Question

Subject : INNOVATION MANAGEMENT FOR GLOBAL

Assignment

You work as a consultant. Your current assignment is to advise a large, traditional manufacturing firm whose products are facing obsolescence. Your initial audit of the company highlights a failure to innovate over many years.

Briefly outline the reasons why large organisations often struggle to innovate. You have been asked to prepare a presentation to the manufacturing company’s senior management suggesting ways in which the company could become more innovative. Provide a report which explains the points that you would cover in your presentation. Your report should be in continuous prose, using a report format.

Answer 1

Struggles in the course of Innovations

There’s no getting away from the fact that this feels slightly counter-intuitive, since chasing growth — in the shape of higher turnover, bigger profits and more of things like branches and employees — has traditionally been seen as the driver of business.

But when it comes to innovation and staying ahead of digital disruption, just a glance at some of the big businesses that have disappeared with startling speed in recent years, demonstrates the truth that big isn’t necessarily better.

WRONG DECISIONS

Management often sets the wrong course in innovation projects or when selecting ideas. Wrong decisions can affect the prioritization of ideas, product strategies for new products, selection of variants in development, etc

The reason behind this are Lack of Corporate strategy and innovation strategy as a basis for decision making. Also insufficient or incomplete information as a basis for the decision.

LESS PRIORTISED

In case of day to day business topics appear on the management's agenda, they have priority. These are the ones you earn the money with today and they have to be solved as quickly as possible. But how do you earn the money tomorrow? Urgency is unfortunately more important than urgency.

If the management's commitment is lacking, it runs through all levels of the organization. Innovation has a low priority because everyone cares about the day-to-day business first. In addition, innovation is something "new" and brings with it changes that many people cannot identify with or that cause insecurity and resistance. The unrealised commitment and the lack of support for innovation are certainly one of the main reasons why innovations fail. As a result, many resources are lost through friction losses and innovation tasks are not worked out in the required quality. The main cause is from above and it is also reflected in the culture of innovation.

LACK OF MARKET ORIENTATION

The lack of market orientation and customer needs is another main reason why new products fail on the market. The product does not offer a true and convincing customer value or differentiate itself from existing products. Investing in extensive customer and needs research is a key success factor for innovations. The more you know about your target groups, the better products you can develop and don't have to rely on half-true assumptions.

SLOW STRUCTURES

The larger an organization is, the slower the processes often become. Sluggish processes with long decision-making cycles can be a death sentence for innovations. In addition, there are often interface and communication problems. All this has a negative effect on the quality and efficiency of innovation projects. This becomes more and more aware when you see how quickly start-ups can innovate.

CONCLUSIONS

One solution to the ‘innovation problem’ which many larger companies are opting for is to ‘contract out’ their innovation. This is done in two ways; by collaborating with start-ups and entrepreneurs or by recreating the structures of a start-up within the larger corporate framework. A recent Accenture survey of 1,000 G20 companies found that 9% of the revenues of such companies are now generated by collaborations with smaller concerns, a figure which was expected to rise to 12% in 3 years and 20% in 5 years.

The other option was taken by British Gas when developing its’ smart metering capability, a field in which it faced competition from many smaller, digitally savvy start-ups. Centrica, the owners of British Gas, dealt with the risk of inertia by creating Hive, which was treated as an independent start up and developed the ‘smart energy’ concept outside normal corporate management structures, adopting a ‘lean start-up’ approach based upon developing innovation through constant small improvements.

Another good example of the kind of approach which larger companies have to take if they want to remain innovative is the Amazon ‘Two Pizza’ rule. This states that every individual team within the larger business should be small enough to be fed by two large pizzas, preventing the kind of top heavy management which slows decision making.

There are many reasons why innovation projects or new products fail on the market. Usually, a failure is not related to the quality of an idea itself, but to its implementation, which means that it has internal organisational causes.

This is where business management and innovation management must start. You have to be aware of your own weaknesses and take appropriate measures. Because if an innovation is constantly confronted with hurdles, every innovation euro invested is a waste.

If, on the other hand, management creates a framework that encourages and strengthens innovation, companies with the same resources can achieve significantly higher innovation successes and thus generate additional earnings.

The overall message seems to be that your business will get bigger if you make sure that certain parts of it stay small.