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Creating Value Through Innovation

Creating Value Through Innovation

Innovation is often poorly understood and rarely harnessed to unlock the full value potential available within companies. In this discussion, Nick Pennell and Greg Lavery present the value of innovation and how to capture it, reflecting on their recent work in the field.

Innovation is simply about harnessing good ideas and seeing them through their development and implementation across a company. Done properly, such ideas can increase revenue, reduce costs, improve competitive advantage, improve company sustainability – and in doing so lift staff productivity and morale through seeing their ideas come to life.

An effective innovation process must follow three principles:

  • Inclusivity: best practice innovation companies (e.g. 3M, Google) make innovation part of everyone’s job description; after all, good ideas can come from anywhere and everywhere.
  • Strategic fit: Innovation priorities must fit with the corporate strategy and vision. We have seen numerous examples where priorities for innovation are not set clearly, leading to sub-optimal cost and resource allocation.  Linked to this, motivating staff participation often works best where innovation is connected to both the corporate strategy and a ‘higher purpose’ – this is where a sustainability lens can be invaluable.
  • Tightly defined innovation brief:  big picture, ‘blue sky’ thinking has its place early in priority setting, but results occur much more quickly if staff are focussed on solving well-defined challenges.

Applying these themes, we recommend that companies adopt an innovation cycle which includes four key processes:

  1. Priority setting to ensure that the whole organisation, including senior management, share the same innovation goals. The bigger the organisation, the more important this is to ensure that parts of the organisation do not inefficiently pursue their own agendas. We have found that a strong fact-based logic and rational business case are often needed to identify priority innovation areas and ensure widespread agreement.
  2. Gathering ideas widely. Many leading companies (e.g. GE and P&G) use open innovation approaches to gather ideas widely from within the company and also from external experts and partners.
  3. Rigorous management of innovation ideas. Once opportunities have been identified, each must be captured in a knowledge management system, evaluated, triaged, and the best ideas supported in their growth. For bigger ideas, development should occur using a common series of development phases with structured stage-gates to ensure criteria for continued investment are met as the ideas are developed.
  4. Ongoing review. Frequently, but at least annually, innovation projects, priorities and budgets should be reviewed for fit against business priorities and progress towards the company’s strategic goals. This ensures that the innovation pipeline is feeding the development of the company at the rate necessary, while efficiently using the company’s resources.

Taking a structured, inclusive approach with a few simple processes can make a big difference in supporting, through innovation, rapid progress towards your company aims – be they growth, cost reduction, safety, or sustainability performance.