Innovation does not come from itself. Especially not Business Innovation. Many companies devote a smaller or bigger part of their budget to R&D and innovation – but almost always includes developing new products or technologies. In this fast-moving, digital and disruptive world, I believe it’s crucial for our future success to also invest in Business innovation! Discovering unmet customer needs, developing value propositions incorporated into new business models. In my opinion, this investment and strategic work mainly takes place in either start-ups or enterprises. Middle-sized companies tend to be very focused on operations here and now, lacking both the skills, resources and time to devote to more strategic and explorative business development processes.
In his latest blogpost, Alexander Osterwalder nicely illustrates the four key factors needed to be successful in business innovation:
Osterwalder emphasizes that you need to allocate money – preferably 10% of your R&D budget – and manage the money as a Venture Capital firm would; a portfolio of innovation projects. Aligned with the strategy, the directions you want to explore. Some will fail, some will be ok and some might even be your next future cash cow.
Innovation doesn’t happen by itself or by just investing money. It requires time, dedication and empowerment. Leaders should dedicate at least 20% of their time to business innovation, Osterwalder continues. Not interfering with the process, but sharing visions, strategic direction and empowering the team. This is a way to emphasize the importance off innovation in an organization.
As Osterwalder puts it, ”innovation is not done on a Friday afternoon”. People need to be able to dedicate time and resources to truly explore, test and develop new ideas. The right skillset must be available and a combination of seniority and youth can turn ideas to workable business approaches. This process must be supported by the proper processes and incentives – measuring success on other KPIs than the ongoing business.
I’ve conducted numerous workshops with mid-sized companies and in every occasion we have found embryos to new, potentially very interesting business opportunities. Unfortunately, in most cases, there has been no organization, skillset, process or resources available to continue to explore these ideas and turn them into possible future opportunities. How do we get management to realize the importance of investing in business innovation? How do we increase a sense of urgency, that cuts through the feeling of security and ”fat and happy”? How do we help managers and boards to understand that exploring new ideas, even if they might be competing with current business, should be a vital part of the company’s operations as much as other functions? How do YOU address these questions in your company?
Personally, I take comfort in Osterwalder’s blogpost. He meets and discusses these questions with top brand and enterprises all over the world and it’s apparent that not even on those levels, it’s a given that business innovation is a natural part of R&D. Let’s hope that we, by highlighting and discussing the issues more and more can get some actions!