Innovation management has become a much more strategic activity in modern enterprises, and its importance has grown significantly given its ever-increasing role in transforming the way companies work and expanding their opportunities in different markets.
Companies now typically look for a more structured and rational way of approaching innovation to ensure good use of resources. Still, they also need to become more adaptive, because circumstances change much more rapidly than they did in the past.
Yet there’s no real roadmap setting out how a company becomes innovative.
To investigate how companies evolve over time in terms of their approach to innovation and their decision-making about where to prioritize investments in innovation, I interviewed executives and managers from 30 companies.
But let's start at the beginning.
What is Innovation Maturity?
Innovation maturity refers to how developed and well-organized a company is at coming up with and successfully implementing new ideas. It's an insightful measure of how much an organization has grown in its capacity to be innovative and adapt to changes in the market and technology.
The maturity model we developed through our interviews is an observation rather than a prescription. While there’s no silver bullet or ideal pathway mapped out for companies to follow, by assessing what happens in practice, we can help you avoid the pitfalls and learn lessons from other organizations’ experiences.
Three-Stage Innovation Maturity Model
We created a three-stage innovation maturity model based on what we learned about companies’ experiences in the real world rather than formulating a model based on an idea of what might be ideal.
While speaking with these companies, we observed that companies moving through the three stages become more adaptive. Of course, the fact that they are moving through different stages suggests they are adapting but, more importantly, companies that graduate to phase three are usually characterized by their much greater capacity to adapt.
In our full white paper, you’ll see a variety of innovation practices at each of the three phases, and you’ll also see a clear progression in the way companies grow, transform, and adapt. Read the paper for a full analysis of our findings but, if you’re short of time, here are the highlights and some further thoughts.
Phase 1: Idea Generation
During the first stage, companies focus on generating and gathering ideas and on the process of moving ideas from concept to reality. In particular, companies prioritize the issue of how to gather more ideas.
The quest for ideas is often driven by a sense that one breakthrough idea will change the company’s future. And once that idea has been uncovered, they focus on the best way to process it to reach the market.
At this stage, companies are typically tied down to conventional financial KPIs. What’s the business plan? What’s the potential return on investment?
The number of innovation projects is likely to proliferate at this stage and companies are likely to pick up on lean innovation. They get into a “fail-fast, fail-cheap” mindset, often because they have too many ideas, too many projects, and insufficient budget.
It’s a phase companies probably need to go through but should get out of as quickly as possible.
Phase 2: Customer-Centric Innovation
In the second phase, companies become increasingly customer-centric and far more willing to involve customers in their innovation activity. They typically focus on “lean” innovation, with more investment in externally acquired skills, like design, to ensure that potential products meet a minimum value proposition. That often means an innovation manager has been able to push back on ROI strictures enough to give a project “space to breathe.”
At this stage, companies tend to have more critique of innovation conventions and are more concerned with tying innovation into a long-term and more open innovation strategy.
Phase 3: Innovation-Centric Organizations
In the third phase, companies are more willing to spend time and resources on finding new avenues for innovation to happen. At this stage, organizations are more likely to invest in foundational capabilities, such as their employees, and to find out how innovation is impacting their bottom line.
Companies are also more willing to fail and to start building an innovation portfolio that strategically makes sense for their business and also has an impact on the wider society, environment, and sustainability.
In this phase, companies have graduated to a new way of doing business. They tend to think more of their strategic options. In other words, they’re innovating for a fast-moving world and creating options they may or may not use. That implies that they have recalibrated financial KPIs around a long-term adaptive strategy.
They’re likely to have moved beyond simple ideas for customer involvement in projects to a point where they track customer behavior on a continuous basis. And their decision-making processes are likely to be much more sophisticated as they combine optionality with continuous insight.
Chris Thoen, formerly with P&G and now CTO at Givaudan, summarizes the third phase very well:
“In the established business, financial metrics play a more important role. The new areas mean you have to be entrepreneurial, have a good testing profile, and be good at learning, be more fluid. When transforming, everything becomes discovery, including the financial side.”
In my view, the innovation maturity model has significant merit because it’s based on observation. In effect, it reflects back to the innovation community some of the ways it behaves. However, more can still be done to refine and simplify the model. And of course, we always need to keep in mind that innovation and the model for effective innovation will constantly evolve and change.
