Can We Predict Innovation? :: Arpad Makray-Rozsas

Innovation. The word automatically implies people in white lab coats, studying the results of a test, finally crying out in joy: Eureka! What’s wrong with this picture? Nearly everything.

First, it equals innovation with technology or products – falsely, as innovation can address several dimensions: production procedures, organisational setup etc. Second, it suggests innovation is always a long-term process, requiring considerable capital and assets, whereas the truth is, innovation can deliver value over multiple time-frames, as controlled by the innovation agents. Also, in many cases, innovation does not require technology development but it is about combining existing technologies for new purposes (see Uber eg). Finally, innovation usually is not the result of the work of one or a handful of people but of processes bringing together many actors.

In response to the rising need to boost innovation capacity of the companies of the European Union, the European Commission launched the IMP3rove initiative in 2006. IMP3rove is an innovation management methodology, innovation consultancy service and an official technical specification (CEN/TS). It was initiated to provide companies and public policy makers with an innovation management tool, which is a) practical and up-to-date, b) objective and independent of economic sectors or industries, c) based on scientific research, and d) intended primarily to support innovation activities of small and medium sized enterprises (SMEs).

AT Kearney developed and launched the innovation methodology and consulting service by 2008. The framework was based on the House of Innovation Model, which measured the innovation capacity of any company through an online service, providing global benchmarking in the process. The IMP3rove service and technical specification (CEN/TS 16555-1:2013) was made available throughout the EU by 2013.

This has provided considerable opportunities for European companies, as they gained access to innovation benchmark data unavailable from any other source (eg innovation projects per company, lifecycle data of products, time-to-market, time-to-profit data etc.), based on a company database representative of the EU’s entire economy.

Innovation management system

Getting back to the misconceptions for a moment: company surveys and innovation management studies have proved that if an organisation applies a holistic system of innovation to manage its innovation activities, results from innovation become highly predictable, with disruptive market offerings and superior financial results. (For the latter, see the example of Apple: the company possessed 17.2% of market share in mobile phones in 2015, but earned 91% of the total profit of mobile manufacturing companies).

Recent years have seen a boom in research into innovation management, especially on how to set up an innovation system, what organisational structure is ideal and how these activities should be organised regarding planning horizons. The Technical Specification on innovation management (soon to become ISO stand0ard as well) defines the innovation management system (or IMS) as a “set of interrelated or interacting elements of an organization to establish innovation policies and objectives as well as processes to achieve those objectives.” Such a system serves three major functions: organisational, life-cycle management and time-planning.

1. Organisational function

The Innovation Management System provides the organisational framework for the actors of the innovation process, enabling them to work in a structured way to achieve their objectives. Based on recent innovation literature (eg by Ralph-Christian Ohr) an integrative approach to innovation is necessary when establishing an innovation system: balancing the exploitation oriented activities (ie exploiting and refining the existing business models and technologies) from exploration oriented initiatives (ie searching for new business models, market opportunities and technologies with high disruptive potential). This is called “organisational ambidexterity” as success in the short and long term requires the organisation to master both kinds of activities.

This organisational framework comprises not only actors within the actual company so that they can co-operate, share the documents or communicate in secure channels. Explorative (or radical) innovation needs to be implemented in a collaborative manner, including many actors from outside of the company (customers, suppliers, industry experts, research institutes, universities etc.), thus achieving so-called open innovation. Also, organisational ambidexterity brings about the need for a new line-up of innovation team members: instead of a few engineers or other specialised employees, an interdisciplinary (or cross-functional) team works on innovation initiatives, representing many fields (marketing-sales, technology, production, finance etc.).

2. Lifecycle management function

Lifecycle management is implemented in a holistic manner, from idea through innovation development and launch to phase-out. Thus measuring, monitoring and controlling the efficiency and effectiveness of innovation activities becomes integral part of the system.

The function also ensures that all major phases of innovation development is properly structured with sufficient resources. In order to achieve breakthrough innovation, random pulling of ideas from random actors will not suffice – organised, systematic and networked based ideation is a must, which includes examining the environment and market of the company.

3. Time-planning function

The innovation system shall perform efficiently and effectively its above functions with proper time-planning of the activities. On the one hand, time horizons of exploitative and explorative activities must be harmonised, with different success indicators and organisational setups. Based on the three horizons model (see eg the works of Steve Blank, Ralph-Christian Ohr, Vijay Govindarajan), different time horizons need different tools and processes: on Horizon 1 (current efforts) efficiency is the primary objective, by best utilising the current technology and core compentencies of the company. Horizon 3 is about exploring new business opportunities, independent of the current capabilities of the company, or technology of the products. Horizon 2 aims to build new business by finding new market potential for the existing capabilities.

The other aspect of the time-planning function is the scheduling of all these processes in a stage-gate manner, where actors, tasks and indicators are all clear and defined in advance. The stages in the system comprise all tasks necessary for development, and the gates ensure that there is a transparent, efficient and disciplined decision making system enabling the management to make well-informed calls in a timely manner.

The tools of successful innovation

The IT support of an efficient and effective innovation management system must enable all the above functions, providing for security, collaboration tools and customisation as basic principles.

  • Proper workflow management is vital to efficient operation, ensuring that tracking all processes from idea to financial monitoring is taken care of.
  • Applications and other tools must provide the highest security available as innovation is the ultimate business secret of every company.
  • The system needs to manage the development stages and the decision gates of the innovation processes, so that decision-makers receive up-to-date information and have full control of innovation phases.
  • Breakthrough innovation needs customisation of the system and the structure of included actors, therefore the IT systems should enable the tailoring of organisational setups and procedures.

iLex innoICON: fully-fledged innovation solution for SMEs

The innoICON application is based on the iLex legal workflow management platform and is able to perform all functions required by an innovation system. It also brings a new approach to the market of IT innovation management tools: whereas most applications are specialised and apply only one development methodology, in the iLex innoICON several methods are available based on the development needs of the customer (IMP3rove, Design Thinking, Agile etc.).

Another new function is the possibility to use innovation consultants based on the actual need of the customer company, by applying a system of remote consultant availability, and calculating and billing fees based on the time used. This enables SMEs to launch innovation initiatives without the need for a larger investment already at the beginning of the project.

Customers will also benefit from the innovation know-how of document templates, project structure samples and other analyses readily available through the system.

The best time to innovate is: today

Corporate cemeteries and textbooks are full of companies, which realised their challenges but missed to take the necessary measures in time or with sufficient efforts. Kodak invented the first digital camera in 1975 but as it required to film for operation, top management ditched the project. 37 years later Kodak went out of business because the demand for camera film collapsed, basically abolishing its market…

Today the greatest global challenge for companies is the 4th industrial revolution, when the entire innovation chain must be placed on new IT foundations, using Big Data and other new methods not just to serve current customer needs but also to project unarticulated demand.

Why is today the best time to innovate? Because we already have learned that any company may achieve success that understands that building an efficient and effective innovation management system provides for long-term competitiveness, for leading in digital transformation and for opportunities to form markets and solutions. And the best of it? They don’t have to invent new IT solutions: tools of the future are already available today!

Arpad Makray-Rozsas
Managing Director
imp3rove Guide