Capabilities

Overcoming Innovation Challenges

Based upon extensive research and engagement work, Kaiser has identified and devised strategies to overcome a number of key challenges that companies face when building or re-building innovation systems:

  1. Failure to deploy an optimized organizational design and innovation approach results in:
    • Underutilization of capabilities
    • Slow core competency development and institutionalization of best practice learning
    • Lack of leverage: Organizations that are too internally focused, suffering from "not invented here" syndrome
    • Costly dependencies: Organizations that are too externally focused and reliant upon M&A activity to source innovation and generate growth
    • Misalignment of incentives and requisite practices

    Kaiser's Innovation Practice research has identified 16+ different innovation enterprise innovation models that exist along a continuum of organic to external models

    Spectrum of Enterprise Innovation Models - Please see table below text for model definitions & additional detail
  2. Lack of clarity regarding roles, responsibilities and accountabilities often results in:
    • Executive messaging that "innovation is everyone's job" creates a lack of accountability (as it becomes no one's job)
    • Uncoordinated and potentially redundant innovation efforts
  3. Weak processes yield disappointing results and create an inability to deliver results on a sustained basis. e.g.,:
    • Commercial failures due to activities being driven largely from single disciplines without sufficient input from others (e.g., engineers developing products with insufficient engagement of Marketing, Brand Management, Supply Chain, and Finance)
    • Watered down, low impact innovations due to underdeveloped "go-no-go" decision processes
    • Missed opportunities to explore strong ideas due to standards that value early stage volume over later stage quality, failing to effectively promote idea development
    • Confusion resulting from failure to apply distinct and appropriate practices to innovation efforts designed to yield incremental results (in order to maintain industry position) and those designed to yield breakthrough or disruptive results (new growth engines)
  4. Segregation of business analysis and business development from innovation activities results in:
    • Poor use of available resources developing ideas that are not commercially viable for the enterprise
    • Low success rates transitioning from innovation / product development to commercialization
    • "Analysis paralysis:" seemingly never-ending cycles of idea evaluation prior to launch
  5. Defining innovation too narrowly often results in:
    • Portfolio imbalance skewed toward either incremental versus breakthrough or whitespace versus adjacencies
    • Portfolio imbalance skewed toward reliance upon product-based innovation, ignoring opportunities to innovate in services and go-to-market strategies
  6. The lack of a defined innovation strategy often results in:
    • Confusion, wasted effort, and wasted dollars due to pursuing innovations that are not aimed at high-potential known "targets," identified and informed by an intelligent fact base
    • Missed opportunities to leverage existing competitive advantages and corporate strengths such as brand and intellectual property
Model Description Pros & Cons Key Success Factors
Centralized Top down approach where R&D and innovation activities are performed from a corporate-funded, central facility to take advantage of economies of scope Pro: Designed to maximize control and R&D efficiencies, while promoting information sharing
Con: Challenging to sustain as organizational and business segment complexity grows 		Low product and geographic diversification or low differentiation among within segments served – i.e. a "global product or service solution"
De-Centralized Physical location and funding of innovation happens at the business unit level.  Some companies take it further and decentralize within the BU, thereby making innovation "everyone's job" Pro: SBUs are closer to the customer and can better identify and develop products to meet customer needs Con: Can entail higher coordination costs, limit sharing of best-practices and  encourage fiefdoms Requires leadership to effectively communicate a global perspective so BU's don't lose sight of broader picture.
Corporate must monitor under-funded efforts at the BU and take appropriate action
Business Technology Innovation focused on developing information technology that helps provide a highly differentiated product or service to customers or a cost advantage over competitors Pro: Technology can create predictive insights while increasing responsiveness to unpredicted changes in customer needs; is highly scalable and can yield network effects Con: Projects can require large investments and lengthy development times Investing in strategic technology – that which allows you to provide better, differentiated service to your customers.  Leverage supply base for commodity technology and selectively customizing elements.  Don't mistake for, or tie-up with, traditional IT or six-sigma initiatives
Design-Driven Places strategic focus on creating value through improving form, function, or aesthetic.  Great design is usually the result of extensive observational research and the ability to link functional needs with emotional needs Pro: Allows for differentiation without proprietary technology or functionality.  Design leaders capture price-premiums even in mature industries.  Relatively low cost / high-ROI
Con: Designs have short life-cycles, rarely produce disruptive innovation.  Hard to get right 		View design as a problem-solving process.  Frame the problem in terms of identifying and solving a customer need.  Market, research, engineering and design functions must be intimately integrated
Capability Driven Focusing on "what you're uniquely good at" and applying those capabilities to the development of new products and services, centered on those capabilities Pro: Truly best-in-class capabilities create barriers to entry as new competitors find the learning curve too much to overcome Con: Rarely takes a company out of its comfort zone and into entirely new spaces Capabilities must be defined at a level that transcends SBU lines – i.e. capabilities must 1) provide access to a variety of markets 2) contribute to end-product benefits and 3) difficult to replicate by competitors
Customer Experience Focuses on elements beyond the core product or service that trigger positive emotional responses.  Ideas are founded on empathetic observation, research and experimentation Pro: Memorable experiences create loyalty which lowers marketing expenses, reduces acquisition costs, expands margins and creates more predictable financial results Con:Difficult to measure performance w/ traditional metrics, but when you see it, you will recognize it for certain Successful experience innovation results from attention to all details of the customer interaction – and at every step of interaction / experience.  Requires observational research, human factors and experimentation capabilities / skills
Rapid Experimentation A low-risk, high-value method for testing several product, service or business model concepts, gauging customer response, uncovering latent needs, and providing organizational learning Pro: Provides immediate feedback early in the development cycle to more effectively build on new concepts
Con: Projects can easy targets for corporate nay-sayers and results can be difficult to interpret if not measured properly 		Conduct experiments in a "live" environment to achieve more predictive outcomes.  Proactively set and manage internal and external client expectations.  Establish mechanisms to protect established brand
Innovation-Led Brand Leverages clearly perceived, widely identifiable brand attributes to find new spaces in existing markets.  Brand attributes must be unique, easily transferable to new markets, and difficult to imitate Pro:Innovations have a higher take / trial rate as consumers rely on prior brand experiences when assessing trial risk
Con:Reliance on brand can lead to firm weakening its organic innovation muscle 		Identify brand principles that are aligned with customer needs and are truly unique to the company.  Focus less on brand value, and more on specific brand attributes.  Target markets where brand attributes differ from those of the incumbent leaders
Productize One-Off Customer Requirements   Pro:
Con:		  
Commercialize Internal Capabilities   Pro:
Con: 		 
Corporate Incubator Incubators are designed to speed the time-to-market for startup initiatives by freeing them from organizational restrictions such as legacy culture, business model, technology, or processes Pro: Leverages key corporate resources without subjecting venture to corporate bureaucracy.  Protects intangible asset of the core business.  Direct learning in "real world"
Con: Results are unpredictable and success rates are modest 		Ability to deploy corporate resources such as industry connections, supplier clout, and functional expertise.  Invest in incubators that challenge corporate bias and threaten the core business model; Conduct best-in-class research and model after winning formulas
Leveraged Customer Base Taps into the creativity of the customer base by providing customers "tools" and forums to re-engineer or play with existing products.  An inexpensive way to develop new products that create an immediate connection with the customer Pro: Provides customers with a greater sense of involvement and promotes loyalty.  Customers are willing to reveal their ideas for free.  Results / insights reflect actual customer desires
Con: Best suited for industries with active user communities.  Most innovation is incremental 		Discovering and leveraging "lead users," those customers with high product / service involvement and at the leading edge of market trends.  Creating a low-cost platform for idea exchange (e.g. co-design toolkits)
Leveraged Supply Base Innovation is achieved by co-developing new products and services with suppliers or obtaining exclusive distribution or commercialization agreements for pre-developed products and services Pro: Leverages a larger pool of skills and expertise and allows internal resources to focus on core strategy functions and core competencies
Con: Exclusivity clauses can be difficult or expensive to achieve and could lead to increased dependence 		Explicitly state about what you are looking for.  Determine a strategy to affect a win given existing cost reduction programs with supply base (which can interfere with innovation objectives)
Outsource Contracting third-party product or service developers to assist with (or drive) key elements of the innovation process.  Many companies draw a line between commodity work and core intellectual property work Pro: Outsource partners usually perform the tasks better, faster and cheaper.  Allows organization to reallocate resources to activities aligned with core competencies.  Learn from the experts
Con: Potential leakage of intellectual property or trade secrets 		Put your members of staff onsite of outsource partner to protect IP, manage relationship, attend to critical needs and learn skills
Work with parties on a repetitive basis, reducing learning curve costs
Venture Groups Companies establish the equivalent of an internal venture capital firm to invest in startups that can help drive future business growth.  Companies take a less-active role, but still lend key resources and capabilities to assist growth Pro: Avoids traditional "corporate roadblocks" of in-house innovation efforts (e.g., channel conflict, business model conflict, arduous process, etc.) Con: Long term investment – Easy target for cost cutting initiatives from impatient management Internal innovation capabilities are necessary to effectively gain strategic benefits from the venture.  Involve SBU mangers to conduct audits on venture, but be careful not to frustrate venture activists with corporate processes or perspective
M&A Rather than build innovation capabilities internally, this model focuses on acquiring proven innovation technology, capabilities, or talent.  Shifts capability needs from innovation to finance and integration Pro: Provides quickest access to proven innovation and other new capabilities
Con: Studies show 70% of M&A deals fail to create shareholder value.  IT integration, cultural differences a big challenge 		Integration speed is critical, as competition's pace of innovation does not wait.  Requires practice and talented integration managers waiting in the pipeline.  Understand where integration is unnecessary