CEOs need to move innovation to the top of their To-Do lists
Posted: March 11th, 2009 in Senior Management Committment
Creating A Declaration of Innovation
Everyone has been focused on cutting costs and cutting jobs of late. The problem is that we have now cut the legs out from under many of our businesses. The economic situation will only turn around if we start putting people back to work and recreate jobs, then get businesses to invest again in future growth. One critical way to stimulate that growth is through innovation.
However, the innovation naysayers are widespread these days. “How can we possibly afford to invest in innovation?” “Our budgets have been slashed.” I understand. However, most companies haven’t fired their sales force, their marketing departments, or their accounting and finance people. Manufacturing plants are still operating and engineers are still working. The problem is that innovation hasn’t yet reached the priority level that it needs to be at in most companies.
Innovation is not a luxury expenditure that can be made in flush times. It must be viewed as a core business strategy that needs to be built into the budget in the same way as any other functional area – an on-going business discipline.
So what does it take to achieve this? First, get the CEO to move innovation towards the top of his/her to-do list. OK, but then what?
The next step is to create a simple but well thought-out statement on the strategic and financial roles that innovation should play for the company going forward. Often, I will refer to this as an Innovation Strategy or A Declaration of Innovation. This 1-2 page document needs to be signed by the top 7-8 executives similar to our forefathers signing the Declaration of Independence. One of the keys for innovation success is getting all senior managers on the same page in terms of how they define innovation, how they want to measure it, a common description of success, and an agreed-upon process. Making this dialogue happen is one of the most valuable things that a CEO can do to activate innovation – as opposed to just talk about it.
What goes into an Innovation Strategy (or Declaration of Innovation)? It should start with an Innovation Vision which defines the overall role and purpose of innovation within the company. Closely linked to this vision are Innovation Strategic Roles and the Financial Growth Gap. The roles should describe more specifically the balance of new products, new services, new business models, and new-to-the-world initiatives with closer- in more incremental innovations. The Financial Growth Gap should set up the financial gap that new innovations are expected to fulfill within the next 3-5 years.
In addition, screening criteria need to be developed along dimensions of customer or consumer need, market attractiveness, degree of competitive insulation, operational feasibility, and ultimately financial hurdles. However, it is important not to consider financials until concepts have been fully explored with consumers and/or customers.
By taking the time to get senior leaders to agree on these issues, most companies will have cleared one of the biggest hurdles to innovation – getting everyone at the top to agree to innovation objectives, goals, and the “rules” of the innovation game. While there is still more work ahead, creating an Innovation Strategy starts to shift the mindset and re-invigorates the culture to view innovation as an on-going business activity.
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