In turbulent economic times, innovation departments are quickly cut. But why?
In times of shrinking economies, large organisations’ often slash costs and shift resources to boost productivity and achieve short-term gains, sidelining future growth opportunities. The writer of Snoopy, Charles M. Schulz, once said; “You can’t survive by sucking the juice from a wet mitten”, and when existing revenue decreases; isn’t it more rational to adopt an offensive, future-focused mindset to find better solutions and services to ensure long-term success for the organisation?
Against this backdrop, we’ve noticed a remarkable trend where innovation departments in larger established companies – such as those in retail, banking, insurance, and telecommunications – are either being shut down or having their mandates and purposes drastically changed. Do large organisations truly believe that innovation and creative thinking are not important? Or is this solely a result of not seeing any impact from innovation efforts?
Our hypothesis is the latter. Over the past decade, significant sums have been invested in structural capital, hiring of innovation leaders, study trips to Silicon Valley, and memberships in accelerators and incubators. However, the expected return on investment of innovation activities has not materialised; or it has simply not been appropriately forecast, measured and quantified.
Many organisations have set up innovation labs and frequently showcase prototypes and pilots. Yet, from an outsider’s perspective, it seems that the purpose has been to include a few sentences in their upcoming annual report about working on innovation, rather than genuinely transforming their organisation.
Innovation activities have largely focused on testing new technologies such as drones, robots, and Artificial Intelligence. Unfortunately, too many innovation initiatives get stuck in pilots and initiatives that do not create value, often as a result of lack of clear direction and structure. From our standpoint, there are far too many innovation departments engaged in ‘innovation washing’ rather than contributing to the bottom – or top line.
If that is the case, perhaps it’s justified to shut down these innovation departments.
Innovation should be used as a tool to gain competitive advantage, and with executive focus on commercial benefits realisation, underpinned by clear objectives and key results, the innovation department can deliver significant organisation value. The organisations that will be successful need leaders that lead in a forward thinking away.
Innovation starts from the top
Is it the management’s understanding of what the innovation department should be used for that is the root of the problem? Or is it the innovation departments which have not been able to convey their purpose?
I imagine that all leaders are aware that the world is changing, and unpredictable times creates uncertainty. Predicting the future is difficult but looking back at what worked over the last 10 years and continuing with business as usual – that’s easy. Most leaders sense that changes in the external environment will have ripple effects on their own organisation. But why is innovation often deprioritised during tougher times? It’s time for organisations and leaders to realise that the era of innovation labs and hiring trendy people with hoodies is over.
Organisations that maintain or boost their competitive advantage use innovation as a tool to reduce the uncertainty and focus on real transformation supporting the overall strategy. For the innovation department to truly matter, the leadership must leverage it to draw insights from external environments, challenge the organisation’s status quo, and most importantly; test new technologies, solutions, and business models. This approach helps validate what will contribute to achieving the organisation’s overarching goals of growth, sustainability, and efficiency.
The future is approaching rapidly
Organisations need to earn their right to exist, and innovation must be an integral part of the strategic work. Innovation departments should focus on experimentation and assist leadership in determining what can contribute to the continued growth and relevance of their own organisation in the years to come.
It’s time to stop token innovation and instead prioritise innovation on the strategic agenda with a systematic approach and outcomes-focused governance. The innovation department should be a powerful tool for creating sustainable future growth. Those who act on this will achieve greater ’Return on Invested Innovation’ and approach the innovation department as an investment rather than a cost to be cut.
Innovation is no longer a nice-to-have; it must be an integrated into the core of the business to improve the odds of continuity. As the ISO56000-series shows us; innovation is multidisciplinary and cross functional, requiring contributions from all business functions to harvest the real effects.
In this monthly series, we will explore the following core elements required to be in place to deliver systemic innovation. Inspired by the ISO56000-series and considering our experience in the delivery of Open Innovation services, we will share the importance- of, and best practice for, each element.
- Leadership,
- Context,
- Culture,
- Exploration,
- Support, and
- Implementation
Find out more about Sopra Steria Scale up here.