INNOVATION LEADERSHIP IN PRACTICE - II

This Tomorrow’s Challenge is the second in a series on innovation leadership. The first part, Promoting bottom-up innovation, looked at how to build a company culture that encourages and supports bottom-up innovation – the spontaneous innovation that comes from the ideas and entrepreneurship of a company’s people. This article looks at the second, complementary innovation mode, top-down.

Putting innovation on to the top management agenda
Top-down innovation is initiated and fuelled by the vision of a company’s top management. Unlike bottom-up innovation, which capitalizes on ideas freely generated by its staff, top-down innovation results from a deliberate management vision and ambition.
There are two general reasons why management may want to initiate an innovation drive top-down. The first motive is to respond to an external threat, such as from:

- Disruptive technology – e.g., the impact of digital photography on companies like Kodak and Fuji.
- Gradual performance erosion – e.g., the declining performance over time experienced by GM and Ford.
- Commoditization – e.g., rapidly declining prices in flat screen displays which make Japanese and Korean companies unable to reap the benefits of their huge investments.
- Stock market pressures – e.g., harsh judgments made by financial analysts on the R&D pipeline of pharmaceutical companies.

The second reason is to drive management’s own ambitions for the company. These may include:
- Changing the internal rules of the game – e.g., opening the company to ideas and technologies from the outside, as P&G did with its "connect & develop" model.
- Leveraging technology to pursue new growth applications – e.g. Dow-Corning in the field of silicone.
- Reaching organizational excellence by improving a vital process – e.g. Tetra Pak in liquid food packaging.
- Attracting world-class talent by offering them the opportunity to work on innovative ground-breaking projects.

Implementing top-down innovation
Top-down innovation starts with a vision and strategy. It builds upon a seamless process and networking culture and it requires adequate resources. These will each be discussed in turn.

Innovation vision
Most companies today have a business vision or mission which defines what the business is trying to achieve. However, fewer have an innovation vision that determines how innovation will help achieve the business vision.

Creating an innovation vision requires observing the environment in which the company is operating and identifying early signals of industry and market changes in order to find opportunities. Examples include changes to industry structures and regulations, the convergence of different industry segments, the emergence of new distribution channels, and/or changes in customer needs, habits and values.

Innovation strategy
While essential, identifying opportunities is not enough by itself. Management also needs to clarify its innovation strategy and priorities, i.e. define where the company will focus its innovation efforts. Very few companies seem to actually manage to make their technology strategy explicit.

Creating a strategy can be achieved by answering four simple questions:
1. Why do you want to innovate? Is it to create a totally new business? Or to reinforce one of your current businesses?
2. Where do you want to innovate? In "black-box" new products or services? Or in your business system or model?
3. By how much do you want to innovate? Do you want a radical change? Or an incremental improvement?
4. With whom do you want to innovate? Will you innovate mostly within your company? Or do you want to partner with others to innovate?

The answers to these questions define the objective, focus, intensity and boundaries of the innovation effort. In turn, they determine four generic innovation thrusts:
- Creating new/improved products or services;
- Creating totally new product categories or service offerings;
- Creating a totally new business model or system;
- Creating new/improved customer solutions or systems.

The implementation of innovation strategies is greatly facilitated by the preparation of roadmaps, i.e. technology roadmaps; competence roadmaps, project roadmaps and product roadmaps.

Seamless process
Top-down innovation drives generally include the building—or re-vamping—of the company's process from idea to market. The process to be developed must be seamless to avoid traditional functional handovers. It should not be bureaucratic – it needs to remain lean, flexible and fast. Management must ensure that all employees are aware of the entire process, not just those parts that directly affect them.

The innovation process consists of a number of integrated and dynamic sub-processes, namely:
- business and technology intelligence (gathering and analysis of information and insight);
- idea management (generation, screening and validation of new concepts);
- technology and supply base development and deployment;
- product and technology strategy and planning (including product and project portfolios);
- program management, that combines product development and commercial launch;
- product lifecycle management.

Three fundamental requirements are needed to ensure the innovation process works seamlessly: (i) process owners and coaches for each of these sub-processes; (ii) strongly empowered program managers who can take cross-functional teams from the beginning to end of innovation projects; and (iii) a close partnership between marketing and R&D to ensure both functions move in the same direction.

Above this, there also needs to be a mechanism to integrate all elements of the process and track innovation performance. As it is very difficult for a single innovation leader to orchestrate the whole effort, a better solution is to create an innovation board representing the key businesses and functions involved in the process.

Networking
Innovation requires intense networking – not just internally between different departments and functionalities, but also externally with suppliers and partners. Management may worry that involving outside partners deeply in their innovation process will threaten the company's intellectual property. This is definitely a concern that needs to be managed. However, truly innovative companies consider that speed is the best weapon against copycats. They recognize that early supplier involvement and innovation partnerships lead to faster and more effective innovation.

Resources
Innovation will not happen without resources. This includes an adequate supply of people with the right competencies; risk-money for experimentation; project funding, of course; access to relevant information sources; adapted tools; and time… because innovation takes time!

The leadership behind innovation
Top-down and bottom-up innovation are driven by different factors. The task of management is indeed quite different when focusing on creating a company culture that encourages bottom-up innovation or driving innovation proactively top-down. But both types of innovation ultimately require a strong and persistent commitment on the part of the management team. Leadership is the key condition for sustaining innovation.

Professor Jean-Philippe Deschamps teaches on Mastering Technology Enterprise (MTE), the Driving Strategic Innovation (DSI) and the Orchestrating Winning Performance (OWP) programs.