Why Innovation Management Matters So Much
A startup is the epitome of an innovation engine. Everyone wears many hats, and the only thing constant is change. The bigger a startup gets, the more difficult it becomes to innovate. That’s because as companies grow, processes get put in place to structure things. Soon, a human resources department gets formed, and employees don’t want to be seen “rocking the boat.” Fast forward a decade after the IPO and you have a publicly traded company with KPIs and systems in place to make sure everything that’s being worked on contributes to what leadership has deemed worthy of attention.
Usually, it’s a competitor that gets the C-suite talking about “innovation.” “Why are we copying our competitors when we should be innovating ourselves,” the CEO will say. Someone will mention something Saint Steve Jobs once said, and before you know it, the company is blindly pursuing something called “innovation management.”
Beware of Buzzwords
When a customer relationship management (CRM) system gets rolled out company-wide, nobody questions why. It’s clear that the company wants to sell more effectively and service customers better. Being able to pull up a company’s most-recent customer service cases prior to a contract renewal negotiation is extremely valuable. You know what pain points they have with your product. Another feature in Salesforce is “Ideas” which lets people submit ideas and vote on their usefulness. That’s where innovation management starts for most companies – a bulletin board of ideas, a suggestion box, or Shark Tank competitions. This works at a tactical level, but at a strategic level it can quickly lead to nowhere.
If you’ve served time in a publicly traded corporation, you’ll be familiar with what’s affectionately known as “buzzword bingo.” Print out these cards and give them to each participant at the next innovation round table.
Everyone checks the boxes as the buzzwords come spewing forth, and the first person to connect a line wins. That’s because many companies confuse radical innovation with the extent to which they can riddle a slide deck with buzzwords. In order to learn what real innovation management looks like, we decided to speak with the best company in this space. According to market research firm Forrester, it’s a venture called Planbox.
Canadian startup Planbox was founded in 2015 by Ludwig Melik, his brother Rudolf, and two other principal shareholders to build a leading innovation management platform. Their clever use of a stylistically simple website helps them fly under the radar as they focus on relentlessly executing as opposed to spending heavily on marketing to convince everyone they’re experts. Leading the charge is Ludwig, CEO of Planbox, whose prior experience includes helping Upland Software close six acquisitions and IPO on Nasdaq in 30 months. Now, he’s doing the same for Planbox which had three M&A events in four years. One of those was the acquisition of a publicly traded firm called Imaginatik whose year-end results in 2017 give us a peek under the hood. What we found was a growing business with some big-name clients and a retention rate of over 90%. Lots of money to be made in innovation management, so let’s talk about what that actually entails.
What’s Innovation Management?
There used to be lots of ambiguity around what the term “innovation management” means. That’s why the ISO actually came out with a set of standards around innovation management so we can all speak the same language. The idea is that in order to innovate at an organizational level, we need to put processes and systems in place to do so. That’s what innovation management is.
When asked to think about innovation, many will turn to Apple and give examples of product design. We need to get beyond that. Innovation is much broader. Think of innovation as continuous improvement. Every employee in your organization is motivated to continuously improve their job function and feels empowered when their success story gets shared within the company. If innovation is doing something differently to achieve a better result, innovation management is making sure everyone gets involved and recognized for their successes.
Across all sectors, the world’s biggest companies understand how disruptive innovation can create a competitive advantage. Ferrari wants to imagine a new car, PricewaterhouseCoopers wants to improve the business model canvas template, and National Grid wants to create a centralized database of emerging technologies. They’ve all approached Planbox for help with that. We sat down to talk with CEO Ludwig Melik about how innovation management can help companies like this.
Initially, companies may come armed with a problem to solve which acts as a proof-of-concept for the platform. When successes are realized, other parts of the organization want to climb on board. This incremental innovation leads to organizational innovation as successes get advertised company-wide. While there’s a service element involved with on-boarding clients, the idea is to enable them to use the Planbox innovation platform without any hand-holding. Each company is given an automatically-generated innovation report card that they can use to monitor ongoing progress. But it’s not just about process, it’s about mindset.
The Psychology Behind Innovating
“It’s not about having the most well-funded innovation management program,” said Mr. Melik, “it’s about getting your entire company to be psychologically invested in innovation.” Below in bold are some ways he suggested companies can get employees psychologically invested in innovation management.
- Share success stories – Quick wins mean you can share stories more frequently. Also shows management some ROI.
- Organize motivational ‘town halls’ – If employees aren’t asking questions during town halls, then figure out positive ways to motivate them to participate.
- Gamify innovation – Critically important, but be careful to examine how these incentives are actually affecting the quality of output.
- Integrate innovation in your HR process – Just don’t let HR start stifling innovation with too much process and procedure
- Involve everyone – Toyota beat Ford for decades before America realized the value of kaizen – continuous improvement everywhere.
- Every organization is different – Copying what someone else did that led to success won’t work
- Top-down and bottom-up – If senior management doesn’t buy into innovation management, don’t expect everyone else to.
In large organizations, you’ll be dealing with loads of data once you start down the innovation management path. That’s where some hungry artificial intelligence algorithms might come in handy.
AI and Innovation Management
The biggest thing Planbox does is to attach information to a problem they’re trying to solve. They’ve patented a technology called Self-Driving Innovation which starts with an underlying understanding of the problem the user is trying to solve then builds on top of that with useful data. Humans-in-the-loop help identify what’s useful or not. Slowly the algorithm starts to understand what’s being deemed useful all by itself.
Data can be gleaned both internally and externally. In some cases, businesses are willing to collaborate with other businesses in areas where they don’t compete to share best practices and most importantly, big data. Mr. Melik talked about how there is a growing demand by companies to access “anonymized” data across other companies and industries. Especially in today’s environment, people are becoming increasingly willing to share anonymized data. The willingness and ability to look outside for answers is what makes for a great innovation management platform.
The Best Innovation Management Platform
In order to understand what makes for a best-in-class innovation management platform we can return to the Forrester report which mentions three things:
- Moving beyond internal idea management into things like technology scouting, agile idea incubation, and collaborative innovation development.
- Companies need more than a platform, they need professional services to help adopt market best practices for innovation management. Every organization has unique needs. Bring in experts who have seen it all.
- Don’t just look at internal data, but outwards. Customer and market insights, emerging technology and startup data, academic publications, patents, these are all places to find innovation insights.
That last bullet point rings true for anyone who has attended a corporate training event led by their peers because there was no budget to bring in outside experts. Companies need to look outside for inspiration. They also need to realize it’s not just about internal stakeholders. Sometimes, customers will be your best source of low-hanging fruit. They’re probably the single most important reason why innovation management matters.
A Real-World Example
AST Financial is a firm we’ve used for half a decade for direct stock purchases. The company claims to take “a strategic approach to every interaction.” Says it right there in the “About Us” section of their website. Yet every time we want to make certain changes to our holdings, we need to – wait for it – mail them a form using snail mail. How can a company possibly talk about “a strategic approach to every interaction” when they expect their customers to mail in forms? Why not ask someone in customer service what common complaints they hear from customers and start with some quick wins? Or just pay attention to media mentions and you’ll quickly hear about customers you annoyed with your “we’ve always done it this way” response to complaints. These are the terrorists Harvard Business Review warned you about in their famous diatribe on “Apostles and Terrorists: A Company’s Best Friends and Worst Enemies.” They’re a great example of why innovation management matters so much.
Startup founders don’t typically have an innovation strategy because all you do when building a new company is innovate. Some say it’s when you hit your 100th employee that things start to change. Standard operating procedures (SOPs) become the bane of innovation. HR gets involved. Swimming against the current becomes a career limiting move (CLM). Successful innovation management requires company leadership to acknowledge innovative thinking, therefore increasing employee engagement and leading to an increase in idea generation and collaborative new concept development.
Large companies often become crippled by bureaucracy and innovation gets paid lip service. Some poor soul gets anointed innovation manager and is expected to organize some innovation activities in addition to their daily responsibilities. Nobody becomes psychologically invested in the whole thing, and it just becomes some overused mantra like Hewlett Packard’s “going back to the garage” in the 90s. That’s why big names like ExxonMobil, Whirlpool, Novartis, and Dow use Planbox for innovation management. They can’t afford to fail at it.
Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence Dividend Growth Investing report freely available to Nanalyze Premium subscribers.