We all know that innovation is the driving force for business survival and competitive advantage. As we move further into 2023, we think it’s important to recognize the most significant challenges that businesses are facing in this field. In this article, we will explore the ten biggest challenges in innovation management that executives and teams will need to address to stay competitive in the years ahead.
By proactively identifying and addressing the challenges an organization is facing in innovation management, businesses can position themselves to better leverage emerging technologies, attract and retain top talent, and navigate risks associated with innovation to drive growth and success in the long run.
Of course, every company and very team has different challenges that are at the top of the agenda this year. Our list is based on our experience with multinational clients, as well as insights from more than 200 experts in the fields of innovation, digital transformation, R&D, strategic partnerships, open innovation, and many more, across various industries, including oil and energy, consumer goods, pharma and healthcare, logistics, electronics and telecommunications, and automation, on their biggest challenges in innovation.
Let’s dive right in.
1. Innovation culture
Innovation culture refers to an organization's collective mindset, values, and behaviors that promote and support innovation.
It is essential for organizations to foster an innovation culture because it encourages creativity, engagement, commitment, and acceptance for new approaches, which can accelerate and enhance the process of developing new products, services, and processes.
However, many organizations struggle to create an innovation culture because it requires a fundamental shift in their approach to work. Employees need to be empowered to share ideas, collaborate, and challenge traditional ways of thinking. Organizations must also be willing to invest in innovation and accept failure as a natural part of the innovation process.
Some common challenges organizations face when trying to develop an innovation culture:
- Resistance to change: Employees may resist new ideas or processes because they are comfortable with the status quo.
- Lack of resources: Organizations may not allocate enough time, money, or talent to support innovation initiatives, which can hinder progress and success.
- Siloed thinking: Departments or teams may work in isolation, which can prevent cross-functional collaboration and hinder innovation.
- Fear of failure: Employees may be hesitant to take risks or pursue new ideas because they fear failure, which can stifle innovation.
- Short-term focus: Organizations may prioritize short-term goals over long-term innovation, leading to a lack of investment in innovation initiatives.
- Lack of management support: Leaders may not prioritize innovation or fail to communicate the importance of innovation top-down, which can prevent buy-in.
- Inadequate metrics: Organizations may not have effective metrics in place to measure innovation success, which can make it difficult to evaluate progress and adjust strategies.
Sanjeev Mervana, Vice President of Product Management, Emerging Technologies & Incubation (ET&I) at the multinational technology company Cisco, was guest in our Innovation Rockstars Podcast where he addressed the topic of innovation culture.
He explained that the executive leadership team at Cisco works hard to bridge the gap between employees, customers, communities, and partners to facilitate and support innovation aided by Cisco’s conscious culture.
Cisco uses a top-down approach where the tone and expectations of innovation are set by the CEO and CSO, which funnels down through various branches and departments. This drives the growth of innovation through commitment. He points out that it takes a lot of strategic planning, commitment and hard work at all levels of an organization to drive innovation culture, but it's worth it when you consider the fruits of success it bears afterwards.
2. Change management
Change management is the process of planning, implementing, and monitoring changes to an organization's processes, systems, or structures. It involves understanding how change affects individuals within the organization and taking steps to help them adapt to new ways of working.
Change management is essential because organizations need to be able to adapt to changing market conditions, technologies, and customer needs to remain competitive. However, it can be challenging to get employees to embrace new ways of working.
Effective change management requires:
- Clear communication: Employees may not see the need for change which can lead to a lack of buy-in and participation in change efforts. It has to be clearly communicated why changes are being made and how they will be affected. Moreover, change management requires a clear vision and goals that employees need to understand.
- Leadership buy-in: Successful change management requires strong leadership support. If leaders are not committed to the change or do not provide adequate support, it can be challenging to implement the change effectively.
- Employee engagement: Ensure accountability and commitment from key stakeholders and employees to drive change.
- A plan to manage resistance and mitigate risks: Effective change management requires careful planning and preparation. Change efforts can require significant resources, including time, money, and personnel. If an organization does not allocate sufficient resources to a change effort, it may struggle to achieve its goals.
Overall, change management can be a complex and challenging process. Organizations can increase their chances of success by identifying these common challenges and addressing them proactively.
Digitalization in organizations involves the integration of digital technologies into all aspects of an organization's operations, from customer interactions to back-end processes. It is important because it can accelerate processes, improve efficiency, increase productivity, and enhance customer experiences.
However, organizations often struggle with digitalization due to a lack of digital literacy or technical expertise, limited financial resources, resistance to change, and difficulty in integrating new technologies with existing systems.
To overcome these challenges, organizations can develop a digital strategy, invest in employee training on new tools and technologies, and collaborate with external partners who can provide support and guidance.
ITONICS customer Siemens Energy is making great efforts to drive forward digitalization. According to Christian Weber, Digitalization Program Management Lead at Siemens Energy, digitalization forms a core pillar of the company’s strategy and is the key to transformation ambitions. It touches all relevant business areas – spanning from strategy and innovation to execution.
As the digital backbone of all topics related to internal digitalization targeting the profitability increase, innovation, and cybersecurity, Siemens Energy's Orbit Ecosystem powered by ITONICS is designed to strengthen transparency and cross-organizational collaboration to future-proof the entire organization.
Despite the challenges posed by digitization, its opportunities can be fruitful for a company’s innovation management and overall operations in the long term.
4. Business relevance
Business relevance refers to an organization's ability to stay current and competitive by adapting to changing trends, technologies, and customer needs.
However, organizations often face difficulties when it comes to aligning innovation with the business strategy:
- Identifying and prioritizing emerging trends or technologies that are aligned with the strategic goals and business needs to ensure that resources are focused on the right areas.
- Innovation teams may not understand the strategic goals, the business model, and target customers.
- Balancing short-term goals, requiring incremental improvements to existing products, and long-term goals, which may require radical innovations.
- Understanding customer needs.
To overcome these challenges, organizations can invest in research and development, engage in continuous learning and improvement, and collaborate with external partners who can provide guidance and support.
In our Innovation Rockstars Podcast, Manuel Krauß, Senior Consultant Business Model Innovation at Bosch Innovation Consulting, explains that a major pitfall in corporate innovation, or innovation in general, is investing ahead of learning. It is highly recommended to investigate and validate an idea or a new venture before investing in it, as this can result in cash burn. According to Manuel, there is a lot of uncertainty in any new business model, as you don’t know who the customers are and if the product or service being offered is a must-have for them.
Foresight is the process of systematically exploring the future to identify and understand potential trends, risks, and opportunities that may impact an organization.
Continuous foresight is important because it helps organizations to stay proactive to change rather than reactive and position them for success in a rapidly changing business landscape. By identifying potential future scenarios, organizations can develop strategic plans and allocate resources more effectively.
Organizations often struggle with establishing a successful foresight program for several reasons:
- A lack of resources or expertise in future-oriented thinking.
- Focus is on short-term goals and they are hesitant to invest in long-term planning.
- Wrong expectations and conditions.
By developing foresight capabilities, organizations can position themselves for success in an uncertain future. This includes the use of tools and techniques that facilitate the exploration of emerigng trends and technologies and enable companies to assess potential impacts of these developments.
Tessa Finlev, former Head of Foresight at Dolby Laboratories, outlined in her Innovation Rockstars Podcast episode that an effective foresight program requires an internal structure for thinking long-term as well as a centralized platform where people can input valuable information, rate and discuss it.
The most effective way to future thinking is to do it collectively with a diverse group of participants. This can be people from all business units at different levels coming together to help the company have a long-term perspective on what is happening around the world.
Get further insights: The 3 Biggest Challenges in Foresight (and How to Solve Them)
6. Customer centricity
Customer centricity is the practice of designing and developing products, services, and experiences that align with the needs and expectations of consumers.
It involves understanding and anticipating customer needs, providing personalized experiences, co-creation and collaboration with customers, and continuously seeking feedback to improve products and services. Companies can develop more relevant, user-friendly, and problem-solving offerings that create stronger brand-customer relationships through such practice.
However, product development and innovation teams that aim for customer centricity often face difficulties in collecting and interpreting customer data, managing customer expectations, and overcoming organizational resistance.
Below are some common ways companies can become more customer-centric:
- Conduct customer research through surveys and workshops: Collecting data and feedback directly from customers can help organizations understand their needs, preferences, and pain points.
- Develop customer personas: Creating customer personas can help organizations better understand and empathize with their customers, which can inform product development, marketing, and sales strategies.
- Align internal processes with customer needs: Organizations need to align their internal processes and systems with customer needs to provide a seamless, consistent, and personalized customer experience.
- Continuously improve: Organizations need to continuously seek feedback from customers, measure their satisfaction, and use this data to improve their products, services, and customer experience.
7. Tracking the right KPIs
KPIs in innovation refer to the key performance indicators that organizations use to measure the success of their innovation initiatives.
KPIs can help organizations track progress, identify areas for improvement, and demonstrate the ROI of innovation. KPIs enable organizations to make data-driven decisions, allocate resources effectively, and evaluate the impact of their innovation efforts on the business.
However, many organizations fear using innovation KPIs because they do not want to limit creativity, or they use vanity metrics such as profitability, generated ideas, number of patents, return on investment (ROI), and research & development (R&D) spending for the sake of simplicity. The downside of vanity metrics is they merely look good on paper.
In contrast, actionable metrics relate input and output factors and provide concrete indications of whether innovation activities are moving in the right direction, changes are needed, and value is being delivered. Examples of actionable metrics are R&D-to-product conversion, idea-to-margin conversion, time-to-adoption, etc.
There are four categories of innovation metrics that you should consider in steering your innovation activities:
- Innovation Strategy Metrics
- Innovation Organization Metrics
- Innovation Culture Metrics
- Innovation Operation Metrics
To learn more about these metrics and the related KPIs you can track, read: How to Steer Innovation Activities Using KPIs
8. The rising importance of sustainability
The rising importance of sustainability in innovation refers to the growing trend of prioritizing environmentally and socially responsible practices in their innovation efforts.
Sustainability is becoming increasingly important as organizations recognize the impact of their operations on the environment and society and seek to address these challenges through innovation. Addressing sustainability in innovation can help organizations reduce their environmental footprint, increase social impact, and drive long-term business growth.
Five ways organizations can drive sustainability and innovation:
- Move from business as usual to beyond compliance: The most innovative companies of our time are those that embrace uncertainty and are unafraid to fail, defining and forging their own path forward. It is no coincidence that they also tend to be leaders in sustainability.
- Embrace radical transparency: Transparency is a upheld as a pillar of good corporate citizenship and sustainability. Organizations looking to embrace transparency may often do so to align with growing consumer demands.
- Foster a culture of open innovation: Through this approach, organizations can access expertise, technologies, and solutions that they may not possess or be able to develop internally. It enables sustainable innovation that is more inclusive, financially viable, and effective.
- Integrate systems thinking into decision-making: Systems thinking allows identifying opportunities for innovation that address multiple aspects of a problem rather than just focusing on isolated components. And it promotes sustainability by encouraging a long-term perspective rather than just focusing on short-term gains.
- Get equipped with the tools to succeed: With risk levels high and the stakes sometimes higher, it is essential to equip your organization with collaborative software systems that provide you with the capabilities to monitor potential threats and opportunities on the horizon or periphery of your business environment, crowdsource ideas, gain consensus on innovation projects, and future-proof your strategic portfolio to support a more sustainable and prosperous future.
9. Collaboration between teams and functions
While collaboration for innovation management can be mistaken as a simple task, several challenges could pose a threat to innovation.
As innovation requires a diverse range of skills and expertise, collaborating across teams and functions allows for pooling knowledge, skills, and resources that would otherwise be unavailable within a single team or function. This can help to bring efficiency in generating new ideas, solving problems, and generating innovative solutions in a broader mindset.
Suggestions on how organizations can improve collaboration between teams and functions in innovation:
- Create a culture of collaboration: Team leads need to foster a culture that values collaboration, teamwork, and communication. They can set the tone by encouraging open communication, rewarding teamwork, and modeling collaborative behavior.
- Establish clear goals and roles: Clear innovation goals and roles for each team and function need to be established, and it has to be ensured that everyone understands how their contributions fit into the overall innovation strategy.
- Use collaboration tools and processes: Organizations should implement tools and processes that facilitate collaboration between teams and functions, such as innovation management software with collaborative workspaces.
- Encourage experimentation and learning: Organizations need to encourage experimentation and learning by providing opportunities for teams and functions to test and refine new ideas, share feedback, and learn from failures.
By taking these steps, organizations can improve collaboration between teams and functions in innovation, leading to more diverse and creative ideas, better decision-making, and more effective implementation of innovation initiatives.
10. Open innovation
Open innovation is an approach to collaboration with external partners such as customers, suppliers, universities, and other external communities to co-create, develop, and commercialize new products, services, and technologies. It is a way for organization to access new sources of knowledge and expertise, reduce R&D costs, and accelerate innovation.
Common challenges organizations face in open innovation are:
- Lack of clear goals
- Lack of commitment
- Address the right audience
- Manage and coordinate a large number of ideas
- Evaluate and prioritize ideas
- Further digest qualified ideas
Get further insights on how to overcome these challenges: Challenges in Open Innovation and How to Overcome Them
Use ITONICS to tackle your biggest challenges in innovation management
No matter the size of your business, innovation is crucial to your success. However, managing innovation can be complex and challenging, especially when you're dealing with multiple projects, teams, and stakeholders.
Ready to radically upgrade your innovation process and capabilities? The ITONICS Innovation OS is designed to systemize all activities from strategy to execution, at scale. Our innovation management software has tons of features to streamline your efforts, including:
- Real-time signals feed from patents, news, scientific publications, and reports to stay on top of change and disruption
- Collaboratively rate trends, technologies, risks, startups, and other drivers of change with other teams and experts
- Customizable Radar views to understand the potential impact of drivers of change at a glance
- Analyst-curated, industry-specific trend and technology content to kickstart your foresight journey
- Customizable ideation campaign templates to get started quickly
- Capture, evaluate, and prioritize ideas from internal and external sources
- Manage innovation projects, portfolios, and roadmaps
- Monitor and track project progress and performance
- Reports on innovation metrics and KPIs
Don't leave your organization's innovation success up to chance (or spreadsheets). Focus on what really matters: driving innovation and growth for your business. Get started with a free demo today.
See the ITONICS Innovation OS in action