Generating innovations for future growth while the economy is down, capital sources are scarce, and the markets continue to evolve quickly is a challenge facing many organizations today. Given the breadth of companies facing this challenge, I wanted to share some best practices from our experience that are practical and systemic answers to this challenge.

Some companies respond to a lack of innovation based on an assumption that their employees lack innovation capabilities and need an offsite or training to spark their thinking. However, if you believe your people can’t think creatively or need to be trained on how to be innovative, you have a fundamental personnel problem to fix. Alternatively, we’ve found that organizational gaps in providing clear strategic direction and a disciplined process for managing innovation projects is what is lacking. And when those issues are addressed, innovation is unleashed.

Customer-Focused Strategic Direction:

Executives today are highly focused on the current quarter’s performance for a variety of reasons. Most functional groups have been able to match that near-term focus with things like just-in-time manufacturing, quarterly sales quotas, marketing budgets weighted towards immediate paybacks, and agile development for information technology. Research and Development (R&D) or teams focused on strategic new businesses have projects that usually take longer than one quarter to generate value. This situation causes a major disconnect between executive focus, investment levels and other functional groups.

As a result, investments become an allocation of what can be afforded, not a prioritization of the most important mix of long and short term initiatives based on the company strategy. It then becomes the job of R&D to try and determine which projects to fund. But without clear strategic direction, the best they can do is to spread the investments across many different projects sponsored by different R&D teams.

This dynamic is what led to HP having 150 concurrent research projects in their labs that were collectively stuck in sub-optimal funding and lack of executive focus to deliver results. I’ve written about HP’s move to take those 150 projects down to 15-20 high impact projects with the best chance of delivering market value. But what is not clear is what strategy is guiding the decisions on HP’s targeted projects. It may not become clear until we see the market impact of those 15-20 projects in the future.

One great example where we can see a customer-focused strategy guiding prioritized innovation investments is Nintendo’s Wii. Nintendo had spent years chasing after the Sony Playstation and Microsoft X-Box, trying to keep up with competitive innovations and chasing the market. Once the strategy was set to create an inexpensive, family-oriented gaming platform that moms would love to have in their homes, the focus changed. Heavy investments on motion controllers, all wireless operation, and full backwards compatibility were the things that would differentiate the platform and those are the breakthroughs that have led to the huge commercial success of the Wii.

At Apple huge investments, once the iPod strategy was determined, were centered on the new user interface and controls, the mini hard drive, the form factor and simple integration to iTunes. Again, this was a clear customer-focused strategy driving prioritization of the breakthrough innovations that would have the greatest market impact.

If employees understand the most important customer needs and unsolved problems to deliver the strategy, their best talents and most innovative ideas can be concentrated on delivering those specific breakthroughs.

An Innovation Process

In addition to generating the breakthrough ideas in alignment with a clear strategy, many ideas simply never make it from concepts into results. A recent article by Christoph H. Loch, a professor at Insead, was published in Research and Technology Magazine (Sept.-Oct. 2008). He identifies a key to driving innovation as having a Cascading Tool and process.

He defines a successful process has having the following steps:

1. Clarify the strategy
2. Communicate, communicate, communicate
3. Negotiate goals with department heads and decide who will do what
4. Communicate, communicate, communicate (again)
5. Translate department head strategies and goals into lower level goals and repeat
6. Feed observations of infeasibilities, problems and constraints as well as opportunities into your dialogue on innovation
7. Allow innovative ideas to be produced bottom-up

Loch does not suggest a specific process as a solution that meets his keys to success. However, our BIG Ideas to BIG Results process meets all of the Loch’s criteria for a successful innovation process. And through our experiences across many different types of organizations including technology companies, retail, business services, financial services and others, it has reliably produced customer-focused innovations that have delivered big results in the marketplace.

Our process is a leader-led, high-engagement approach to confronting external market realities, generating alignment across the team, engaging the full organization in an effective dialogue to come up with solutions and identify potential roadblocks, and translating goals down to every individual in the organization to clarify how they will contribute to the strategy.

If you are facing the challenge of sparking greater innovation in the face of tighter budgets and a tough economic cycle, here are a few troubleshooting tips to consider that may help uncover the true reasons that innovation is lagging and what you can do about it.

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