Innovation centres may fail to deliver value due to lack of alignment

18 January 2018 Authored by Consultancy.uk

As companies increasingly fund innovation centres, new research shows that their effectiveness may be limited. However, rather than being inherently poor ideas, their failures may well reflect a lack of integration of innovation units with wider organisational outcomes, with key barriers such as culture, vendor engagement and governance holding back their true potential.

Innovation has been a mainstay of the business environment for centuries, offering potential edges, whether in terms of customer engagement, cost reduction or new offerings. Creating the conditions in which innovations happen has become increasingly pressing, as technology enables a whole new operational model for many groups. However, organisations which fail to link their adoption of innovations to concrete business needs could be at risk of wasting resources without actually improving results.

In recent years companies have increasingly invested in innovation centres, whose function is to bring together a broad array of skills, clients and resources. However, a new report from Capgemini’s Digital Transformation Institute titled ‘The discipline of innovation’, critically assesses whether these centres have really succeeded in transforming inputs into innovations.

Innovation maturity

The study assessed in how far organisations have achieved ‘innovation maturity’, scoring employees and management to check five key dimensions: culture, environment, governance, process, ecosystem and average. These were then considered in terms of four levels of achievement. These were beginning, ‘where organisations have a few isolated innovation projects driven by individuals, with no enterprise focal point’; building, ‘where a set of initial innovation projects is run largely at the departmental level and without central management’; established, ‘where the organisation has achieved some success, with several projects being taken from idea to commercialisation or operational impact’; and optimised, ‘where the organisation shows a consistent track record of taking ideas from inception through to significant commercial or operational impact’.

Collectively, the research noted that innovation culture at companies – defined as the extent to which employees are encouraged to explore and deploy innovated ideas – was relatively mid-range, scoring a 2.5 for all employees and close to 3 for leadership. Governance, meanwhile, defined as the extent to which leadership supports innovation and ensures its alignment to the organisation’s growth strategy, stood at 2.5 for leadership and 2.4 for employees.

Culture

The environment rating, reflecting the extent to which innovation is carried out across the organisation or limited to certain units, was relatively high for leadership, at more than 3 points, but somewhat lower for all employees at around 2.6. The ecosystem category, in which the extent to which organisations worked with vendors and other partners to enable innovation was evaluated, stood at a cool 2.4 for both leadership and all employees.

Lack of cohesion

The cultural metric was largely concentrated in the building phase, with a few in the beginning stage (5%) while those in the established and optimised phase stood at 17% and 1% respectively. The large number of respondents in the building phase reflects the relative difficulty of transforming organisational culture to encompass innovative behaviours, from the possibility of failure to listening to subaltern ideas.

The governance metric also showed signs of concentration in the building phase, however, the number of organisations in which the metric stood as established came in at 33%. Capgemini’s analysis shows that companies are not fully aligning innovation department results with wider business priorities – and the authors subsequently stated that, “without the support of senior leadership—and clear alignment with the company’s strategic objectives—innovation units’ efforts risk being sidelined when competing with the company’s other strategic priorities.”

Environment

The environment score was more spread in outcome, with very few organisations in the beginning phase (2%), while the majority (51%) were established. The rest found themselves in the building (19%) and optimised (28%) phases. The analysts note that there continues to be a risk that innovation units operate in isolation, with results not integrated into the wider organisation – creating potential barriers to move from innovation to implementation and transformation.

The survey found that many of the companies are in the beginning phase of business wide innovation for the ecosystem metric, while around 18% are optimising their operations. A small number are in the building category, while 25% say that they are established. Various factors affect this metric’s relatively low outcomes – including cyber security concerns, data protection concerns as well as a lack of interface between organisations and partners.

Lanny Cohen, Global Chief Technology and Innovation Officer of Capgemini and member of the Group Executive Committee said, “Organisations need to accept that they cannot just open innovation centres and expect an overnight transformation in their creative output. To achieve and sustain real change, firms need to create a culture in which all employees are encouraged, through financial and non-financial incentives, to experiment and push ideas to market. Innovation units can play a large role in this process, partnering with individual teams to develop ‘out of the box’ ideas and provide a link to the partner and vendor ecosystem. However, a sense of innovation and creativity needs to be instilled company-wide if it is to be truly successful.”

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