Learn how to generate ideas, create an innovation process that works, and measure your innovation efforts.
Managing innovation is quite an undertaking, from initial idea generation right through to delivery and post-rollout analysis. And it’s impossible to tell you everything you need to know about innovation management in one guide. Instead, we’re going to share some useful innovation management theories, frameworks and other ideas.
What is innovation management?
Innovation management is organising, structuring, and monitoring the innovation process of a company. It helps to regulate the idea generation process so that it is refined and implemented in a way that drives value, depending on what that means to you. This might be cost-saving, revenue, profit, environmental impact reduction, social impact, or a combination of profitable outcomes.
Every business leader will know that innovation – new products or services, new internal processes, new approaches to customer service and more – can drive a business forward. But while having an idea is a great start, developing and refining that idea and successfully taking it to market and then scaling it is quite another.
Why is innovation management important?
The most promising ideas need structures and processes to turn them into reality. But don’t just take our word for it, check out our 2020 Innovation Blockers Report. Innovation management provides that structure by putting systems and tools in place to formalise the innovation process from start to finish. Here’s why that’s so important:
1. It reduces wasted time and money
A standard, sustainable process that encourages the growth of ideas, refines these ideas through honest feedback, and continually improves them can allow you to successfully turn ideas into value drivers for your company. This in turn leads to better time management and more effective use of the company’s resources. The transparency it creates gives people clarity into which ideas the company is looking for, what to do with those ideas, and how those ideas will progress.
2. It produces more predictable innovation outcomes
Innovation will always be a bit unpredictable, but it doesn't need to be random. By following a standardised process, you increase the probability of success across all innovation projects. It also enables you to be strategic about what it is you decide to work on.
There are also a great number of ideas you lose because they are not properly paced, or adequately followed up on. From ideas getting lost on random sheets of paper to bad ideas floating to the top above good ones, a haphazard process has never been good for anyone.
3. It creates greater strategic alignment
Successful innovation management allows you to align the innovation process with your organisation’s strategic goals, giving you a competitive advantage. This helps secure buy-in from leadership and makes sure that innovation is focused on delivering future value and not on 'innovation theatre'.
Find out how to navigate common blockers to innovation with our latest report.
Types of innovation and innovation ambitions
With Acclaim Ideas, we follow Doblin’s ten types of innovation to categorise ideas, then segment these ideas by three innovation ambitions developed by Harvard Business Review’s Innovation Ambition Matrix.
The ten types of innovation
Doblin’s ten types of innovation have been split into three categories. These move from those that are the most distant from customers to those that are the most customer-focused.
Configuration types of innovation focus on how your organisation actually works.
- Profit Model – a classic example is Rolls-Royce's Power By The Hour model, invented in 1962. Rather than selling aircraft engines as products with a one-off capital cost, the company sells flying hours at a fixed cost per hour. This allows their customers to avoid the burden of significant capital expenditure, while locking them into a maintenance agreement with Rolls-Royce.
- Network – many organisations are looking at how to use their networks differently to power their innovation efforts. Customer co-creation is a popular network innovation and has been used successfully by Lego, BMW and many others.
- Structure – Organisations are always experimenting with different ways of organising their assets, people and disciplines, for example by centralising or outsourcing certain functions. An innovation currently under scrutiny is moving from employing people to working with self-employed suppliers, as in the case of Deliveroo or Uber.
- Process – Henry Ford's automation of the Model T assembly line is one of the most cited examples of process innovation, but in modern times 'fast fashion' chains such as Zara and Primark have dramatically cut the time from design to clothing.
- Product performance – this is what most people think of as innovation, focusing on new products and services as well as new features for existing ones. Unless it involves some sort of intellectual property protection, this is one of the easiest forms for competitors to copy.
- Product system – By combining products or services into bundles or creating ecosystems around them, organisations can reach new markets or create additional value in existing ones. For example, Colgate originally only sold toothpaste, but has since created an entire product system around dental care, including mouthwash, toothbrushes, and whitening products.
Experience types concentrate on the customer-facing elements of your organisation.
- Service – Without changing the product or service, organisations can change the way they deliver them to create additional value: for example, Enterprise Rent A Car will deliver your hire car to your door, or come to pick you up so you don't need to travel to the Enterprise office.
- Channel – The rise of digital technology has provided some enormous opportunities for channel innovation, especially in the fintech market. First Direct's success was directly linked to it being the first telephone-only bank with no branches, and recently Monzo, Revolut, Nimbl and Osper and the like have revolutionised banking for adults and children, as well as how we buy foreign currency, through channel innovation.
- Brand – Innovating around a brand can be fraught with danger, so Carlsberg's recent campaign admitting that its lager probably wasn't the best in the world was a brave move. However, sharing negative reviews of their beer in a counter-intuitive move gave them the platform to talk about the new recipe.
- Customer Engagement – How you deliver your product or service is one thing, but what about how you connect with potential customers even before you make a sale, or ensure that your post-sales service is up to scratch? A great example of innovation in this area is the use of chatbots to deal with initial enquiries or direct customers to the right information.
The Innovation Ambition Matrix is based on a classic diagram devised by the mathematician H. Igor Ansoff to help companies allocate funds among growth initiatives. Its aim is to help companies construct an innovation portfolio that produces the highest overall return that’s in keeping with their appetite for risk.
Put more simply, these ‘ambitions’ split your innovation initiatives into what your actual aim is. It can help you match your innovation efforts back to your overall strategy, and make sure they continue to match.
Core innovation initiatives
Core innovation initiatives could make up roughly 70% of your innovation portfolio. They count as initiatives that make incremental changes to existing products and roads into new markets with them.
Transformation initiatives make a bigger splash – creating new products or even new businesses to serve new markets or customer needs. They might even create entirely new markets or help customers realise needs they didn’t know they had! These could make up about 10% of your innovation portfolio.
Adjacent initiatives sit somewhere in the middle, and can claim characteristics of both the above. They involve taking something a company already does well – a product or service – into an entirely new space, or creating a new product or service for a market you know very well. These could make up about 20% of your innovation efforts.
The 70%/20%/10% split isn’t a magic formula, just a rule of thumb – companies can work out what the right mix for them is and involve it over time.
Don’t miss out on our very first Innovation Blockers Report – read it here.
Key innovation management concepts and theories
The Innovator's Dilemma
Clayton Christensen introduced this concept in his book, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.
The Innovator's Dilemma describes a situation leading companies find themselves in when faced with disruptive changes. Because transformation initiatives (which Christensen and many others refer to as disruptive innovation) serve a smaller, low-end market, there’s a less likely chance for profit for large companies.
This makes it seem too risky for big companies to invest in disruptive innovation so they stick to core innovation initiatives (sustaining innovation for Christensen) that serves an existing and larger market. The problem with this is that they might get displaced by disruptive changes. A solution to this problem could be to create a separate entity, like a startup, to take on the risk and compete with others.
The technology adoption life cycle
Geoffrey A. Moore discusses the technology adoption life cycle in Crossing the Chasm.
It describes how new technology is adopted after its introduction to the market. From the hands of innovators, it is embraced by early adopters, then slowly gains mass appeal, and is then used by the early majority before being adopted by "laggards".
The technology life cycle has four stages which are: research and development, ascent, maturity, and decline.
But this leaves a gap between the creation of technology and its adoption by the large majority, which, when successfully crossed, would mean your product/services can move from being an unknown name to recognition and mass adoption.
The Three Horizons
The three horizons are based on the idea developed by McKinsey that divides innovation into three horizons based on time and profit. To succeed and remain profitable, companies need to focus on the three horizons simultaneously.
The first horizon (H1) focuses on providing continuous optimisation of a company's existing business model.
The second horizon (H2) directs resources to finding and extending to new customers, markets, or targets.
The third horizon (H3) is creating innovations to counter disruption or to take advantage of disruptions.
Looking for more innovation resources? Check out our reports, videos and podcasts.
Creating an innovation process that works
In order to manage innovation successfully, you’ll need to first ensure that you have a solid innovation process in place. Innovation processes vary, and it is vital that you choose a model that fits with the way your business operates – one that complements your overall business strategy as well as your organisational goals.
As an example, consider the process that we have built into the Acclaim Ideas innovation management tool.
This five-moment process shows one way in which businesses can build a clear innovation strategy.
- Strategy: Strategic innovation needs strategic alignment. Keep sight of your wider business goals when developing your innovation process, mapping each of your ideas to a business goal to keep the bigger picture in view.
- Ideas: The best ideas may come from anywhere within your organisation (and potentially beyond). Open up the idea generation process to your entire staff, crowdsourcing ideas in specific areas to prioritise more immediate business needs.
- Testing: Testing, iterating and refining ideas before you commit to them is vital. Create teams that are responsible for this process, assigning them set tasks and capture and share all of your learnings.
- Prioritisation: You may have multiple projects on the go, not all of which can be executed at the same time. Therefore, be sure to prioritise based on the factors relevant to your operations: cost, ambition, timing, innovation type and more.
- Delivery: The delivery of a new project should be carefully managed: its scope defined, its budget tracked, and its progress monitored and measured to ensure success.
These moments don’t have to occur in order. As we know, innovation isn’t a linear path. Ideas can emerge from any point, and can be taken from delivery back to testing, while learnings from testing may inform new goals and help refine your overall innovation strategy.
Important considerations for your innovation strategy
There are various types of innovation strategy that you may wish to consider, depending on how you plan to innovate. For some businesses, for example, the strategy may be based around incremental innovation – phased, gradual improvements to existing products, services or processes. For others, it may be about disruptive innovation. Many choose a mix of different types of innovation for their strategy.
Once you have chosen your approach, there are five simple steps to create your innovation strategy:
- Define your goals and your “why”
The first step in creating an innovation strategy is to determine what you are looking to achieve with your innovation. This should support wider business objectives and may involve either leveraging your existing business model, or creating a brand new business model.
- Understand both customers and competitors
If your innovation strategy is to succeed, you’ll need to ensure that you understand your target customers and their needs so that you can respond to them as best as possible. You will also need to identify competitors in your market – establishing what they are doing and how your offer will compete.
- What is your value proposition?
This is simply a statement that details what you will deliver to customers – what they can expect from your innovation. What can you offer that will give you a competitive advantage?
- What are your core capabilities?
Once you have defined your proposition, you need to define the capabilities that you need to have in place to achieve your goals. These could cover multiple areas, including knowledge, skills, behaviours, values, R&D and company culture.
- Which innovation systems and techniques do you need in place?
For any innovation to work, you will need various systems and techniques in place. These will ensure that innovation can be executed and measured effectively, and will include things like R&D, innovation training, finance, production, marketing and more.
Acclaim Ideas can help you align your ideas with your business strategy and manage the innovation process. Find out more here.
How to improve your idea generation process
After creating an innovation strategy to guide you, the next step is idea generation. But this stage has a common pitfall you should be aware of.
It’s easy to fall into the trap of making assumptions about what the solution might be, and this can restrict the kinds of solutions you come up with. The key is to be clear about the outcome you are looking for or the problem you are solving, while being open-minded about how that outcome should be achieved.
Here are some useful tools and techniques.
The Yes And
With this improvisation technique, team members can build on suggested ideas by simply saying "yes, and" after every suggestion.
This exercise involves picking a word associated with the problem at random and coming up with new words until an idea is born.
By asking why a problem exists over and over again, you can refine your problem statement and come up with new ideas
What, Why, Where, When, Whom?
This technique also involves asking why, but it goes further to also ask more questions about different parts of the problem and then the answers are put in a mind map that then helps to carve the full picture.
The idea generation process can get chaotic, so here are some ideas on how to bring structure to your idea generation and implementation processes.
Idea validation and proof of concept
Idea validation is, quite simply, testing an innovation to understand:
- How viable it is
- Whether there is a market need
- Whether your target audience is willing to pay for the innovation
It essentially establishes whether your innovation is practical and whether it is likely to succeed, before building and launching the final product.
Use the steps below as a guide to test your idea:
- Map out your idea: The business model canvas can help with this.
- Define a hypothesis: What are the assumptions that you have relating to this innovation, and what are the minimum criteria for its success?
- Testing: Establish how you plan on testing your hypothesis.
- Analysis: What does this testing mean for your hypothesis? Should you continue in the same vein, or try a new approach?
- Update model: Based on the results of tests and analysis.
- Re-prioritise assumptions: You should have established how likely your idea is to succeed.
These are all user-centric approaches – a solution-based way to tackle a problem, seeking to understand the needs of your target audience and creating solutions to meet those needs.
There are five stages in the design thinking process:
- Empathise: Getting to know the target audience and really understanding their needs, wants and objectives.
- Define: Gathering insight from the Empathise stage and using it to understand the problem that this particular audience needs resolving.
- Ideate: A creative stage where a variety of techniques – from brainstorming to mind mapping and more – can be used to come up with solutions, which will then be narrowed down to a few potential options.
- Prototype: Create a scaled-down version of each potential solution, and testing it for flaws and constraints, before moving forward with it, altering it or rejecting it entirely.
- Testing: Remember that this may not be the final step: testing may often lead you back to a previous step in the process. Design thinking is rarely a linear process.
Once you reach the end of the process, you will hopefully have a final solution with which you want to move forward. At this point, it’s time to create a Minimum Viable Product (MVP) to put out to a larger group that is more representative of your market.
A prototype is something that you can put very little time and effort into. The idea is to come up with a variety of prototypes, and be able to change, adapt, and throw away ideas very quickly. With an MVP, you've picked an idea and you're rolling with it, which means putting in a little more effort.
Finally, design a roadmap of all the data you’ve gathered to serve as a blueprint for how the idea is fleshed out into a product.
If you’ve reached this point in your proof of concept, then go ahead and flesh out a proposal that sells your idea and persuades stakeholders to approve and invest in it. Don’t be modest, emphasise how great your idea is and its benefits – not just its features.
Acclaim Ideas is the only innovation tool you need to find the best ideas, streamline their delivery and measure their value. Learn more here.
How to measure innovation
We all know how important innovation is to businesses. But not every business puts enough emphasis on truly proving its value.
In our first Innovation Blockers report in late 2019, businesses told us that measuring and proving the value of innovation to others was their biggest innovation challenge. Innovation is something that means different things to different people, and that can span many parts of a business – which is why some struggle to both define and measure innovation.
However, if you truly want your innovation to be taken seriously and to succeed – and if you want to continue to be able to invest time and money in innovation in the future – it needs to be measured.
It’s vital that you not only measure the right metrics, but that you don’t measure too many and risk metric overload. There is no “one size fits all” approach to innovation measurement: each project will have its own metrics that are most relevant.
Useful innovation metrics to measure
Innovation metrics are categorised into two different indicators, namely the input metrics and the output metrics – what is put in your innovation process and what comes out of it.
The input metrics consider if the activities and efforts invested in the innovation are right to reach set goals and whether resources are allocated properly.
On the other hand, output metrics measure whether these inputs delivered the desired impact. To ensure that innovation is measured effectively, both metrics should be considered.
Input and output metrics can be measured in a variety of categories, such as:
Example input metrics: Percentage of senior management time spent on innovation vs. day-to-day business; percentage of senior leaders with innovation training.
Example output metrics: The number of senior leaders that become leaders in new category businesses formed through innovation.
Example input metrics: The existence of formal innovation processes; the percentage of employees who have received innovation training.
Example output metrics: The number of new opportunities gained through innovation; the number of innovations that have made a considerable impact on the business.
Return on investment
Example input metrics: The number of new products, services or processes launched in the last year; the percentage of capital that has been invested in innovation.
Example output metrics: Targeted vs. actual break-even time; percentage of revenue or profit that comes from new innovations.
Innovation accounting is a more modern and mature way to measure innovation, discussed in The Corporate Startup. It’s a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero.
Innovation management tools
Managing innovation when done right can be very rewarding, and on the other hand, a total waste of time and resources when not properly implemented. Our 2020 Innovation Blockers Survey reveals that more than 90% of companies are unhappy with their innovation performance.
From not knowing how to get started, or what data to gather, to trying to magically fix everything, managing the new business creation triggered by innovation, or even implementing the innovation strategy, it’s no small thing to successfully execute an innovation management process.
This is where using tools like Acclaim Ideas to manage your entire innovation process can be a literal ‘innovation saver’, in better time and detailed reporting. Check out our blog for more insight on managing innovation.
Getting started with innovation management
Starting out with innovation management can be complicated, but very profitable for your organisation when you get it right. Helping you get it right and become successful in managing innovation within your company is the core value that Acclaim Ideas is built on.