In most sectors, success constitutes some combination of launching new products, entering lucrative markets, creating competitive advantages and new business models. All of these require more than operational excellence - they demand innovation.
The framework I use to audit innovation is the Enterprise Model that is displayed below (click on to enlarge). Arrayed around the business unit are the external entities that serve as its context and present its threats and opportunities. Inside are the nine variables that influence innovation. In aggregate, you have the equivalent of a comprehensive exam that focuses on your innovation health.
Strategy
Strategy defines the size and shape of the Business box and answers questions that include: What products/services will we offer and how much will we invest in each? What markets/customer groups will we serve and how much will we invest?
By pinpointing what the organisation will not do, strategy establishes innovation guardrails. For example, a defence contractor's strategy included the top team's decisions to exit its commercial and international businesses. The strategy proceeded to pinpoint the scope of the company's offerings to its current and potential US Defense and Homeland Security customers and the advantages that would fuel its future success.
Key question: Does your firm have a clear strategy that establishes boundaries and opens doors that stimulate innovation?
Business processes
Business processes are the workflows that may touch the customer (product development, order fulfilment, customer service) or be invisible to the outsider (hiring, planning, budgeting). Innovation needs to be built into every process redesign effort. You must continually ask not only "How can we do this better?" but also "Why do we do this at all?" and "How would we do this if we had no constraints?"
For example, an industrial products firm had a traditional ‘stage-gate' product development process. Its weak link was the ideation sub-process, which was uncoordinated. The redesigned process includes mechanisms for tapping into creative thinking from the outside (customers, suppliers, academia), stimulating internal innovation, screening ideas, and funding the ideas worth taking to the next step.
Key question: Is innovation built into your business process design/redesign efforts?
Goals and measurement
An old saw says "What gets measured gets done". You are failing to pull one of the most powerful innovation levers if you don't: set clear, strategy-driven expectations for innovation; establish measures; define goals; evaluate actual performance; and provide feedback.
For example, a leisure industry company exhorted its employees at all levels to innovate. Echoing thematically the Apple advertising tag line, they hung "Think differently" posters. However, the campaign fell short of expectations due to the failure to build innovation into employee metrics.
Key question: Is innovation formally built into your performance measures for departments and employees?
Human capabilities
Nothing will compensate for an absence of innovation's raw material: talent. This variable has two components: first, the hiring of people who are innovators, and second, the development of skills and knowledge. The IT function within a global bank used a development program for high-potential leaders that included training in lateral thinking, for example.
Key questions: Is innovation one of the factors you use when screening potential hires? Do you have programmes that develop innovation skills?
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