Innovation management in established businesses is an intricate and indispensable undertaking. Established companies often face the ‘innovator’s dilemma’, where they must choose between new, potentially disruptive innovations and their traditional, successful business models. For instance, Kodak, once a leader in the photographic film industry, struggled to adapt to the digital photography revolution. Their initial resistance to embrace digital technology, despite having the capabilities, led to a significant decline in their market dominance.

Innovation management in established businesses

Understanding Innovation Management

Innovation management is a strategic approach that focuses on the systematic handling of the innovation process within an organisation. This process encompasses everything from the germination of a new idea to its successful execution and integration into the business. In the context of established businesses, innovation management plays a critical role in maintaining a competitive edge. These businesses often operate within well-defined structures and processes that have ensured their success in the past. However, in a rapidly evolving business landscape, relying solely on tried and tested methods can lead to stagnation. Thus, innovation management becomes essential for these businesses to adapt, evolve, and stay relevant.

Integrating Innovation with Corporate Strategy

Aligning Innovation with Business Goals

For innovation to be effective, it must align with the broader strategic goals of the business. This alignment ensures that resources are invested in areas that will drive growth and profitability. British Petroleum (BP), for example, has aligned its innovation strategy with sustainability goals, investing heavily in renewable energy technologies to transition from a traditional oil and gas company to a broader energy provider.

Innovation Management: Overcoming Resistance to Change

Resistance to change is a common obstacle in established businesses. Leaders must address this by communicating the value of innovation and how it contributes to the company’s long-term success. When Satya Nadella became CEO of Microsoft, he shifted the company culture from one of competition to one of collaboration and continuous learning, which was crucial in reinvigorating Microsoft’s innovation engine.

Balancing Innovation with Existing Business Models

A major challenge in the realm of innovation management is striking an appropriate balance between adopting novel, potentially groundbreaking ideas and maintaining the foundational elements of the existing business model that have been key to a company’s success. This balancing act is vital as it entails navigating the risks linked with innovation while seizing new avenues for growth. A notable example is Netflix, which adeptly transitioned from a DVD rental service to a dominant player in the streaming industry. By leveraging burgeoning internet technologies, Netflix innovatively transformed its service delivery model. This strategic move not only preserved their existing customer base but also amplified it on a global scale.

Short-Term vs Long-Term Objectives in Innovation Management

Balancing the immediate financial performance with long-term innovation investment is crucial. Amazon is an exemplar in this aspect, consistently reinvesting a significant portion of its profits into new ventures like Amazon Web Services (AWS), which has become a major revenue generator over time.

Developing an Innovation-friendly Culture

Encouraging a Culture of Experimentation

Encouraging a culture of experimentation is vital for established businesses aiming to foster innovation and adaptability. This approach involves creating an environment where employees are not just permitted, but actively encouraged to explore new ideas, experiment with different solutions, and learn from both successes and failures. Such a culture acknowledges that not every experiment will lead to a successful outcome, but views these experiences as valuable learning opportunities that contribute to overall organisational growth and creativity.

3M is a company renowned for its innovative culture. 3M has institutionalised experimentation through its “15% Culture.” This policy allows employees to use 15% of their paid time to pursue their own ideas, independent of their regular projects. This practice was instrumental in the development of the Post-it Note, one of 3M’s most iconic and successful products. The product originated from an employee’s experiment with a unique type of adhesive, demonstrating how a culture of experimentation can lead to groundbreaking innovations even in a well-established company. Such policies exemplify how fostering a culture of experimentation and openness to failure can be a powerful catalyst for innovation and long-term success in established businesses.

Implementing Cross-Functional Teams

Cross-functional teams bring diverse perspectives and foster an environment where innovative ideas can flourish. Procter & Gamble’s ‘Connect + Develop’ program, which brings together people from different departments and even outside the company, has led to successful product innovations like the Swiffer.

Continuous Learning and Development

Committing resources to employee training and development is crucial for maintaining a culture of innovation. Siemens exemplifies this by providing an extensive array of ongoing educational programs for its staff. These programs concentrate on the latest technological advancements and market shifts, equipping their team with the knowledge and skills necessary to spearhead innovation initiatives.

Strategies for Effective Innovation Management

There are several types of strategies in innovation management that established businesses can adopt to foster innovation and maintain competitiveness. These strategies can vary depending on the vertical, company size, market conditions, and the specific goals of the business. Here are some key strategies:

Open Innovation

This involves collaborating with external entities such as startups, universities, research institutions, or even competitors. The goal is to bring in fresh ideas, technologies, and expertise that are not available within the organisation. This approach can accelerate R&D processes, diversify product portfolios, and introduce new business models.

Incremental vs. Radical Innovation

Businesses need to decide between focusing on incremental innovation (improving existing products or services) or radical innovation (developing completely new offerings or disrupting the market). Often, a balanced approach is most effective, allowing companies to maintain their existing customer base while also exploring new markets.

Customer-Centric Innovation

This strategy places a strong emphasis on understanding and anticipating customer needs and preferences. It involves using customer feedback and market research to drive the innovation process. This approach ensures that new products or services are closely aligned with what customers actually want, reducing the risk of unsuccessful innovations.

Technology-Driven Innovation

Here, the focus is on leveraging emerging technologies (like AI, IoT, blockchain, etc.) to create new products, services, or processes. This strategy is particularly relevant in fast-evolving industries like tech, finance, and telecommunications.

Internal Innovation Programs

Such programs encourage employees to come up with innovative ideas and contribute to the company’s innovation efforts. This might include setting up dedicated innovation labs, running idea generation campaigns, or allocating time and resources for employees to work on innovation projects.

Innovation Management: Portfolio Approach

This involves managing a portfolio of innovation projects, balancing risk and reward, short-term vs. long-term goals, and allocating resources effectively. This strategic approach ensures that the company invests in a diverse range of projects to spread risk and maximise potential gains.

Strategic Partnerships and Alliances

Forming alliances or partnerships with other businesses can pave the way to new markets, technologies, and resources. This is especially useful for entering new geographical markets or integrating new technological capabilities quickly.

Corporate Venturing

This involves investing in external startups or creating spin-offs. This strategy allows companies to tap into new ideas and business models without the constraints of their existing corporate structures.

Each of these techniques offers different advantages and can be used in combination to create a robust and dynamic innovation management approach tailored to the specific needs and goals of a business.

Innovation management

Innovation management in established businesses is a complex yet essential process. By understanding its nuances, aligning it with corporate strategy, fostering an innovation-friendly culture, and continuously adapting to changing market dynamics, established businesses can not only survive but prosper in today’s fast-paced business environment. Through real-world examples, we see that the successful management of innovation is a delicate balance of nurturing new ideas while leveraging existing strengths, a balance that can propel companies to new heights of success.