Ideas can’t execute themselves. Instead, organizations create and maintain processes for capturing, validating, developing, and executing new ideas. The discipline of overseeing these processes is known as innovation management.
Innovation management is a rich and nuanced set of practices. This guide provides an overview of the benefits and scope of innovation management. For more expert-level insights and success stories, consider following our Innovation Talks podcast.
Key benefits of innovation management
The most promising ideas need structures and processes to turn them into reality. Innovation management facilitates this by putting systems and tools in place to formalize the innovation process from start to finish. Properly done, innovation management brings your organization three significant benefits.
Innovation management improves efficiency and reduces waste
Turning ideas into value drivers for your company requires you to develop a standard, sustainable process that promotes ideation, refines ideas through honest feedback, and continually improves them. This in turn leads to better time management and more effective use of company resources. Innovation management brings transparency, giving people clarity on what kind of ideas the company is looking for, how to prioritize them, and how to execute on them. It gives them a framework to focus their efforts in the right areas, encouraging innovation to occur in the most valuable ways.
Innovation management produces more predictable outcomes
Innovation is unpredictable by nature, but an orderly approach to innovation gives us more assurance of what will happen when we innovate. Following standardized processes increases the probability of success across all innovation projects, and it allows for more strategic decision making. A thorough innovation management program captures ideas effortlessly, recognizes the ideas worth consideration, and gives you the data and clarity you need to prioritize the best ones.
Innovation management creates greater strategic alignment
Successful innovation management aligns the innovation process with your organization’s strategic goals, giving you a competitive advantage. This helps secure buy-in from leadership and makes sure that innovation is focused on delivering real value.
What innovation management entails
Innovation management involves several separate activities pertaining to the ideation, development, and execution of new endeavors. Depending on the organization, this may include the creation of new products, new processes, new intellectual property, and even entirely new organizations.
While innovation innately refers to doing new things, there are predictable subdisciplines involved within that function. Innovation management programs encompass of these disciplines, each of which address a fundamental question about the new endeavors you undertake:
- Strategy: What are we doing, and why?
- Operations: How do we innovate?
- Performance: How well are we innovating?
- Orchestration: How do we prioritize and balance the portfolio?
- Governance: How do we overcome challenges and stay on strategy?
Innovation strategy: What are we doing, and why?
Innovation strategy is set by the organization’s leadership. It defines what areas the company will innovate in and the extent to which that innovation should go.
Innovation strategy can take many forms, but it almost always involves an intentional mix of short-term, mid-term, and long-term initiatives. In aggregate, these initiatives are referred to as the innovation portfolio—we’ll discuss that further when we get to the orchestration portion of this guide.
No matter what your organization’s innovation strategy is, it should address the following areas:
Defining goals and rationale
The first step in creating an innovation strategy is to determine what you are looking to achieve with your innovation. These goals should ladder up to wider business objectives. Ideally, your innovation strategy should make it clear what your expected innovation activities are, what the expected innovation outcomes are, and how those outcomes contribute to the organization overall.
Identifying customer needs
No organization innovates in a vacuum. A successful innovation strategy takes the target customer’s needs into account and seeks new ways to meet them. Keeping the customer in mind helps keep innovation activities aligned with the needs of the people who will ultimately need to derive value from them—and it’s especially useful for validating and prioritizing new ideas.
Analyzing competition and game theory
Likewise, innovation strategy takes note of other market players who are trying to meet those customer needs. This keeps differentiation part of the conversation from the very beginning of the innovation life cycle, and allows organizations to make strategic moves in the context of the moves others are making.
Assessing core capabilities
Organizations innovate within the bounds of their core capabilities and constraints. Capabilities may include certain sets of people, knowledge, skills, behaviors, values, intellectual property, and company culture. For example, a company with many Ph.D.-holding employees may be significantly more capable of sophisticated research than a company whose people haven’t spent much time in the halls of academia.
Setting portfolio targets
Individual organizations’ objectives will prioritize risks and projects differently. Innovation strategy translates those objectives into a custom target mix of short-term, mid-term, and long-term innovation bets.
For example, an enterprise CPG manufacturer might focus 80 percent of their innovation activities on short-term product line extensions for the upcoming quarter, 15 percent on new product models for the next two years, and five percent on exploring entirely new product categories that may emerge in the next five years. On the other hand, a young direct-to-consumer pharmaceutical company might focus 20 percent of their innovation efforts on short-term product packaging innovations, 30 percent on mid-term supply chain innovations, and 50 percent on developing long-term, breakthrough formulas.
In addition to setting the target portfolio mix, innovation strategy sets target spending across the portfolio.
Innovation operations: How do we innovate?
While innovation strategy focuses on what an organization’s innovation force should accomplish, innovation operations is all about how that strategy is executed. This involves building the right teams, codifying standard operating procedures, and overseeing the process of ideas coming to life.
Innovation operations encompasses all the ways organizations conduct innovation activities, so the precise set of innovation operation areas will differ from company to company. But at the general level, innovation operations addresses the processes involved in managing the entire innovation life cycle.
There are many ways to approach innovation—a good place to begin exploring these is our list of 25 dominant types of innovation based on popular frameworks in use today.
Ideation and innovation management
Idea generation is perhaps the best-known component of innovation management, as every noteworthy innovation begins with a great idea. Innovation operations puts processes in place for identifying problems and potential needs and generating ideas for solutions, as well as capturing ideas that spontaneously emerge.
For examples of how companies manage the ideation process, check out our idea generation guide, which includes a list of popular methods for sourcing ideas.
Validation and testing
Innovation operations includes the processes by which an organization vets ideas for the innovation project pipeline. Different types of projects may be subject to different methods and levels of rigor, but at the very least, innovation management makes sure that there is some bar that an idea clears before full production begins.
Project management
When an idea passes the testing phase and fully enters the innovation pipeline, operations sets the rules for how that project is brought to completion. This is where the project methodology comes most into play: innovation management determines whether a project will involve Stage-Gate®, Lean, Agile, or any other approach to development and completion.
Delivering outputs
Innovation operations funnels into regular operations: it includes the procedures a company uses to bring something from being brand new to status quo. Any launch or rollout plan for bringing a new product to market, introducing a new process to the organization, implementing a new system, etc. is covered here.
Innovation performance management: How well are we innovating?
Innovation success is notoriously difficult to measure—but that doesn’t make it unimportant. An innovation management program defines the KPIs for determining if innovation activities are on time, on budget, and on strategy.
Different projects may report on different KPIs (likely some combination of these 11 specific and often-used innovation KPIs), but in general, most of the metrics monitored fall into the following four buckets:
- Input metrics measure the resources that the organization puts toward innovation efforts, usually to make sure that the organization is spending time, effort, and money on innovation in keeping with the portfolio targets established in the innovation strategy. Examples include new ideas generated or percentage of budget spent on long-term innovation projects.
- Output metrics refer to what comes out of the innovation pipeline. Examples include the number of new products launched or projects completed.
- Effectiveness metrics help tell the story of whether or not an organization’s innovation teams are doing the right things. Examples include sales from new products and portfolio NPV.
- Efficiency metrics help managers understand if the innovation management program is doing things right. They give insights on progress and productivity. Examples include the number of projects that have moved from testing to production and project kill rate.
Innovation portfolio orchestration: How do we prioritize and balance activities?
As mentioned earlier, most innovation management programs involve more than one active innovation project at a time—instead, organizations manage a mixed portfolio of innovative efforts. This usually involves multiple teams and/or departments working on different projects and products simultaneously.
Doing this efficiently and effectively involves orchestrating all of these efforts in a way that prioritizes the right things for the right people at the right times.
An innovation portfolio will usually contain a mix of three types of initiatives—all of which need to be carefully and consistently kept in alignment with organizational objectives, the innovation strategy, and each other:
- Core innovation initiatives make incremental changes to existing products and roads into new markets with them.
- Transformational initiatives create new products (or even new businesses) to serve new markets and meet new customer needs.
- Adjacent initiatives fall between core and transformational ones: they either extend existing core capabilities to new markets or create new capabilities for markets you already serve.
Done well, innovation management ensures that the entire innovation portfolio is kept in harmony with itself. This requires monitoring the operations and performance of every innovation project to ensure that resources are properly allocated across the portfolio at all times.
Innovation governance: How do we overcome challenges and stay on strategy?
Without governance, one chaotic quarter can throw the entire innovation management program into disarray. Governance keeps innovation practitioners accountable to strategy and alerts business leaders when the strategy needs to be adjusted.
Innovation management is rife with challenges—they come with the territory of doing new things. Effective innovation governance helps overcome these challenges by establishing principles and practices that give everyone the direction and information they need to innovate well.
Data visibility
Innovation governance gathers an organization’s innovation data together so people can make informed decisions. This may involve project progress data, financial reports, roadmaps, and more. Ideally, this gives every innovation stakeholder within the organization a sense of clarity. For example:
- C-level executives should be able to view the entire innovation portfolio’s performance at a glance.
- Line of business owners should be able to ensure that innovation projects stay on schedule and on budget.
- Engineers should be able to see what activities are the highest priority.
- Marketers should be able to see when new products will be ready for market testing and promotion.
Accountability
A healthy innovation portfolio involves a host of moving pieces. Innovation governance articulates who is responsible for each piece. This keeps initiatives on schedule and portfolios on target. Thorough innovation governance will capture executive signoff on strategy, clarify project ownership, and illuminate timeline discrepancies.
Alignment
Governance also keeps all the innovation stakeholders on the same page. This allows for multi-directional alignment (and realignment):
- Top-down alignment: governance allows executives to set strategic targets and articulate priorities.
- Bottom-up alignment: when things don’t go as planned, governance gives practitioners the means to call attention to under-resourcing and over-optimism.
- Cross-functional alignment: governance allows line of business owners, R&D, manufacturing, suppliers, and go-to-market teams the collaboration channels they need to keep one another informed about project status and performance.
Manage your innovation efforts with Accolade
Innovation management is hard work—but the right technology partner can streamline key parts of it. That’s what Accolade is for: it’s an innovation management software platform that gives you complete visibility of your organization’s innovation processes from strategy to execution. Accolade lets you view your entire portfolio and drill into specific projects, so you can orchestrate and prioritize every project in context of the rest. Accolade helps organizations reduce time to market, increase new product revenue, optimize portfolio value, and improve pipeline throughput.
If you want to uplevel your innovation management, see what Accolade can do for you—book a demo today.
