I’ve worked in large and small companies and have mentored at a tech incubator. But I’m still not sure how to describe ‘innovation’ or how it is fostered!

According to the OED innovation is:

The action or process of innovating

and to innovate is:

Make changes in something established, especially by introducing new methods, ideas, or products

That doesn’t give us much insight into how or why some businesses are more innovative than others.

I recently came across a series of articles based on The Most Innovative Companies 2015: Four Factors that Differentiate Leaders (BCG report, December 2015).  They make interesting reading [I’ll set aside the question of whether the ranking is correct; it reads more like BCG target client list]. The two most interesting outcome are: the factors that impact innovation and the obstacles to a return on investment from innovation.

Factors that impact innovation

In Enabling Technology-Enabled Innovation the BCG provides a comparative graph of the factors that impact innovation. The most significant being Technology Platforms. Perhaps this is not surprising as the corporate world moves progressively into the cloud and consumer markets digitalize, but the fact that this is seen as a platform rather than a purely product or service issue is interesting.

Of course, putting product and service together as one item in their rankings might tip the balance in terms of priorities. Many companies have already realised the importance of the growth in the service economy so the split between product and service is unhelpful. For example, most IT vendors have moved from a perpetual license to a SaaS rental business model. This is being supported by the myriad of PaaS and IaaS platforms available but at the same time their challenge is now to attract and incentivise their partner network required to support their solutions as revenues flow direct to the vendor.

Chart - Expectations for Technology Platforms

For B2B vendors the key issues are not ones of platform innovation. Having an innovative solution is not enough – organisations must be innovative in terms migration and encouraging adoption. Data migration is the ‘hidden part of the iceberg’ – it might cost more than the savings from a SaaS solution and threatens a smooth transition. Adoption is also critical. This challenge been clear to vendors of CRM and enterprise social networks for many years. Even in the consumer sector, the benefits from say SMART meters will be challenged by lack of adoption. Gamification might provide a solution and that’s where innovation might lie in the future, as well as rigorous focus on the user not the product.

Obstacles to a return on investment from innovation

In The Rising Need for Innovation Speed BCG provide an insight into the factors affecting the speed of innovation adoption which reflect my comments above. More interestingly they also cite the ‘obstacles to a return on investment from innovation’. Here we are on traditional ground; ‘Development times are too long’ was the same issue 30 years ago, but perhaps now it reflects the lack of progress on software methods and tools (given the increasing software content of most products/services).

However, the thing that struck me most about the other factors – idea selection, risk-averse culture, lack of coordination, etc. is that they are all internal obstacles. They are not factors that are outside the companies’ control. Take one example: ‘Not enough customer insight’. This should be something that an organisation continuously strives to overcome, not just for innovation but for multiple business reasons from increasing sales to reducing costs.

Chart - Obstacles to ROI

In my experience the key source of innovation is the customer. Of course they may not be able to articulate what they need in the right way but they can describe the problem. That just leaves you to innovate the solution!

BCG suggest that the organizational and cultural shifts is moving from a traditional “waterfall” approach to idea development. Stopping a project in mid-stream is no longer seen as tantamount to failure; an agile approach quickly and happily kills off the ones that fail to show potential.

That’s welcome news. I remember working in a corporate environment where many projects were pursued but few had a real impact. I’m sure that still exists. Change it.

This post is also available in a downloadable White Paper “Innovation – It’s in your hands!