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.

Enterprise innovation model

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?

Knowledge management

Knowledge management includes IT systems and person-to-person interactions.

A restaurant chain frequently launches promotion programmes that feature limited-time menu items. These historically produced solid results but the business generated by them had become lacklustre and cost was exorbitant. The primary reason for deterioration in performance was that the company had neither a database of lessons learned nor any forums for sharing experiences. The team commissioned systems and interchanges for promotions and their impact is now better than ever.

Key question: Do you have systems and communication vehicles that help people learn from innovation success and failure?

Organisation structure

Boxes on the organisation chart and the clarity of roles within that structure can either support or hinder innovation.

A telecoms hardware manufacturer bet the company on introducing innovative products and reducing concept-to-launch cycles from 18 months to six by rethinking the product development process. The redesign team found that two of the primary disconnects in this process were the Balkanised structure of marketing and manufacturing, and the unclear definition of the roles played by marketing and sales. The redesigned process had department missions clearly communicated.

Key question: Do your organisation structure and the roles within that structure enable innovation to blossom?

Culture

Culture includes everything from tolerance of risk to whether meetings begin on time. A critical component is the reward/punishment system.

A national hotel chain adopted a strategy of making first-class customer service as its competitive advantage and people from vice presidents to cleaners were told that they were responsible for developing service improvements. A cross-functional team developed and installed a process for evaluating suggestions but the system didn't bear fruit until the organisation expunged two aspects of legacy culture: individuals who strayed over the policy line to provide exemplary service were upbraided, and suggestions were rejected if short-term payback could not be demonstrated. Executives sponsored a culture transformation initiative that eliminated these and the chain is now seen as a service leader.

Key question: Does your organisation's culture encourage innovation?

Issue resolution

One of the few long-lasting competitive advantages can be an organisation's ability to solve and avoid problems.
The executives of a small grocery chain were clumsy in defining innovation issues, identifying teams to address them, collecting information, and agreeing solutions. They overcame this deficiency through a "common language" for issue resolution and providing problem-solving and decision-making tools to employees.

Key question: Does your company have a universal set of methods for effectively and efficiently addressing innovation issues?

Leadership

An organisation's leaders establish the strategy that establishes innovation and sponsor business process improvements.

The leaders of a mining company recognised that delegating responsibility for creating a high-innovation business to subordinates or consultants is no more appropriate than delegating strategy formulation to subordinates or consultants. They came to recognise that each of them has to serve as the chief innovation officer in his or her part of the business.

Key question: Do your leaders recognise that they exert the primary influence on your company's innovation environment?

Your path forward

  1. Test your assessment with others
  2. Set priority on those questions that you have answered "No" or "Don't know"
  3. Develop an innovation action plan
  4. Sponsor the initiatives in the action


Innovation cannot be purchased and installed by the end of the month. However, it is not an unmanageable mystery and it can be measured.

About the author:

Alan Brache is business solutions executive director at Kepner-Tregoe, a strategy consulting firm. He is also the author of How Organizations Work