

The importance of innovation in business

Companies that use the essentials of innovation see a substantial performance edge.

Mastering innovation can generate economic profit 2.4 times higher than other players.

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Becoming better innovators

Research shows eight critical elements organisations should master for superior innovation performance. 

  1. Aspire: Viewing innovation-led growth as critical.
  2. Choose: Investing in a coherent, time- and risk-balanced portfolio of initiatives.
  3. Discover: Creating actionable business, market, and technology R&D efforts.
  4. Evolve: Developing business models that deliver defensible and scalable profit sources.
  5. Accelerate: Developing and launching innovations quickly.
  6. Scale: Launching innovations at the right scale in the relevant markets.
  7. Extend: Creating and capitalizing on external networks.
  8. Mobilize

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Examples of successful innovators

  • Mercedes-Benz Group invested extensively in digitizing its product development system, shortening its innovation cycles, improving its ability to personalise cars and increasing assembly efficiency by 25 percent.
  • The information services organization RELX Group ran ten to 15 experiments in each customer segment in its pipeline yearly, then selected one or two of the best ideas.
  • International insurance company Discovery Group mobilised the organisation around innovation by creating incentives using semiannual divisional scorecards.

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Improving the volume and quality of new ideas

Improving the volume and quality of new ideas

Steps to help aspiring innovators get started:

  • Hold collision sessions. Teams consider unmet customer needs, technology trends, and business models and bring creativity and specificity to idea generation. Then a panel evaluates the ideas and prioritises what to do.
  • Challenge orthodoxies. Participants describe common beliefs that prevent the organisation from innovating.
  • Make analogies to other industries. A team creates a list of companies with unique value propositions and then systematically applies these propositions.
  • Apply constraints, such as serving only one type of customer.

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LINUS PAULING

The way to get to good ideas is to get lots of ideas and throw the bad ones away.

LINUS PAULING

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Innovation portfolio

An innovation portfolio is a thoughtfully curated collection of potential initiatives, with clear aspirations and resources defined for each.

The portfolio will help to find new opportunities and determine the appropriate number of initiatives, including:

  • Confirming the total value of the portfolio needed.
  • Evaluating existing innovation projects.
  • Getting comfortable saying “no” to stop projects that are dilutive.
  • Reallocating resources to new initiatives.
  • Identifying portfolio gaps and defining new initiatives.

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How to measure innovation

  • Look at innovation-driven net new growth, called the "green box." The green box looks at growth from innovation alone. It defines the value that a company creates from innovation, on a defined timeline, with quantifiable metrics. Once defined, the growth aspiration can be cascaded into a set of objectives and metrics.
  • R&D-to-product conversion: This metric is calculated from the ratio of R&D spending to sales from new products.
  • New-products-to-margin conversion: This metric view the ratio of gross margin percentage to sales from new products.

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How to create a high-performing innovation team

How to create a high-performing innovation team

Innovation is a team sport and consists of ten traits that fall into four main categories:

  1. Vision - the ability to spot opportunities and inspire others to go after them.
  2. Collaboration focuses on fostering effective teamwork and change management.
  3. Learning or absorbing new ideas.
  4. Execution, with traits that enable quick decision-making even during uncertainty.

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Broad innovation advice for business leaders

A recent poll showed that 85 percent of executives say fear is holding their organisation back from innovative efforts.

  • Create a culture that accounts for the human side of innovation. For example, people who worry about failure, criticism, or career impact of a wrong move can prevent people from embracing innovation.
  • Create a safe environment for innovation.
  • The majority of important breakthroughs failed many times before they succeeded.
  • If someone knowledgeable thinks you have a bad idea, ensure to put them on your board and make them an advisor to prevent blind spots.

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IDEAS CURATED BY

nash_

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