On the evolution of innovation in business, and what works best today

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Innovation holds the key to achieving several business objectives, ranging from market leadership in a product category to warding off a disruptor in a market segment, to earning overall higher returns on capital employed. Firms such as 3M, DuPont, General Electric, Philips, Siemens have been able to achieve market leadership and financial gains on account of a robust innovation process.

The perspective on innovation has also been constantly evolving. From just being limited to new products and services to cover areas such as business models, go-to market strategies, management practices deployed, and so on. There has also been a recognition that innovation must hinge on the creation of new value for customers instead of just new products, technologies or services.

In addition, the importance given solely to the idea generation stage has now moved to the entire process of evaluation of the said ideas. This has allowed the non-promising ones to be rejected earlier without expending much of the limited resources. In essence, innovation today is an outcome of the creation of value by improving upon one or more dimensions of the business ecosystem.

The advent of digitisation has also helped catalyse the process of innovation in firms by offering avenues for quick experimentations, rapid dissemination of information and innovations developed through the use of data analytics and knowledge management.

The fast emerging trends are making it necessary to understand their interaction with and the resultant impact on the business ecosystem. So that organisations are able to distil the implications for them and develop suitable countermeasures and, in many cases, acts as a trigger for innovations.

The development of innovative enterprise hinges on several aspects
Beginning from making it a part of the strategy formulation process in an organisation. We have seen that firms, with objectives of entering adjacent businesses, begin innovating by leveraging their existing capabilities in a different business segment or by acquiring new capabilities. For example, Asian Paints' entry into the home painting solutions business. On the other hand, firms with a strategic objective of serving a new emerging segment, on account of latent consumer needs, innovate their value delivery. For example, the emergence of Maruti Suzuki’s 800 cc car in the 1980s. There are also examples of firms innovating on both these dimensions. Scenario planning approaches also play a vital role in enabling firms to predict the future course of customer value creation and innovate their offerings.

Innovative firms also understand the role played by external players. They often collaborate with inherently agile and more innovative players such as startups to bring about innovations. In addition, the funnel of innovation—from the idea stage to its deployment—is made robust to ensure that the best ideas can progress swiftly and lead to beneficial outcomes.

The organisation structure and culture also have an influence on innovation process
Even though examples of a wide cross-section of innovative firms shows there isn’t one particular structure that works best, a deep dive into innovative organisations does reveal that elements such as motivating employees for innovation, assessing risks and encouraging successes in risky projects, ensuring a mix of personalities and functions in teams tasked with innovations works very well. To ensure monitoring of the innovation process and take corrective actions for improvement, it is necessary to define a set of KPIs and understand the improvement in the innovation quotient of an organisation.

Firms can begin their journey of innovation with trend analysis to understand influential trends of the future and the innovation landscape in their industry. This should be followed up with an assessment of the current state of innovation using a multi-dimensional assessment framework that covers all aspects required for processes and culture conducive to making organisations truly innovative. Based on this, organisations should develop an innovation improvement strategy. They can list the imperatives aligning current vision and strategy for innovation with market requirements, the KPIs, tools, and techniques.

While innovation has for long been a key driver towards profitability and growth of organisations, the volatile and uncertain business environment created by the onslaught of Covid-19 pandemic has increased the urgency for firms to embark on the innovation journey to sustain their competitive advantage and the related market and financial positions. Organisations would certainly do well to make innovation a key agenda in their planning cycles.

The writer is a partner and group Head at NRI Consulting & Solutions

The thoughts and opinions shared here are of the author.