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Why large companies need innovation governance to remain competitive

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For large companies today, competition comes in many forms. Beyond their traditional competitors, these organizations must earn market share against nimble startups and drastically reduce time-to-market. And they must also compete with companies in countries that have to adhere to different sets of regulations.

Meanwhile, consumers are demanding products that are not only innovative but are also environmentally sustainable, smart and connected. In short, the demand for more complex products—at competitive prices—is exceptionally high. And when you also consider factors like the current chip shortage and supply chain disruptions, large product manufacturers have more difficulty developing innovative products quickly, in predictable timeframes and with a high level of quality than ever.

Innovation governance can help large companies overcome these challenges and remain competitive.

Learn more about the importance of governance in innovation in this episode of Innovation+Talks with Executive Chairman of Sopheon, Andy Michuda.

Innovation Governance

Important aspects of an innovation governance framework

The most successful companies view innovation as a repeatable series of actions with specific guidelines for every step of the product development process. Innovation governance creates the management structure necessary to enable lean and agile innovation through clear sets of rules, mandates, and responsibilities. A successful Innovation Governance Framework should include:

  • Defined rules for decision-making. One of the most powerful aspects of an innovation governance framework is that it defines who should make which decisions and when they should make them. These guardrails reduce confusion and eliminate employees’ time asking superiors for permission what they should do in certain situations. They know what they should do and they have the trust of their superior to execute without stopping to ask for permission. This is the so-called Subsidiarity principle of management: the lowest possible layer should be mandated to take decisions.
  • Networked collaboration. Forward-thinking companies no longer see product development as a series of independent teams but instead as a network of specialized teams that work collectively. A modern innovation governance model should define how each team should function within its network while also defining how they should collaborate to maintain the highest quality and deliver products on time. This is especially necessary with hybrid product development, where teams of different functions, disciplines and thus working processes and environments must come together to create a single combined offering. In fact, the network is a system of internal customer/supplier relationships, based on explicit promises and commitments. The network demands a high level of transparency to function as a smooth system.
  • Flexibility. A good innovation governance framework includes rules for how to manage unexpected urgent situations. Consumer demands evolve, and external challenges emerge unexpectedly, so models should be flexible and non-bureaucratic in responding to change as necessary. Always be prepared for the unexpected.

Ensuring efficiency and quality in innovation programs

One of the goals of a good Innovation Framework is to avoid and manage Delays. Delays can happen somewhere in the network of teams working on specific aspects of a system or a product. So it is very important that teams are aware of the network commitments and how their components have an impact on other components and the entire system. To get to this maturity the Governance Framework sets rules for transparency and proactive alerting of the network in case of a failure or an upcoming delay. Let’s assume that a team is not working under a solid innovation governance framework to put this statement into perspective. They miss a small but critical detail, and the product moves on to the next stage of development and then the next without anyone realizing it. When the mistake is identified, the entire process comes to an immediate halt. Now, teams have to fix the problem and re-do all of the processes before the oversight. As a result, deadlines will now have to be readjusted, which can delay the launch. And this is not even the worst-case scenario.

Now, let’s adjust this scenario and assume that this missed detail is not recognized until after the launch. Now you have a product on the market that falls well short of the company’s strict quality standards. And if this issue poses a safety hazard, companies could face costly recalls, litigation, and reputational damage.

With the proper innovation governance processes in place, such an impact would have been avoided, along with the negative repercussions.

Conclusion

An innovation governance framework is like a playbook and is conditional on being flexible, agile, lean and quickly responding to new trends and competitive threats. Without this structure, a large company cannot have direction and short lines between strategy and execution.

If you’re interested in learning more about the importance of governance in innovation, listen to this episode of Innovation+Talks and read Stories About Innovation Governance by Huub Rutten, Sopheon co-founder and Vice President of Product Research and Design.

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