By Patty Burke
To paraphrase the annual January presidential update, I am happy to report that the state of innovation is strong. That assessment is the key takeaway from a recent survey conducted by Accelevate in partnership with the California College of the Arts and Merrill Research.
The survey, “Understanding the iFactors: Trends in Bringing Innovation to Market” explored corporate innovation and venturing best practices in terms of culture, process, governance and barriers. We also wanted to determine the ‘iFactors’–corporate practices that are key indicators of innovation success. The results of the survey were both interesting and surprising and illustrate how far the business of innovation has come, and how it continues to evolve.
Innovation Success at 75%, and Innovation Leadership Makes it Happen
I’m reporting that ‘The State of Innovation is Strong’ because more than 75% of survey respondents rated their organization’s venturing and innovation initiatives as somewhat or very successful in meeting their objectives. And less than 10% reported their initiatives were not very or not at all successful. Compared to a similar qualitative survey that I did in 2013, this is quite an exciting improvement. And there’s more good news: having a dedicated innovation owner – CIO, VP or director of innovation – is the strongest predictor of innovation success. 40% of companies surveyed have titles that include the word “Innovation” (Director/VP of Innovation or Chief Innovation Officer), though fewer than 10% have an actual innovation department.
Innovation usually reports to either Strategy (24%) or R&D (22%), with greater success reported by companies where R&D is responsible. Companies with Innovation reporting to the CEO (primarily smaller companies) report the lowest success rate. But the approach to innovation leadership is shifting. A Structured approach (processes led by mid-managers, R&D, IT or Product Development groups) is most popular currently, but a majority indicate that they are moving to a Dynamic approach (led by executives, strategists & cross-functional teams) in the future.
Charter and Strategy Matter, Particularly for Corporate Venture Capital (CVC)
Most companies (70%) have a stated innovation charter, with 30% reporting they are chartered to explore both new technologies and new business models. Not surprisingly, those without a stated charter are least likely to identify their innovation initiatives as successful. The relationship between innovation and CVC charters is also a key success factor. Companies with a close relationship between innovation and CVC – complementary charters, reporting to the same executive or function, and regular interaction to review trends and opportunities – are most successful.
Most companies also reported a broad range of both internal and external innovation sources and initiatives, including employee competitions, university relationships and CVC. And nearly 50% of companies reported that they have their own innovation center or accelerator. Companies with multiple innovation sources that also included licensing and acquisition were most likely to report innovation success.
Lean Startup and The Power of the Customer
Customer engagement in the innovation process is a recurring theme. It is also highly predictive of innovation success. Almost 80% of companies indicate that access to customers is the most important asset that their company can leverage to support the innovation process, both for internal initiatives and for CVC portfolio companies. And customer involvement in the product definition and development process is on the rise. A customized ‘Lean Startup’ approach, characterized by close customer interaction throughout the development phase, is now the most popular process for bringing innovation to market.
‘Customized’ is the operative word here, since most companies report that Lean Startup and Design Thinking processes must be customized to meet their requirements, often intersecting with a customized Stage/Gate process. Few companies are required to use standard stage/gate processes for innovation, freeing them from some of the cycles and bureaucracy those processes often entail. Customized processes also include a preference for in-depth Voice of the Customer (VoC) research, led by innovation teams, rather than 3rd party market research. The use of VoC methodology is the highest ranked customer input methodology for companies reporting success in meeting innovation objectives.
But despite the adoption of many of these streamlined processes, the bureaucracy barrier is still firmly in place, with decision-making delays and bureaucracy reported as by far the greatest challenge in bringing innovation to market.
So what are the iFactors? Our Top Ten List of Innovation Success Factors
A survey designed to be taken in ten minutes can’t tell the whole story, but we’re very pleased that a number of clear success indicators emerged. As an homage to Dave Letterman, here’s Our Top Ten List of iFactors.
- Ownership: Have an innovation ‘owner’. An innovation function or department is not required, but a dedicated executive Director/VP of Innovation or CIO is
- Charter: Have a clear innovation charter that embraces both new technologies and new business models
- Communication: Establish complementary objectives for innovation and CVC teams, with regular communication about industry dynamics and trends
- Multiple Sources: Employ a broad range of internal and external innovation sources
- Creative Culture: Foster a dynamic or creative innovation culture, with innovation led by executives, strategists & cross-functional teams
- Customized Process: Use new innovation processes—Lean Startup, Design Thinking—but be prepared to customize them for your environment
- Direct Customer Input: Charter innovation teams to seek deep Voice of the Customer input, rather than relying on 3rd party or internal research
- Leverage Your Assets: Provide access routes to customers, distributors, prototyping and expertise—both for internal innovation teams and CVC portfolio companies
- Monitor Metrics: Establish realistic metrics, both financial and strategic, with regular monitoring and reporting processes in place
- Streamline It: Strive for ‘venture velocity’, finding creative ways to avoid bureaucracy and decision-making delays
Validation, Maybe? Insight, Definitely!
The iFactors survey was prompted by our own intellectual curiosity, some probing discussions with the CCA team and a burning desire to validate (or invalidate) our collective beliefs and methodologies. It would have been shockingly scary if many of our tried and true best practices turned out to have no or minimal impact on innovation success. Fortunately that didn’t happen. Most of the venturing and innovation approaches that Accelevate recommends were validated, and we plan to further test the ones that weren’t. We’re all about learning and iteration, and the iFactors survey data has given us new insight that we’ll incorporate into our training and services as we continue our quest to help companies accelerate innovation. I hope our colleagues in the venturing and innovation community will benefit from it as well.
About the iFactors Survey
“Understanding the iFactors: Trends in Bringing Innovation to Market” was conducted in March-April 2015. For more information, contact firstname.lastname@example.org. Survey sponsors were:
- Accelevate: An innovation training and consulting firm with the mission of accelerating innovation impact for large corporations worldwide. Accelevate works with corporate venture capital and innovation groups providing interactive venturing and innovation workshops to build innovation leadership, business models and market strategies accelevate-inc.com
- Merrill Research: Since 1986 Merrill Research has been a leader in providing custom, full-service marketing research backed by the highest quality data. Merrill has complete internal capabilities to fully design, execute and analyze a broad range of research projects. merrill.com
- California College of Arts Design MBA programs: CCA offers three unique MBA programs that focus on different aspects of innovation. CCA’s Leading by Design Fellows program is an executive MBA program that focuses on insights, skills, and confidence to lead change that creates lasting, sustainable business and social value. cca.edu/academics/graduate/design-mba
Patty Burke is partner and co-founder of Accelevate, a consultancy that combines the best of start-up and corporate worlds, maximizing the value and impact of corporate innovation investments. With a broad marketing, sales and BD background, Patty’s career has focused on new category creation – turning new technologies/ approaches into buyable products. Formerly a consultant with Bell Mason Group, Patty worked with many CVC and incubation groups including AmEx, CitiGroup, Coca-Cola, DSM and Merck GHI. Patty is a frequent speaker and blogger on innovation topics and leads workshops on innovation best practices and venture business model planning. She sits on the Advisory Board for the IBF Corporate Venturing and Innovation Partnering Conference, and was an instructor and marketing mentor for CalTech’s Executive Education Entrepreneurship program.