Almost everybody recognises that innovation is crucial to the long-term survival of businesses in the 21st century.

This new century has been characterised by technology-inspired disruption and rapid growth, products conceived and built anywhere, services transferable at an instant worldwide, the outsourcing of backroom functions and many more innovations.

Innovation

There is a widespread misconception that innovation relates only to research and development. But innovation’s broader definition covers the introduction of new ideas, methods, products and services, or even new markets.

This broader definition forms the basis of our Innovation Source Map (see Part 2) – a 28-point grid of innovation trigger points – the starting point of an innovation process. Redesigning a process or procedure may introduce new efficiencies that create greater capacity or profit margins.

Similarly, rebranding your product for a new market can be a new source of growth. My favourite example of this is Lucozade – they rebranded an aging product and targeted the new sports drinks market with Lucozade Sport to enormous success.

Besides creating new products, services, efficiencies, markets etc, being recognised as an innovative company has many advantages.

To quote Jeff Immelt, former CEO of General Electric: “Nobody wants to work for an old-fashioned company. Nobody wants to buy products from an old-fashioned company. And nobody wants to invest in an old-fashioned company.”

Research by Compustat Financial Data indicates that companies with a reputation for innovation have a valuation multiplier of up to three times the book value of assets.

In his book, Innovation Capital, Curtis Lefrandt outlines how leaders can develop a reputation for innovation or innovation capital, that affords them scope and latitude to change the organisation, change the products or change whatever needs to be changed.

High-profile leaders with huge innovation capital include Jeff Bezos, Elon Musk, and Marc Benioff. This innovation capital gains them the respect of both employees and outside investors.

What is culture?

The Oxford Dictionary of English defines culture as “the ideas, customs and social behaviour” of a particular group. In business this can only be set by top management.

It is common in many companies that reach a certain size that they become more conservative, the leaders become less entrepreneurial and decisions are managed by consensus.

Employees, as a consequence, become less willing to take risks with new and innovative ideas. Companies can become complacent, resting on their laurels, just before they find themselves going out of business.

To avoid this scenario, leaders must set a vision, strategy and objectives for innovation within their organisations complemented by a culture that supports intrapreneurial activities.

Creating a culture starts at the top. Management must create an environment where employees feel psychologically safe in suggesting and testing new ideas, methods or products and services.

Employees should know that it is okay to spend part of their day experimenting with new ideas. They should know that failure is part of the learning process and that it is all right to make mistakes so long as something is learned and adds to the overall wisdom within the organisation.

In creating this culture, innovative leaders must be both ‘forward thinkers’ and ‘multipliers’. Forward thinkers ask themselves two questions:

1. What will people/customers want next.

2. What will new emerging technologies enable us to do? These are key questions for the innovative company.

A multiplier attracts talented people, creates an environment that requires their best thinking and work, defines opportunities that stretch, gives them ownership of results and invests in their success.

Once you understand your corporate culture and where it is going you can decide whether your organisation needs a formal (such as ISO 56002) innovation management system (IMS) or an informal IMS. We look at this in more detail in part 2.

Innovation as a career – the intrapreneur

Innovation should be recognised as a permanent function of a successful company. Therefore, companies need to create innovation careers rather than just innovation jobs.

The concept of an intrapreneur (in-company entrepreneur) as a genius who swoops in to save the day is a myth. Companies need to institutionalise innovation rather than expect it to simply flow from intrapreneurs operating within existing structures.

Innovation professionals need clearly defined roles, responsibilities and career paths that stretch beyond traditional R&D or new product development.

They need to carry out functions such as discovery, development, validation, roll out and scaling. All this works best within the context of an innovation management system.

Why are engineers ideally suited for intrapreneurship?

Engineers are by nature curious people. They love understanding how things work and solving problems. Through their training they are highly analytical, and many adopt a project-management approach to planning – crucial to innovation management.

They are adept at turning analysis into actions. These are key skills for intrapreneurs, particularly in the areas of process efficiencies and product/service features.

Identifying the intrapreneurs in your organisation

The ideal intrapreneur has some or all of these traits:

1. A leader – prepared to carry the burden of a new product, idea, method etc. and lead a team in pursuit of success.

2. An innovator – always looking for innovations and innovative ideas.
 

3. Visionary – can see the end result and how to get there.
 

4. An optimist – they not only motivate their team but also use this optimism to learn from mistakes.
 

5. Passionate self-starters – they set goals for themselves and are not afraid to take calculated risks or promote

themselves. They may have side hustles or passion projects they are working on at home.
 

6. Not strictly money-motivated – they value having the ability to implement their ideas with full management support.
 

7. Thirst for knowledge – always learning new skills. The more employees learn the greater use they can put that knowledge to in your business.
 

8. The ability to nurture and develop innovative ideas – able to back up their ideas with research and solid plans.
 

9. Ready to pivot – not discouraged by failure and prepared to change course when circumstances dictate.

In Part 2 we will look at a systematic approach to innovation and Innovation Management Systems;why being creative alone is not enough, you need a system of delivery of new products or services to market; why Edison was more successful than Tesla; and the use of business management tools in assessing viability and mitigating risk.

Almost everybody recognises that innovation is crucial to the long-term survival of businesses in the 21st century.

This new century has been characterised by technology-inspired disruption and rapid growth, products conceived and built anywhere, services transferable at an instant worldwide, the outsourcing of backroom functions and many more innovations.

Innovation Management System (IMS)

In Part 1 we looked at Innovation and creating a culture of innovation in an organisation. Once you understand your corporate culture and where it is going you can decide whether your organisation needs a formal (such as ISO 56002) innovation management system (IMS) or that an informal IMS works best in your culture.

Anybody who has implemented a quality management system such as ISO 9001 or an environmental management system such as ISO 14001 will have experienced the difficulty of getting buy-in from management and staff for all the documentation and paperwork requirements and the nuisance factor of internal and external audits.

Many see them as box-ticking exercises and carry on as normal until the next external audit. An IMS has the advantage in that it lends itself readily to a reward and recognition policy which further reinforces the adoption of the system.

While ISO 56002 has many of the features of 9001/14001 in terms of policy, roles and responsibilities, risk analysis, internal audit and management review etc, it is a guidance document only.

Key elements of an Innovation Management System

An IMS has two essential sides – the intrapreneurial side and the venture side. The intrapreneurial side is responsible for the discovery, validation and development of new innovations and the venture side is responsible for managing a portfolio of these innovations using investment metrics and metered funding. For an effective IMS, both sides must operate in tandem.

Before we explore these two sides in detail let’s visit the story of two of the most famous innovation engineers of the 20th century – Thomas Edison and Nikola Tesla.

While Tesla was by far the greater intellect and innovator (even Einstein said, when asked what it was like to be the smartest man alive – “I don’t know, you’ll have to ask Nikola Tesla”), Edison’s ability to win backers, collaborators and attention for his ideas was much greater.

When Edison developed a commercially viable lightbulb, he was able to convince JP Morgan to advance him $30,000 to set up the Edison Electric Light Company.

He had built up enough innovation capital (discussed in Part 1) that he had no problem getting backers for his ideas. He was ruthless to the point of publicly electrocuting an elephant in order to rebuff Tesla’s AC distribution system.

Tesla had hundreds of patents and in particular, his AC distribution system proved far superior to Edison’s DC system. However, he was very much an altruistic innovator and lacked the commercial capabilities of Edison. He ended up being cheated out of many of the spoils of his inventions and died penniless.

Though he never profited from it, the entire mass communication systems we use today are based on Tesla’s ground-breaking system of wireless communication.

I use the story of Edison and Tesla to illustrate the importance of the two sides of an IMS. Both are crucial elements in innovation success.

Key elements of their intrapreneurial side

The intrapreneurial side may comprise a dedicated team of intrapreneurs, a section of a project department or a loose combination of permanent and seconded staff as circumstances dictate.

Their function is to generate new ideas, research their validity and present in-depth proposals for consideration by the venture side.

It is important to have a proactive system of generating innovation ideas and this can be in the form of brainstorming sessions, hackathons and so on.

At MBA Global, we have developed an Innovation Source Map, a grid of 28 innovation trigger points across the four major innovation categories – ideas, methods/procedures, products/services and markets. It is designed to be the basis of a monthly brainstorming session.

New ideas then move on to the validation and development stage. Again, it is important to be systematic at this stage so that every innovative idea gets a fair hearing.

It was recognising this that led us, at MBA Global, to develop the Business Model Actualisation Platform (the BMAP©). This is an innovation-focused three-step commercial validation and development process that involves; situation analysis, challenge analysis and solution proposal.

Using a combination of established and new business tools such as SWOT, PESTEL, Five Forces and the more recent Business Model Canvas, it takes a systematic approach to analysing proposals, testing and validating the market viability, building essential RoadMaps as a detailed guide to actions required for the next 18 months.

Finally, it involves preparing financial projections and evidence-based business planning.

The BMAP© is supported by the book Countdown to Launch, which demonstrates the principles used in this approach. In this case the context is for a startup venture, however, the BMAP© is applicable to any commercial development environment for businesses of any size.

The upshot from this stage is a portfolio of project proposals for consideration and implementation by the venture side of the IMS.

Key elements of the venture side

There are two key teams on the venture side of the IMS – the growth board and the implementation team. A growth board (US terminology) is essentially a steering committee comprising senior managers who meet regularly to review, fund or kill off new innovation projects.

The board acts like venture capitalists by allocating funding in tranches on a milestone achievement basis (called metered funding). Traditional project finance usually involves full proposals being approved with contingency funds to ensure project completion.

Innovation projects require a different allocation of capital that benefits rapidly successful ideas and quickly kills off ventures that are failing to gain traction.

By dealing with a portfolio of ventures, the growth board quickly learns which types of projects and teams are more likely to succeed and how to spot potential failures early.

At early stages, the board is looking for indications that the team is on the right track while later stage milestones may include hard, quantitative metrics.

The implementation team may be internal or external to the company. Ideally it is internal and may form part of the project department. However, some may be outsourced due to capability restrictions internally.

The size of your company determines the team sizes in an IMS. The larger the company the easier it is to justify permanent allocation of intrapreneurial staff to the IMS.

SMEs have to be more circumspect and creative in structuring their IMS and this may involve a small core team complemented by other staff contributing on an as-needed basis.

Regardless of size, the important thing is to have an Innovation Management System in some manifestation, whether formal or informal.

Author: Liam Fennelly, is a Chartered Engineer and UCD engineering graduate. He has worked for several multinationals both home and abroad. He holds an MBA from Warwick Business School and has been involved at founder/director level in seven startups.

In a career spanning over 30 years, he has more recently been a mentor and business consultant and is co-author of Countdown To Launch, the widely recommended handbook for new venture start-ups based on the BMAP© process. He can be reached at: liamfennelly@mbaglobalconsulting.com