The State of Innovation Management in 2015 Just Released

tate of Innovation Management HypeAs we come closer to the year-end it’s good to look back, make some dedicated time to take ‘stock’, in this case, on innovation’s progress. In a just released “The State of Innovation Management in 2015” that I have authored and kindly provided by HYPE for free, I believe you will find something of interest that you missed during a busy year, coming to a close. I certainly hope you will find time to go through it.

You’ll gain a valuable and quick insight into critical aspects that innovation managers and CINO’s should be aware of. It is in an easy format of thirty plus pages and offers a reference resource that builds a solid understanding of innovation today regarding relevant factors that will stimulate and support your innovation activity.

http://i.hypeinnovation.com/the-state-of-innovation-2015-report

The Surge of innovation reports in 2015

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New report: Improving returns on your innovation investment

I highly value the studies that are undertaken by the larger consulting firms. They have the C-level access and geographical reach to give us some critical insights into the progress of innovation.

Recently Arthur D Little provided their latest innovation excellence study, its 8th Global Innovation Excellence Study, into what companies can do to achieve a better return on their investment in innovation management. The report can be downloaded or viewed here and outlines in their opinion what really works in terms of managing the innovation process.

They offer some good pointers and understanding of what differentiates top innovators within and across industries. It also suggests that it provides new insights into what companies can do to achieve a better return on their investment in innovation management. I think it does fall a little short on a depth to support and validate these claims in my opinion, but it does still provides sound insight.

They specifically attempt to focus on understanding what differentiates top innovators from other companies in different industries. Drawing on over 650 responses, the study sheds new light on the basic key question: what innovation management techniques are most important in achieving a better return on innovation investment? The results they suggest are important for any company that wishes to stay competitive.

Overall the report highlights six key insights:

1. There is strong evidence that excellence in innovation management based on Arthur D. Little’s model leads to higher innovation performance.

It is such a pity they lead off with this ‘claim’ adopting their best practices helps to achieve innovation success. I would strongly argue adopting any good, coherent framework will contribute to improving performance, providing you give this the dedicated focus, resources and top management commitment. I think they have put the “cart before the horse” by leading with this.

2. Top quartile innovation performers obtain on average 13% points more profit from new products and services than average performers, and 30% shorter time-to-break-even, although the gap is narrowing.

They argue the gap in best and worst performers has narrowed in recent years and past under-performers can and do catch up and maintaining a lead in innovation performance is getting harder. I’d have liked to have this observation explained or validated some more.

3. Innovation performance achieved has decreased on average since 2010, yet satisfaction with this level of performance has nearly doubled

This is the really  interesting point for me.

Comparing 2010 and 2012 results, they found a significant overall decrease of up to 25% in innovation performance across a range of industries and suggest this may be driven by the tough market conditions of recent years which have forced companies to focus on short term performance, as well as issues specific to certain industries.

In contrast, they found that overall satisfaction with innovation performance increased significantly from 25% to 42%, although the majority of respondents are still dissatisfied. They conclude on this point that this might also reflect recognition that innovation success is getting harder to achieve.

4. There is a clear correlation between capability in innovation measurement and innovation success, yet less than 20% of companies believe they have a good innovation measurement capability.

What they found as more surprising is that less than 20% of companies believe they are better than average in innovation measurement capabilities and indicates the level of dissatisfaction with their efforts to measure innovation performance.

They offer the view this underlines both the inherent difficulty of effective measurement of innovation, and the significant potential for companies to improve their capabilities in this area.

5. Certain innovation management practices have a particularly strong impact on innovation performance

Top innovation performers invest relatively more in radical improvements to products, services and business models, as opposed to incremental improvements. They suggest there are four basic practices but the key, for me, is the one of mobilizing the whole organization to develop new ideas. I would argue mobilization across all that innovation covers is critical, not just new ideas but ideas to commercialization.

6. Top innovators do much better in adopting best practices in accelerating growth

The study found that top innovators are better at identifying unmet needs, fostering an entrepreneurial culture and leveraging existing key competencies.

Another really important point for me that is often understated.

They pick up on it is the organizations ability to overcome important internal challenges such as getting top-management support, enabling fast decision-making and establishing productive cross-functional relationships that gives them innovation leadership.

The conclusion of the study.

The study concludes with the two important insights: there is a strong correlation between adoption of new business growth practices and achieving innovation success and top innovators are more effective at dealing with internal barriers.

I think the study gives encouragement that having a focused, disciplined approach to innovation does make a difference. By tackling the internal barriers successfully will change innovation performance. It is not a ground breaking study but it does offer some helpful focal points to improve organizations performance.

The real disappointment for me?

I still feel disappointed they started off with promoting their own model as blatantly as the reference point to success. I am not a lover of  generalizing around “best practice”. I’m of the school arguing for “emerging practice or novel practice”.

I also wonder if they have not fallen into this old trap of perhaps practice leader’s self-justification for this study, hard as it might seem as a comment. This tends to be for me the older consulting practice approach of self-promotion that I believe actually constrains your perceived value to clients. Today a more detached view seems to offer greater consulting judgement even in best practice observations.

I quote from www.sourceforconsulting.com in a recent article “Consulting firms need to re-think their approach to thought leadership from scratch.  Less money should be frittered away by people writing whatever they want and more invested in centrally co-ordinated thought leadership.  Some seriously innovative thinking needs to go into developing a game-changing approach to content or publication”

I would apply this observation also to this Arthur D Little study. To quote again from the above www.sourceforconsulting.com article “Research is a good example: liberally distributing the results of an expensive survey in your publications used to be a differentiator but even the smallest firms do this now; primary research has to be either very clever or very big to stand out”

My final thoughts

I think the Arthur D Little innovation practice does make a really sound contribution to innovation practices without doubt. I think they can do a whole lot more actually.  I really do think translating their observations from benchmarking and best practice observations can be significantly lifted up in being real value differentiators by extending their existing toolkit at www.adl.com/InnovationExcellence into something more dynamic as a “must go to” source.

They need this deeper thinking through of thought leadership, aligning their innovation practice and the growing knowledge coming into them to provide a distinctive set of offerings . There are surely,  far more imaginative ways to offer us all more value from their studies, from their engagement and practice involvement than simply leading with “strong evidence suggests our model leads to higher innovation performance” and you read on with that growing feeling they are simply working backwards to this opening validation, as you read more of the report.

I think they can do better, they have the capability but not yet the right application and end goal. Innovation and its management needs broader engagement by the larger consultants.

There is a real leading innovation practice space to fill and this goes way beyond existing approaches made by the bigger consultancy firms or the ones exclusively focusing on innovation. A large diverse innovation practice can fill this space but it needs so much more. Will anyone step up to the plate I wonder, it needs it.

Is innovation within the consulting sector under enough pressure?

In a recent study (see below for details) it seems innovation activities need to change within what consultants are offerings as services to their clients. The study makes for fascinating reading and answers a number of questions I’ve been recently having. Let me expand on this:

One: there is increasing less time available within the mid to large consultants to train, research and development for their services so as to differentiate themselves in innovation, in what is actually becoming even more of a crowded market. Focusing on maximising utilization and containing overheads and costs leaves less time to think and develop.

Two: equally the cumulative experiences of clients in dealing with consultants, especially through the practice of more central procurement, has added more pressure on consultants not providing ‘added extra’s’ or to take more radical approaches to innovation solutions for the risk of being compared badly, not offering clear returns and then screened out of the bidding process.

These trends are pushing it seems more incremental innovation in my opinion, but to overcome the concern that the often provided ‘one-size’ fits all that clients seemingly are wary of, what is increasingly happening is having more joint initiatives between clients and consultants. This gives the client more control- in my opinion where it should always be– and gives the consultant the potential for reducing overheads.

So it seems innovation consulting is being managed through some constraining issues. My concern here is it can limit the potential that external advice can contribute and  so it can fall short on stretching thinking around innovation that might actually, limit the final result the client is looking for out of their innovation activity.

The study was conducted in the UK

In the UK there has been an excellent study looking specifically at consulting and innovation, published in October 2011 entitled “Management innovation in the UK consulting industry”, by Dr. Joe O’Mahoney, a Fellow at the Advanced Institute of Management and a Lecturer at Cardiff University and commissioned with the Institute of Consulting.

The aim of the report is to stimulate consultancies to be more innovative and therefore add more value to their clients. For me, this is an objective I would really welcome looking around at all the ‘safety first’ approaches going on in this area in many consultants, big and small.

The report can be viewed here: http://bit.ly/tQdeld

I’m sure many points are equally applicable to innovation consulting globally.

For some time I’ve been puzzled on where the bigger innovation consulting projects have gone and this report points to one logical reason. The main conclusion in the study was: “more sophisticated clients, the need to share costs, higher utilisation levels and the increasing role of procurement mean that innovation tends to be client-specific, shared and based around improvements rather than large-scale, industry-wide innovations.”

Some of my initial reactions from reading this study raise real concerns

It seems the increasing internal ‘invented here’ approach has been at the expense of seeking the external contribution and the belief that tailoring innovation to meet unique needs is more prelevent. Is this actually good? Are there other constraining factors at play here? Are clients simply reinventing the wheel, actually spending less efficiently?

I would also suggest external advice is being used ‘selectively’ as it is more a lagging advice and not leading advice as in most cases of consulting. I get the impression within innovation advice that this client- consulting relationship is actually being constrained. Let me explain.

I would argue from reading this study we are seemingly downsizing collaborative innovation between clients and consultants, restricting the potential for pushing out innovation.  The consultancies as restricting their innovation practices and don’t make the type of investments that would help advance thinking? If I am right then we are actually constraining innovation. Consultants are possibly behind the game and are learning from emerging practices within the client and can only then provide limited support. Consultants are seemingly not providing “thought leadership” just reporting on best practices and what they are learning from this to apply it elsewhere. So consultants are reduced to supporting subsidiary roles. That is a pity if this is the case.

Identifying constraints and applying imaginative solutions

This report helps identify the constraints to current models and allows some excellent insight for others to think through and see if they want to explore the potential and seize a different value proposition by restructuring differently around the depth of their innovation services and ‘jump ahead’ in the innovation learning curve.

There are plenty of imaginative ways to do this restructuring that can continue to contain costs in the early stages that fit with these economic uncertain times and then apply the ‘gas’ as the recognition and value can be seen by present day reluctant clients. I would argue many clients are actually desperately seeking a more robust set of innovation activities to get more growth back into their businesses and good external advice can shorten the learning curve considerably if this is recognized as such.

The perceived issue: a chain is no stronger than its weakest link.

For me these constraints have some potential opportunity. I focus 100% of my time on formulating the innovation path in different ways. I do honestly struggle to attract the bigger clients as they often tend to look for certain big consulting brands to give them that certain ‘security’ and if something then goes wrong they can always claim in defence of their decision, “well X consulting co” recommended this approach.

Often the selection process is one of the constraining dynamics smaller service providers have to work hard to overcome and balance. Expertise and outcomes has to be seen and valued for the potential to justify delivering ‘great value’ from any work done very much more upfront.  Specialists like me, can and do invest far more in focused innovation knowledge. I see this in many areas where specialisation can really score if the client ‘see’s the value but there though, is often the rub, getting them to ‘see it’ and ‘engage’ early enough is difficult particuarly if you go through a central procurement proceedure. It becomes often an onerous route when you have limited resources to go through the selection process, often not getting into meaningful discussions with the person charged with implementing the solutions.

Also within innovation much of the emerging work simply has rawer edges to it as innovation itself needs to be explored. Clients want to push innovation ‘out’ and achieve real competitive advantage but reluctant to do this through the smaller, less known consultant, they look for the ‘reputation tag’ yet the bigger consultants are failing to invest in leading edge thinking, offering a ‘catch 22’ situation.

I would always argue if any innovation is managed thoughtfully and piloted well in its introduction the ‘risk’ is no different than thousands of other decisions made within organizations on new adoption of technology, changes in processes or launching new products, actually much less.

Also smaller advisory firms can be far more personal and collaborative in far greater, more flexible ways, and often at lower costs. Just don’t expect them to underpin those internal weaknesses often encountered with hordes of young consultants that implement the solution and then leave and the association with innovation leaves with them!  Smaller firms usually want to be there at the implementation outcome but in different ways than the bigger guys, looking more to be judged on the results and sharing in the ‘vested’ outcome, as they are wanting a far more lasting relationship built on good value, commitment and trust, a valued advisor.

Certainly some of the conclusions from this report I have drawn out have some potential opportunities but also provides much cold comfort for innovations future, as it does seem to be constrained, if these findings are right. In some ways it offers a bleak future for innovation consulting unless things change.

Some key finding in the study

I think pictures tell a thousand words, in this case four tables from the report.

Table taken from the Study "Management innovation in the UK consulting industry" by Dr. Joe O'Mahoney.

I really feel the ‘modifications to existing practices’ serves up much of the same, with the costs spread out across multiple clients is not great consulting practice. Equally  tapping into existing other practices for making ‘changes to internal processes’ utilizes Six Sigma, BPR and other consulting practices but this is not innovation. Innovation is hanging on the coat tails of other pactices, more often around efficency and effectiveness. Also relying on conducting (often) COO surveys to provide often the ‘thought leadership’ leaves a lot of room for improvement from what I have been reading where many leading consultants do not underpinning suggestions or observations with solutions. The client leads, consultants follow, it seems in what I take from this table.

Table taken from the Study "Management innovation in the UK consulting industry" by Dr. Joe O'Mahoney.

For me, selecting innovation consulting is not so much in the way they differentiate but in what they can clearly deliver in depth of understanding, that comes more in demonstrating this knowledge and excellence. Thankfully this table has the two as the most important but I’d suggest demonstrating knowledge leads to differentiating when it comes to innovation, or should. Demonstrating knowledge leads, differentation comes out of this.

Also with a centralised procurement, at many of the clients that seemingly hampers according to the report, are playing an increasing role in the final decision of which ‘bid’ to accept. I really wonder how procurement officers can assess results for managing innovation, as much of the standard critera is on assessing  the returns on investment. Innovation is far more longer term, sometimes speculative and tougher to quantify.  This must cause problems for wanting to ‘push out’ on bigger innovation with consultants for those responsible, arguing for more imagination (and risk) around greater disruptive thinking and business models yet struggling to provide procurement the result criteria to validate this?

Table taken from the Study "Management innovation in the UK consulting industry" by Dr. Joe O'Mahoney.

If you have clients taking ‘minimal risks’ and you have a lack of time to think about ways to innovate you are certainly in a constrained market. Then add in clients (lack of) budgets for innovation and low demand for services it really adds up to a grim picture of seeing how you can lift the innovation consultants lot from just providing incremental support in my opinion.  I also think I’ve got some answers to this but those are more for my opportunities to offer a ‘decent’ alternative, if wanted!

Table taken from the Study "Management innovation in the UK consulting industry" by Dr. Joe O'Mahoney.

So seeing that the constraints are increasing over time in this table is worrying for me. Without the client demand for going beyond present more incremental and collaborative innovation, except for sharing joint initiatives that are sometimes likely to be mutually exclusive, the consultant has no real incentive to ‘invest’ in expertise and break out of this cycle. A lack of ‘bench strength’ of innovation specialists, a reluctance due to uncertainty and consulting in innovation (often intangible and not solution specific without serious work) the consultant industry is reluctant to make deeper investments really concerns me.

To finish on the foreword may seem a strange place but the right one.

The Institute of Consulting council chair, Judy Craske, offers in her foreword the challenges that need to be addressed as innovation consulting will remain constrained unless it makes some radical changes based on changing economic conditions.

She remarks: “As international, national and even local economies change and react to markets in turmoil; our clients’ outlooks reflect these changes, often defensively. Consultancies need to identify and respond to these factors, and then modify their responses to fit their clients’ changing needs and expectations. Developing creative capital within the industry will remain essential”.

She goes on to state: “Whether lone practitioners or multi-disciplinary practices, consultants need to become more innovative and adaptive in their proposals, methods and solutions, while traditional client/consultant boundaries need to be challenged, stretched and even broken”.

Her most important point from my perspective was the following: “Consultancies may also need to be more open to partnership working with other agencies, such as academia or even competitors, if they are to respond effectively to the pressures of the current high-cost, low-resource business environment”.

This point on collaboration is for me the most potentially potent- if only larger consultants learnt to collaborate more with others within the provision of ‘services’ – it not only spreads costs, allows for greater potential for fresh thinking but brings into play a richer ecosystem platform of innovation advice to offer clients and that is where we should be heading I feel.

I certainly drew out a lot from this study, by Dr Joe O’Mahoney.

There is much to ponder from my own business perspective deriving from this study and I feel it does gives us all involved in providing consulting or  advisory services some real food for thought involved on providing innovation services differently.

Innovation does needs to advance, consultants can help in this. I believe this can be far more than it is as at present and perhaps the CEO who consistently laments about his innovation performance might raise the game by reducing one of the constraints perhaps holding innovation back and reflect on this constrained client- consulting relationship around innovation.

For all their sins, consultants and advisors should be really rich sources of external advice on innovation but it needs greater investment and recognition of mutual value and potential to break into this current relationship. This report lifts the lid well for reflecting on the challenges and offers some sound advice to move forward.

One big issue for me is “should the current client/ consultant consulting model for innovation services change for these tougher times?” I for one, believe it should be changed- not just for personal reasons but I believe you cannot ignore any ‘unturned stone’ when it comes to wanting to manage innovation well in such volatile times where innovating successfully has plenty of uncertainly but still really does hold out the promise for a better future.

It does seem both consultants and clients are acting defensively, it’s a little the opposite of what you would expect in ‘pushing’ for innovation in leading practices and many clients and markets desperately seeking growth. This growth does comes from pushing at the edges not staying in the comfort zone  .

The Copyright for this report is with the Chartered Management Institute ©. All rights reserved. Except for the quotation of short passages (and in this case selected tables) for the purposes of criticism and review has been granted.