To paraphrase the annual January US presidential update, I am happy to report that the state of innovation is strong. That assessment is the key takeaway from a recent survey conducted by Accelevate in partnership with the California College of the Arts (CCA) and Merrill Research.
The survey – Understanding the iFactors: trends in bringing innovation to market – explored corporate innovation and venturing best practices in terms of culture, process, governance and barriers. We also wanted to determine the iFactors– corporate practices that are key indicators of innovation success. The results of the survey were both interesting and surprising, and illustrate how far the business of innovation has come, and how it continues to evolve.
Innovation success at 75%, and innovation leadership makes it happen
I am reporting that the state of innovation is strong because more than 75% of survey respondents rated their organisation’s venturing and innovation initiatives as somewhat or very successful in meeting their objectives. And less than 10% reported their initiatives were not very or not at all successful. Compared with a similar qualitative survey in 2013, this is quite an exciting improvement. And there is more good news. Having a dedicated innovation owner – chief innovation officer, vice-president or director of innovation – is the strongest predictor of innovation success. About 40% of companies surveyed have titles that include the word innovation, though fewer than 10% have an actual innovation department.
Innovation usually reports to either strategy (24%) or research and development (R&D – 22%), with greater success reported by companies where R&D is responsible. Companies with innovation reporting to the CEO – primarily smaller companies – report the lowest success rate. But the approach to innovation leadership is shifting. A structured approach – processes led by mid-managers, R&D, IT or product development groups – is most currently popular, but a majority indicate they are moving to a dynamic approach, led by executives, strategists and cross-functional teams, in the future.
Charter and strategy matter, particularly for corporate venturing
Most companies (70%) have a stated innovation charter, with 30% reporting they are chartered to explore both new technologies and new business models. Not surprisingly, those without a stated charter are least likely to identify their innovation initiatives as successful. The relationship between innovation and corporate venturing charters is also a key success factor. Companies with a close relationship between innovation and corporate venturing – complementary charters, reporting to the same executive or function, and regular interaction to review trends and opportunities – are most successful.
Most companies also reported a broad range of both internal and external innovation sources and initiatives, including employee competitions, university relationships and corporate venturing. And nearly 50% of companies reported that they have their own innovation centre or accelerator. Companies with multiple innovation sources that also included licensing and acquisition were most likely to report innovation success.
Lean startup and the power of the customer
Customer engagement in the innovation process is a recurring theme. It is also highly predictive of innovation success. Almost 80% of companies indicate that access to customers is the most important asset that their company can leverage to support the innovation process, both for internal initiatives and for corporate venturing portfolio companies. And customer involvement in the product definition and development process is on the rise. A customised lean startup approach, characterised by close customer interaction throughout the development phase, is now the most popular process for bringing innovation to market.
Customised is the operative word here, since most companies report that lean startup and design thinking processes must be customised to meet their requirements, often intersecting with a customised stage/gate process. Few companies are required to use standard stage/gate processes for innovation, freeing them from some of the cycles and bureaucracy those processes often entail. Customised processes also include a preference for in-depth voice-of-the-customer (VoC) research, led by innovation teams, rather than third-party market research. The use of VoC methodologyis the highest-ranked customer input methodology for companies reporting success in meeting innovation objectives.
But despite the adoption of many of these streamlined processes, the bureaucracy barrier is still firmly in place, with decision-making delays and bureaucracy reported as by far the greatest challenge in bringing innovation to market.
So what are the iFactors? Our top 10 list of innovation success factors
A survey designed to be taken in 10 minutes cannot tell the whole story, but we are very pleased that a number of clear success indicators emerged. Here is our top 10 list of iFactors.
- Ownership: Have an innovation owner. An innovation function or department is not required, but a dedicated executive director, vice-president of innovation or chief innovation officer is.
- Charter: Have a clear innovation charter that embraces both new technologies and new business models.
- Communication: Establish complementary objectives for innovation and corporate venturing teams, with regular communication about industry dynamics and trends.
- Multiple sources: Employ a broad range of internal and external innovation sources.
- Creative culture: Foster a dynamic or creative innovation culture, with innovation led by executives, strategists and cross-functional teams.
- Customised process: Use new innovation processes – lean startup, design thinking – but be prepared to customise them for your environment.
- Direct customer input: Use charter innovation teams to seek deep VoC input, rather than relying on third-party or internal research.
- Leverage your assets: Provide access routes to customers, distributors, prototyping and expertise – both for internal innovation teams and corporate venturing portfolio companies.
- Monitor metrics: Establish realistic metrics, both financial and strategic, with regular monitoring and reporting processes in place.
- Streamline: Strive for venture velocity, finding creative ways to avoid bureaucracy and decision-making delays.
The iFactors survey was prompted by our own intellectual curiosity, some probing discussions with the CCA team and a burning desire to validate, or invalidate, our collective beliefs and methodologies. It would have been shockingly scary if many of our tried and true best practices turned out to have no or minimal impact on innovation success. Fortunately that did not happen. Most of the venturing and innovation approaches that Accelevate recommends were validated, and we plan to test further the ones that were not. We are all about learning and iteration, and the iFactors survey data has given us new insight that we will incorporate into our training and services as we continue our quest to help companies accelerate innovation. I hope our colleagues in the venturing and innovation community will benefit from it as well.
About the iFactors survey
The survey was conducted in March-April 2015. For more information, contact patty@accelevate-inc.com. Survey sponsors were:
- Accelevate: An innovation training and consulting firm with the mission of accelerating innovation impact for large corporations worldwide. Accelevate works with corporate venture capital and innovation groups providing interactive venturing and innovation workshops to build innovation leadership, business models and market strategies – accelevate-inc.com
- Merrill Research: Since 1986, Merrill Research has been a leader in providing custom, full-service marketing research backed by the highest-quality data. Merrill has complete internal capabilities to design, execute and analyse a broad range of research projects – merrill.com
- California College of Arts Design MBA programmes: CCA offers three MBA programmes that focus on different aspects of innovation. CCA’s Leading by Design Fellows programme is an executive MBA programme that focuses on insights, skills, and confidence to lead change that creates lasting, sustainable business and social value – cca.edu/academics/graduate/design-mba