Do organizations with formal innovation structures and processes perform better than companies that manage their innovation on a more ad hoc basis? According to a 2012 study by Accenture, the answer is yes.
Companies with more formal innovation structures and processes saw better outcomes and higher satisfaction levels with their innovation than those with informal – or no – systems in place. In that study, C-level executives were surveyed to find the answer. But what do we learn from asking front line innovators (brand managers, researchers and R&D professionals) working day to day on new product development?
Recently, Affinnova surveyed 400 consumer products professionals who ranked below the C-level; these respondents all worked on innovation and new product development projects in their organizations. Interestingly, the data uncovered the opposite finding of the Accenture study. Participants were asked to describe their innovation structure and also their company’s typical new product success rate. When comparing the innovation structure at top performing companies (those with the highest self-reported new product success rates) and average performing companies, there was no substantial difference. Innovators at top performers were no more likely to report having formal systems and processes in place. We found that revenue size was not a major catalyst in terms of dictating innovation success. In fact, top performers tended to be from companies with smaller annual revenues.
So, if size and structure don’t make a difference in determining innovation outcomes, what does? In comparing innovation behaviors of top performing companies against bottom performers, we found that top performers demonstrate four key organizational characteristics:
- Effective Collaboration: Companies with the highest rates of new product success are 20% more likely to have effective cross functional collaboration on new ideas than companies with the lowest success rates. Cross functional collaboration, however, means more than just involving marketing and market research. In pinpointing specific collaboration practices, top-performing companies are more likely to involve sales and trade in the innovation process than low-performing companies. They involve them from the beginning strategy and ideation stages through package design and determining price, unlike lower performing companies which generally involve sales and trade teams at the end stages of the innovation process (final launch decision making).
- Risk Tolerance: Companies with the highest rates of new product success are 37% more likely to have cultures that encourage and reward creative risk taking than companies with the lowest success rates. As a result, they are highly effective at generating the level of breakthrough thinking required for consistent innovation.
- Research Driven: Top-performing companies are doing a better job of understanding consumer needs through research and data. Companies with the highest rates of new product success are 35% more likely than the lowest performing companies to empower their employees with insights for understanding consumer needs. But even more critical, they use data and insights to assess their product ideas against competitor strengths and weaknesses which enable them to establish differentiated propositions for their products. Top performing companies are 28% more likely to assess innovation ideas against competitors than bottom performing companies.
- Supportive Culture: Top-performing companies don’t just give their innovators more “intellectual” resources (budget, data and technology) for innovation; they also empower them with more “emotional” resources (guidance, support and running room). They are less likely to encumber their innovators with frustrating internal politics and more likely to put the full skills and talents of their people to use. The payoff in terms of employee morale and engagement is huge. Compared to the lowest performing companies, innovators at top performers are 1.3 times more likely to feel that their talents are being fully leveraged, 2.9 times more likely to feel that senior leadership is supportive and 3 times less likely to consider leaving their company to work for more innovative companies.
Does this mean that leaders should abandon their efforts to embed formal processes and systems around innovation? Of course not. It just suggests that systems – in and of themselves – contain no value unless they drive specific organizational behaviors and help establish the right cultural norms. In formulating better systems, leaders should focus on behaviors that matter. Namely, getting people to collaborate more extensively and more broadly across the organization; giving people access to better insights to form and evaluate ideas; removing barriers to risk taking and giving their people the running room to use their full talents.
image credit: Steven Depolo
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