Innovation is an investment in the future: an enterprise undertakes the project of creating something new in hopes that, once the new thing exists, the enterprise will be better off for it. Ideally, innovation works like a machine: ideas and resources go in, new creations and benefits come out.
This innovation machine is one of the most important components of any enterprise. An organization needs to evolve in order to stay relevant and competitive, and innovation is the process that brings about that evolution. Business leaders know that in order for the organization to survive, the innovation machine must be fed.
However, most business leaders face a problem: the enterprise innovation machine is a notoriously unpredictable black box.
You’ve experienced this. Launch dates get delayed. Projects stall in the development pipeline. Progress reports are difficult to come by (and difficult to translate into business implications).
All of this means that, while you know that you need to invest in innovation, it’s hard to be sure what you’ll get from any given investment. The inputs don’t predictably map to outputs. This causes problems at the strategic level: it’s difficult to confidently set targets and allocate resources when one of the essential parts of your organization is a mystery.
This leaves everyone frustrated: business leaders have a hard time relying on innovation teams to produce results, and innovation teams have a hard time advocating for the resources they need to produce those results.
It doesn’t have to be this way, though. We’ve seen enterprises use the principles of growth innovation to unlock the black box and enjoy a transparent, predictable new state of innovation.
We’ll get to how that happens soon, but first, let’s take a closer look at the black box problem and uncover the fundamental issues causing it.
The black box of enterprise innovation: 3 problematic mysteries
Since 2001, our Accolade innovation management system and consultants have helped enterprises organize and automate their innovation processes. This black box issue has consistently come up as a source of (pre-Accolade) frustration for business leaders, researchers, development teams, and other innovation stakeholders for more than two decades.
The innovation black box problem expresses itself in many forms. A few examples include:
- Risk mismatches: the company strategy calls for taking big, high-risk swings at long-term growth, but the innovation pipeline only ever produces incremental, low-risk improvements.
- Phantom launch dates: everyone knows that launches never happen on schedule, even though delays can cost hundreds of millions of dollars.
- Elusive reporting: projects in the innovation pipeline can report on their progress through development processes, but it’s difficult to get KPIs that translate to business objectives.
- Endless asks: teams in the innovation pipeline need more resources, but can’t make a business case for getting them.
- Zombie projects: initiatives stall in the innovation pipeline for years, leeching away time and resources with no foreseeable launch in sight.
All of these problems have been known to exist in enterprise innovation organizations—you’ve probably experienced some of them yourself. But although they’re common in the enterprise, nobody can explain why. On paper, these problems exist: a good innovation strategy should be executed on time and on budget.
And yet, enterprises across the globe still commonly deal with three problematic innovation mysteries—all of which combine to form our black box problem.
1. “How does innovation (actually) work in our organization?”
While front-end innovation and the development pipeline have established processes, people in other teams and departments don’t always have visibility to them. Operational intricacies become second nature to the people practicing them, but they become arcane to those siloed off from the process. Those inside the process can see exactly what needs to happen in order for a project to move forward, but translating those needs into reports that make sense to outside teams—especially executives and other critical stakeholders—isn’t always easy.
This makes it difficult to translate outside needs to the teams on the inside, too. When plans and priorities shift, people who aren’t familiar with established processes and contingencies don’t know how their new directives will affect pipeline throughput. What may seem like a minor adjustment to business executives may require a massive overhaul of the innovation pipeline, and what might seem like an enormous ask may require only a few simple tweaks.
Likewise, innovation practitioners often don’t have visibility when it comes to how activities are prioritized. They work on what’s assigned to them, and adjust when new directives come down the pike. But they never know when a pivot will take place, and each high-urgency demand is followed by another. This means that although they want to be proactive, they lack the visibility and capacity they need in order to do so.
In this respect, innovation becomes a two-way black box. Leadership can’t see how FEI and the launch pipeline work, and so they don’t know how their decisions will affect them. And because FEI and pipeline teams don’t know how their projects connect to leadership’s business priorities, they don’t know how budgeting, roadmapping, and target-setting works.
2. “When will innovation (actually) deliver?”
Everyone knows that doing things the right way takes time, but when it comes to enterprise innovation, timelines tend to be either ambiguous or untrustworthy. The launch dates set at the beginning of an initiative rarely represent (or even resemble) the actual dates when they end up going live.
Leaders find this problematic for obvious reasons: strategies are made based on projected outcomes, which are based in part on launch schedules. If a schedule isn’t trustworthy, the projections aren’t trustworthy either, and the innovation strategy is reduced to little more than business fiction.
Innovation practitioners don’t like this, either. Nobody wants to deliver projects late. But when the pipeline is rife with high-urgency demands and little strategic direction, it’s difficult for them to predict exactly what throughput can look like in a given period of time. This puts them in the position of feeling constantly overstretched and under-resourced. They want to deliver on time, but they often don’t have the budget, direction, or authority to make it possible. From their perspective, they’re moving as fast as they can—but they’re consistently told that it’s never fast enough.
3. “What’s the (actual) ROI of innovation?”
Business leaders make investments in R&D, but they often don’t know when or if those investments will prove to be smart ones. Like we’ve already discussed, the lack of visibility into processes across teams means that strategic decisions and pivots can have unintended consequences on pipeline throughput—and the timelines for innovation can already be unpredictable. Plus, the outputs of front-end exploration may or may not be directly tied to business KPIs, which makes it difficult to calculate the value of investments in intellectual property and technical discoveries. For leaders, it’s easy to see exactly what you’ve spent on innovation, but the same can’t always be said for what you’ve got out of it—especially if you’re looking for a direct accounting of which specific initiatives produced which specific financial outcomes.
Of course, this isn’t good for the people working inside the innovation machine, either. The fuzzy connection between innovation activities and business KPIs makes it hard to build a case for extra resources—or to make the case that past efforts have been successful.
Where does the black box come from?
This is the nature of the enterprise innovation black box. Nobody has an integrated view of how all the parts of the innovation machine work. Nobody knows how to make it run on time. And nobody knows for sure what the return on investment is. This leads to risk mismatches, zombie projects, late launches, and other problems.
But if you pull at these problems long enough, eventually you’ll see the root causes:
- Nobody has visibility to all the information they need to make portfolio-level decisions.
- Innovation activities aren’t prioritized against organizational objectives.
- There’s no clear-cut, organization-wide system for keeping innovation aligned with strategy.
These three statements are true of most enterprises. But some organizations have changed this—cracking open the black box and turning innovation into a transparent, predictable function of the business.
Crack open the black box with growth innovation
Over the years, some Accolade customers have completely transformed their innovation operations. We’ve paid attention to the organizations that significantly improved pipeline throughput, time to market, and profit margins, noted their similarities, and synthesized these practices into a new innovation management methodology: growth innovation.
Growth innovation is an innovation management philosophy that sets growth as the single most important innovation outcome, and manages every step of the innovation process accordingly. This philosophy relies on three principles:
- Growth: Articulate measurable growth targets in the innovation strategy, and explicitly connect every innovation activity to at least one of those targets.
- Visibility: Centralize all innovation management data in one place and give every stakeholder access to the information they need.
- Orchestration: Make every decision in context of a portfolio-level growth strategy.
Enterprises who fully apply all three principles have opened the black box and transformed their innovation process. This works because together, these principles solve the root issues mentioned earlier.
Growth targets give everyone direction
Under growth innovation, the enterprise prioritizes innovation initiatives based on how they contribute to the overall business growth strategy. These initiatives are then assigned resources based on how they’re prioritized. The strategy is then translated to specific, measurable targets for each initiative, with KPIs that map to a unified portfolio-level business case.
This means that from inception, every innovation project gets:
- A documented, objectives-backed rationale for existing
- A clear priority level derived from business objectives
- Budget reflective of the project’s priority level
With these in place, all stakeholders can more easily agree on where to focus their time, resources, and energies—which speeds up throughput and keeps the innovation portfolio on strategy and on schedule.
Data visibility gives everyone clarity
When all the innovation data is documented in one place, everyone can reference the information they need whenever they need it. Business leaders can use historical data from past launches to calculate accurate launch timelines, and practitioners can assemble reports that tell the story of how their projects are contributing to the business’ growth strategy.
Furthermore, innovation stakeholders at every level can access documentation on strategy, procedures, and other areas of institutional knowledge that would be arcane otherwise. The mysteries of how innovation works, when it delivers, and how it contributes to overall portfolio value.
Orchestration keeps everyone aligned
Growth innovation enterprises treat every innovation decision as part of a greater portfolio-level business case. That means pivots in strategy are only made after considering the implications they would have on the entire innovation portfolio, which drastically reduces disruption to the pipeline. And thanks to the direction and clarity supplied by the other two principles, organizations can finally orchestrate innovation activities proactively—looking down the pipeline to catch potential snags and setbacks before they happen.
This requires consistent calibration. Enterprises who take this principle to heart regularly review innovation operations to make sure activities are in alignment with company priorities. And they set up governance policies to ensure that when adjustments are made, they keep the innovation machine running on time, on budget, and on strategy.
Get the free growth innovation guide for enterprises
The enterprise innovation black box is a problem, but it’s a solvable one. With the right mix of leadership, tools, and stakeholder buy-in, you can crack open the black box at your organization, too.
If you’re tired of the issues caused by the innovation black box and ready to turn things around, we’ve created a guide to help you get started.
Our free ebook, New Product Development vs. Growth Innovation, The One Formula for the Evolution of R&D Management takes a look at the importance of shifting from traditional New Product Development to a Growth Innovation Mindset. Download your copy now!
