Companies have been pursuing innovation for as long as they existed, as designing a new compelling product or service is at the heart of value creation.
Only in recent years has innovation become a discipline in its own right and has required a dedicated function within the organisation. Companies have always had R&D departments and Labs, but an innovation function? Why and anticipating what benefits?
The reason has probably to do with the realisation that there are many ways to carry out innovation in the corporate world. Technology is important, but there are many other ways to innovate: in the organisation, in the business model, looking around at other industries or competitors for different and improved ways to do business.
The Open Innovation movement and the case study of the Xerox Labs in Silicon Valley have also thought an important lesson: innovation shall not exclusively happen inside the company and initiatives born inside a company often accrue value somewhere else. Sometimes by design, other times unexpectedly.
Opening up your innovation funnel to a global network of potential contributors is at the core of the value creation of the Open Systems. Sourcing externally new potential initiatives is also a very cost effective alternative to investing directly to generate them.
As a result, many companies have in the last ten years and with different speeds and articulations adopted the open paradigm, ending up in creating and feeding some type of corporate innovation funnel. It typically starts by looking inward to exploit untapped contributions from the employees and to stimulate a more entrepreneurial mindset in the workforce – often under the sponsorship of the human resource function.
Managing the innovation funnel
The adoption of a stage and gate approach follows where ideas are discussed and fine tuned at team level. They are further analysed collectively at company level and selected for early stage development, where domain experts typically mentor the founding team into developing some type of MVP – minimum viable product.
At the end of the funnel the company is often left with a set of initiatives but very few ideas of what to do next. The employees have dedicated to the task time carved out from their daily responsibilities, the ideas have an MVP but their potential is yet to be fully tested and some of those are not aimed at value realisation in first place.
The end of the funnel conundrum
Nowadays most companies are pressed by the economic climate and the constant drive for results: where to focus innovation efforts is what really matters.
How does a company screen out low-potential innovation and how can it make sure it’s investing time and effort in transformative projects with sizeable results?
The recipe is not straightforward and very much dependant on the characteristics of the company. Innovation is not a one-size-fits-all endeavour, and the best approach for each company depends on an array of variables: its market, its competencies, its ambition, its development level along the innovation savviness curve.
There is nonetheless a set of common recommendations that might be suitable for most companies:
- Innovation strategy: have a clear innovation strategy in mind. There is no progress toward an objective, if the objective is unclear
- screen out weed from grass: a proper set of selection criteria can generate the right conditions for meaningful innovation
- boost your creativity by tapping as much as possible on an extended network of contributors
- define your end-of-the-funnel processes: moving the MVP to next stage of the development often requires new capabilities. Depending on the type of company, financial resources, new skills, an improved entrepreneurial mindset, a business partner, a target client, business building competencies could all be relevant to make the innovation initiative successful.
- Define your KPIs: closely related to progress toward your objective is the ability to measure this progress
- Be flexible: some of the initiatives will be best left inside the company to mature, others best suited to develop outside the company. Certain initiatives might hit the market too soon, others find the market is already crowded in that space. A different solution and set up might be required for each initiative
The best way to anticipate the end of the funnel conundrum is to anticipate and get structured around it.
A careful analysis of the context of the company will be required and an evaluation of new partnerships or the development of new competencies. Many different tools and instruments are available (accelerators, corporate venture capital, incubators, M&A activity, IP management, corporate venture builder) with each of these options carrying pros and cons for the company and the specific innovation initiative. The best is to be prepared in advance.
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