In a slow or no-growth environment, everyone knows that successful innovation is essential for companies to establish and maintain a competitive advantage. But the question remains, how do industrial manufacturers achieve high value from innovation initiatives? The answer could be four simple steps.
New products and services attract new customers and, in many cases, can help manufacturing companies gain market share, even when the overall market is growing slowly. Although most companies recognize the importance of innovation, not all organizations approach the innovation process with the rigor and discipline it requires. A lack of accountability and focus can produce negative-spiral, low-value innovations absorbing too many resources, with an ever-poorer rate of success.
Although most organizations recognize the importance of innovation, not all industrial manufacturers approach the innovation process with the rigor and discipline it deserves. The first step to achieve higher return from innovation is to recognize that the concept of innovation has broader applications than many organizations realize. In addition to new products or services, possible innovation targets include launching new customer relationship capabilities to transform the customer experience, revamping the supply chain to dramatically reduce time to market or introducing new business models to drive superior consumer value.
Developing a diverse innovation portfolio that covers all facets of innovation is not sufficient, however. Having worked with companies with an established track record of successful innovation, four additional characteristics have emerged that enable them to drive high value from innovation:
Innovation is a business process requiring management discipline. Innovation benefits from the disciplines that apply to other key business functions. While many people believe that innovation is a creative endeavor that cannot be managed, the truth is that effective innovation requires cross-functional cooperation and accountability throughout the entire process. Innovation, however, is not a “one-size-fits-all” endeavor and manufacturers may need to deploy multiple processes, one for breakthrough-type innovations and another for line extension-type, bread and butter innovations.
Selectivity and balance are critical. Successful innovators have a portfolio of innovations in the pipeline, ranging from modest line extensions to bigger bets on new ideas or technologies. At the same time, however, the successful innovators keep the portfolio small; they do not place their bets on too many horses, but they do focus on the best possibilities for both low and higher-risk ideas. Ongoing trimming of the portfolio prevents the dilutive effect of having too much effort spread over too many projects.
Innovation must adopt new technologies. To keep up with shorter product lifecycles and rapidly evolving consumer demands, companies must leverage new tools to support innovation. In addition to established tools, such as stage-gate and others used for portfolio management, companies can use social media to develop products and improve service. This might seem a particular challenge for manufacturers, but it can pay off.
- Innovators must be prepared for failure. One of the hallmarks of a strong innovation program is the ability to determine—at a relatively early stage—that a project or product simply will not work. Terminating initiatives that are likely to be unsuccessful, and doing so quickly and efficiently, conserves valuable resources that can be directed to other, more promising manufacturing activities.
A steady flow of new ideas—turned into value-adding products, services or process improvements—can be a tremendous source of growth and vitality for companies in almost any industry. A disciplined, managed approach to innovation can make this process more predictable, repeatable and profitable, leading to better top and bottom-line results and overall high performance.
James Robbins, email@example.com, is automotive industry & industrial equipment industry North American managing director and Adi Alon, firstname.lastname@example.org, is a senior executive in the Innovation Practice with Accenture, a global management consulting, technology services and outsourcing company.