During the last century, the average lifespan of a company shrank drastically by as much as 80% to about 18 years (McKinsey & Co, MD, Dominic Barton, 2016). We know innovation and constant redefinition is a way to maintain success and achieve healthy growth. Therefore, activities that aim for the exploitation of existing businesses have to be complemented and counterbalanced by exploratory activities. On a corporate level, it means that functions with the goal to identify new business opportunities are required.
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To give an example: a company that produces exhaust filters for the coal mining industry, would be exploiting the cash cows of their current business on the one hand. But on the other hand, they would already be scouting for alternative applications of their knowledge to distribute the risk and secure new revenue streams. To be precise, they would seek to find answers to the question: How can I apply my existing knowledge to new products or new markets as the ongoing decarbonization trend matures?
Easier said than done. In our daily business, we experience numerous organizations that struggle to find an appropriate balance between the core and exploratory activities.
COFIM | Control Objectives for Innovation Management
Let’s look at one major roadblock in detail: Clarity, structure, and blueprints for innovation functions are scarce goods. Organizations have exploited their core in increasingly efficient ways for more than a century. Today, the parameters that make exploitative functions successful are sufficiently studied and very well understood. For establishing and running efficient core business functions, multiple useful tools are available to guide managers. To name only two examples, COBIT (Control Objectives for Information and Related Technology) and ITSM (IT service management) are established frameworks for IT Management.
On the other hand, while the need for innovation grew, either, it was often equated with ideas, creativity and design thinking or it was reserved for the eccentric spirits of a company. In many boardrooms, the high relevance of holistic innovation management for a company’s future success has only recently manifested. As a result, highly goal-oriented guidelines that a manager should consider for establishing exploratory functions have been missing for a long time.
Innovation Leader's Insight - Systematized
Successful innovation leaders at companies like Cisco, DMK, KSB often established their innovation functions based on tailored frameworks that they iteratively developed from scratch.
COFIM (Control Objectives for Innovation Management) is a framework that has been designed, based on more than 10 years of experience and intense collaboration on the matter. It can be used to set the focus, to systematically develop new competencies in an organization and to monitor progress in the most relevant areas of expertise. Four areas of expertise describe the universal framework.
Strategy & Positioning
Define long-term goals and well-integrate innovation initiatives into the corporate structures
Potential challenge example: An innovation function has been initiated by the general management (GM) at a German SME because pressure is rising as young companies with new business models enter their own market segment. The GM expects “ideas” on how to counteract the development. However, the new innovation manager quickly finds: merely collecting ideas is not enough. She misses a strategic basis and a justified course of action. So far the GM did not recognize the holistic nature of innovation activities. As a consequence, impact is low and long-term commitment does not exist.
To establish a successful innovation framework, clarity in regard to the internal positioning of the initiative and its integration into the existing corporate strategy is inevitable. Subsequently, defining goals and strategically communicating the undertakings enhances awareness and relevance. At the same time, it is the foundation of making actions measurable - often the key to management’s long-term commitment.
Organization & Governance
Establish structures and channels that people can make use of
Potential challenge example: We are looking at a company where the HR together with the strategy department took on the objective to implement a collaborative platform for monitoring and assessing trends. After 6 month it appears, the tool is barely in use. An internal consultant comes to the result that the ownership of the activity is unclear. No individual or team is fully committed to establish routines, maintain channels and integrate the undertaking into the internal environment.
For guiding and leading innovation-related activities, processes and channels are as necessary as defined roles and decision-making structures. The right resources need to be deployed and enabled. As a result of clear organization and governance, the initiative’s long-term success is carefully monitored.
Establish a collaborative, future-driven corporate culture that facilitates organizational learning and innovation
Potential challenge example: The focal company's executive department is in the process of implementing an emerging technology management. The responsible Innovation Director delegated his team of two innovation managers and a working student to establish an “Em Tech” - Network across the organizations. During the piloting of activities, the team realizes, the physical separation of BU’s in combination with a questionable reward system manifested strong silos. People hesitate to participate and to share their insights across different units.
A positive culture for innovation is the bedrock for sustainable return on innovation. Formats and platforms that engage people to participate and that trigger cross-functional communication are required. Incentives and rewards can be used to further facilitate engagement. As a matter of fact changing culture is a steady process that demands for common understanding, managers role model behavior and solid commitment.
Insights & Abilities
Generate and use data
Potential challenge example: The team leader of the technology scouting activities in a pharmaceutical company has done a really good job in maintaining a large database of relevant technologies for the different development units with his team. Therefore, now, he received the task to extend the nature of delivery and also provide regular recommendations of action to the management. The goal is to initiate short prototyping projects and hackathons. The team leader now needs to first, accumulate further knowledge on the holistic innovation approach. And second, find ways to enable his team for the new challenge.
The organization’s ability to bring innovation into streamlined operations, from the front end towards decisive planning and execution is the remaining puzzle piece. By implementing different internal and external channels, scouted information fuels and augments your innovation initiative and helps you to stay ahead of the competition. Impact manifests when the organization can make use of knowledge for developing solutions, before fitted visualization and presentation methods can be deployed for internal and external communication purposes.
A Tailored Toolbox - Not From Scratch
Every single one of the areas of expertise is further broken down into sub-components that can be designed and mature when you fill them with suitable tools. As your toolbox develops, a completely tailored and unique solution, that represents a particular corporate heritage, future strategy and innovation culture manifests. Step by step. Complementary support in deciding which measures are most urgent to take and where to start with filling in the right tools is provided by the lightweight maturity assessment.
Starting from scratch is not necessary. Make use of the experience of numerous innovation leaders and rely on the knowledge that has been systemized and transferred already. This way you enjoy a head start for establishing your organization’s balance between exploitation and exploration and fully reap the fruits.
We at ITONICS have been consulting innovation leaders and teams across multiple industries, helping them to enable, shape, and grow their innovation management activities. We are ready to assist you too in deploying COFIM for establishing and expanding your innovation function.