This is the third and final in a 3-part series by Sopheon’s CEO, Andy Michuda.
In Part 1 of this series, I introduced the two key market factors driving the new norm economics of the digital age: consumerization and the digitization of business. In Part 2, I discussed two of the three organizational capabilities that companies are being forced to address in order to be successful today, namely revisiting the idea of an annual strategic planning cadence, and changing how strategic plans are executed to ensure that the organization is dedicating time and resources to activities that will result in the strategies being realized in practice. In this last post in the series, I’d like to discuss the third critical competency that companies need to succeed in a global and digital marketplace.
Scalable, Enterprise-Wide Innovation Management
It's not uncommon for companies to struggle with products being late to market, not meeting revenue and volume targets, missing the mark on customer needs, and more "me too" rather than really innovative products. In Gartner's 2015 "Market Guide for Enterprise PPM Software", authors Donna Fitzgerald and Teresa Jones shine a spotlight on enterprise program and portfolio management, a key view which applies to Enterprise Innovation Management (EIM).
Here are a few central insights from additional industry studies on the impact of innovation management on business performance:
- Only 25% of respondents in one survey said their company was highly effective at both ideation and converting ideas to product development. This group outperformed industry peers on three important financial measures: revenue growth, market cap growth, and earnings as a percentage of revenue.1
- Selecting the ideas to move into full-scale product development is more critical to a company's innovation success than the generation of ideas.1
- No correlation has been found between how much companies spend on R&D and their financial performance. What is consistently shown is that how companies spend their innovation dollars is much more important: investments in select capabilities, tools, talent, and culture which are tightly aligned with a business' strategy are what drive sustained success.2
- Consistent with previous studies, the 10 most innovative companies outperform the top 10 R&D spenders.2
The fast moving and interconnected business reality is fundamentally changing the face of corporate innovation competency, forcing a shift away from the decades-long, narrow focus on research and development (R&D) management to broader, interconnected EIM competency.
EIM allows companies to cut through the complexity of a dynamically changing global business environment by improving and increasing their rate of innovation. New technologies, products and services are strategically aligned with long-term growth goals, market requirements, industry regulations, and supplier competencies. An executive-, or board-level, strategic objective can be driven, propagated, managed, tracked and realized through all areas and levels of the enterprise with a velocity that cannot be accomplished without an EIM strategy and an EIM platform in place.
After 20 years of personally working with companies from all over the world, I feel the tipping point is upon us. While excellence in innovation management is commonly accepted as a necessity for corporate growth, the inadequacies of managing innovation without the proper tools are becoming clearer.
Many corporations invest huge amounts of money in R&D but fail to invest in an EIM platform, leaving themselves without the visibility to make informed decisions or map a clear path for the future, and as a result failing to realize the growth plan. With renewed levels of accountability for the R&D and other C-level executives managing the millions, sometimes billions of dollars in investments, it baffles me to see companies using Microsoft® Excel® and PowerPoint® to guide the decisions for their multi-million dollar product portfolios.
The EIM platform has emerged from the enterprise need for dynamic management of continually shifting investments and re-prioritization in cadence with new market trends. CEOs want to measure the success of those investments against improved time to market, improved profitability and improved growth. Leaders want to leverage the power of IoT into their product portfolios, when the real value to consumers is still to a large extent unknown, making the evaluation and selection of options all the more complex. None of this can be accomplished in a disconnected enterprise and without EIM decision support.
Authentic EIM solutions allow organizations to:
- Improve the strategic alignment of projects in the portfolio that receive funding
- Improve product success rates
- Increase throughput of new product development processes
- Decrease time to market
- Decrease administrative burden and increase efficiencies in the work of new product development, portfolio management, strategic planning and reporting
With the age of the almighty consumer reigning on the corporate world, and the digitization of business, organizations around the globe are experiencing an unprecedented frequency of transformation.
The secrets to growing in this new norm include updating the AOP process to one that is nimble and more frequent. Stakeholders across a company need to be aligned with corporate vision and strategies. Finally, realizing your enterprise innovation strategies and initiatives is essential to staying alive in this new-world environment. It is your EIM platform that will make strategic realization a reality.
- Resource Hub: Strategy Execution
- eBook: How to Evaluate an EIM Software Solution
- White Paper: Enterprise Innovation Management Solutions Landscape—Connecting the Dots
1 Booz & Company, "The 2012 Global Innovation 1000 – Making Ideas Work"
2 Booz & Company, "The 2013 Global Innovation 1000 Study – Navigating the Digital Future"
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