In this post I share four elements I’ve seen that are crucial for leaders who want to make innovation a reality in their companies. Bringing these elements together is incredibly powerful.
1. Allocate Money - VC Style
It’s not just about “investing money”. Money is not enough, it’s how you invest. Leaders should take 10% of their traditional R&D budgets (usually for product and technology development) and put it into innovation that explores new value propositions and business models. This money should not be invested in big bets, but allocated to a portfolio of ideas like VCs do. Many will fail, some will return mediocre results, and a few will become a home run. Early stage venture investments show that it is impossible to pick the winners without investing into ideas that will lose.
2. Invest Substantial Amounts Of Time
Leadership dedication to innovation teams is incredibly important. Leaders need to speak to innovation teams constantly. The role isn’t to tell people what to do, but to inform them about the vision, understand where innovation teams are heading, and give them guidance as they explore new growth engines for the company. Leaders who don’t invest at least 20% of their time into innovation, don’t care about innovation.
3. Give Innovation Power
Put people with clout and credibility on the job and give them sufficient time to seriously explore new ideas. Innovation is not a Friday afternoon job--just like finance & marketing aren’t hobbies either. A mistake I often see is that leaders give innovation projects to the youngest, most inexperienced people with the argument that they bring fresh thinking. All that leads to is vulnerable innovation projects and it sends the wrong strategic message. Rather, put people with clout, a track record, and an entrepreneurial flair on the job and surround them with multi-disciplinary teams.
4. Create A Strategic Space For Innovation To Function
What I mean with this, is not just a physical building or an incubator. Every company has those. What you need is a strategic space with a different incentive and reward system, a different culture and different processes. Innovation teams need rules, but the rules are different from those that guide the management of existing businesses. For example, the metrics and measurement system to evaluate new ideas needs to be radically different from the one that helps manage existing businesses. You’ll ultimately kill any chances of innovation success, if you force innovation teams to work like a team that manages an existing business unit.